March 09,2004

Baucus Presses for Trade Agreements that Help the Economy, Addresses Offshoring

Senator Asks GAO to Conduct Study into Trade Agreement Enforcement

(WASHINGTON, D.C.) In today's Senate Finance Committee hearing with U.S. TradeRepresentative Robert Zoellick, U.S. Senator Max Baucus continued to press the administration oninternational trade opportunities that will help the economy and create jobs.

Last week, Baucus unveiled a proposal aimed toward addressing offshoring - the practice ofU.S. companies using resources or employees outside of the United States. Baucus emphad thatone of the best ways to boost the economy is by the U.S. embracing trade and making America abetter place to work, rather than building walls.

Baucus's proposal to address offshoring includes: passing the JOBS bill, which provides atax break to American manufacturers, expanding the R&D tax credit and increasing fe deralspending on research, promoting educational programs to prepare today's children for tomorrow'seconomy, and helping employers with the rising costs of providing health care, among otherprovisions.

In today's hearing with USTR Zoellick, Baucus focused on the trade component of his antioffshoringpackage, including better selection of free trading partners, better enforcement ofexisting trade agreements, and stronger labor and the environment provisions within agreements.

"Let’s face it: offshoring of jobs has people worried," Baucus said in the hearing. "And thelegitimate worries of the American public cannot be dismissed. There is no silver bullet. There arelots of pieces to the offshoring puzzle – tax, education, health, research and development – to namea few. But today, we should talk about the trade piece.

"We need to re-examine how we choose partners for free trade agreements… Americanworkers, farmers, and businesses deserve the most bang for the buck that we can get them. Theydeserve trade deals with commercially significant markets that will generate job growth at home,"Baucus added.

Baucus also announced today that he is requesting that the General Accounting Office(GAO) conduct a study into the enforcement of the more than 250 trade agreements that the UnitedStates currently has on the books. Completion of the study is requested for January 2005.

"This study will allow Congress and the administration to better assess how well we do atenforcing trade agreements and how to allocate our resources to achieve the best possible results.It's vital that we continue to move forward with new trade agreements that open markets and levelthe playing field for American workers, but it's equally critical that current agreements with ourtrading partners are actively enforced," Baucus added.

Baucus's letter to the GAO and his Finance Committee statement follow:

March 9, 2004

The Honorable David M. Walker
Comptroller General
U.S. General Accounting Office
441 G. Street, N.W.
Washington, DC 20548

Dear Mr. Walker:

According to The President’s 2002 Annual Report on the Trade Agreements Program, theUnited States is now a party to more than 250 separate trade agreements. These include the WTOAgreements and free trade agreements with Canada, Mexico, Israel, Jordan, Singapore, and Chile.They also include bilateral investment treaties (BITs), Agreements Concerning IntellectualProperty, Agreements on Trade and Intellectual Property Rights, Agreements on Textiles andTextile Products, and a host of agreements addressing other sectoral, bilateral, and plurilateralissues.

The United States has a very active negotiating agenda and is constantly concluding newtrade agreements. In addition to ongoing negotiations in the WTO’s Doha Development Round, theUnited States is negotiating the Free Trade Agreement of the Americas with 34 countries and is orwill shortly begin negotiating bilateral or regional free trade agreements with an additional 20countries. A number of other bilateral and sectoral agreements are pending or under consideration.

Concluding trade agreements that open markets, level the playing field, and create a strongset of rules to govern international trade is critical to the success of American workers, farmers, andbusinesses in the global market. It is equally critical, however, that commitments made in suchagreements by our trading partners be actively enforced to assure that in each case we are gettingthe benefit of our bargain.

In light of the large and growing number of trade agreements being concluded, the widesubject areas covered by such agreements, and the limited resources available both to negotiate andenforce trade agreements, we would like to explore the manner in which trade agreementscompliance is monitored and enforced by the United States Government. Specifically, we requestthat GAO determine: (1) what mechanisms exist for monitoring compliance by our trading partnerswithin the full range of U.S. trade agreements; (2) what criteria are used to judge compliance, aresuch criteria uniformly applied, and is there an objective basis for comparing compliance levelsacross different agreements; and (3) what criteria guide the allocation of resources among tradeagreements compliance and enforcement activities and between such activities and tradenegotiations.

In order that Congress and the President may be informed by your findings as set theagendas for the next Congress and the next Administration, I ask that you provide this report by nolater than January, 2005.
I appreciate your assistance on this issue.


Max Baucus
Ranking Member
Committee on Finance

Statement of U.S. Senator Max Baucus

Hearing on the Administration’s International Trade Agenda

Thank you, Mr. Chairman and thank you Ambassador Zoellick for appearing before theCommittee. You have given us a comprehensive overview of the many issues that will be on ourradar screen this year. I would like to focus today on one issue, and that’s jobs. I think the primarygoal of our trade policy should be to keep and create jobs.

In the last three years, we’ve lost about 3 million jobs in this country. Some of those jobsare moving overseas – and increasingly, the jobs that are moving overseas are higher-paying, andhigher skilled jobs. Every day now, it seems like there is news on the subject of “offshoring.” Ihear it from the press, from my colleagues in the Congress, and from constituents. Manufacturingplants moving to China. Call centers moving to India. Even jobs in state unemployment offices arenot immune – in some states unemployed workers have to call someone overseas to find out whattheir state benefits are.

There has been a lot of debate on whether this is good or bad in the big economic picture.But let’s face it: offshoring of jobs has people worried. And the legitimate worries of the Americanpublic cannot be dismissed. There is no silver bullet. There are lots of pieces to the offshoringpuzzle – tax, education, health, research and development – to name a few. But today, we shouldtalk about the trade piece. About how to use our trade policy to create and keep good jobs here athome. I think it is a question of priorities.

First, we need to re-examine how we choose partners for free trade agreements. I rememberwhen we were debating fast track and the Trade Act of 2002. All of us – here in Congress, in thebusiness community, and at the White House – we were all talking about exports, competitiveness,and economic growth. In short, we were talking about jobs.

But somewhere along the line, that goal got hijacked. Instead, as the General AccountingOffice recently concluded, foreign policy considerations now dominate this administration’sselection of trade partners. I think that’s a mistake. I do want to commend you, Ambassador, forcontinuing to push forward on the World Trade Organization (WTO) Doha Round. The collapse ofthe new Round in Cancun was a serious setback; we need to continue to make the WTO a priority.I also agree that the WTO can’t be the only game in town. We need to move ahead on differentfronts. We need to negotiate free trade agreements.

But – we are now negotiating a number of agreements that will have very limited benefits.Now I want to be clear – I welcome more open trade with any country willing to makecomprehensive commitments. But negotiating these agreements takes a lot of resources. And ournegotiating resources are not unlimited. American workers, farmers, and businesses deserve themost bang for the buck that we can get them. They deserve trade deals with commerciallysignificant markets that will generate job growth at home.

Second, enforcement. Negotiating free trade agreements is not the only way to get marketaccess. Case in point is India. We all know that India is benefiting enormously from the offshoringof service-sector jobs from the United States. But the United States is not getting anything inreturn, because India has such a closed market. And India is certainly one of the leading countriesholding back progress toward greater market access in the WTO.

The administration’s proposed solution is to negotiate a free trade agreement with thecountry next door to India – Sri Lanka. Total U.S. exports to Sri Lanka last year were about $143million. So after we expend lots of negotiating resources and wait out a 10 to 15 yearimplementation period, we might have free trade with an economy that has a current commercialworth to the United States of $143 million a year.

By contrast, American businesses in 2002 lost more than twice that much – $342 million inretail revenues – just from software piracy in India. India has made commitments under the WTOTrade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement to protect intellectualproperty rights. What are we doing about enforcement? How can we spur innovation and createjobs at home if we let people steal our intellectual property – $13 billion worth of software alone in2002? Wouldn’t our limited resources be better spent combating piracy than negotiatingagreements with tiny markets?

I think we need to reassess our priorities. That is why today I am requesting that the GAOconduct a review of how we enforce the more than 250 trade agreements that the United Statescurrently has on the books. This study, which will be completed in early 2005, will help Congressand the Administration better assess how well we do at enforcing trade agreements and how toallocate our resources to achieve the best possible results. And by best results, I mean first andforemost jobs. Because that is what Americans need.

Third, we must ensure that U.S. companies can compete on a level playing field. But weshould reject the notion that we must lower standards in this country to compete. Instead, we mustlook to raise standards in the countries we trade with. The Trade Act of 2002 made tremendousprogress in this regard, but we must continue to “race to the top.”

When it comes to standards on labor and the environment, the debate in the last three yearshas been about what this administration and this Congress – not our trading partners – will accept.Our trading partners will accept higher standards in order to gain the prestige and access that a tradeagreement with the United States gives them. I know that – I’ve met with the trade ministers andtalked with them about these issues. But we negotiate with ourselves instead of with them. We’vegot to do better.

Mr. Chairman, Ambassador Zoellick, I look forward to working with both of you, and thisCommittee, as we focus on the priority issues in this year’s trade agenda.