[Senate Hearing 113-564]
[From the U.S. Government Publishing Office]
S. Hrg. 113-564
NOMINATIONS OF ROBERT W. HOLLEYMAN II AND CARY DOUGLAS PUGH
=======================================================================
HEARING
before the
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
on the
NOMINATIONS OF
ROBERT W. HOLLEYMAN II, TO BE DEPUTY UNITED STATES TRADE
REPRESENTATIVE, WITH THE RANK OF AMBASSADOR; AND CARY DOUGLAS PUGH, TO
BE A JUDGE OF THE UNITED STATES TAX COURT
__________
JULY 16, 2014
__________
Printed for the use of the Committee on Finance
U.S. GOVERNMENT PUBLISHING OFFICE
93-277 PDF WASHINGTON : 2015
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
Washington, DC 20402-0001
COMMITTEE ON FINANCE
RON WYDEN, Oregon, Chairman
JOHN D. ROCKEFELLER IV, West ORRIN G. HATCH, Utah
Virginia CHUCK GRASSLEY, Iowa
CHARLES E. SCHUMER, New York MIKE CRAPO, Idaho
DEBBIE STABENOW, Michigan PAT ROBERTS, Kansas
MARIA CANTWELL, Washington MICHAEL B. ENZI, Wyoming
BILL NELSON, Florida JOHN CORNYN, Texas
ROBERT MENENDEZ, New Jersey JOHN THUNE, South Dakota
THOMAS R. CARPER, Delaware RICHARD BURR, North Carolina
BENJAMIN L. CARDIN, Maryland JOHNNY ISAKSON, Georgia
SHERROD BROWN, Ohio ROB PORTMAN, Ohio
MICHAEL F. BENNET, Colorado PATRICK J. TOOMEY, Pennsylvania
ROBERT P. CASEY, Jr., Pennsylvania
MARK R. WARNER, Virginia
Joshua Sheinkman, Staff Director
Chris Campbell, Republican Staff Director
(ii)
C O N T E N T S
__________
OPENING STATEMENTS
Page
Wyden, Hon. Ron, a U.S. Senator from Oregon, chairman, Committee
on Finance..................................................... 1
Hatch, Hon. Orrin G., a U.S. Senator from Utah................... 2
CONGRESSIONAL WITNESS
Landrieu, Hon. Mary, a U.S. Senator from Louisiana............... 5
ADMINISTRATION NOMINEES
Holleyman, Robert W., II, nominated to be Deputy United States
Trade Representative, with the rank of Ambassador, Executive
Office of the President, Washington, DC........................ 7
Pugh, Cary Douglas, nominated to be a judge of the United States
Tax Court, Washington, DC...................................... 9
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Hatch, Hon. Orrin G.:
Opening statement............................................ 2
Prepared statement........................................... 21
Holleyman, Robert W., II:
Testimony.................................................... 7
Prepared statement........................................... 24
Biographical information..................................... 26
Responses to questions from committee members................ 37
Landrieu, Hon. Mary:
Opening statement............................................ 5
Prepared statement........................................... 49
Pugh, Cary Douglas:
Testimony.................................................... 9
Prepared statement........................................... 51
Biographical information..................................... 52
Wyden, Hon. Ron:
Opening statement............................................ 1
Prepared statement........................................... 62
(iii)
NOMINATIONS OF ROBERT W. HOLLEYMAN II, TO BE DEPUTY U.S. TRADE
REPRESENTATIVE, WITH THE RANK OF AMBASSADOR, EXECUTIVE OFFICE OF THE
PRESIDENT; AND CARY DOUGLAS PUGH,
TO BE A JUDGE OF THE
UNITED STATES TAX COURT
----------
WEDNESDAY, JULY 16, 2014
U.S. Senate,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 10:06
a.m., in room SD-215, Dirksen Senate Office Building, Hon. Ron
Wyden (chairman of the committee) presiding.
Present: Senators Hatch, Crapo, and Thune.
Also present: Democratic Staff: Michael Evans, General
Counsel; Kara Getz, Senior Tax Counsel; Todd Metcalf, Chief Tax
Counsel; Lisa Pearlman, International Trade Counsel; Elissa
Alben, International Trade Counsel; Anderson Heiman,
International Competitiveness and Innovation Advisor; and Jayme
White, Chief Advisor for International Competitiveness and
Innovation. Republican Staff: Everett Eissenstat, Chief
International Trade Counsel; Rebecca Eubank, International
Trade Analyst; Nicholas Wyatt, Tax and Nominations Professional
Staff Member; and Kevin Rosenbaum, Detailee.
OPENING STATEMENT OF HON. RON WYDEN, A U.S. SENATOR FROM
OREGON, CHAIRMAN, COMMITTEE ON FINANCE
The Chairman. The Finance Committee will come to order.
Today the Finance Committee is going to consider two
nominees, Mr. Robert Holleyman, who is nominated to be Deputy
United States Trade Representative at the Office of the U.S.
Trade Representative, and Ms. Cary Pugh, nominated to be a
judge for the U.S. Tax Court.
First is Robert Holleyman. If confirmed as Deputy USTR, Mr.
Holleyman will be responsible for a broad portfolio of issues,
including trade matters affecting U.S. service providers and
intellectual property rights owners, as well as the ongoing
Trans-Pacific Partnership negotiations and the broader U.S.
trade relationship with Asia, including China.
It is essential that the U.S. has a Deputy USTR in place,
given the critical juncture of the TPP negotiations and the
many challenges that U.S. companies face in China and across
the region. Mr. Holleyman has had a long career in the
technology industry, from which he brings a valuable
perspective on the importance of digital trade to the American
economy. He has years of experience on the ground, working to
expand access to markets such as India and China. Digital trade
has rapidly emerged as a major source of economic growth and
innovation, and it is fundamentally reorganizing how goods and
services are made and traded across our borders.
As significant trade agreements take shape, it is essential
that USTR provide global leadership in the development of rules
that make sense for a 21st-century digital economy. I am eager
to work with USTR and Mr. Holleyman, if confirmed, as they work
to adopt trade agreements that address these new challenges.
Mr. Holleyman also has experience on Capitol Hill, where he
worked in both the majority and minority and served as senior
counsel on the Senate Commerce Committee. Understanding how to
work effectively with the Congress is an essential skill in the
role for which he is nominated.
Also with us today is Ms. Cary Pugh, who is nominated to be
a judge on the U.S. Tax Court. The Tax Court is the judicial
backbone of the Federal Tax Code. The 19 judges who make up the
court have a challenging mission that requires them to travel
around the Nation. While it is certainly difficult, these
judges do indispensable work to ensure that taxpayers' voices
are heard and that the Nation's tax laws are enforced in a fair
and effective manner.
Ms. Pugh comes to this task well-prepared. She served in a
variety of roles, including time at the IRS, and she is yet
another alum of the Finance Committee. She has also spent time
working in the private sector. This range of experiences and
knowledge is going to serve her well as she adjudicates the
Nation's tax cases.
I thank both of the nominees for coming before the
committee this morning, and I look forward to hearing from each
of you.
[The prepared statement of Chairman Wyden appears in the
appendix.]
The Chairman. I will say that we are going to have a bit of
a logistics challenge this morning. There is a vote at 10:15,
so we will have Senator Hatch make his opening remarks. We are
also very pleased to have the chair of the Energy Committee
here. I have had a chance to watch her expertise in action.
So we will get as far as we can in the first few minutes. I
do anticipate that we will have to come back, and it should not
be long after we come back, but we appreciate your patience. It
is my intention to return immediately after the vote. I know
some of these votes seem to go on forever, but I will return
immediately.
Senator Hatch?
OPENING STATEMENT OF HON. ORRIN G. HATCH,
A U.S. SENATOR FROM UTAH
Senator Hatch. Thank you, Mr. Chairman. I just want to say
these are excellent nominees. I intend to vote for them. I have
known them for quite a while, to be honest with you, and they
are good people. I am told that Ms. Pugh has deep roots in the
Old Dominion. Her family has lived in the same rural community
for many generations. I am told that your passion is Duke
University.
Ms. Pugh. Yes, sir.
Senator Hatch. Well, I happen to like that too. I like
their basketball team very much. They tell me you are also a
patient and well-prepared angler, so you cannot be all bad, is
all I can say. You also happen to be a great former staffer to
this committee.
During your tenure on the Finance Committee Democratic tax
staff, you became known as a reliable member of Senator
Baucus's team and developed a reputation as a problem-solver,
which is important to the committee, accomplishing quite a bit
in the legislative arena in a relatively short period of time.
Your reputation only grew in your later government and
private-sector experience. I think your small-town common sense
is going to be very important here, but you also have excellent
academic and professional credentials which should serve you
well in this position on the Tax Court.
The Deputy USTR also plays an important role, particularly
in formulating U.S. trade policy and advocating on behalf of
America's international trade interests. I have known Mr.
Holleyman a long time and have a lot of regard for him, and I
intend to support him. You will be taking on a very important
portfolio, including Asia, services, and intellectual property,
all areas where we face significant challenges.
If anybody can make some inroads there, you ought to be
able to. Turning first to Asia, China continues to be one of
our most important and most challenging trading partners. China
reaps great benefits from an open world trading system, but its
record of adhering to the rules of that system is mixed at
best. U.S. exporters and investors in China face a host of
challenges when trying to compete in China's large and growing
market, including the continued theft of U.S. intellectual
property and trade secrets, trade-
distorting subsidies, forced localization, and regulatory
barriers.
Throughout Asia, our exporters face a range of barriers to
their goods and services, and one way to address many of these
barriers is to negotiate strong rules in the Trans-Pacific
Partnership, or TPP. But here too, problems persist.
While I continue to support these negotiations, I am
becoming increasingly concerned with the direction the
negotiations appear to be taking. It seems that the
administration may consider something far less than full tariff
liberalization from Japan. This would not only result in a weak
TPP agreement, but also set a very bad precedent for other
negotiations, including the TTIP negotiations, the Trans-
Atlantic Trade and Investment Partnership.
I am also concerned that the administration may once again
short-change U.S. innovators and intellectual property rights
holders by agreeing to a weak outcome for intellectual property
rights protection. Let me just be clear: I will not support an
agreement that does not provide for the robust protection of
U.S. intellectual property rights, including terms of data
protection for biologics similar to those found in the U.S.
law.
As the author of Hatch-Waxman, I know how important that
data protection really is, and I get tired of the politics
being played around that all the time. It had better be the
same. That was a very hard set of negotiations that allowed us
to reach those particular data protection figures.
Mr. Holleyman, if confirmed, intellectual property rights
and innovation will also be part of your portfolio. It is
essential that the Deputy USTR be a powerful advocate for
strong intellectual property rights protection. I think you
will be. I hope that you will be that voice, and such an
advocate is badly needed at USTR right now.
But another area that would be in your portfolio is
services. Trade in services is one of our country's most
competitive exports. If confirmed, you must work closely with
Ambassador Punke to ensure that we meet the ambitious goals of
the trade and services agreement and the TTIP. I will also be
counting on you, if confirmed--and I think you will be--to
ensure that all services, including financial services, are
included in the regulatory coherence and market access outcomes
of TTIP.
Finally, I hope you will help push the administration to be
a stronger, more public advocate on behalf of renewing Trade
Promotion Authority, or TPA. Without it, I do not think the
administration can negotiate high-standard trade agreements
that will achieve the goals of Congress and that will be passed
into law. The Bipartisan Trade Priorities Act that I introduced
with former Senator Baucus and Chairman Camp would renew TPA
and outline a set of bipartisan priorities for our trade
negotiators.
Now, a lot has changed since the last time TPA was renewed
in 2002. Our bill recognizes that reality and, with extensive
input from multiple stakeholders, we have created a bill that
addresses the challenges our job creators, workers, farmers,
and ranchers are facing today. So I hope we can move on our
legislation as soon as possible. We have a new chairman, and he
is excellent, and I think we can do this. It is essential to
ensure that the ambitious trade negotiations currently under
way are successful and that we achieve the best possible
outcome for the American people.
Mr. Chairman, I thank you once again for holding this
hearing.
The Chairman. Thank you, Senator Hatch. I very much
appreciate your statement. I also want to note that you have
long focused on this absolutely critical area of protecting
intellectual property, and I very much appreciate your focus
here again today.
[The prepared statement of Senator Hatch appears in the
appendix.]
The Chairman. Our first nominee is going to be Mr. Robert
Holleyman, nominated to be Deputy United States Trade
Representative. It is a tradition in this committee, Mr.
Holleyman, that you introduce your family.
Mr. Holleyman. Thank you, Mr. Chairman. I would like to
introduce my husband, Bill Keller, who is here in the front row
and who is joined by friends who are here and family in
Louisiana who are watching via the webcast.
The Chairman. Very good. It is nice to have the chair of
the Energy Committee here, a long-time ally of Senator Hatch
and I on a whole host of matters. She wants to make sure that
the voice of Louisiana is heard again this morning.
Senator Landrieu, let us have you introduce Mr. Holleyman.
STATEMENT OF HON. MARY LANDRIEU,
A U.S. SENATOR FROM LOUISIANA
Senator Landrieu. Thank you, Mr. Chairman. It is wonderful
to see you in your new role as chair of this important
committee. Thank you for your leadership for our Nation and for
your support of me as I learn how to be a chair of the Energy
Committee. Senator Hatch, thank you for your support of these
two nominees.
I am here to present to the committee Robert Holleyman.
Robert and I did not meet here on the Hill; we actually met in
high school many years ago when we were both up here to
represent our respective schools--his in Lake Charles, mine in
New Orleans--at the Louisiana Youth Seminar. It was there that
we were encouraged to pursue more leadership abilities, and so
here we are as the U.S. Senator and as Ambassador from our
State, or soon to be.
We shared that unique experience early in life and both of
us have continued our passion to represent our State and to try
to help make this country a better place.
Robert grew up in Lake Charles. He still has family and
friends throughout the State. He is married to Bill Keller.
Bill is a wonderful partner, and we are proud of both of them.
As many of you will understand, you can take a man out of
Louisiana, but you cannot take Louisiana out of the man. I am
confident that Robert--who grew up literally within earshot and
across the street from the Port of Lake Charles, which is the
most important trading port in our country--will bring all of
that background to the position that the President has
nominated him to serve. He graduated from Barbe High School, a
great public school in Lake Charles, graduated from Trinity
University in San Antonio, and then received his law degree
from Louisiana State University.
After being admitted to the bar, he served as clerk for the
late U.S. District Judge Jack Gordon in the Eastern District of
New Orleans. He then, amazingly, moved to Washington to work
for Senator Russell Long, former chair of this exact committee.
So he is actually back where he started many years ago, and now
as a proposed Trade Representative.
He worked for an extensive period of time with the Senate
Commerce Committee. He is extraordinarily familiar with and
steeped in the issues before the Finance Committee as they
relate to trade. I believe strongly that is why President Obama
has tapped him to serve in this capacity.
In addition, his career after the Hill, which was in the
software industry and remains to this day in the high-tech
community, is going to best serve him, I think, to represent
our country in these negotiations. He is currently CEO and
founder of Cloud4Growth, a cloud technology development
company, and he represented the Software Alliance from 1990 to
2013.
So, Mr. Chairman, his experience as a young leader, his
commitment to leadership and excellence throughout his career,
his professional background, his academic degrees, and his work
already deeply imbedded in work of the Finance Committee, on
the Commerce Committee, and in the office of Senator Long, I
think give him a very long and broad perspective of the kind of
issues that Senator Hatch has raised which are so important,
making sure that America is well-represented--America as our
country, but also America as small business owners--and that
the average person is well-represented at those trade
negotiations so that our people are not left behind.
I will conclude with, Louisiana has right now--and Mr.
Holleyman is very familiar with the challenges of trying to
promote fair trade with the Pacific Rim, with China, and many
of the countries in the Pacific. We have had some serious
issues with dumping of seafood, crawfish, and shrimp that are
undermining a part of our economy that is very, very important.
There have been some threats to the Jones Act, which protects
our maritime shipbuilding industry, which is extremely
important to Louisiana.
So believe me, I would not be supporting someone for this
position if I did not think that he was capable of representing
the interests of Louisiana, the Gulf Coast, shipbuilding, our
seafood industry, and let me mention our movie industry. I am
not California, but Louisiana has literally just surpassed
California in movie production in the Nation, amazingly.
There is a big threat under way for China and some of these
countries to steal this intellectual property and to undermine
the domestic creative industries here in America and promoted,
amazingly, through Louisiana.
So Robert is familiar with these challenges. That is why I
give him full support. I know he will do a wonderful job.
Robert, thank you for your leadership over these many years.
And I will submit the rest of my statement for the record,
Mr. Chairman.
The Chairman. Senator Landrieu, thank you for a very
thoughtful introduction. I think, Mr. Holleyman, you know that,
when you are with Chairman Landrieu, you are running with the
right crowd. Suffice it to say, Chairman Landrieu, I think your
point with respect to trade enforcement is particularly
important. After Ambassador Froman came to the committee, that
was actually our first hearing on trade enforcement.
[The prepared statement of Senator Landrieu appears in the
appendix.]
The Chairman. I like to think that it is already paying
off, because we had the United Steelworkers and the U.S. Steel
Company here, and last week we had a favorable decision with
respect to Korea. So I think that what is now being shown is
strong bipartisan interest around exactly the kind of issues
that you have raised, and I thank you for, once again, your
incisive comments.
Our next nominee is Cary Pugh, nominated to be a judge on
the U.S. Tax Court. Ms. Pugh, if you could introduce your
family, that would be great.
Ms. Pugh. It would be my pleasure. My parents are also
watching from home in Lynchburg, VA, but I am pleased to
introduce my sister Sydnor Smalera; my brother-in-law Andrew;
my niece Frances, who is missing camp; my aunt Margie Pugh; and
my cousin Daniel Dixon and his son Weston, who also drove up
from Lynchburg to join me today.
The Chairman. Very good. Also with us today, and we are
honored to have them, are five distinguished judges of the U.S.
Tax Court. The Chief Judge is with us, Mr. Michael Thornton,
who for many years served as tax counsel on the Ways and Means
Committee; Judge Joseph Gale, who served as an advisor and
chief counsel on this committee under Chairman Moynihan; the
esteemed Judge John Colvin, who, among many other things, spent
many years in this room as counsel to Chairman Packwood--so we
are happy to have the Oregon connections--and they were days,
notably, during the Tax Reform Act of 1986; Judge Kathy
Kerrigan, who served with distinction both in the House and
under our former Finance Committee colleague Senator Kerry; and
finally, Judge Joe Nega, who joined the Court after serving as
a legislative counsel on the Joint Committee on Taxation for
nearly 30 years.
So we have the distinguished judges of the U.S. Tax Court
out in force this morning, and we very much appreciate your
professionalism and having you with us. We thank our nominees
and our guests for being here.
Just so you know, it is our usual practice that the
prepared statements are automatically made part of the hearing
record. We would like you to use your 5 minutes to summarize.
Since we are well into the vote, I would say to our nominees, I
will run over. I have my credibility on the line with Senator
Hatch that this will be very brief, so I will run/sprint over
to vote, and I think we can recommence in probably about 10, 12
minutes.
So with that, we will go vote, and we will return shortly
for your statements.
[Whereupon, at 10:25 a.m., the hearing was recessed,
reconvening at 10:45 a.m.]
The Chairman. All right. The committee will come back to
order.
I very much appreciate our nominees' patience; today looks
hectic even by Senate standards.
Let us start with you, Mr. Holleyman. We welcome you.
STATEMENT OF ROBERT W. HOLLEYMAN II, NOMINATED TO BE DEPUTY
UNITED STATES TRADE REPRESENTATIVE, WITH THE RANK OF
AMBASSADOR, EXECUTIVE OFFICE OF THE PRESIDENT, WASHINGTON, DC
Mr. Holleyman. Chairman Wyden, I want to thank you, Ranking
Member Hatch, and the distinguished members of this committee
for the privilege to appear before you to testify as the
nominee for Deputy U.S. Trade Representative. I am humbled by
the confidence that President Obama and Ambassador Froman have
placed in me to serve in this position.
I would like to thank Senator Mary Landrieu for her warm
introduction and for her support. I have valued our friendship
over many years, and fellow Louisianians are fortunate to have
such a strong leader and advocate here in Washington.
I would also like to thank my husband, Bill Keller, who is
with me today. His steadfast support and shared belief in
public service help enable me to make the full commitments
needed for the work ahead. With my friends who are also here
and family who are watching, this really has enabled me to
eagerly take on these challenges.
Thirty-two years ago, I moved to Washington to work for my
home State Senator, Russell Long. He served as chair and
ranking member of this committee for 20 years. From him I have
a profound appreciation for the role of this committee and of
Congress in formulating trade policy.
Following his retirement, I was fortunate to serve as
counsel for the Senate Commerce Committee under Chairman Fritz
Hollings, and I am honored to be sitting now on this side of
the witness table with the opportunity to once again serve the
American people.
Throughout my time working in Congress and in the
technology industry, I have witnessed the benefits of trade for
American businesses and workers. I have seen directly how U.S.
exports can drive growth. I have also seen how close
consultation with Congress and with stakeholders can help craft
better policies that benefit American businesses and support
jobs here at home.
I have lived at the epicenter of the digital economy since
its early days. I have worked to ensure that U.S. goods and
services secure fair treatment across borders and that our
innovative industries which rely on strong and balanced
intellectual property protections can be given the best chance
to succeed abroad. I traveled extensively to Asia, Europe,
Africa, and Latin America on behalf of American innovators to
promote U.S. ingenuity and break down trade barriers, helping
to create and protect American jobs here at home. If confirmed,
I hope to build on this work, and I look forward to joining a
dedicated team at USTR that is working on one of the most
ambitious trade agendas in a generation.
Together, the TPP and TTIP account for two-thirds of global
GDP. Our partners in TISA, ITA, and the just-launched
Environmental Goods Agreement each account for upwards of 80
percent of trade in their respective global sectors. In the
WTO, the administration is working with 160 members to make the
institution and the agenda more relevant to stakeholders and
the world as it exists today.
I know firsthand that the United States and our workers can
win in the global economy. If confirmed, I am committed to
making the United States the innovation and production platform
of choice and to strengthening the potential for Made in
America goods, services, and agricultural products.
At the same time, we must hold our trading partners
accountable by vigorously enforcing our existing trade
agreements. It is critical that we take a whole-of-government
approach to addressing unfair trade practices. If confirmed, I
would bring to my position a strong background in global
enforcement matters to support the administration's unmatched
enforcement record.
I have had the honor of meeting with you, Mr. Chairman, and
other members of this committee in preparing for this hearing.
That has helped give me an even better understanding of the
priorities in your home States and for this committee. If I am
confirmed, I am committed to strengthening and maintaining that
ongoing partnership with each of you and with Congress.
In conclusion, I thank the President for this opportunity
and the committee for considering my nomination. I look forward
to answering any questions you may have. Thank you.
The Chairman. Thank you very much, Mr. Holleyman. We will
have questions momentarily.
[The prepared statement of Mr. Holleyman appears in the
appendix.]
The Chairman. Ms. Pugh, welcome.
STATEMENT OF CARY DOUGLAS PUGH, NOMINATED TO BE A JUDGE OF THE
UNITED STATES TAX COURT, WASHINGTON, DC
Ms. Pugh. Thank you, Mr. Chairman, Ranking Member Hatch,
and members of the committee. It is a true honor to be before
you today as the President's nominee to serve as a judge on the
United States Tax Court. I am grateful to the President for his
confidence in me and to the committee for the opportunity to
appear today.
I am especially grateful for the support of the staff of
this committee throughout the process, and their swift
consideration. Of course, I would not be here today without the
support of many others throughout my life and my career,
starting with my family, but also friends and colleagues and
mentors who have helped me immeasurably along the way. Some of
them have joined me today, and I would like to particularly
mention Russ Sullivan, who actually hired me to join the
committee staff back in 1999.
I have been blessed by many opportunities in my chosen
profession, including the years I worked for this committee. I
treasure that experience, but none of my past work could
surpass the position for which I have been nominated. My mother
worked as a legal secretary before I was born, and I announced
on a 3rd grade academic game show that I would be a lawyer. I
chose a legal career early, or it chose me.
Tax law came later, as I grew to understand how it touches
all aspects of lives and economic activities. I have learned
over my legal career and in my endeavors outside work that I
feel the greatest sense of accomplishment when I am able to
resolve issues and disputes.
As a tax lawyer then, I have a particular affinity for a
court charged specifically with resolving tax disputes between
taxpayers and the government. Working for the government--as
staff of this committee and then at the IRS Office of Chief
Counsel--and for clients, both pro bono and paying, I have seen
the key role that this court plays in shaping the tax law, and
I have witnessed the importance of a forum for taxpayers to
have their say before an impartial party.
This is true for individuals and corporate clients. It is
also true for the IRS. The key to our system is respect for the
law, for everyone--from the smallest taxpayer to the largest
corporation to the government--to understand that, in the end,
it is the law that matters, not who you are or how much is at
stake.
It is just as important to the work of this committee and
Congress to have confidence that the law will be applied fairly
and impartially. If I am confirmed, that will be my guiding
principle. I am grateful to the President for his confidence in
nominating me and will aspire to be worthy of the position if
this committee and the Senate deem me qualified.
Thank you again, Mr. Chairman, Ranking Member Hatch, and
other members of this committee, for your consideration. I
would be happy to answer any questions.
The Chairman. Ms. Pugh, thank you very much. I appreciate
both of the statements that you all have made.
[The prepared statement of Ms. Pugh appears in the
appendix.]
The Chairman. Now, it is our standard process to ask you
four questions. I will ask them of both of you, and we can get
through the questions expeditiously.
The first question is, is there anything that you are aware
of in your background that might present a conflict of interest
with the duties of the office to which you have been nominated?
Mr. Holleyman. No, Mr. Chairman.
Ms. Pugh. No, Mr. Chairman.
The Chairman. Second, do you know of any reason, personal
or otherwise, that would in any way prevent you from fully and
honorably discharging the responsibilities of the office to
which you have been nominated?
Mr. Holleyman. No, Mr. Chairman.
Ms. Pugh. No, Mr. Chairman.
The Chairman. Do you agree, without reservation, to respond
to any reasonable summons to appear and testify before any duly
constituted committee of Congress, if confirmed?
Mr. Holleyman. Yes, Mr. Chairman.
Ms. Pugh. Yes, Mr. Chairman.
The Chairman. Do you commit to provide a prompt response in
writing to any questions addressed to you by any Senator of
this committee?
Mr. Holleyman. Yes, Mr. Chairman.
Ms. Pugh. Yes, Mr. Chairman.
The Chairman. Very good. Let's do this, because I think it
will be somewhat discombobulating if we try to go back and
forth between trade and the Court.
Let me start with you, if I might, Mr. Holleyman. I think
you all there in the trade field know that I feel very strongly
that trade policy needs an upgrade. It needs an upgrade, at
least because we have seen an explosion of digital trade,
digital goods, digital services, and this is a new economic
driver in our country.
What we have faced is a host of new trade barriers--this is
what American providers have faced as a result--and the
barriers are not just, I think you might say, technical, tech
industry issues. Whether you are an auto manufacturer in
Detroit or a financial services provider in New Jersey, today
you consider data flows absolutely key to efficiently sell your
product in these increasingly competitive global markets.
Coming from the tech sector, my view has been that you have
a unique perspective on how to reshape U.S. trade policy to
account for these digital challenges, and I think you heard me
say that one of the reasons I feel so strongly is that this is
``advantage America.'' This is an area where we have a cutting-
edge lead.
Why don't we start by having you outline what you would do,
if confirmed, to heighten awareness among the many different
offices within USTR to address these issues and ensure that an
integrated, comprehensive strategy is put together to deal with
them?
Mr. Holleyman. Mr. Chairman, thank you for that question. I
certainly know of your keen interest in this issue, and of
other members of this committee. I share that keen interest.
Indeed, I share the imperative of ensuring that the U.S. trade
policy be at the forefront of leading and establishing the
rules of the road for digital trade.
The U.S. currently has a $135-billion trade surplus in
digitally delivered goods. That number will grow, but that
number will only grow if we work now to put the right rules in
place that will allow and recognize not only how this affects
the technology industry, but also users of data and information
that are important.
Coming out of the technology industry, I know quite well
that the rules of the road in trade that the U.S. helped
negotiate over the past 20 years have been essential in
allowing U.S. innovators to succeed globally as they have under
existing trade regimes, but those rules, while a good
foundation, do not fully contemplate the type of barriers that
we are now seeing to digital trade.
That makes it all the more important for this committee,
Congress, and the administration to be driving a digital trade
agenda. I intend to pursue that vigorously to ensure that in
the next 20 years, the next 40 years, that American
entrepreneurs and workers have the same opportunities to
succeed as they have had in the past.
That means things like ensuring that there are cross-border
data transfers, ensuring that we have provisions against forced
localization, ensuring that there is not a discrimination
against digital products, and ensuring that there is the legal
certainty so that businesses know how to operate in this
environment. I look forward to working with you and with the
committee, and, if confirmed, with USTR and the whole of
government, to focus on these critical issues.
The Chairman. Let's go to the question of transparency in
these trade negotiations. I think you heard me say privately,
but I just want it stated publicly, this is an absolute
prerequisite in order to build a new bipartisan coalition for
trade policy in our country. It is something I feel very
strongly about.
In my State, one out of six jobs depends on international
trade. The trade jobs pay better than do the non-trade jobs,
because they reflect a high level of productivity. What
Oregonians want to do is pretty similar to what a lot of people
in this country want to do, and that is to grow things and make
things here, add value to them here, and then ship them
somewhere.
We are not going to be able to win support, bipartisan
support, for a new coalition to get trade policy passed--not
just TPP, about which you will be specifically concerned with,
but trade generally--unless the American people are brought
into this debate. Right now they have been in the dark. They
have been in the dark, and some of these staff people who were
sitting behind me have had difficulty getting access to some of
the key documents that are necessary.
I want you to know, and I have told Ambassador Froman this,
I have told the President this, that the American people have
to be brought into this debate. This is not something that you
can just send to the U.S. Congress and say, all right, you all
are going to have a vote under the current laws--that is that.
The American people have to be brought into this debate,
and the Congress has to be consulted about the specific terms.
So my question to you is, if confirmed, what would you do to
make sure that both the Congress and the American people are
brought into this discussion, this discussion about U.S. trade
agreements, before, underline before, they are signed?
Mr. Holleyman. Mr. Chairman, thank you for that question.
We have had an opportunity to talk about this. I have certainly
paid very close attention to the keen level of interest you and
other members, not only of this committee but of Congress, have
on this issue. I think that certainly, in the digital era in
which we live, citizens have an expectation for availability of
information at all levels, including how government pursues
these issues.
I commit to, if confirmed for this position, doing
everything I can to work with you and with this committee as we
look to ensure the greatest level of confidence and
information. I commit to making this a chief priority.
The Chairman. I am not going to flog this any further. I
know a nomination hearing is not the time to get into
specifics, but it will be shortly, because this is a
prerequisite. If we want to have a new bipartisan coalition for
America's trade agenda and the ability to create high-skilled,
high-wage jobs in tough global markets--I can tell you, I had
town hall meetings it seems like a few days ago on Oregon's
south coast, in Coos Bay and Curry County, and, as I made my
way through town meetings, people would bring this issue up.
They would say, ``I know you all are talking.'' They are
not into all the details about the Ts: TPP, TPA, TTIP. They
say, ``We want to know what's going on. It is not acceptable to
just negotiate stuff in a bunch of hearing rooms in Washington,
DC and then tell us we're supposed to be for it.'' So today is
not a day for going into further detail, but that day will come
shortly, and we will need more specifics.
On the issue of China retaliation and enforcement, as you
know, the committee held a hearing on trade enforcement
recently and how to ensure that U.S. companies, farmers,
ranchers, and workers get the benefit of the bargain from the
trade rules on the books. This too goes right to the heart of
what the trade debate is going to be about, because people
often come up to me, and they know I have been a supporter of
all the major trade agreements.
They say, ``Why in the world would you be talking about a
new trade agreement if you are not going to enforce the laws on
the books?'' So we have put a significant effort here into
these issues, and you heard me say to Senator Landrieu, I
think, some of our effort to beef up enforcement has already
borne fruit, because we were pleased about the effort with
respect to Korea.
An additional enforcement challenge that was highlighted at
our recent enforcement hearing is that our companies are
increasingly subject to retaliation by China and others when
they stand up for their rights, using U.S. trade laws, or help
the U.S. Government take enforcement action at the World Trade
Organization.
Now, if you are confirmed as the deputy responsible for
China trade matters, how would you, working in collaboration
with the General Counsel, work to ensure that there is a strong
enforcement effort in light of this growing problem? You may
also know about the problem in Oregon with respect to
SolarWorld, one of our leading solar manufacturers, where there
are high-skill, high-wage jobs being cyber-hacked. So this
enforcement issue with respect to China and retaliation, this
is priority business. How would you respond?
Mr. Holleyman. Well, Mr. Chairman, I agree that China is
priority number one. I think priority number one in this is
ensuring we have enforcement, and adequate enforcement, of
existing agreements. I have spent, in my career, 20 years
engaging on issues related to China trade, including spending a
lot of time on the ground in China trying to find new ways to
enforce rights that exist, to close loopholes, and to try to
ensure that innovative American companies and others can
succeed in that market.
So I am committed to working with this committee, if
confirmed, and with the whole of the administration to focus on
that priority. I think it starts with enforcement of existing
agreements, it starts with forging new agreements in critical
areas like protection of trade secrets and enforcement, and I
think it requires being diligent in every bilateral and
multilateral negotiation.
Let me say on the issue of retaliation, I have certainly
seen and I share your sense that there is a growing, not only
risk, but occurrence, of retaliation that many U.S. companies
face when they raise issues affecting China. I think that makes
it increasingly imperative that the full weight and force of
the U.S. Government be placed on these issues, because many
U.S. companies cannot be or are not in a position to be
forward-leaning.
Finally, let me say that I think there is an opportunity to
create some partnerships with like-minded trade partners in
other parts of the world, as we did on the indigenous
innovation in China issue, so that it is not simply the U.S.
standing up on these issues but finding our allies, because
ultimately fair trade--and fair trade in China--is dependent
upon collective activity.
The Chairman. Let me turn now to intellectual property. As
you heard Senator Hatch say, and in my view very appropriately
so, this is a very significant part of our focus here. I have
long been a supporter of policies like section 230. This was a
law that Congressman Chris Cox and I wrote together on a
bipartisan basis that many have said really was the legal
foundation for the investment in social media, because, prior
to that law that Congressman Cox and I wrote, you could have a
website or a blog held liable for something that was posted on
it.
Of course, the website owner or the blog could not have any
idea where it was coming from or who was controlling it. That
law ensured that the website and the blog would not be held
secondarily liable. I have been told that you would not have
had investment in social media without that law, because
investors would not have been willing to put money into social
media without having that security that they would not be held
secondarily liable.
So I am very interested in these policies with respect to
what is needed to encourage growth and innovation in the
digital economy. I think, as we have talked about going back to
those early laws that Congressman Cox and I wrote, I think this
is a completely bipartisan kind of concern.
I feel strongly that our country ought to oppose proposals
that would undermine the fundamental architecture and openness
of the Net. As you know--we talked about it--there are some who
are concerned that your views on intellectual property do not
take into account the balance required to preserve free speech
and innovation and the economic dynamism of the Internet.
I think it would be helpful to just have on the record your
description of your perspective here on these policy issues
that would ensure that the Internet remains an open platform
for speech and commerce and the engine of economic growth and
job creation that has been a priority of mine--I note I am
joined here by Senator Thune. He and I have teamed up on
another major initiative with respect to data flows and digital
goods, so why don't you give us your position on IP, if you
would.
Mr. Holleyman. All right. Mr. Chairman, I think your
question is absolutely the right one. I think it follows up,
importantly, on a conversation that you and I had in your
offices after I had been nominated for this position.
Certainly, I want to be clear in saying that, as someone
coming out of the technology industry, I believe it is
critically important for us to not only foster, but encourage,
the growth and openness of the Internet. Indeed, the type of
digital commerce, the digital trade issues that you and Senator
Thune and others have worked together on, are dependent upon
that platform.
I believe that, in the area of intellectual property
protection, the U.S. has committed to supporting the type of
provisions that exist in U.S. law that provide for a balanced
protection of recognizing the link between intellectual
property protection and innovation, but also the type of
exceptions and limitations that exist in U.S. law ensuring that
the type of social media and other commerce that you were
addressing with Senator Cox in the Communications Decency Act
are also carried forward as fundamental values of the U.S. I
commit to working with you, working with Senator Hatch, working
with the administration, to ensure that that proper balance is
struck and is reflected in our trade negotiations.
The Chairman. Let me ask you one other question, and then I
will turn to my friend from South Dakota. Now, our
understanding is your portfolio will include Asia, services,
investment, and intellectual property and innovation. So that
is a pretty big portfolio. You are not going to be sitting
around reading paperbacks up there at this job. Also, with
negotiations over the TPP, that will certainly consume a good
chunk of your time.
Why don't we just wrap up this portion, and then I am going
to go to my friend from South Dakota for his questions. Give us
your sense of what the big opportunities are for American firms
in Asia, and then the challenges, sort of a quick overview:
opportunities, challenges.
Mr. Holleyman. Sure. For Asia, I would say it really breaks
down into sort of three things. One, I think we have a unique
position of opportunity to try to be the leader in striking the
new
forward-looking trade agreements with our partners in Asia that
really ensure that the kind of values and the openness and the
opportunities for innovators in America exist in that region. I
think it is particularly important for us to be, as we are in
TPP and elsewhere, stepping up to the plate and showing that
kind of future-oriented trade, including in areas like digital
trade.
I think the second priority in Asia, even for the region,
is always the same, back to China, which is, with China, we
have to work regionally to ensure that the U.S. influence on
trade policy addresses some of the practices that we have seen
in China that can be most harmful to American innovators, job
creators, and workers trying to gain access to that market.
So I think that is finally, at the end of the day then, the
challenge for the region, which is to make sure that every tool
that we have existing for enforcement, whether it is our
bilateral agreements, whether it is multilateral agreements
through the WTO and elsewhere, that we are using those
vigorously to enforce rights, to establish the kind of conduct
that is necessary, and really to be a leader going forward.
The Chairman. Senator Thune?
Senator Thune. Thank you, Mr. Chairman.
Mr. Holleyman, as the chairman noted, these are issues that
he and I have worked together on extensively. I know you have
already plowed some of the ground with regard to digital trade,
cross-border data flows, things that we have a great interest
in. I would also like to maybe ask this question a slightly
different way. There is a suggestion that has come from some
other nations around the world in the wake of the NSA
surveillance disclosure that countries ought to attempt to
create their own national or regional Internet networks.
I am just curious about your thoughts with regard to
keeping the Internet as an open platform for business,
information, and education, and how a regional network that
treated U.S. companies differently than other companies around
the world and websites within the network, whether or not that
would constitute a new form of trade barrier. So just overall
give us what your thoughts are with respect to that issue,
because that is something that we hear being discussed by other
countries.
Mr. Holleyman. Senator Thune, I absolutely do believe that
things like that can be significant barriers to trade, and not
only significant barriers to trade, but they can really
undermine the fundamental underpinnings of the cloud-computing
model and where we are headed.
I think efforts to fight against the Balkanization of the
cloud are good for users of the cloud, because really the way
the cloud works is through the collective efficiencies and cost
savings that come through allowing data to be exchanged and
really bringing low-cost computing capacity to both citizens
here and in emerging economies. That allows a level of
innovation unlike anything we have been able to see, because it
really breaks through the barriers to cost.
For countries that want to break up the cloud, to Balkanize
the cloud, I think they are doing it for misguided reasons, one
of which is, I think that some countries believe that the
economic value of the cloud is around hosting physical servers
in their markets.
We need to help them understand, as the U.S., that that is
not the economic value of the cloud. We also need to help them
understand that this is not just a U.S. interest, but indeed it
is also an interest for many emerging markets where small
companies and entrepreneurs, if given the ability to use an
unfettered cloud, will be able to grow and prosper.
So I think we have to lead here. I think this is part of
the digital trade agenda in TPP and TISA, TTIP, and elsewhere.
If confirmed for this position, I commit to working closely
with you and with the chairman to make sure that this absolute
imperative for the U.S. moves forward.
Senator Thune. That would be great. Chairman Wyden and I,
on the digital trade bill that we have introduced, designed it
to really put additional focus and light on, as we negotiate
these trade agreements, the importance of not having these
types of protectionist barriers raised against American digital
goods. If you look at it, there is enormous potential out there
globally for American business and the opportunity for economic
growth on levels that ought to make everybody interested in
this issue.
It is one of the few areas in our economy where we actually
run a trade surplus. Do you know what I mean? It is a net-net.
It has been a very good thing for our economy, and I hope that
we will be able to be very clear in these negotiations that
this is an issue on which we cannot give ground. We need to
make sure that we keep this platform open, and I hope that that
will be a high priority for you and for your colleagues at
USTR.
I want to shift gears for just a minute and talk a little
bit about another issue that is of great importance to me, and
that is agriculture and how these trade agreements impact
American farmers, and particularly market access in Asia, which
I know will be geographically under your portfolio.
I know you have people who specialize in agriculture, and
that may not be your specific area of interest, but I want to
know if you could assure me and other members of the committee
that you will insist on a TPP outcome that results in broad-
based tariff elimination and meaningful market access for our
agricultural producers.
We see areas like Japan as huge market opportunities. They
historically have worked very hard to limit the discussion on
agricultural issues to a very narrow range, and I hope that we
can make this a very broad-based attempt, at least, to do away
with a lot of these tariffs and other types of barriers that
they erect to our products.
Mr. Holleyman. Senator, I understand your keen interest in
this. We run a trade surplus in agricultural products of about
$40 billion a year. The fastest-growing market opportunities
are in Asia--existing markets and the fastest-growing.
I think we have an opportunity, and I will commit to
working with my colleagues at USTR throughout the building, to
ensure, whether it is through TPP or elsewhere, that we provide
comprehensive and meaningful market access to agricultural
markets, including Japan and elsewhere, and that we look at the
type of SPS and other measures that are being used in some
markets to try to block legitimate, healthy, and safe U.S.
products from getting into those markets. It is an important
part of the economy today. It is an important part of the
economy even more going forward, and Asia is really a huge
opportunity for us. I commit to working with you on that.
Senator Thune. Well, we will look forward to continuing the
dialogue on that. I mentioned Japan and also China. China is
the number-one market for soybean exports, a very fast-growing
market for corn. They are not approving, at least in a timely
way, new biotech traits, which is something that is very
troubling and could have a significant negative impact on our
trade relationship.
I hope that, if confirmed, you will work with your
counterparts in China to move expeditiously on the approval of
agricultural biotech products that have already been approved
in the U.S. for entry into the Chinese market. They have, on
some of these issues, been very difficult to deal with of late.
Of course, that has a lot of implications for agricultural
trade, which, as you mentioned, is another area of our economy
that is a real bright spot.
We globally have enormous opportunity through TTIP and TPP
to really expand the reach of American agriculture and to help
feed the world, but, in order to do that, we have to get these
new technologies, these new biotech traits, approved in some of
these countries. So we will look forward to working with you on
that, and I will take your assurance that you will press on
those issues and make that a priority. I will take that as
reassurance that you will be very engaged on those. So, thank
you. I appreciate that.
Mr. Chairman, thank you.
The Chairman. Thank you, Senator Thune.
Mr. Holleyman, let me just highlight a couple of the points
that Senator Thune mentioned. First, I would just want to make
clear that opening Japan's agricultural market is priority one
for agriculture. In our State we do a lot of things well, but
what we do best is, we grow things. You could be talking about
Oregon wheat, you could be talking about our fruits, you could
be talking about our vegetables. But Senator Thune is spot-on
with respect to making sure that these markets in Asia are open
to agricultural products.
Second, on the matter with respect to the Internet, where
Senator Thune also was commenting, I would just say that to
echo Senator Thune's comment, he and I wrote an op-ed article
for the Wall Street Journal, and the heart of our op-ed was to
make sure that concerns about surveillance do not become a
stalking horse for digital protectionism. That was right at the
heart of our article.
So you have two Senators, one a Democrat, one a Republican,
saying very similar things with respect to trade that you will
be dealing with.
Let me turn now, if I could, to your colleague for a few
moments. First, I think it would be helpful if we could have
kind of a teach-in here on what somebody does at the Tax Court.
Tell us what you see your role is as a Tax Court judge.
Ms. Pugh. Thank you, Mr. Chairman. I think the role of the
Tax Court judge really is to give an opportunity for taxpayers,
in a pre-payment forum--that is, they do not have to pay the
amount that the IRS says that they owe first to get into Tax
Court--to have a chance to go before a judge, to have a judge
determine whether in fact they owe that money to the government
or not.
It is an important forum for the smaller taxpayers. The
judges travel around the country. They do sit in Washington,
but they travel to all 50 States so that the taxpayers do not
have to travel, so that they can have their issues heard by
someone who should be, and hopefully is, always impartial.
One of the other important features of the Tax Court is
that many of the taxpayers appear without representation, so
one of the challenges for the judges is to be able to elicit
from the taxpayers the true facts and then make a decision
based on the law as applied to the facts in the case.
The Chairman. All right. Let us also see if we can get some
free advice here on one other tax matter. You probably read
that we are blasting ahead full steam on tax reform. I have 9
years' worth of sweat equity into putting together bipartisan
bills and have worked with colleagues on this committee and off
the committee.
One of the central questions is the discussion about
simplifying the code and streamlining the expenditures. I think
you are aware that, since the last time there was tax reform,
we have had something like 15,000 changes. It comes to around
one for every working day for every year, year in and year out,
since the last time there was tax reform.
So by way of asking for some free advice, what do you think
might be done, recognizing that the devil is obviously in the
details--and in the tax code the details number in the
thousands--to cut down on the number and thereby reduce the
type of controversies that come before the Tax Court?
Ms. Pugh. Yes, Mr. Chairman. I have watched with great
interest and applaud the work of this committee, and the work
of Congress, in laying the groundwork for fundamental tax
reform. Obviously, as you said, the devil is in the details,
but simplification should be the goal, along with promoting
economic growth and competitiveness.
Simplification, from my time on the Hill, what I saw as the
challenge, sometimes driven by budget constraints, would be a
lot of the very detailed rules about who does and does not
qualify. I know that there are, many times, very good policy
reasons for drawing the rules as they have been drawn, but
again, that is something to focus on. When you have very long
and detailed provisions, that gives a greater opportunity for
dispute with the IRS, and then those often end up before the
Court.
I might add, another thing that I think would be very
helpful in tax reform is to make sure that, as the committee
works its will--and I know that you are working through
hearings--that we have the mark-ups and the legislative history
so that the Court then has some guidance as to what Congress
was thinking at the time it wrote the legislation if the
dispute ultimately comes before the Court.
The Chairman. That presumes that Congress always was
actually thinking about something. Kidding aside, there has
been some very good work done on these issues. Chairman Baucus
in particular, I think, deserves enormous credit for the policy
papers that he put out.
At that time, I was chairman of the Energy Committee, and
he was very gracious and consulted with us on those, so I think
your counsel to, to the extent we can, shorten provisions and
bring greater clarity to them, that avoids some of the
headaches that stem from the longer provisions that are subject
to multiple interpretations and are sort of a prescription for
trouble. So, those are points well-taken.
Both of you have been very cooperative. We will have
additional questions, I know, coming to both of you from
committee members. With that, the Finance Committee is
adjourned.
[Whereupon, at 11:25 a.m., the hearing was concluded.]
A P P E N D I X
Additional Material Submitted for the Record
----------