April 28,1999

Roth Speaks on Globalization and the American Trade Agenda

Addresses Economic Strategy Institute's Annual Conference

WASHINGTON -- Senate Finance Committee Chairman William V. Roth, Jr. (R-DE) this morning addressed the Economic Strategy Institute's Annual Conference. Roth said that there is, "more harmony than discord in the different perspectives on our trade policy"; outlined an agenda for the WTO meeting in Seattle; and outlined the direction that U.S. trade policy should follow.

"It's a pleasure to join you again at the Economic Strategy Institute's annual conference. I want to thank Clyde and his staff, who, for the second year in a row, have brought together a broad range of perspectives on globalization and its impact on our economy, our politics, and our daily lives.

"Since we last met here at Clyde's conference, I have been doing much the same thing with the Senate Finance Committee which I chair. A year ago at this conference, I announced my intention to begin a thorough review of U.S. trade policy. My goal was to rebuild a bipartisan consensus that would allow us to address the challenges we face as a nation in a world of rapid political, economic, and social change.

"Thomas Friedman, in his perceptive new book, 'The Lexus and the Olive Tree,' summed up much of what the Committee heard throughout the course of our review on the process of globalization. In response to a friend's question how he felt about globalization, Friedman joked that, 'I feel about globalization a lot like I feel about the dawn. Generally speaking, I think it's a good thing that the sun comes up every morning. It does more good than harm. But, even if I didn't much care for the dawn there isn't much I could do about it.'

"Friedman goes on, in a more serious vein, to describe the basic tension inherent in the process of globalization as the tension between doing what it takes to succeed in the new global economy (building a Lexus) while at the same time preserving a sense of place and identity (a sense of rootedness like an olive tree).

"Of course, coming from Delaware, I would have much preferred that Friedman use the example of the Dodge Durango and the poultry farm. But, I suppose that simply reflects where the roots to my own olive tree are planted!

"That said, Friedman accurately defines the challenge we face, as a nation and as individuals, as finding 'a healthy balance between preserving a sense of identity, home, and community and doing what it takes to survive within the [global economy].'

"To do that, however, we have to be clear about what globalization is and what it is not. Globalization emphatically is not a conspiracy, as Ralph Nader has claimed. Neither is it a machine out of control, as William Greider would have us believe. Nor is it the product of bad trade deals in which U.S. negotiators got snookered, as Pat Buchanan and some critics of American trade policy, both Republicans and Democrats, so often seem to cry.

"Rather, globalization is the product of two different trends. The first involves the advances in technology that reduce the barriers and cost of communication and transportation. Those changes are fueled by a renewed drive toward innovation. They underscore the fact that those countries and companies that will survive what many want to call the 'crisis' of globalization will be those that innovate not just in how they manufacture products, but how they manage their businesses and their politics in the face of the challenges globalization presents.

"The second, and in my view, more powerful trend, is the elimination of the barriers to political, economic, and social interaction that characterized the Cold War era. What has fueled those changes has been that most powerful of human aspirations -- freedom. The result has been a deeper, more widespread interaction between nations and people, economically, politically, and socially that would have taken place even without the advances in technology, but which the advances in technology have surely helped.

"That desire for freedom and its consequences is precisely why I am optimistic about the outcome of the changes under way in the world today. Even the most ardent critics of globalization cannot quarrel with the value of human freedom or with the benefits of increased human interaction. Indeed, the critics of globalization have been among the first to take advantage of the new freedom to communicate to advance their view of a just society.

"Yet, the question before us is a practical, rather than philosophical, one. It is not a question of whether we should participate, but, how. To paraphrase Tom Friedman, the truth is that we can't stop the process of globalization - except at a huge cost to human development - and we shouldn't waste time trying. What we should be thinking about is how to get the best out of this new system and cushion against the worst, for the benefit of the most people possible.

"What I found in the process of the Finance Committee's trade policy review is that there is a remarkable degree of consensus on that basic approach. Let me illustrate that point with a quote from testimony we heard before the Finance Committee during our hearing earlier this year. The witness said, '[t]he process of global economic integration is well underway. We cannot stop it, nor should we try. Product, capital, and labor markets are increasingly transnational just as the process of production is. These integrating forces can help us meet our shared objective of seeing to it that working people everywhere enjoy a better life and that the benefits of rising output and rising profits are broadly shared.'

"That sounds a lot like Tom Friedman, doesn't it? It could have been an expert economist. It could have been a leader in industry. But, in fact, the witness was John Sweeney, head of the AFL-CIO.

"I cite Mr. Sweeney's testimony for a reason. His testimony reflects the fact that there is real ground for consensus among the most thoughtful of our leaders.

"There are, however, many others who prefer to practice the politics of division for short term political advantage. Their instinct is to focus on what separates us, rather than what brings us together. After nearly forty years in public life, I can tell you that is the wrong approach.

"That approach won't work in addressing the challenges of globalization. One practical example is the debate over trade negotiating authority. Looked at as a narrow zero-sum game of short-term political advantage, it would make sense to empha the differences between business groups and labor over the scope of any future grant of negotiating authority.

"But, viewed from the perspective of how we, as a society, face the challenge of globalization, that is entirely the wrong approach. We need both business and labor working together to build a third American century worthy of the legacy of the previous two. This is all the more important now that we are about to host the members of the World Trade Organization in Seattle at the end of this year, where I expect that we will launch a new round of global trade negotiations.

"The agenda for that meeting and for the negotiations that follow should, in my view, be an ambitious one. For examples, on industrial tariffs, I believe it is time that we told the rest of the world that the next step is to bring their tariffs down to our levels or below and then negotiate a schedule for their total elimination within ten years.

"On agriculture, it is time to call for the worldwide elimination of export subsidies and expand considerably on the process of liberalization begun in the Uruguay Round. Our goal should be to ensure that agriculture is, at last, fully integrated into the disciplines of the world trading system.

"On services, it is time to build on the framework developed in the Uruguay Round. There we established a mechanism for liberalizing trade. Now, we must take the next step and seek actual reductions in the barriers our industry faces in foreign markets.

"On labor and the environment, there are a number of measures we can take that are consistent with trade liberalization. For example, eliminating foreign tariffs and subsidies that afford additional competitive advantages to foreign industries that compete with us principally on the basis of wages should be high on our list of priorities. We should also consider the benefits of establishing a working group in the appropriate forum to examine the connections between trade and employment opportunities, wages, and worker rights, akin to that suggested by John Sweeney in his testimony before the Finance Committee.

"Similarly, on the environment, we should place a high priority on eliminating tariffs and subsidies that both distort markets, but also do considerable damage environmentally. In fact, the most environmentally pernicious subsidies are those that lead to overproduction in agriculture, like the European Union's Common Agriculture Policy. Other examples include Japanese tariffs on wood and paper products and foreign subsidies to the fishing industry worldwide.

"To rewrite the trade agenda in that fashion, however, we have to be willing to seize the opportunity before us. And, to do that, we must come together to shape the negotiating objectives the President and his Trade Representative will take to the ministerial meeting in November.

"I, for one, believe that is possible. There is, in fact, more harmony than discord in the different perspectives on our trade policy and on how we should confront the challenges of a global economy. For example, there is no doubt that labor has as great a stake in opening markets to U.S. goods as does any U.S. manufacturer, farmer, or service provider.

"I have no doubt because I have heard directly from auto workers in Delaware about their stake in opening China's auto sector as part of its accession to the World Trade Organization. The auto workers rightly perceive that high tariffs and a restrictive quota on imports will encourage investment in China at the expense of investment and employment in the auto industry in the United States.

"Furthermore, for workers, opening markets to U.S. goods and services is not just a question of their current jobs, it is a question of their retirement as well. Most of their pension funds are invested in companies that must remain internationally competitive to survive. And that, in policy terms, means we must be at the negotiating table in November prepared to advance their interests.

"Equally, I have no doubt that U.S. businesses shares the growing concern for improving conditions of workers not only in our country, but worldwide. I do not say that because I believe in the altruism of the private sector. I say that because I believe that pursuing an anti-labor strategy is bad for their bottom line, whether here or abroad, because of consumer and investor response to any suggestion of poor labor practices.

"Based on what I heard in the course of hearings before the Finance Committee, I believe that both labor and U.S. business share a considerable stake in seeing the process of trade negotiations move forward. Here, again, John Sweeney's testimony is instructive. He stated that, 'It should be clear by now that we are not debating whether the United States will continue to trade and invest with the rest of the world, or even whether trade and investment flows will continue to grow.' As Mr. Sweeney put it, we are instead debating 'whether we can write rules for the global economy that will lead to broadly shared prosperity.'

"American business and labor have, in fact, already begun that process. In June of this past year, the members of the International Labor Organization agreed to a Declaration on Fundamental Rights and Principles at Work. That declaration affirms that membership in the ILO implies an obligation to afford core labor rights of freedom of association, collective bargaining, non-discrimination in employment, and the abolition of forced labor and abusive child labor. The declaration included a follow up mechanism to measure compliance. Significantly, the declaration also abjures the use of labor standards for protectionist purposes.

"The members of the ILO, which includes representatives of labor, employers, and governments, would not have reached that agreement without the leadership and cooperation of the American business and labor communities. I also think that the declaration suggests a model for the future as well - one that stresses the need to raise labor standards while eschewing their use as reason to raise new barriers to trade. I believe that is a model to which both business and labor could agree going forward.

"Indeed, the process is one that offers a model of how we should more broadly address the challenges of globalization. That brings me to the conclusions that I have drawn from the Finance Committee's trade policy review and the steps we need to take here at home.

"First and foremost, we need to empower the President to represent our interests internationally. As a practical matter, that means restoring the President's authority to negotiate international trade agreements. The process of globalization is moving too fast not to authorize the President, regardless of who holds that office, to take a seat at the negotiating table and represent America's interests.

"Second, we need to add a greater deal of democracy to the trade policy process. By that I mean, principally, restoring Congress' constitutional role in setting the objectives of the negotiations, reviewing the talks as they progress, and in drafting the legislation that would implement any eventual agreement.

"Third, we need to expand our vision of what constitutes trade policy and its tools. For example, pursuing the issue of labor rights through the ILO is as much a tool of our trade policy at this juncture as any attempt to negotiate labor rights within the framework of the World Trade Organization, and likely to improve the prospects for achieving something meaningful in the end.

"Fourth, we must reinvigorate the process by which we enforce our trade agreements. We will not be able to rebuild a consensus on trade or expect that either business or labor, or any other interests in our society, will support a system of trade rules that other countries can routinely flaunt.

"I believe that we can make a new start on trade policy if we organize a proposal around those four basic principles. That is what I, as Chairman of the Finance Committee, am prepared to do.

"In closing, I will use a story you may have heard about the speech that bureaucrats at one of our trade agencies wrote for their principal. The speech was an attempt to evoke a visionary call for progress in the face of significant challenges. It unfortunately concluded with the following immortal lines -- " We stand on the precipice of a new era. And, together, we are about to take a giant step forward."

"In my view, we should at least look before we leap, but we need to leap nonetheless. It's time to take that giant step."