EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF THE U.S. TRADE REPRESENTATIVE
TRADE POLICY STAFF COMMITTEE PUBLIC HEARING
for
The Proposed Free Trade Area Negotiation with Thailand
Tuesday, March 30, 2004
--------------[Extract: Verbatim oral testimony of Jeffrey Race]--------------
The hearings came to order at 10:00 a.m. in Rooms 1 and 2 of the 1724 F
Street, N.W., Washington, D.C., Carmen Suro-Bredie, Chair, presiding.
Present:
Carmen Suro-Bredie USTR
William Clatinoff USTR
Ralph Ives USTR
Leslie O'Connor USTR
Barbara Weisel USTR
Bob Mackie Department of Agriculture
Steve Wixom Department of Agriculture
Kevin Boyd Department of Commerce
Jean Kelly Department of Commerce
Jim Shea Department of Labor
Kevin Honan Department of State
Rob Rapson Department of State
Won Chang Department of the Treasury
Witnesses:
Ernest Z. Bower, President, U.S.--ASEAN Business Council
Raymond J. Sander, U.S. Chamber of Commerce
Pamela D. Walther on behalf of Will and Emory McDermott, California Cling
Peach Board
Desiree Filippone, Eli Lilly, Warren Maruyama, Shira Kilcoyne, PhRMA
Michael Schlesinger, Vice President, International Intellectual
Property Alliance
John Goyer, Vice President, Coalition of Service Industries
Scott Otteman, Director of International Trade,
Grocery Manufacturers of America
Todd Eckles, Director of Sales, Toray Plastics
Michael P. Daniels, International Trade Counsel,
Footwear Distributors and Retailers of America
John Keeling, Executive Vice President and CEO, National Potato Council
Lee McConnell, Chairman, Sweetener Users Association
Julian Heron, Counsel, Blue Diamond Growers
Jack Roney, Director of Economics and Policy
Donald Philips, Trade Consultant, American Sugar Alliance
Thea Lee, Assistant Director for International Economics, AFL-CIO
Dr. Jeffrey Race
Shawna Morris, Trade Policy Coordinator, National Milk Producers Federation
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CHAIR SURO-BREDIE: Thank you. Let's see our next witness, we're running a
little in advance, is Thea Lee. I don't know if she's here. No. Is Dr.
Jeffrey Race here?
DR. RACE: Yes.
CHAIR SURO-BREDIE: Yes, would you mind testifying now?
DR. RACE: Not at all. I've come a long way and I'm glad to be here.
CHAIR SURO-BREDIE: Thank you.
DR. RACE: Thank you. Madam Chairman, distinguished committee members and
friends. Thank you for the opportunity to speak about Thailand, a special
country where I have been privileged to travel for 35 years as a military
officer, an academic, a consultant to government, including our government,
private industry and international organizations, and most recently as an
entrepreneur.
I'm a fluent Thai speaker and I have extensive experience in Southeast Asia in
business and in the Thai law enforcement system. I have appeared in Thai
courts hundreds of times in a variety of capacities and proceedings. For
numerous happy reasons, Americans and Thais get on very well together and many
of our business relationships succeed brilliantly. But some do not due to
chronic law enforcement issues. That's what I want to talk to you about
today.
I'm not here to ask you for anything.
A foreigner is usually treated very well and very courteously in the Thai law
enforcement system. And if he is in dispute with a nobody, he may expect jus-
tice. If he's in dispute with a state body or with the well connected, then
that prospect recedes. Many find that complaints of even grave abuses are
cheerfully ignored by the Thai authorities. For the facts on which I base
these conclusions, which I admit are rather strong, please refer to the case
studies which were cited in my written submission which summarize Thai offi-
cial documents and detail what really happens in the bowels of the permanent
bureaucracy, in the courts and in the state enterprises.
This particular series of case studies recounts the experiences of three
families, a mix of Thais and Americans, in a real estate investment and some
related family matters. And the reason I raise them here is because they
spotlight issues which jeopardize all potential beneficiaries of the agreement
that you hope to realize and which I hope you do realize. I'm a strong sup-
porter of this agreement. I just want it to work.
But in these cases, between 1984 and 2002, these parties litigated over $8
million of assets in which the foreigners shared ownership. One Thai in
league with Thai officials and the employees of a state controlled bank has
succeeded in blocking the foreign owners from access to their assets for 20
years, meanwhile laundering into the mists almost the entire corpus of these
assets. So doing entailed numerous incidents of grave official misconduct and
criminal acts by those working under government control.
I'm here today -- I lead the team seeking the restitution to these victims.
When it became clear to us that our opponents were above the law, we sought
the help of our Department of State which sent the Thai foreign minister a
diplomatic note, which I have a copy of here, which says essentially, "Please
tell us none of the allegations in the hundreds of pages of attachments is
true". That's these attachments here. "But if any of them are true, please
tell us how you plan to remedy the injury to our citizens".
And in parallel with this, I myself contacted the following people; the Cabi-
net Secretary, the Senior Policy Advisor to the Prime Minister, the Permanent
Secretary of the Ministry of Finance, the Executive Chairman of the state-
controlled bank which was involved in the criminal activity, the Attorney
General, the Minister of Justice, and the Legal Ethics Committee of the Law
Society of Thailand. Unfortunately, I have to tell you that nothing good
happened after all that effort.
We won a Supreme Court Judgment to liquidate the remnant of the unlaundered
assets, but when we went to the court, the Chief Judge informed us that the
title deeds had disappeared from the locked court storeroom and we have not
been able to execute the judgment.
The Law Society refused to discipline the attorney who rigged a sham auction
to launder the assets that were involved not because there was no evidence--in
fact, we have his confession in open court--but because this is a legitimate
legal tactic in Thailand. It's really true. The Secretary to the Law Society
Chairman told me that, just like this with a straight face.
The public prosecutor refused to prosecute a case of blatant asset laundering.
Thai law provides one important advantage to the people who are in a difficult
situation like that. You're allowed to conduct a private criminal prosecution
in Thailand and we conducted a private criminal prosecution and we got a
conviction. And later we found out that a key prosecution staffer had a
monetary interest in the laundering transaction. So we then complained to
that Attorney General who investigated.
I myself was deposed for three days. It was a rather tiring experience and I
submitted irrefutable evidence of criminal acts by an assistant prosecutor.
After two years, I got a letter back. The Attorney General denied all the
allegations and exonerated his subordinate.
Then more evidence appeared. There was a new investigation and the Prime
Minister's office refused to allow us to see the report of the investigation
even though it's our legal right to see that report.
Now, yesterday, March 29th, 2004, was a year to the day since the Thai Foreign
Minister received our diplomatic note. Our Department of State is waiting
very patiently for the honor of the Minister's reply.
To this day, every Thai official involved in the misconduct which is document-
ed in these case studies remains at liberty to victimize other Americans.
And with one humorous exception, which I can tell you about if you're inter-
ested, every agency that we contacted has ignored, failed to act upon or
actively rebuffed our attempts to make the Thai law enforcement system work.
Thailand advertises itself as a land of refinement and it is. No one burst in
with guns drawn shouting, "Get out, get out, we're taking over", as might
happen in some places that we read in the newspapers. But legally refined
trickery, cover-ups by the powerful and indifference at the cabinet level have
the same effect.
Of the eight agencies approached to remedy the misconduct, only one advanced
any interest, so far without any result. And from this sample, I think it's
fair to conclude that seven of eight at the top of the Thai government won't
lift a finger for the rule of law. They do not oppose it; they are just se-
renely indifferent to it. And this, by the way, answers the question that Mr.
Michael Schlesinger had about his puzzlement about why nothing is happening in
terms of IPR enforcement in Thailand.
What do these facts imply for your negotiations? I respectfully suggest four
things. First, Thailand is special and earlier FTAs are no template for an
FTA with Thailand and particularly the Singapore FTA which I brought along
here. Second, I ask you whether an FTA is now legally possible. The facts
which I document to you clearly void the usual presumption of good faith
between contracting parties in the specific subject matter of enforcing a
possible US Thailand FTA. The Thai authorities decline to enforce their laws
to protect American citizens and they decline to reply to gracious diplomatic
correspondence from a valued ally--that's us. Instead they conspire to cover
up criminal acts in their midst and cabinet ministers know this very well.
Can an American official legally sign an agreement when he knows that the
counterparty is signing in bad faith? Ask your lawyers the answer to that
question; I know what they'll tell you. Furthermore, as a legal fiction, a
Thai representative can bind his government to an FTA but he cannot commit
undisciplined state organs to implement it. As of today, the Thai government
simply lacks the practical capacity to contract with us.
Third, I can offer two litmus tests that easily confirm whether these legal
obstacles persist. Looking backward, does the Thai government cure its bad
faith by compensating the victims in these cases which are documented in the
URL I submitted to you and then does it respect international practice by
answering its diplomatic mail? If not, how could one even imagine signing an
agreement?
Looking forward, will the Thai authorities agree to quality controls which
work independently of their intention to uphold the law? I can offer specif-
ics in the question time if you're interested. Now, I would just simply
suggest that stringent public review procedures within the agreement are the
only valid index of Thai willingness to implement the agreement, not just to
sign it and there's a big difference in Thailand.
Fourth, I ask you to be sensitive to symbolism. The Thai authorities are well
known to have evaded their solemn duty to uphold the law in these cases and
they are known to ignore their diplomatic mail about these cases. Signing an
FTA now would destroy the credibility of our Ambassador in Bangkok and expose
our diplomatic service to ridicule everywhere. Many would infer that to sign
an FTA America would endure any depth of humiliation and contemptuous treat-
ment. And from that inference they might act with impunity against our firms
and citizens elsewhere as they had in Thailand. Now, these systemic disorders
stem partly from the charming Thai preference for harmony over conflict. It's
one of the things that makes it such a pleasant place to live. I've lived
there for 35 years.
In fact, these disorders may victimize any nobody, not just foreigners, I'd
like that to be clear. Thai citizens suffer under these disabilities as much
as foreigners do, at least the nobody type citizens. Many Thai officials
deeply regret this state of affairs but they cannot act upon it. And many
have told me that we can ease their clean-up job if we politely insist upon
the rule of law and what that means in operational terms. And with our help,
I am sure that they can adapt the special charm of their culture to the legal
demands of world commerce. These negotiations provide you a splendid oppor-
tunity to help them while advancing the values that made our nation a light
unto the world.
This was to be the end of my oral presentation but something just came in this
morning I would like to share with you. It's an e-mail from an American
attorney who actually read my testimony yesterday on the Internet. And he
sent me a message this morning. He's a law professor in Thailand. He's lived
there for 12 years. He asked me to read this to you. He said, "As an Ameri-
can and a lawyer who has lived in Thailand for the past 12 years and having
taught at Thai law schools, I can confirm the essence of your testimony.
There is very little idea in Thailand of the rule of law as we know it and the
worst offenders are those in power. You might make a point in your testimony
of how important the concept of status is in Thailand and how those who have
high status here feel that they are really above the laws. It's one of the
reasons that I am leaving Thailand".
May I submit this to you? You might like to contact this man who seems to
know quite a lot about this problem.
Thank you again for this opportunity to speak. I wish you all success in your
negotiations and welcome any questions that you might have.
CHAIR SURO-BREDIE: Thank you, Dr. Race.
[Verbatim transcript of oral testimony of Jeffrey Race, before the Trade
Policy Staff Committee of the Office of the United States Trade
Representative, Washington DC, March 30, 2004, extracted from the
official record at <http://www.us-asean.org/us-thai-fta/USTR_Transcript.doc>,
with minor corrections of misspellings and transcription errors. This oral
testimony slightly expands upon the written submission archived at
<http://www.camblab.com/nugget/fta_0330.pdf>.]
[This extract is archived at <http://www.camblab.com/nugget/verb_01.htm>]
[Replies to questions are archived at <http://www.camblab.com/nugget/verb_02.htm>]