June 30,2005

Floor Statement of U.S. Senator Max Baucus Regarding CAFTA


(WASHINGTON, D.C.) U.S. Senator Max Baucus delivered the following floor speech duringtoday’s Senate debate voicing his opposition with CAFTA. The statement prepared for deliveryfollows:

Mr. President, I rise in opposition to the CAFTA Implementation Act. But before I speakto CAFTA specifically, I want to put my comments in context.

I believe in trade, and I have the voting record to prove it. I worked with the first BushAdministration to pass NAFTA. I worked with the Clinton Administration to pass legislationgiving Permanent Normal Trade Relations status to China. As Chairman of the FinanceCommittee, I led the fight in the Senate to renew the President’s fast-track trade negotiatingauthority after a lapse of eight years. And I have voted for every one of the United States’bilateral free trade agreements.

I have spent decades fighting for trade, because I know that lowering tariffs and levelingthe global playing field creates enormous opportunities for America’s workers, farmers, andbusinesses. Trade opens new markets for our agriculture, manufactured goods, and services.Trade generates good-paying jobs. And, as consumers, it gives us all more choices at lowerprices.

The benefits of trade are quantifiable and real. Economists estimate that the tradeagreements of the 1990s – principally the WTO Uruguay Round and the NAFTA – save theaverage American family over $1500 every year. In my own state of Montana, total exports toMexico have increased sevenfold in 10 years under NAFTA.

And the benefits of trade spread beyond our borders. By engaging other nationseconomically, the United States can help developing countries generate the wealth they need tolift their people out of poverty. We can spread the values of democracy and promote the rule oflaw. While harder to measure, these benefits are every bit as real as those we can.

But there is a right way and a wrong way to pursue trade liberalization. And I fear we areheading down the wrong path in at least three respects:

• We are pursuing the wrong agreements.

• We are not doing enough to enforce the agreements we already have.

• And we are ignoring the public’s growing unease with our trade policy.

All of these mistakes may have perilous consequences. In the short run, they have madethe debate over CAFTA far more divisive than it needed to be. In the longer term, the success ofthe Doha Round, our broader trade agenda, and our nation’s long-term economic prospects areall at risk.

The Dangers of Putting Foreign Policy First

First and foremost, nations trade for economic gain. So the primary goal of our tradepolicy should always be to maximize those economic gains.

That is why I have long advocated a focus on trade deals with large markets that offer thegreatest bang for the negotiating buck. Trade deals that bring obvious benefits sell themselvesback home and help create a virtuous cycle of trade liberalization and economic growth.

Yet, in the past few years, we have seen an increasing focus on free trade agreementsmotivated by abstract foreign policy concerns. These agreements with small markets take a lotof resources to negotiate. Even with fast-track procedures, they are difficult to move throughCongress. And, in the end, they offer few if any economic gains to justify the money, time, andeffort that goes into negotiating them.

Time and again, Members of Congress are asked to take difficult votes on agreementsthat have few obvious benefits to the people back home. That is just not a sustainable pattern. Itis a recipe for what I have been calling “trade fatigue.”

We need to refocus our negotiating resources on markets that matter.

First and foremost that means the WTO. The Doha Round is at a critical point. It willtake strong U.S. leadership to keep it on course. And we must keep it on course if we want tomake meaningful progress on a host of key issues in agriculture, services, and other criticalsectors.

Does that mean we should abandon the pursuit of bilateral and regional free tradeagreements? Certainly not. Does it mean CAFTA offers no benefits to the United States? No.

But it means we should make better choices. Countries like Korea, Malaysia, andTaiwan offer large and growing markets for our goods and services. The benefits of anagreement with any one of these countries are easy to quantify and worth the investment ofresources.

We are told these countries aren’t “ready” to negotiate. I don’t see that they are any lessprepared than many of the countries with which we are already negotiating. The simpleexplanation is that economic goals are not a sufficient priority in selecting FTA partners. Andthat must change.

Indifference to Enforcement

Negotiating the right agreements would help set us back on the right course. But that isnot enough.

We also need to do a much better job enforcing the agreements that are already on thebooks.

Our trade negotiating resources are finite. That’s not something trade officials like toadmit, but it’s true. The more resources we devote to negotiating new agreements, the fewerremain to enforce the agreements we already have.

Still, lack of resources is only part of the problem. The larger problem is lack of will tomake enforcement a priority.

Focusing on enforcement is not about rhetoric. It is about the bottom line. TheInternational Trade Commission estimates that – in 15 or 20 years when it is fully implemented –CAFTA could increase U.S. exports by about $2.7 billion per year, with a comparable increasein imports. Compare that to $7.5 billion in lost software sales due to piracy in the Asia-Pacificregion in 2003 alone.

Negotiating CAFTA has consumed enormous resources. By any measure, the UnitedStates Government has devoted far fewer resources to combating the theft of intellectualproperty. Worldwide, the problem continues to grow unabated. Anyone juxtaposing theprojected benefits of CAFTA and the known losses from software piracy ought to question ourpriorities.

This indifferent approach to enforcement must change. When our government isperceived as weak on enforcement, the public justly questions whether trade agreements aren’tall give and no take. Without meaningful actions to address the public perception that tradedeals are giveaways, it is no wonder public skepticism about trade is growing.

Enforcement means as much or more to the bottom line as new agreements. Enforcementbuilds public confidence in open trade. It needs to be a much greater priority.

Ignoring the Grassroots

In the end, trade policy is supposed to be about helping people – helping them to findjobs, find markets, and live better lives.

And yet, to the average American, the downside risks of trade are often far more obviousthan the benefits. That’s not new. What is different is our recent unwillingness to acknowledgethis reality.

I remember when President Clinton toured the country making the case for NAFTA. Heknew that average Americans were nervous about trade and globalization. President Clintonwent directly to the people to explain why trade benefits us all. He was honest in admitting thatsome people might lose their jobs – that some communities might be hurt by NAFTA. But hemade a strong case for the overall benefits. And he promised to lend a helping hand to thosewho might suffer.

No one is doing that now. The Finance Committee amended CAFTA to include a neededexpansion of Trade Adjustment Assistance to service workers whose jobs move offshore. Butthe final bill came back with the amendment stripped out.

Instead of making a positive case for their policy choices, instead of putting in placepolicies to help ease the inevitable transitions that come with global competition, our currentapproach seems to marginalize people who express concerns about trade.

Nowhere is this more obvious than in the debate over CAFTA.

Everyone agrees that workers in Central America face significant hurdles when they tryto exercise their internationally recognized right to organize and bargain collectively. Yet, whenAmerican workers raise legitimate questions about CAFTA’s potential effects on this situation,they are written off as protectionists.

Everyone agrees that more attention needs to be paid to environmental issues in CentralAmerica. Yet environmentalists are marginalized in our trade advisory committee structure andtheir views dismissed as extreme.

Everyone agrees that sugar producers are the sector of American agriculture with nothingto gain and much downside risk from CAFTA. But when our sugar producers object to beingsacrificed, their concerns are dismissed as exaggerated and selfish.

Political leaders turn their backs on the grassroots at their peril.

If we want our trade agenda to succeed, we must confront the public’s fears head on. Weneed to make the case for trade and why it is important to us all. We need to address the shorttermtransitional needs of our workers and the long-term competitiveness of our economy. Andwe need to start enforcing trade rules so that Americans receive the benefits of our bargains.

The government works for the people. Sooner or later, we cannot make Americansswallow a policy with which they do not agree. I worry that we are getting closer to that day.

CAFTA

We are at a turning point. Our trade policy makers need to decide if they want the tradeagenda to move forward or to stop in its tracks. The first test is CAFTA.

From the very beginning, CAFTA faced an uphill battle in Congress. This agreementfaces the strongest, most diverse, and most unified opposition brought to bear on any tradeagreement in the past decade.

Labor unions, human rights groups, and environmentalists believe the agreement willworsen Central America’s already poor record on workers rights and environmental protection.Sugar and some textile producers see their economic survival being sacrificed in exchange forforeign policy goals and perhaps some very modest economic gains to other sectors. Grassrootsagriculture organizations, like R-CALF and the National Farmers Union, are convinced that thecurrent structure of U.S. trade agreements does not level the playing field and brings them nobenefit.

It didn’t have to be this way.

We made a lot of progress in the Trade Act of 2002 on labor and environment. But sincethat time, the debate has been largely one-sided, and progress has essentially stopped. That’s acontrast to other areas, such as intellectual property, where we seek successive improvements ineach new deal.

Many Central American officials have made clear that their governments would haveaccepted stronger labor rights provisions in CAFTA – but U.S. negotiators were not permitted toask the question.

To be fair, I must acknowledge that some progress has been made – at my urging – oncertain environmental issues in CAFTA. This proves that progress on CAFTA’s difficult issuesis possible. But a similar effort was not made on other issues until – at the last minute – thevotes did not add up.

I am particularly disappointed in the unfair way that CAFTA deals with sugar.The administration claims that CAFTA will allow in only a teaspoon a day of extra sugar– not enough to harm anyone. But their own study from the International Trade Commissionestimates that the sugar industry will suffer by far the largest negative effects from thisagreement of any domestic industry – including thousands of lost jobs.

The sugar beet farmers of Montana and the workers at Montana’s two farmer-ownedsugar beet processing plants rightly see CAFTA as a threat to their livelihoods.

I also hear the argument that we cannot get a good trade deal for American agriculturalexports unless we open our market to imported sugar. Experience simply does not bear out thisclaim. Certainly U.S. agricultural exporters received a good deal in the U.S.-Australia Free

Trade Agreement without any new sugar access.

The United States has rightly refused to negotiate our farm programs in the Free TradeAgreement of the Americas or in any of our other bilateral or regional trade agreements. Itmakes no sense to reduce price supports for wheat, corn, cotton, soybeans, dairy, rice, or othercommodities without being assured that other big producers of those commodities will similarlyreduce their price supports.

But that is effectively what we are doing to our farmers who grow sugar. We are givingaway our leverage in a tiny bilateral while major subsidizers like Brazil and the European Unionare not at the table. On behalf of Montana’s sugar beet farmers, I stand firm in saying this is notright. Any discussion of farm programs belongs in the WTO – nowhere else.

During all the time that CAFTA was being negotiated, and during the year and a halfsince negotiations concluded, the sugar industry has been ready and willing to work with theadministration. But their suggestions have never received serious consideration.

As CAFTA struggled for votes, Secretary Johanns came forward just a few days ago witha proposal. But that proposal is a short-term fix for a long-term problem. It’s not enough for myMontana sugar beet farmers, so it’s not enough for me.

But even more disturbing than the proposal itself is the way it was developed. Ratherthan meeting with the sugar industry to develop a reasonable proposal, the administration simplyoffered its own plan. In my judgment, that was not the best way to allay sugar industry concernswith CAFTA. And it has left us where we are – with a proposal inadequate to address the realfears of sugar beet and sugar cane growers in Montana and elsewhere.

Prospects for TPA in 2007 and the Long-Term Agenda

The CAFTA agreement, like most trade agreements, has its merits. But there were twoways to pursue it — have an inclusive process and deal with hard issues, or sidestep them andthen try to win by a vote or two. In this case, we have followed the latter course.

Even if this strategy works, I’m afraid the victory will come at great cost.

In 2007, Trade Promotion Authority will expire. Any proposal to renew TPA will comein the form of a fully amendable bill.

Everything this administration does – or rather doesn’t do – on trade, tells Congress howthe executive views the role of Congress in the development of trade policy and will influencelegislators’ views on a new TPA bill.

In a few short years, I sense that there has been a significant degradation of theCongressional-Executive partnership that has steered our major trade deals to completion sincethe 1970s. I fear that we have taken a step backward from the work that I, and many others, didto build a new consensus in the Trade Act of 2002.

I can only urge that we see the error of our ways before it is too late. Before we put theDoha Round, future bilaterals, and TPA itself at risk.

Our nation stands at a crossroads. Which way will we turn?

Toward a trade policy of inclusion or one that ignores those whom it marginalizes?

A trade policy that promotes economic growth, or one that sacrifices our economic good forperceived foreign policy gains?

A trade policy that will move us forward together, or one that will divide the Congressand the country – and inevitably bring the process of trade liberalization to a grinding halt?

It is my sincere hope that we learn our lessons from the difficult road CAFTA has taken,and that in the future, we follow a different path.

Thank you, Mr. President. I yield the floor.