TESTIMONY OF ROBERT D.HORMATS

Vice Chairman, Goldman Sachs (International)

Before the Committee on Finance

United States Senate

February 27, 2002

GLOBALIZATION AND AMERICAN TRADE POLICY

Mr. Chairman and members of the Finance Committee,

I appreciate the opportunity to appear before you again to discuss American trade policy and to share some thoughts on the key issues before this Congress and this country in the period ahead.

The most urgent next step in American trade policy is to develop the critical mass of support necessary for the US to advance its international economic interests in the decade ahead.

Expanded global trade and investment over the last 50 years have provided enormous benefits for American workers, consumers and, businesses. We tend to take it for granted today, but this experience is in sharp contrast to the horrible economic mess the US and world got themselves into after World War I -- when American leadership faltered. Protectionist measures and international financial instability were among the major factors that led to the depression. We should not forget the lessons of this period -- or let our leadership of the global economy be derailed by internal divisions or complacency that the world economy will work just fine whether the US is an effective leader or not!

Access to growing foreign markets was a vital factor in America's economic growth in the 1990s, especially for its most productive sectors such as high technology, agriculture, entertainment and financial services. And competitive imports have reinforced the dynamism of our economy and broadened consumer choice, holding down the prices of many products to the benefit of millions of households. America's leadership in promoting trade liberalization and a robust global economic system have been essential to secure these benefits for the American people and to this country's ability to remain a strong and effective leader on global political and security matters for the last 50 plus years.

However, in recent years advocates of open, rules-based, transparent and non-discriminatory trade -- and supporters of American leadership in the world economy -- have been on the defensive. The benefits of expanding trade are too often neglected while vocal criticism of US trade policy, the WTO and globalization tend to get more attention. The role of a strong global economy in maintaining a strong American economy is too often ignored.

It is now a matter of great urgency to present more forcefully, and to a broader range of our citizens, the very compelling case that exists for sustaining freer trade and investment and for the extension of market-oriented rules to a broader range of countries and sectors.

It is also time to explain in clear terms to the American people that the central international economic institutions, while far from perfect, are important to the sound structure of the global economy.

And it is critical at this moment to recognize that by sitting on the sidelines while other countries negotiate their own preferential bilateral and regional trade agreements, the US is doing considerable damage to its economic interests and to its position as global leader.

In making the case for expanding trade and for improving the rules of the trading system it is important to address concerns that have been raised in recent years about the impact of globalization on jobs in our country, on the environment and on economic development in the poorer nations of the world -- and to address head on the charge that the WTO and global trade agreements are simply designed to benefit big corporations at the expense of large groups of citizens and are inherently undemocratic. Unless these concerns can be successfully addressed, distrust of trade institutions and resistance to further global trade liberalization is likely to grow.

However effective American trade policy is, America cannot remain a world-class trading power without a world-class system of K-12 education and adult training. For a multitude of economic and social reasons this country needs to do a far better job of educating and training our own citizens so that larger and larger numbers of them can thrive in the competitive, knowledge-driven global economy of the 21st century -- and see trade as an opportunity rather than a threat.

The US needs a coherent and compelling trade agenda that Americans perceive as serving this country's interests. It must pull together and prioritize a wide range of trade issues. The April meeting of the Summit of the Americas in Quebec City will be the first major opportunity for President Bush to address trade issues. That meeting will offer an opportunity to convey strong political support for negotiation of a Free Trade Area of the Americas agreement. But rather than treat this as an isolated -- albeit highly important -- event, the president should use it as opportunity to present to the American people and the world -- in a major address -- a comprehensive and forward looking US approach to trade and investment and spell out the leadership role that this country will take in the global economy during his presidency.

That approach should underscore as a first step the goal of freer trade in this hemisphere -- a bold and comprehensive FTAA -- but also support a broader set of WTO-centered negotiations that reform agriculture and services worldwide and lead to a larger trade Round. "Fast track authority," or "trade promotion authority," is critical to this country's ability to execute such a strategy -- not simply because it is legislatively important but also because it provides political support for the president's trade policy and America's negotiators, strengthening their credibility in international negotiations. The absence of such authority puts our negotiators at a significant disadvantage.

The president must also address -- as a broader international economic issue -- the growing moral and economic problem of grinding poverty and disease among hundreds of millions of people in the world's poorest countries. These people will become a growing source of economic, social and political instability if their lives are not improved.

Let me now address these subjects in greater detail.

REINVOGORATING AMERICAN LEADERSHIP OF THE TRADING SYSTEM

Notwithstanding considerable progress in many areas in the 1990s -- NAFTA, agreements on telecommunications and financial services, PNTR and the prospect of Chinese membership in the WTO and numerous enforcement agreements, to name but a few -- and despite the best efforts of many political leaders and officials in both parties and on both ends of Pennsylvania Ave, as we enter this decade the US is now on the sidelines when it comes to major trade negotiations and significant regional or bilateral trade expansion activities . We are on the sidelines due to divisions at home over our trade objectives and lack of "fast track" legislation that would make us a more credible negotiator and leader -- as in the past -- of the trade liberalization effort worldwide. During this period, according to a report recently released by the Business Roundtable, other nations have concluded roughly 130 preferential trade agreements. The US has concluded only three -- although one, of course, was the highly significant NAFTA, whose trade consequences were far greater than any of the others by a considerable margin.

Nonetheless, the proliferation of agreements by other nations -- including major US trading partners such as Mexico, Canada and the EU -- is harmful to US trade interests. These agreements provide their members with preferential access to one another's markets -- while disadvantaging American agricultural products, manufactured goods and services. Some American companies can overcome such barriers by producing abroad, but many (particularly small and medium-sized companies) cannot. American workers and farmers are at a particular disadvantage because they cannot easily relocate across borders. Moreover, those people concerned with the rights of workers and the environment abroad surely cannot take pleasure in knowing that negotiations are taking place in which American influence on these subjects -- however inadequate they may deem such influence to be -- is non-existent because the US is not even at the table.

There are currently more than 20 sub-regional and bilateral trade pacts in Latin America and the Caribbean alone. Many more are being planned. Since 1997, when the Clinton administration failed to obtain "fast track authority," Chile has negotiated preferential deals with Mercosur, Canada and Peru. The EU has recently signed a free trade agreement with Mexico and is in talks with Mercosur, Caribbean nations and Chile. To cite the consequences for but one of these agreements -- in the Canada-Chile FTA Chile has eliminated its across the board 11% tariff for Canadian goods while US exporters continue to pay that duty. Extrapolate from this example the many other agreements of a similar nature around the world and you see the complexity, and kind, of impediments American exporters face.

The Business Roundtable Report correctly warns that these FTAs in which the US is not a member are harmful to American interests not only because of higher tariffs but also because they "provide fertile ground for preferences" in such areas as telecommunications and financial services, permit other nations to "embed their national or regional design and engineering technologies in the standards and regulations adapted by other countries" and set dangerous precedents by, for instance, adapting agreed rules on e-commerce that are inconsistent with US interests.

Were this process to continue and broaden American, exporters and workers would suffer even more discrimination with respect to tariffs, non-tariff barriers, and services -- and be vulnerable to even more discriminatory product standards, regulations, investment requirements etc. Moreover, if the US does not enjoy the benefits of special trade access, its products and services are more vulnerable to the imposition of new barriers abroad. Under NAFTA, Mexico kept its markets open to US goods following the peso crisis earlier in this decade, in contrast to its imposition of restrictions against US exports during the peso crises of earlier decades. In contrast also new barriers were imposed on imports from the US by other countries in this hemisphere, with which the US had no bilateral trade agreements, during the financial instability in the late 1990s.

The broader point, however, is that is addition to the need to take the initiative on trade liberalization to avoid growing discrimination against American products, there are a broader set of benefits from trade expansion to be realized. Many of these tend to be overshadowed or drowned out by critics of US trade policy and globalization. Great progress was made on trade in the last half century to the benefit of large numbers of Americans and citizens of many other nations as well. Since 1992 alone, world tariffs have been cut by one third, industrial goods quotas have been eliminated and there have been tighter rules imposed on subsidies. American exports have risen by 75 percent during this period. Trade rules have been broadened to reduce distortions on a wide range of agricultural goods, services and intellectual property. A growing number of developing nations, and those in transition from socialism to the market, now see participation in the global trading system and the WTO as enhancing their domestic reforms.

There has been a tendency on the part of some detractors to blame global competition and technological change for disrupting economies and costing jobs -- for harming the environment and undermining workplace standards. The facts however tell a different story. Foreign trade and investment are playing an instrumental role in helping large numbers of people in this country and others to enjoy higher standards of living and providing consumers with a wide range of competitive products from which to choose. From our farms to our factories, from our insurance companies to our software producers, exports have been vital to the growth in high-value-added jobs, increasing corporate profits and creating incentives to invest in new technologies and to adopt competitive new business models.

For the one half of American households who own stock, exports have been an important source of strength for many companies in which they have invested. For those who are concerned by the recent drop in the stock market, imagine how much worse it would be if this country were to accept the notion that trade expansion and open markets were harmful to our interests and retreat from our global role as leader in negotiating trade expansion. We know from the experience of the world after World War I how dangerous to stockholders and to the entire economy -- most especially American workers -- such a strategy is.

Those who argue that trade and investment have hindered development in the world's poorer nations ignore the fact that large Asian countries such as China and South Korea, poorer African nations such as South Africa and Mauritius and modernizing Latin American nations such as Chile and Mexico have harnessed the benefits of trade and investment to lift large numbers of their citizens out of poverty. Former Mexican President Zedillo and his successor President Fox are both strong advocates of harnessing the competitive forces of international trade to their country's advantage. As President Zedillo put it, "In every case where a poor nation has significantly overcome its poverty, this has been achieved while engaging in production for export markets and opening itself to the influx of foreign goods, investment and technology -- that is by participating in globalization. Truly progressive minds sincerely committed to the advancement of poor people in developing countries should be converted into firm allies, not enemies, of globalization."

In most cases foreign factories have raised workplace and environmental standards in developing nations -- and those countries that have experienced rapid growth due to trade have more resources to devote to social and environmental problems. It is the most closed economies -- those behind the old Iron Curtain, Burma and North Korea for instance -- that have demonstrated the lowest regard for workers' rights, the environment and other social considerations. The more closed the economy the greater the likelihood that very large numbers of its citizens suffer from poverty -- and are deprived of access to the flow of communications, commerce, visitors and ideas that enhance human liberty and creativity. The vast majority of environmental problems, child labor abuses and poor workplace standards would exist even if there were no foreign trade or investment, because they reflect the stage of development of the country in question or the type of domestic policy it pursues. More, not less, trade and investment have proved to be the best way to improve workplace and environmental standards and reduce poverty.

But those who have seen and experienced the benefits of expanding trade and investment opportunities have not made a strong enough case to a broad enough group of citizens for trade liberalization, harmonious regulatory practices and the need for effective multilateral rules for the global trading system. Whatever its imperfections, the rules based, market-oriented system we have today is far better than one based on arbitrary decisions of governments -- or a system that fails to promote open, non-discriminatory commerce. If the current system breaks down into discriminatory regionalism or aggressive beggar-thy-neighbor policies, prosperity and political cooperation around the world will suffer.

The argument that the WTO-centered system is undemocratic is also a misperception. That system is the creation of governments the large majority of which are democratic. In formulating their positions, they take into account a wide range of worker, environmental and consumer -- as well as corporate -- interests. They hear from and interact with NGOs and other interested groups on a regular basis. Doubtless some could do it better -- but this is part of the domestic democratic process through which positions in the WTO are arrived at.

Others fear that globalization -- and the WTO -- will lead to a new race to the bottom in so far as labor rights and environmental standards are concerned. One common argument is that the WTO, and the trading system in general, should be harnessed to press nations to improve labor and environmental policies -- with penalties if they do not. But it also is argued by some that the WTO is too powerful and can impose its will on the US to compromise domestic environmental policies and goals.

The WTO cannot be a source of leverage in behalf of every good cause or desired improvement -- however meritorious -- in areas outside of trade policy. So for the most part other means of achieving such goals will have to be employed. But where domestic measures in areas other than trade do have an effect on trade flows -- for instance environmental or health standards that discrimination against imports or subsidies that both distort trade and lead to wasteful use of natural resources -- the WTO's rules can play a role. Government officials would clear up a lot of misimpressions by better explaining the limits of the WTO's influence in pressing governments to take actions that are not linked closely to trade as well as the areas of domestic policy in which it has a legitimate role because they are linked closely to trade.

How such issues are dealt with in coming years will play a critical role in determining how effective US trade policy will be. Some in this country are concerned that tying market access to the achievement of improved environmental standards or workers rights -- with trade penalties imposed for violations -- will lead to a spate of new import restrictions. And many developing country leaders see them as a subterfuge to justify the imposition of new barriers against their goods. At home labor unions are concerned about competing imports and investment moving abroad to take advantage of countries with low labor and environmental standards. And environmentalists fear some countries will lower standards to maintain competitiveness or attract investment -- or that some kinds of production and exports degrade the environment. In some cases there is a feeling that the system serves corporate interests at the expense of others.

This longstanding set of issues and tensions is not likely to be resolved soon. But it is not in the interest of this country, or those favoring improved environmental or labor standards, to hold up progress in resolving a wider range of trade and investment matters because of an impasse on these controversial issues. Even the most ardent advocates of improvements in labor and environmental standards should recognize that as other nations reach agreement on Free Trade Areas among themselves, and develop strategic trade alliances that do not include the US, American influence in the trading system will diminish. So the US will have less and less ability to achieve even modest progress in these areas. Specifically, the more trade alliances reached among emerging economies that resist many of the things unions and environmentalists want, the weaker the US influence will ultimately be.

The key point now, it seems to me, is to avoid a "cookie cutter approach" -- which calls for one formula on these issues, or one set of criteria for judging progress, to be used in every trade negotiation and with every country. These issues were covered differently in NAFTA and in the US-Jordan Free Trade Agreement. Other constructive proposals have included eliminating environmentally damaging subsidies in areas such as agriculture and removing barriers to trade in environmental goods and services. Some of these formulas, or others, might be tried in the FTAA. Congress should give US negotiators the flexibility to come up with arrangements to address these issues without ex ante tying them to any particular formula. An ongoing consultative process between Congress and US negotiators is preferable to putting negotiators in a legislative straightjacket.

In the meantime efforts to develop a consensus should be undertaken in the Congress. Congress should also recognize -- as I know many in this Committee do -- that in a substantial number of cases countries with which the US is negotiating will refuse to include toughly worded, or in many cases any, provisions that relate their performance on such issues to market access in the US, or any other nation, if such provisions make them vulnerable to trade restrictions. In such cases other means will be needed to advance labor and environmental goals.

The US should be prepared to use its market and its influence to try to achieve improvements in other ways. Giving consumers more information about environmental and labor practices -- utilizing private sector monitoring groups or voluntary standards -- could harness the force of the market to improve conditions. Consumers could incorporate their view of a country's or companies labor, human rights or environmental practices in their purchasing decisions. The transparency provided by the Internet is increasingly being utilized to convey information on such practices. The challenge is to address these legitimate issues without imposing new barriers on the international trade and investment that will help reduce poverty and improve living standards in developing nations. Trade agreements could in some circumstance promote US objectives in these areas. Other institutions like the ILO and the multilateral/regional development banks can be very useful in improving both labor and environmental standards.

NEXT STEPS IN US TRADE POLICY

President Bush has signaled his intention to make negotiation of an FTAA a top priority. That makes great sense. Americans will find it easier to rally around the more concrete goal of hemispheric trade liberalization at this time than the less tangible goal of a new global trade round -- although in the longer run America's global trade interests create a compelling case for not being satisfied only with regional liberalization and improved regional rules, as important as they are. Achieving similar progress on a global scale should be our ultimate goal. But for the moment further opening markets in this hemisphere and advancing the goal of regional harmonization on a variety of product standards, investment rules, etc., will be a big step forward. It will reduce barriers to US goods in markets where such barriers are still high, simplify the now very complex mosaic of preferential trade agreements that have sprung up within the hemisphere -- and ultimately put in place a more unified set of tariffs and other trade and investment measures. And it could create a strong incentive for other regions -- fearing discrimination in the hemisphere against their products -- to be more forthcoming in the launching of new multilateral trade negotiations centered on the WTO.

The latter point will require the US to achieve a fine balance. If other countries or regions perceive that the new FTAA is restrictive and discriminatory, they might be inclined to strengthen their own regional groupings as a counter measure -- or as a way to enhance their strategic advantage in negotiations with the US and the FTAA. There are those in the EU and Asia who would like to reduce their trade dependence on the US and America's trade influence in their regions. A discriminatory FTAA would play right into their hands. To counter this, as a recent paper by the Democratic Leadership Council argues, participants in the FTAA talks should embrace the goal of "open regionalism" -- whereby non-members in other parts of the world that open their markets and reduce barriers in a comparable way to those agreed in the FTAA would receive the same market access to the FTAA as members themselves. And throughout the FTAA negotiations, work should proceed to lay the basis for broader global negotiations.

It is important that progress be made in the FTAA in the very near future. Delay invites countries suffering from internal problems of low growth or financial market instability to impose new barriers. Building momentum in the FTAA process can be a counterweight to that. Delay also tempts groups like the EU to seek deals with other countries in the region in advance of the US doing so. This would place American exports at a disadvantage in the region and increase the incentives for Latin American nations to buy from the EU rather than the US in such areas as capital equipment and agricultural products. The EU has recently signed a Free Trade Agreement with Mexico and is in negotiations with Mercosur, the Caribbean and Chile. If successful the trade benefits for the EU in the region would be substantial.

These considerations and others present a compelling argument for not holding up progress on the FTAA until there is a consensus at home and in this hemisphere on labor and environmental issues. At the same time these issues cannot be ignored. Ways of addressing them through creation at a hemispheric level the kind of institutions for dealing with environmental issues that were created by NAFTA, plus other approaches perhaps centered on the Inter-American Development Bank, should be discussed either in or along side the FTAA talks.

There is also a busy agenda of issues handed off from the last administration. The Jordan and Vietnam bilateral agreements represent important progress, as much for political as for economic reasons. Passage of both would be a positive signal about the US commitment to further liberalization and the role good trade ties play in advancing positive political objectives. Reaching agreements with Chile and Singapore would do likewise. Both are important US trading partners, vigorous economies and strong proponents of free markets -- and trade agreements with them would have both economic and symbolic value.

The very complicated work of bringing China into the WTO and ensuring a smooth transition deserve high priority. Close US government cooperation and consultation with Chinese authorities and US companies in monitoring compliance and resolving the inevitable differences that will emerge in the transition period will be essential. They are needed to support the reform process in China and the objectives of US companies in increasing their market access there based on the more open and market-oriented China that will emerge as it adheres to WTO rules.

The task of orderly Chinese accession to the WTO and smooth integration into its system of rules, procedures and obligations will be an enormous challenge for the WTO as it will be for China. This is by far the largest country -- 1.2 billion people --to have been brought into the trading system since World War II. Many sectors of its economy will be facing real foreign competition for the first time. There is growing concern about unemployment and its effects on social stability. And it faces major changes in top leadership next year (due to "age-limits"). Close inter-governmental cooperation to manage the panoply of issues that will inevitably arise will be vital to managing overall relations between the two countries and reinforcing China's market reforms. In this set of circumstances, I encourage the Congress to form a working group that would meet on a regular basis with members of the administration, Chinese officials and private sector experts to monitor, and be helpful in guiding, events.

APEC -- in whose summit President Bush will participate in November in Shanghai -- presents another opportunity for progress. As host to the Summit, China will play a key role in shaping its agenda. This presents a good subject for productive cooperation between Beijing and Washington. Countries of the region have a strong interest in expanding opportunities for trade in high-technology goods and services. They have done so in the past, by taking the initiative that led to the Information Technology Agreement. While APEC suffered a setback during the regions' recent financial crisis, it still contains many of the world's most dynamic economies. The administration has an opportunity to revitalize and reshape this potentially usefully group. Like progress in the FTAA, it can induce members and non-members alike to be more energized in the pursuit of global negotiations.

In the final analysis, it is global trade liberalization that the US should ultimately seek. This country is the world's biggest trading nation -- and must tap as many markets around the world as possible. Whether a full fledged new Round is justified, or even possible, in the near future remains an open question at this point. It might well be that there is no international consensus likely in the foreseeable future on a broad Round and that instead there should be a series of sectoral negotiations -- as was done in much of the 1990s. In this case agriculture and services are top priorities.

TWO LONGER TERM ISSUES

Before concluding, I would like to make two broad points.

First, the challenge of finding ways to finance the social security pensions of the large number of "baby boomer" retirees in the US and abroad will be the most important economic issue facing government around the world in the first part of this century. Countries that fail to prepare in this decade for the enormous financial impact on their social security system in the next are vulnerable to a major crisis. Those countries that are funding their national pension funds, or have the ability to finance their future benefits without significantly raising taxes, sharply cutting promised benefits or engaging in extensive new borrowing, will be in the best competitive position in coming years.

In contrast, countries that are poorly prepared will be forced to raise payroll or income taxes or borrow heavily to pay for future social security benefits -- unless they are willing to default on obligations to retirees (who will have so much power in view of their numbers that they can prevent this from happening). In either case, they will be at a major competitive advantage. They will find it harder to attract and retain high quality knowledge-workers -- who will want to work in a lower tax environment. They will also be burdened by a very poor fiscal environment -- an environment characterized by higher interest rates and government borrowing that crowds out private sector investment and other government programs. On both counts generating the new private sector investment that is key to boosting productivity -- and thus to sustaining, non-inflationary growth -- will be a lot more difficult. Trade competitiveness will suffer.

In this respect the outcome of the current debate in this country over tax cuts will have a major impact on trade policy. Relatively little attention has been devoted to the long-term financial consequences of an aging society in which larger and larger numbers of retirees will live longer and longer and demand more and more government services. Although this country enjoys large budget surpluses now, it will begin drawing down its Social Security and Medicare Trust Funds in the next decade and beyond. We can afford a tax cut now -- and properly structured this can provide useful stimulus -- although most of the burden is on the shoulders of the Fed. But this is also the time, in this decade, to generate substantial surpluses not so much for their own sake but -- importantly -- because paying down the debt and accumulating assets for the future will put the country in a better condition to withstand the substantial additional costs and borrowing requirements of an aging population in coming decades -- which will be the inexorable result of this country's demographics. Managing the Social Security/Medicare issue will strengthen the US economy and US competitiveness for decades to come.

Second, the key to a future American competitiveness lies in strong productivity -- and that depends heavily on a robust education system, involving dramatic improvements in K-12 education and programs for updating adult skills. The question of education reform is beyond the scope of these hearings, but it is critical. The better educated and better trained Americans are, the more likely they will be to thrive in the face of competitive challenges. US society will be less divided over economic issues -- including on international trade and investment.

If a foreign power destroyed a third of US factories, it would lead to war. If a corporation caused an environmental disaster that destroyed a third of America's trees, it would produce mass demonstrations. Yet the US is losing a far greater resource when thirty percent of American adults read at or below a fifth grade level -- and there is little sense of urgency to correct this.

In the 19th century, Britain was at the peak of its power, having pioneered the industrial revolution. It squandered its advantage by not educating large numbers of children of low-income groups for the technically demanding jobs of the 20th century. That should be a powerful lesson to the US.

Early in the 20th century a mass, grass roots effort known as the "high school movement" built new schools and recruited teachers in communities throughout the US. The communities that launched this effort did so to prepare their sons and daughters for the new industrial jobs that were being created in this country at the beginning of the 20th century. High school enrollment rose from 10% to 75% between 1910 and 1940.

Today America's communities need a similar awakening. A recent study conducted by Harvard and Northwestern found that fully one third of Massachusetts 3.2 million workers lack the basic skills necessary for success in the new economy. Roughly one fifth lacked the literacy skills for basic functioning in new economy jobs. This is in a state with a strong tradition of education. Their Report, entitled "New Skills for a New Economy," recommended, inter alia, partnerships between community colleges and employers to meet this challenge. It also endorsed tax credits for employers who provide or pay for basic skills education.

A poor system of education and training could -- as for Britain in the 1800s -- be the Achilles Heel of the America economy in the decade ahead. Correcting this must be a matter of great urgency for our country -- a high economic and trade policy priority for government at all levels and the private sector (already desperate for skilled workers). However good US trade policy might be, and however effective our negotiators are in opening markets around the world, the future trade prospects and competitiveness of the US economy will be put at risk if we fail to educate and train a far greater portion of our citizens for the knowledge-driven jobs of the 21st century.

CONCLUSION

The US needs to get off the sidelines and back into its accustomed role of leader of the global economy -- again spearheading the process of trade liberalization and championing improvement of the institutions of the global economy. The longer we wait the more harm will be done to our economic and political interests. The more effective our leadership, the greater the potential benefits to millions of American workers, consumers and businesses. New legislative authority is needed. So is broader public support and understanding of this country's central objectives in the global economy and of our limited ability to use trade to obtain other worthy objectives. And we need to address longer-term economic issues, such as effectively preparing for the demographic changes that will dramatically boost the number of Social Security and Medicare beneficiaries in coming decades and better educating and training a larger portion of our citizens. Both are vital to the success of the US economy in coming years.