MAIN PAGE | SPEECHES & EDITORIALS | 1999 | CONGRESS, BUSINESS, AND COMMERCIAL POLICY
PACIFIC BASIN ECONOMIC COUNCIL
MAIN PAGE | SPEECHES & EDITORIALS | 1999 | CONGRESS, BUSINESS, AND COMMERCIAL POLICY
Congress, Business, and Commercial PolicyWilliam J. HudsonVice Chairman, AMP Incorporated Chairman Emeritus, PBEC US Member Committee Thursday, February 11, 1999 International Economy in Crisis: Options for Sustaining Growth and Stimulating Recovery
Good morning again. I am extremely pleased to have the opportunity to address this PBEC Conference, and I have a keen sense of just how special this special panel is. Being introduced by a newly minted PBEC Board Member Gary Hufbauer is special in itself. So is participating in a discussion of legislation with Angela Ellard and Grant Aldonas. Virtually any American audience of educated men and women would appreciate that the Chairman of the House Ways and Means Committee and the Chairman of the Senate Finance Committee are extremely powerful and influential individuals, as are the subcommittee chairman of those bodies. This audience is more than simply well educated. It is an audience that is exceptionally sophisticated about legislation, the legislative process and about the people who write the laws that make those processes work. You understand the critical roles that are played by the trade counsels to the Ways and Means and Senate Finance Committees. I emphasize these things, not to flatter my fellow panelists, but to underscore the importance I attach to our discussion this morning. Senator Roth, the Chairman of the Finance Committee, laid out last spring a plan for analyzing America's trade policy needs with a view to squarely addressing them in the 106th Congress. Angela Ellard and her principals are today engaged in a discussion of the Congress's trade policy agenda for the coming year. I will leave it to them to share with you the current thinking in their respective committees about our country's challenges in the area of international trade and the appropriate legislative responses. My goal in the next few minutes is to give you one businessman's perspective on four topics:
FAST TRACK Let me start with fast-track. Good times are wonderful. They are also a curse. It may be a bit sweeping, but I would suggest that, in good times, societies make their worst mistakes. Why? Because in good times, no one sees the need for sacrifice or compromise; few are inclined to make difficult decisions; and, worst of all, the habit of trusting one another in political matters is all but abandoned. That's the downside of the rising DOW. These comments are particularly relevant to fast-track because fast-track negotiating authority is ultimately about trust. I doubt that I need to explain fast-track to anyone here. Some of you have written fast-track bills, most of you have lobbied for or against one or another of them. Virtually all of you know the subject pretty well. Suffice it to say that fast-track negotiating authority, created by the Trade Act of 1974, is the recognized technique for bridging the division of responsibility for trade matters that is part and parcel of the checks and balances of the U.S. Constitution. The basic conundrum is this: Congress is ultimately and explicitly responsible for regulating trade, and the Administration is responsible for international negotiations, including trade negotiations. There is also the collateral problem of convincing trading partners that they really can do business with the Administration, without fear that Congress will second-guess everything. The fast-track concept of the 1974 Trade Act was to amend the rules of the House and Senate for the implementation of trade agreements, provided that those agreements were negotiated in accordance with specified congressional mandates. The rule changes, as you know, promised guaranteed up-or-down votes, no amendments on qualifying trade bills. It was a brilliant idea, packaged in the form of a law. Odd, but brilliant. It is odd because the technique skips over the fact that, under the Constitution, the House and Senate each makes its own rules. The Executive Branch has no role. Fast track is brilliant because it goes beyond legalisms to the issue of political trust. And that is as it should be. America cannot accomplish any truly important goal without some measure of trust among political leaders and political institutions. By my count, there have been three major failed attempts during the Clinton Presidency to conclude a fast-track agreement between the Administration and the Congress. In the summer of 1994, it was reported that the then U.S-Trade Representative and the House Republicans had reached an agreement on the question of the treatment of labor and environment in new fast-track legislation. That deal fell apart in a press conference. In September 1997, the Administration proposed a bill after months of negotiation, only to pull it from the House floor for fear that there were not enough votes to pass it. Finally, in September of 1998, the Republican leadership took a fast-track bill to the floor, only to have it defeated by a margin of 180 to 243. According to Washington Post columnist David Broder and other analysts, the Administration could have had fast-track authority last fall but rejected it for the sake of other political considerations.(1) The academic experts know that America is losing out as a result. So do the companies who confront higher tariffs in Chile for their U.S. made products than they do for the same goods made in Canada or Mexico. Separately, diplomats and business people realize that Mexico is now focused on a trade deal with Europe that will, almost certainly, erode the U.S. market share in that country, which is now our second largest export market. The experts know these things, but they are far from general concerns. Certainly there is nothing to fear in any of this, the thinking goes. These are good times. We can worry about these trade issues later. I am not so sanguine. I am the former CEO of a company that relies on foreign markets for more than half of its sales, and I am concerned. I hope very much that Angela and Grant can tell us that we will finally get a fast-track bill in 1999, because we need one. As I mentioned, fast-track legislation has been stalled in large measure over labor and the environment issues. Those issues deserve some comment. So does the issue of blame. As some of you may recall, the 1997 fast-track episode trailed behind it a string of charges about who was to blame for the debacle. Here I would simply like to make a few obvious points about fast-track as it relates to labor and the environment. Fast-track has always been controversial; understandably so. Senators and Representatives should not readily forswear their usual legislative prerogatives, such as the right to offer amendments. They should do so only where there is a high degree of consensus in favor of the goal to be achieved, such as lower tariffs for American exports, and where such Congressional restraints appear to be necessary to achieving those ends. We have had such consensus in the past, and I suspect we have it still. There is, however, no such clear consensus with respect to America's international goals for labor and the environment. Until there is, authorizing fast-track authority for negotiations in this area will be problematic. Anyone who doubts the absence of such a consensus should consider the fate of the Kyoto convention on climate change, a convention that the Administration negotiated but has still not submitted to the Senate. No one should want a rewrite of U.S. labor or environmental laws as a consequence of an international agreement, especially not an agreement concluded in the absence of a societal and Congressional consensus in the United States. The last point I would make is that, historically, the Congress has linked fast-track authority to specific negotiations. That too began in 1974 when Congress authorized U.S. participation in the Tokyo Round of GATT(2) negotiations. There may be a case for making a similar linkage this time, especially now that President Clinton has called for a new round of global trade talks. THE WTO AND MTN NEGOTIATIONS This brings me to my second subject, which is the proposed new round of multilateral negotiations under the auspices of the World Trade Organization. Yesterday [February 10, 1999], the Board of Directors of U.S. PBEC endorsed a resolution in support the announced U.S. goal of a new global trade round, to be launched at the WTO Ministerial this fall in Seattle. I have been talking to PBEC groups for a couple of years now, and most of you know that our company, AMP Incorporated, makes electrical and electronic connectors and interconnections systems. These are the sine qua non components of everything from Motorola cell phones to Boeing airplanes. About half of all of our business is in global accounts, companies like Motorola, VW and others that we do business with all around the world. Global trading rules have a number of advantages for AMP and indeed for all of us. They lower the costs of doing business - whether by reducing tariffs or removing non-tariff barriers. They increase living standards by encouraging investment, and they enhance economic stability. EVSL On the other hand, the fact of the new round should not be used by any country or group of countries to impede progress that can and should be made virtually immediately. In plain English, PBEC has worked hard to support the APEC early voluntary sectoral liberalization effort. We were encouraged by the decision of the APEC leaders to move the EVSL tariff negotiations to the WTO and by the deadline they set themselves, namely the end of this year. We hope and believe that the EVSL tariff commitments should be in place before the new round starts. INVESTMENT With that caveat, there should be no artificial restrictions to the scope of the new round. And, certainly, it should include investment. PBEC had worked hard in support of the Multilateral Agreement on Investment that was the subject of negotiations in the OECD. We are disappointed that these negotiations have been suspended. It is unrealistic to think that the World Trade Organization can simply take up where the OECD left off. The institutions are very different, and ultimately, the OECD is going to need to return to its unfinished business. At the same time, the WTO needs to continue the investment work it began in the Uruguay Round, and investment needs to be on the WTO agenda. Foreign investment is critical to the United States, both inward investment and outward investment. A serious discussion about the role of international investment in our economy is long overdue. For that reason alone, it is in our national interest for the WTO to begin talking about investment. And there are dragons to be slain. The Uruguay Round began to address the issue of performance requirements in international commerce, but it only scratched the surface. Today, countries routinely demand various things - exports, the use of local inputs, technology transfers and so forth - as preconditions for investing in their economies. American workers and business leaders can only benefit by disciplines that curb these kinds of demands. We also need to move the trading system towards greater protection for existing investments. CHINA At this point, I would like to comment briefly on China, specifically China's application to join the World Trade Organization. Two things are crystal clear. The first is that it is overwhelmingly in China's interest, not only to join the World Trade Organization, but to undertake the liberalization that will be required of it as a condition of entry and as a condition of membership. Second, it is overwhelmingly in the interest of the United States to have China in the WTO. I believe this to be true for geopolitical reasons as well as economic ones. In simple trade terms, however, the United States already applies normal (WTO) tariffs to imports from China. Having China in the WTO would give us access to better tools for challenging China's treatment of U.S. goods and U.S. companies than are available exclusively under U.S. domestic law. We should know in a month or two whether China is indeed willing to make a good faith effort to joint the WTO and abide by its rules. If they are, I hope Congress will do its part to complete the deal. BUSINESS AND TRADE POLICY Lastly, let me touch on the issue of business and the trade policy debate. Business has a big stake in trade policy. We carry out the trade, and the investment. But it is government that makes the policies. As citizens in a democracy, we have an obligation to tell government what the implications are for various policy options. On fast track, on NAFT, on China, on investment, and on many other issues we have done that. If government agrees with our assessment of the national interest, we hope that they will try to implement the relevant policies. To the extent that policies we support are pursued, however, they should be pursued because policy makers believe them to be in the national interest, not as a favor to one interest group or another. In the case of fast track, I hope that, at some point, the Administration will vigorously go after it, not because we the business community ask them to, but because they believe it is in the national interest. As I said earlier, fast-track is fundamentally about trust. Yes, trust needs to be re-established between the Congress and the Executive Branch. (It could also use some repair between government and the private sector.) We in business will do what we can to help. But building a better relationship between Congress and the Administration is not something we can do for them, and certainly the situation will not be improved by making a scapegoat of business. Thank you. 1. The Washington Post column of David Broder, December 11, 1998.
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