 OK, ladies and gentlemen, good morning, everybody. Welcome. My name is John Hamry. We're delighted to have you here. Ishii Gesang, thank you for being our partner. We were just talking before we came out. This is the ninth conference that we've held, annual conference with Jettro. And we've greatly appreciated it. And of course, it's a very, very different landscape today than the earlier days, when there was a great deal of uncertainty about where Japan was heading. Just over the weekend, of course, we all saw the data that Japan's economy grew, I think, 7% or 8% in the first quarter. It's booming over there. And of course, it feels like that when you go to Japan now. There's a buoyancy in the air that is just everybody is walking a little taller and smiles. And it's really quite exciting to see this. And we're very glad for it. So this is going to be a very different format for our conference this year. No longer gloom, Ishii Gesang, you're back. Japan is back. And we're delighted to have you here. It's my privilege today to be able to introduce to representative Aaron Schach. For a man who is so new to Washington, he got on the power committee. And it tells you it's an insight into how he is seen by his colleagues in the House of Representatives to be invited to be a member of the Ways and Means Committee, which puts him right at the epicenter of politics these days in Washington, especially with Asia. Representative Schach just came back from a trip to Asia. He's been to Asia many times, but his first time to Japan and had a very good conversation with Prime Minister Abe talking about what's on everybody's lips, trade promotion, the TPP and trade promotion authority, I should say. I hope that he will get into that today because this does represent kind of the start of a fundamental agenda between us for the next 20 years. Where is it going? And of course, it's uncertain. It's been a very labored process, not so much the negotiations, but just us getting focused here in the United States. It's been labored. So now we're coming to the focal point. And I think it's a remarkable opportunity for us to hear from Representative Schach to be with us. So would you please with your warm applause welcome, Erin Schach, who is with members of the Ways and Means Committee. Well, good morning. Thank you for the warm introduction and the opportunity to be with all of you. As was mentioned, I'm a member of the Ways and Means Committee, also a member of the Trade Subcommittee. And you will not find a more outspoken proponent of trade not only in the Asia Pacific, but with any country we can get a free trade agreement with. As a United States citizen, I can't imagine not believing that with only 5% of the world's population, it is to our benefit of our economy, as well as my constituents who need jobs and growth, that we look for as many opportunities as we can to level the playing field and have access to the other 95% of the world's population. I happen to believe in Americans' exceptionalism, both in our people as well as in the products that we sell in the commodities that we grow. And if you believe, as I do, that America can compete, that we should not fear any open markets around the world. And I mention that in my opener, because as a member of Congress, I'm a representative of who I, who elects me. And the amazing thing about trade is that sometimes the politics of trade are not as easy as perhaps the policies. And as a member of Congress who runs every two years back in my central Illinois district, the number one industry in my district is agriculture. There are 60 members of Congress left in the United States House of Representatives who have ag dominant districts like myself, which means all 60 members of Congress can vote together on ag issues and we lose overwhelmingly. So we have to do a good job of explaining ag policy to our colleagues in suburban and urban America. And second, the second largest industry in my district is manufacturing. Chief among it is a big yellow tractor company called Caterpillar, which is in my hometown. And both manufacturing and agriculture are intricately tied to new markets' growth and trade. And yet when I pull this issue back in my congressional district every two years, should we enter into new trade agreement? Should we look for new markets and new access? Believe it or not, it's a 50-50 issue nearly every two-year cycle on whether we should move forward with more trade. And so that's why as a member of Congress and someone who's passionate about trade, I'm never bashful about bringing this up when I'm back home on the stump, whether I'm in a hospital setting or a town hall forum or any business or educational institution about the benefits of trade and why more access to free markets are important because oftentimes those on the other side of these issues are better organized, better funded and do a better job of communicating. So we have our work cut out for us to continue to advance the ball forward. I also think it's a good opportunity to remember what we just went through with Columbia Panama and South Korea. Here in the United States, we have seen huge boom in economic growth. Even despite our anemic recovery, the administration purports several hundred thousand jobs have been created as a result of those three trade agreements. So you can imagine how more weak our recovery would have been without the implementation of those three trade agreements. And certainly in our ag and manufacturing sectors, they have benefited from exports to those three countries. Why I mention that is because what struck me when I went to Japan was the politics of trade is not just unique to the United States. And in our meetings with Prime Minister Abe and many of his cabinet members, Finance, Defense and others, it became very apparent that sometimes perhaps what they want to do on the policy front is a bit encumbered by the politics. And it's refreshing to hear from a Prime Minister like Abe who speaks with such clarity about what he wants to do not only for the benefit of their economy, but I would also submit for the benefit of their country from a national security standpoint. It's no secret that the United States and Japan have had a very close relationship after World War II militarily. We have a treaty that we reaffirmed when we were there that America stands by her allies, regardless of any dispute, regardless of who the dispute is with, America stands with her ally and we will continue to do that militarily. Needless to say, as we then ventured to South Korea and China, which were the two countries we visited after Japan, we got talked to a little bit about those comments. But nonetheless, it is America's position not only by our President, but also reinforced by the congressional delegation that visited the country. But second, we know that countries that trade together and grow together economically are that much stronger. And so I think both from our administration as well as the Japanese administration, they understand that a trade agreement and particularly TPP being signed into law will help further that relationship, both economically, but also send the message to the region that America is tied both militarily and economically with no daylight, which I think is extremely important. This TPP proposal really can get done, but for a few obstacles. One, the administration's discussion about excluding particular items from TPP. I will tell you specifically on ag components, if the administration goes forward excluding certain lines within agriculture, I think that bill will be dead on arrival in the House of Representatives. And this is a very important message that we delivered to Prime Minister Abe, and it's also a very important message that the Ways and Means Committee and the Trade Subcommittee has communicated directly to Ambassador Froman and his team. If I'm gonna go back to my district and explain why manufactured products from Japan should come to the United States tariff free and autos should be able to go back and forth, which is another issue of contention. We cannot unilaterally exclude products like pork and beef, which are extremely important to the constituencies in rural America, and quite frankly, to a number of members of Congress that we need to be yes votes on TPP. Second, the President of the United States cannot allow the United States Senate to run the country, specifically Harry Reid. The President needs to be willing to exercise the political capital that he needs and seems to be willing to do on other things. Most recently last week, releasing five detainees from Guantanamo Bay clearly expended some political capital to do that. So we have a President who's willing to make some tough decisions that he believes is right when he's willing to do it, and this is one of them that he needs to flex his political muscle and get the votes from his own conference and buck perhaps even some of the leadership in his own Senate to do what he knows is right for America. And finally, all parties have to be willing to embrace a truly free model of free trade. They have to be willing to face the temporary political obstacles, both in the United States of America, as well as in Japan, to get this agreement done. Knowing that long-term, the economic growth will far outweigh any political outfall that either country will have or either leader will have. I think if both leaders are willing to do that, we can get a TPP agreement passed. These 12 countries, as you know, represent 40% of the world's GDP. It means a lot not only to the United States, but also to Japan and others in the region. And I think Japan and the United States are really the two sticking points in the agreement. If we can get Japan and the United States on the same page, I think the other 11 countries will fall into line. Finally, I would say to the Americas, in my country, I would say, if we don't get our act in order, we have the potential to lose out. Again, I would point to the trade agreements we most recently signed. As we took our time on the Columbia trade agreement, our wheat sales to Columbia fell from about 70%, 80% of total wheat sales to Columbia to about 20% of total wheat sales to Columbia. Why? Because Columbia entered into a free trade agreement with Canada, which made their Canadian wheat much cheaper than United States wheat, and as a result, we lost market share. Same will be true with Japan and other Asian countries as they enter into agreements with other countries around the world as United States takes its time on trade. And so that's really why time is of the essence, and so many of us are pushing the administration to not let the political season or the political calendar get in the way of doing the right thing for our economy, for jobs, and for growth here in our country. Finally, let me just say about, mention another country in the region, which is important. A year ago, I had the opportunity to go with two other members of Congress and be the first U.S. delegation to meet with Chief Minister Narendra Modi for the first time in 10 years that a congressional delegation had met with him. We were visiting India on the invitation of Chief Minister Modi. Some in the United States said, oh my gosh, I can't believe you're meeting with him. It looks like we bet on the right horse. Now Prime Minister Modi, one with overwhelming election, a historic election, set a record in terms of turnout, and one with no need to build a coalition government. He and his party won enough votes to basically control the entire operation of the Indian government. Why is this relevant? Well, India represents the largest democracy in the face of the earth. You talk to U.S. business owners, perhaps Japanese business owners as well. They will tell you many of the challenges dealing with India is certainty with the rule of law, unpredictability in the courts, and let's face it, corruption. And those were the themes that I kept hearing from U.S. businesses is that they've attempted to invest in the world's largest economy. When I visited the state of Gujarat, and I met with the leadership of Abbott, met with the leadership of Ford Motor Company, who at the time was under construction of a new billion dollar factory in the state of Gujarat, in private meetings with just the American congressmen and the leaders of these U.S. companies, I posed the question, why are you building in the state of Gujarat? Why are you putting a billion dollar facility here? And the one word answer they gave me back was Modi. I said, oh, come on, you know, I'm an elected official, he's an elected official, no one's perfect, why? They said, yes is yes, his no is no, he's not corrupt, you don't pay to move your file. He said he would build a road, he built a road. We don't get that anywhere else in the country. And so for 10 of the 12 years that he had been chief minister, they had double digits growth in that state. Those are the reforms that he ran on as prime minister. Roll out the red carpet and cut the red tape. Maximum governance, minimum government. Sounds like a few politicians here in America. The point being that he now has not only the track record of doing that within a state of India, but I would suggest he also has the political might and the political capital to execute that on a national level, given his overwhelming electoral victory. And I think it is opportune time for the Asian countries and the United States to reach out a hand and perhaps consider inviting India into the TPP negotiations. The largest democracy on the face of the earth, and if they can accept some of these same free market principles and leveling a play field and elimination of tariffs, I think that country can see a very similar economic boon that we're seeing in countries like Japan and others that have this pro-growth economy. The right leadership with the right political capital can do the right thing, both in Japan and the United States, and I would also submit it in India. So it's an exciting time right now with trade. Final thought is this. Our administration here in the United States has been discussing the possibility of moving forward and completing TPP negotiations prior to the passage of TPA. I think that will make it extremely difficult, if not possible, to pass TPA. TPA, in very simple forms, a simple explanation, is Congress's ability to lay out its wants and desires as a part of the fast-track authority it gives to the President. For the President and the administration to complete negotiations on agreement and then come back to Congress and say, we want your opinion on how to negotiate is more than putting the cart before the horse. And at a time when there is some skepticism within the Congress about how far they can trust the administration for a number of reasons, and someone who is actively involved in whipping my members to vote yes on trade and yes on TPA, I will tell you the biggest pushback I get on TPA is members who say I'm not sure we can trust the administration. Perhaps TPA is simply a blank check for the administration to negotiate whatever they want on trade, and we're only getting their votes by saying, look, this is actually your opportunity to weigh in on how far the administration can go. This is your opportunity to weigh in and give some framework to how the trade agreements will be negotiated. If the administration completes TPP prior to the passage of TPA, I believe it will be very difficult to get TPA passed and ultimately TPP. And this is, again, a message I have taken to the administration, specifically to Mr. Froman, and said you're making a huge mistake if you move forward with TPP before TPA. The President has shown again that he's willing to flex his political muscle. We understand the political season right now with primaries is underway, but I think, again, the opportunity is there for the Republican House, the Democratic Senate, and the White House to get TPA done. Max Baucus and Chairman Kamp had agreed to language on TPA. And the only reason we didn't have a bipartisan TPA bill in the House of Representatives was because the White House was silent and didn't weigh in. Had the White House endorsed the Baucus-Kamp agreement, we would have had a bipartisan bill in the House and TPA would have passed the House of Representatives overwhelming. So it is up to the administration, particularly the President, to exercise some political capital right now to get TPA across the finish line and in advance of TPP concluding their negotiations. So with that, I think it's appropriate to open it up for some questions and let all of you perhaps drive the last 10 or 15 minutes of dialogue. Once again, I appreciate what you're doing to foster the U.S.-Japanese alliance and helping grow our economies. And I will tell you, as, again, the congressmen for Caterpillar Tractor Company, they have significant investments in Japan. And a growing Asia is good for U.S. economy and U.S. manufacturers and agriculture. So hopefully we can get TPP done to continue to grow those economies, both from an economic strength, but also I would suggest for a military and the national security strength as well. Thank you. Do you want to go over here? Or do you want to come down here? Thank you, congressman. I'm Mike Green, Senior Vice President for Asia here at CSIS. And I want to thank congressman Schach for a real tour de force. The politics of trade in this country, the urgency of it, but a very astute observation on the bookends of our Asia policy, if you will. Japan and India are largest Asian ally and the largest democracy in the world. So that was terrific. We're going to open it up for Q&A. I'm going to use the prerogative of the chair to ask the first question, if I might. Could you walk us through the best case scenario over the coming months or years bounded by the reality of politics in the midterm election? Given the urgency, what's the best case scenario for the timing of TPA and TPP? Some people talk about the lame duck session, others say no, it won't happen until the next administration in 2017. What's the best case scenario you see for TPP and TPA over the next months and years? Well, I have found lame ducks to be rather lame. And this is my sixth year in Congress, so perhaps this will be my third lame duck. And everybody puts so much hope and so much optimism and has such high expectations that so much will get done during the lame duck. And I mean it sincerely, they usually tend to be quite lame and very little gets done in the lame duck session. So I guess I would start with the premise of why the lame duck? We have an overwhelming House majority willing to vote for TPA. The President has said he wants TPA. But for Harry Reid in the Senate, I would argue we should have TPA. So this ideally from a time standpoint is, again, I'm not gonna give Harry Reid election year advice, but I would suggest that if he wants to remain majority leader and he looks at the senators who are in the most risky U.S. Senate seats or states, they're primarily states that Republicans have won and trend red. They are also states which tend to be more supportive of trade. So from a political standpoint, as well as a policy standpoint, I think post-primary season, whether that be the end of July or the three weeks that were in session in September, I think September is an opportunity for the President to flex his political muscle, for the Senate to actually deliver on something pro-growth, pro-business, pro-jobs, for those senators who are in tough re-elections and need something of substance to show for in a Senate who's done very little. So that is an opportune time, I think. I think it's perhaps too much to ask that TPA and TPP, first of all, it's speculation of when we'll finish TPP negotiations, but TPA and TPP before the November election, I think maybe a bridge too far to cross, but I really don't think TPA before the November election would be too difficult if the President was willing to lean in and flex his political muscle. If not, it's not gonna get done without the President's engagement. Simply put, Ron Wyden, the new chairman of the Senate Finance Committee, I don't believe has the political muscle to overturn the will of the majority leader in the Senate. Only the President can do that, and if the President wants TPA, I believe he can get it done before the November election. TPP, once TPA is finalized, once TPA is signed into law, I think it will eliminate the doubt that we heard in the Japanese voice when we were there about whether or not Congress would back up what the administration negotiates. Sometimes we lose sight of the fact that what we do in the United States, in the ping-pong between the White House and the Congress, and the Congress and the White House is constant fighting back and forth, sometimes undermines our credibility to speak with one voice internationally. And one of the concerns expressed by the Japanese to us was, if we negotiate in good faith with this President, we'll you the Congress back that up. And in order for us to be able to say yes, we have to have TPA. Without TPA, I think a negotiated agreement on TPP is hallow. Thank you. The floor is open, and we have a few minutes, so keep your questions brief. Yes, ma'am, in the back there. My name is Victoria Guida. I'm with Inside U.S. Trade. And I was wondering, you mentioned earlier that there shouldn't be agricultural product exclusions in TPP. When you talked to Prime Minister Abe, did you talk about whether there could be reductions, but not necessarily exclusions? And did he seem willing to maybe include tariff lines, but was interested in maybe not reducing them too much? What was the message that you got from him there? Well, without divulging too much of private conversations, I will just say nothing was settled. But the interesting thing is someone who represents a large ag district is that while both of our sides on ag recognize that it's an issue of contention, ag is a large industry in the United States, but I would submit they're not very well organized. Short of the Farm Bureau, in terms of political might, these are not the super PACs that you fear in an election, right? However, contrast that with Japan, which relatively speaking within their economy, the ag sector is not the dominant force. However, my sense was they are far more well organized and have more political muscle outsized of their weight within the percent of the Japanese economy. And so my sense from Prime Minister Abe began not talking specific ag lines, pork, beef, soybeans and the like, but a 30,000 foot view, my sense was that he has to deal more with the political realities of ag and not so much the economic impact of a free trade agreement on those lines with ag. And so much of what he's been doing, I think, is really building up his base, building up his political capital back home so that if and when he needs his members and he himself needs to do some tough things, he's got the political capital to expend to do it. And so perhaps when our embassy gets exercised over visits to the Yasukuni Shrine and other things, we lose sight of the fact that our political leadership here in the United States, both Republican and Democrats, act in very similar ways when it comes to shoring up their base, when it comes to making sure that they have the political capital, sometimes doing things that aren't as mainstream, but perhaps are important for political reasons that then allow you to reach out and expend that political capital on policy initiatives. So I think that the Prime Minister Abe heard us when we said, as the United States Congress as representatives here, we cannot deliver a TPP bill in the House that excludes ag portions of the bill, but whether or not there's a sunsetting of some of these tariffs similar to what the President negotiated with South Korea on autos, perhaps there are things like that that our negotiators are looking at. We're not involved in the day-to-day negotiations, but the top-line message was if you expect us to deliver a bill that excludes specific ag portions of our economy, it's gonna be extremely difficult, if not impossible. Is that Robin? Robin White, retired Foreign Service. Thank you, Congressman, for your support of free trade. Following up on the ag issue, we have some protectionist interests on our side, particularly sugar, and of the 60 members you cited in the ag group, I'm sure some of them have the opposite feeling that, gee, maybe some exclusions might be needed. Would you please comment on sugar? Well, as a corn and soybean grower, and my home state being the largest candy producer in the country, perhaps you know my bias, which is, generally speaking on agriculture, I think the elimination of tariffs is a good thing. And I think if you look at the New Zealand model in other countries, which have gone down that path of a true-level playing field, a true elimination of support programs and assistance, ag has booned, and we tend to, just as in manufacturing, get really good at what we're good at, and get out of what we're not good at. And so I was one of the members of Congress who voted to eliminate subsidies to the sugar industry as a part of the farm bill. Obviously we lost that fight in the house, and I would also say that the ag assistance program are bipartisan, so it's not a Republican-Democrat fight, it's really a regional fight. But there will be no perfect TPP, so we have to recognize that. But I think the message from the Congress, and certainly the message from the Trade Committee, which will be the first hurdle for us to get through, is the cleaner the bill, the fewer the tariffs, the more flatter and fairer the trade agreement is, the better it will be, and the easier it will be to get past Congress. But you're right, one man's pork is another man's safety net, and we see that in not only ag, but social programs and the like, you can name it. So I guess we'll all watch, wait and see. We'll invite a congressman from Louisiana next time, just so you can ask the question again. Or Florida. Or Florida. Or Minnesota. Hi, Manny Manriquez with the Japan Automobile Manufacturers Association. Also thank you very much for your support for free trade, we very much appreciate that. There's been some sounds recently that Ron Wyden might introduce his own version of TPA, which he has termed SmartTrack, and it will probably contain some form of currency manipulation in the negotiating objectives, and it will probably have something on labor and environment, a lot of democratic priorities, which he said he's been speaking to members about. I'm wondering to what extent would Republicans be willing to address some of those democratic priorities in TPA and perhaps integrate them into a larger bill? That's basically it. Well I would first say that would be suggesting that the Bacchus camp bill that was negotiated in February didn't include some of the democratic priorities. If Ron Wyden thinks that he can reopen negotiations on TPA to grab more of the democratic Christmas list with nothing in exchange for Republicans, he's mistaken on how negotiations work. So I guess I'd back up and say what is more important timeliness or perfection? The trade office had signed off on the camp Bacchus language. The administration short of the White House and specifically the President speaking out publicly about that agreement had all but endorsed it. So I would submit that the perfect is the enemy of the good. And at the end of the day we want is a good TPP bill. What I would say to my democratic senators, look you probably have more sway with the White House than I do. And so TPA is really the framework, TPP is the specifics. And so to completely slow down and bring to a halt the movement of passing a TPA bill, a good TPA bill because you want to make it perfect, I think really jeopardizes the possibility of getting TPA and then ultimately TPP done across the finish line. So Chairman Wyden certainly has the powers, the Chairman of the Senate Finance Committee to try to begin a new negotiation on TPA, but it's not going to be as simple as him adding democratic priorities to a TPA bill that was originally structured under Bacchus and camp. That means that camp is then going to have to go back to us and say, okay, if we're going to agree to these democratic priorities, what are we going to get exchanged for that? And I actually thought the camp Bacchus TPA bill is one that could have passed. Certainly the USTR team felt that it was good enough that they could work within it, which means the Republicans weren't hamstringing their ability to negotiate a TPP deal. So let's not try and make it perfect. We've got a good TPA agreement. It's necessary for TPP and other trade agreements. And my wish would be for us to move forward on language similar to the Bacchus camp bill, not because it's perfect, but because there seems to be a coalition of Republicans and Democrats that can get that done. My fear with a new agreement is it will take a considerable amount of time and then you get into the uncertainty of the political calendar of when will we pass that? And what does that mean in the timeline and holding up progress on TPP? Let me ask finally, when the Bush Administration got into this TPP business, it was described as a building block towards a free trade area of the Asia Pacific. Presumably the APEC countries, presumably including China at some point, the debate in China has shifted with Japan's active participation. There's not a lot of interest. This could be setting rules China needs to be a part of, but also as a lever to force reform and so forth in China. This is getting way ahead of ourselves, given everything you said about the politics of moving on TPA. But thinking down the road, if we get a successful TPP and TPA bill through and demonstrate results, is China just too big for Congress to swallow? Do you think that we could get on track where that's conceivable down the road? Well, I definitely think a trade agreement with China, I mean, to the degree we can get a level playing field with China I think will be a good thing for us. I'm not sure the Chinese are ready to agree to where Japan, United States, and presumably the other level countries are gonna go. But there's nothing like competition to get your act in order. And there's nothing like seeing economies boom, markets grow, jobs being created, for others to say, you know what, I wanna be a part of that. And if there was any theme that we took away from our trip to China and something I knew about from my other trips to China is they recognize that their strength and their ability to maintain power is directly tied to their ability to maintain economic growth and a continual movement up the economic chain of ladder for the people of China. And so whether it be for economic reasons or political reasons internally, they're gonna wanna be a part of trade period, whether it be a part of TPP or some further yet to be negotiated trade agreement. But I think the best thing we can do with a partner like China, which may not be ready like Japan is, is to conclude an agreement with Japan and the other allies in the region create some synergies there, create some growth for both of our countries, and that will get the competitors in the region to I think more quickly fall in line. Congressman Schock, you've been generous with your time and given us a very energetic and compelling case for engagement internationally and for trade. And what we really have to do is let you get back to the other side of town where there's a lot more work to be done. So please join me in thanking Congressman Aaron Schock. Thank you.