in other countries like Canada, Australia and the U.K. which we do not have in the United States. Canada alone offers federal and provincial tax credits of between 22% and 46% of labor costs. Those incentives are enough to make any business relocate. Particularly when savings from filming in Canada can mean a dollar savings overall.

The United States should not be put at a competitive disadvantage by tax incentives offered abroad. Rather we need to level the playing field for the small businesses impacted by runaway production and create jobs in America, for Americans. Related to this there is an issue of Canadian cultural content policy. The Canadian Government has given certain "cultural industries" special treatment. This policy has been implemented in large part through Canadian legislation, as well as some foreign trade through tariffs, taxes, foreign investment restrictions and content requirements that discriminate against U.S. cultural industries. Canada has consistently protected its cultural industries.

This has been discussed and negotiated in the past. I believe that it must be addressed in Seattle with the backdrop of the issue of runaway film production. We have a situation in which thousands of U.S. jobs are being lured to Canada and other countries through favorable tax treatment. While at the same time, cultural policies established by the Canadians and others discriminate against U.S. interests thereby creating a double hit to industries like domestic film production.

Mr. Chairman, with the problem of runaway film production in mind, I ask that the issue of cultural content be placed on the table and addressed at the WTO talks in Seattle. Lets be honest about this issue of runaway production-its all about jobs. The average film industry worker earns $26,000 a year. This Congress has given great attention to the loss of 10,000 steel industry jobs over the past year. The film industry has lost 20,000 jobs and most of those jobs have emigrated north. It is time to address the problem and save U.S. jobs.

Thank you Mr. Chairman.

Chairman CRANE. Thank you.

Mr. Becerra. Wait. One thing before you start, Xavier. Try and keep your oral testimony to 5 minutes or less and all written statements will be made a part of the permanent record.

STATEMENT OF HON. XAVIER BECERRA, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. BECERRA. Thank you, Mr. Chairman, and thank you to the Members of the Subcommittee, my fellow Subcommittee Members. Let me also begin by thanking my colleague, Mr. Weller, for having raised this issue of runaway productions as we start to develop and negotiate objectives for the upcoming World Trade Organization ministerial in Seattle.

This issue may not have quite the direct connection that you might think in terms of the ministerial that we are about to embark upon in Seattle, but it certainly does relate to trade. Jobs are leaving communities across the Nation and production companies are choosing more and more to film outside not just of California, but outside of this country. Whether it is New York, North Carolina, Illinois, Washington State, Texas, Oregon, Maryland, Michigan, Wisconsin, all of these States along with California and others have been able to attract substantial production in the past. But unfortunately we are seeing more and more that these sites are being abandoned for places abroad.

Mr. Weller mentioned that already we can talk about the 20,000 jobs that have been lost, some $10.3 billion in economic loss to the United States in 1998 alone as a result of these fleeing productions. Now, we are not talking about the movie stars who make the million dollar salaries. We are talking about the ordinary working

people who build sets, provide lighting, cater food, operate hotels, and work in other capacities directly or indirectly in support of production of movies and television programs. The average film industry worker makes about $26,000 a year.

Although a number of factors have caused productions to leave the United States, it is clear that government tax credits by other countries do have an impact. In Canada, since 1996, we have seen that nation offer to those production companies that come into their country 11 percent tax credits for labor costs and production costs. When you add up what the provincial governments also provide you have somewhere between 22 percent to 46 percent savings of their labor expenditures for production companies going into Canada. There are other things they do as well. They provide duty free import of stage props, special effects equipment, other things that give these production companies a rather large break.

Now, I raise this issue today because, as Mr. Weller has said, there is a disconnect, perhaps a little, between what the U.S. is accepting in terms of Canadian insistence upon its cultural content laws while at the same time it is aggressively targeting U.S. jobs. For instance, only 40 percent of films aired on Canadian television can be produced in other countries. The Disney Channel and HBO are not allowed to have their own channels in Canada due to laws designed to protect Canadian competitors.

At the same time, it is not uncommon for Canadian government officials to fly to Los Angeles, New York, and other U.S. production centers to attend events and to meet directly with film and television producers to advertise their incentive structure. For example, representatives of Revenue Canada-that is the Canadian IRS-attended a recent "Location 99" show in Los Angeles in order to promote Canadian incentives.

I know the Office of U.S. Trade Representative will be testifying today and we are looking forward to addressing this issue with her a little further and we encourage Ambassador Barshefsky to try to limit this content exception. We know that she has tried in the past to try to eliminate it and we appreciate that.

In 1996, the motion picture and television industry made $27.5 billion in contributions simply to the State of California's economy. If you add up the rest of the other 49 States you will find that the impact of this industry is tremendous. Canada is now the second largest exporter of television programming, following the United States. In 1998, Toronto became the third busiest production center in the world after Los Angeles and New York. And Vancouver now ranks fourth.

If we do not engage on this issue, we will find that we have irreversibly and irretrievably lost jobs in this country because we have failed to act in a timely manner. We certainly don't want to have to constantly go to the floor of the House to do what we did yesterday to try to support the steel industry.

would hope that we would move quickly. While we may not be dealing directly with this issue through the ministerial in Seattle, it is a good time to talk about cultural content and other factors that do in the end cost U.S. jobs.

Mr. Chairman, I thank you and the Members of this Subcommittee for the attention.

[The prepared statement follows:]

Statement of the Hon. Xavier Becerra, a Representative in Congress from the State of California

Let me begin by thanking Chairman Crane, Ranking Democrat Levin, and my fellow Subcommittee Members for affording me the opportunity to testify here this morning. I want to also commend my colleague Mr. Weller, for raising the issue of runaway productions as we start to develop our negotiating objectives for the upcoming World Trade Organization Ministerial in Seattle.

Jobs are leaving communities across the nation as production companies_choose to film abroad rather than filming in California, New York, North Carolina, Illinois, Washington state, Texas, Oregon, Maryland, Michigan, or Wisconsin, as they had in the past. In 1998, the U.S. suffered a $10.3 billion economic loss because of productions moving to other countries. Last year runaway productions accounted for the loss of 20,000 U.S. jobs.

It is important to note that job loss resulting from runaway productions affects ordinary working people who build sets, provide lighting, cater food, operate hotels, wait tables in restaurants and bars, and work in other capacities that directly and indirectly support the production of movies and television programs. The average film industry worker makes about $26,000 a year.

Although a number of factors have caused productions to leave, it is clear that government tax credits in other countries have played an integral role in the exodus of U.S. production companies. Countries like Canada recognize the benefits that U.S. movie and television production companies can bring to local economies. Since 1996 Canada has offered federal rebates that equal 11% of spending for all Canadian labor involved in a production. Many provincial governments supplement these incentives, creating a total savings of 22% to 46% on Canadian labor expenditures. Moreover, as of January 1998, wardrobe, stage props, special effects equipment, and photographic equipment, of U.S. origin, used in the production of feature films, t.v. movies, or t.v. series are imported duty-free.

I raise this issue today because there is a disconnect between the U.S. accepting Canada's insistence upon its cultural content laws while at the same time it aggressively targets U.S. jobs. For instance, only 40% of films aired on Canadian television can be produced in other countries. The Disney Channel and HBO are not allowed to have their own channels in Canada due to laws designed to protect Canadian competitors. At the same time, it is not uncommon for Canadian government officials and film commission representatives to fly to Los Angeles, New York City, or other U.S. production centers to attend events or meet directly with film and television producers to advertise their incentive structure. For example, representatives of Revenue Canada (the Canadian IRS) attended a recent "Location 99" show in Los Angeles in order to promote Canadian incentives.

The Office of the U.S. Trade Representative will be testifying in the next panel and I look forward to further developing the discussion on cultural content laws at that time. Three years ago the Trade Representative attempted to persuade Canada to drop cultural content restrictions, but unfortunately did not succeed. I encourage Ms. Barshefsky to redouble her efforts in this endeavor. In the past, the issue of cultural exemptions was more narrowly focused on whether a clear violation of free trade should be granted an exception. I think that the answer was "NO" then, and I think it is "NO" today.

However, the unfairness of the exception is even more dramatic today. The recent study commissioned by the Directors Guild of America and Screen Actors Guild demonstrates how the runaway productions problem has escalated since the last round of trade talks. Consequently, the U.S. must fight harder than ever to eliminate the cultural content restriction and open up the Canadian markets to all productions.

In 1996, the motion picture and television industry made a $27.5 billion contribution to California's economy-$14.2 billion in economic activity was generated in Los Angeles alone. The industry is integral to sustaining our economic prosperity not only due to jobs created by the entertainment industry but also because it spurs growth in related sectors such as the fashion and apparel industry, furniture manufacturing, multi-media industry, and tourism.

Canada is now the second-largest exporter of television programming, following the U.S. In 1998, Toronto became the third busiest production center in the world, after Los Angeles and New York, with Vancouver ranking fourth. If we do not engage on this issue, we will find that we have irretrievably lost U.S. jobs because we failed to act in a timely manner.

Chairman CRANE. Thank you. Mr. Regula.

STATEMENT OF HON. RALPH REGULA, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO

Mr. REGULA. Thank you, Mr. Chairman. And I will summarize my remarks. I think there is a lot of synergy between what is happening on the floor today and this hearing, because we will hear a lot of speeches during the debate that we have a surplus, the economy is strong, and therefore we should give some of the money back to the taxpayers. That strong economy is predicated on both free and fair trade. And I think you might call this a quality of life hearing as much as a trade hearing, because if we are to have a strong economy prospectively and generate all of those surpluses we are hearing about out in the future, it is going to have to depend on a strong economy with jobs, with an opportunity to trade. And obviously a free flow of trade internationally is a very strong bulwark against the reduction in the economy.

I just noticed in the paper today that South America generally has had some diminution in their economy overall, and that will affect us, as we found out with Asia when the Asian economy got sick and we got the flu in a backhanded way.

So I commend you for what you are doing. But let me say also that we put a lot of effort into the Uruguay round. I was involved as cochairman of the Steel Caucus in getting protection of our antidumping laws, and the antidumping laws go to the question of fairness as well as the freedom in our trade relationships.

I am concerned that there is a group in the WTO that wants to reopen the question of antidumping rules and thereby weaken the U.S. trade laws. I commend Ambassador Barshefsky for ensuring that the WTO working group on the Interaction between Trade and Competition Policy focuses its attention on significant, well-defined international competition policy and not include trade remedy instruments.

I would just have one simple message as they look at the WTO rules: leave the dumping rules alone. If anything, strengthen them, but do not tamper with them and do not respond to some countries that want greater access to our country. We had a debate last night on the steel issue and obviously we heard that over and over again that there have been predatory practices that tend to circumvent our antidumping laws.

We do have an enormously open marketplace, and I think we are a model for the rest of the world, but as part of this we need protection against unfair trade practices. I certainly advocate WTO consistent reforms to the trade laws, including reforming the injury standard for section 201 cases to the injury standard provided in WTO's safeguards agreement. The U.S. currently has a higher injury standard than is required by WTO rules. This change would allow industry and labor to use section 201 more effectively.

We constantly hear the statement that the industry and labor should use the laws that we have rather than seek additional protection_that_perhaps goes in excess of our current law. I have to smile, I see President William McKinley's picture up here, who was

a former Chairman of Ways and Means, and he built his first run as a Member of this body on the protective tariff and that was the keystone of his first campaign. And yet if you read the speech in Buffalo after he had been inaugurated for a second term and he said we are in a world trade situation and we have to open markets and we have to trade with the world. So he really did a substantial reversal on the issue of trade.

Those statements he made in Buffalo are certainly very relevant today and I think you have an enormous challenge as a Subcommittee to give recommendations to our negotiators in Seattle to ensure that our industry and our Nation is in a free trade environment, but also a fair trade environment. And I thank you for the opportunity to be here.

[The prepared statement of Mr. Regula follows:]

Statement of the Hon. Ralph Regula, a Representative in Congress from the State of Ohio

Mr. Chairman and Members of the Trade Subcommittee, thank you for the opportunity to present testimony regarding the U.S. negotiating objectives for the WTO Seattle Ministerial Meeting. As you are well aware, the Seattle Ministerial will convene this November in order to launch and set the negotiating parameters for a new "round" of multilateral trade negotiations.

U.S. Trade Representative Charlene Barshefsky testified earlier this year before the Commerce, Justice, State Appropriations Subcommittee that the agenda for these meetings should include such issues as broad reductions in tariffs, the elimination of export subsidies and further reductions in trade-distorting domestic supports linked to production. I further understand that these trade talks will focus more directly on reshaping WTO rules on agriculture, services and intellectual property. The question remains, what other issues will be added to the list of items subject to negotiation.

While I support market opening efforts, I would like to stress that maintaining free trade depends on maintaining fair trade. In this regard, I believe that it is imperative that the United States hold firm against reopening the WTO's antidumping rules.

As a veteran of the Uruguay Round negotiations, I remind everyone that the current WTO antidumping rules were agreed to only with great difficulty. I personally participated in many meetings and worked closely with industry, labor and administration officials to ensure that U.S. trade laws were not adversely impacted or significantly weakened during the Uruguay Round.

I am concerned that there continues to be a group of countries that seek to reopen the WTO antidumping rules and call for a weakening of the U.S. trade laws. Most recently, there were efforts in the WTO Working Group on the Interaction between Trade and Competition Policy to weaken our trade laws. I commend the U.S. Trade Representative for ensuring that this working group focuses its attention on significant, well-define international competition policy issues that do not include trade remedy instruments.

Effective antidumping rules are a cornerstone of an open market policy. The United States now has one of the most open markets in the global marketplace. But, there must be some protection against unfair trading practices if we are going to make our markets available to all our trading partners. We still face many trading partners that have not reciprocated by fully opening their markets. So it is only fair that our domestic industries have some protection against dumped and subsidized imports.

A case in point is the recent steel import surge that occurred in 1998, with imports still continuing at higher than average rates in 1999. The U.S. industry and labor have sought redress through our unfair trade laws and as these cases move through the process, we are now seeing some relief provided to slow the rate of dumped and subsidized steel imports. But, even under expedited procedures, the process has been long and costly for domestic steel manufacturers and American steel workers. For this reason alone, it is imperative that our U.S. trade laws are not weakened.

I would further advocate several WTO-consistent reforms to the U.S. trade laws, including conforming the injury standard for Section 201 cases to the injury standard provided in the WTO Safeguards Agreement. The U.S. currently has a higher