Opening Statement of Senator Chuck Grassley

Senate Committee on Finance

Hearing, "Globalization and American Trade Policy"

Feb. 27, 2001

Today's hearing on globalization and American trade policy will address fundamental questions of what globalization means to the American economy.

Recently, during Ambassador Zoellick's nomination hearing before this Committee, we heard a lot of specific concerns about a number of individual trade issues.

Lumber. Steel. Bananas. Aircraft. Beef. Catfish. The list is long. Serious concerns are involved. I share many of these concerns. But this will be a very important year for America's broad trade policy interests.

One month from now in Geneva, the United States will try to advance agricultural trade negotiations at an important meeting of the Special Session of the WTO Agriculture Committee.

In April, President Bush will attend the Summit of the Americas, to try to regain momentum for the crucial Free Trade Area of the Americas talks.

In November, the United States will again play a central role in the WTO Ministerial Conference Meeting, where the 140 WTO member nations may again try to launch a new round of global trade talks.

With this far-reaching trade agenda before us, I believe it is important today that we look at the big picture, because it is much too easy to lose sight of why trade liberalization matters.

It was U.S. leadership that created the modern world trading system as the best way to rebuild global economic prosperity and peace following the devastation of World War II.

In 1947, when we started post-war trade liberalization, the total value of world exports was $50 billion. Today, the total value of world exports is $7 trillion - more than three times the entire budget of the United States.

Because of globalization, free trade has enriched every American family. I've pointed this out before. But the numbers are so stunning, they need to be pointed out again.

According to the President's 1998 Economic Report, the added economic benefit to each American through expanded trade is $1,000 per year, or $4,000 per year for a family of four. This is equal to an annual $4,000 family tax cut.

This is real money, that families can use to pay their children's tuition. To save for a house.

To put away for retirement.

Now, we've started to talk in Congress about returning the surplus revenue collected by the government to the American people who earned it in the form of tax cuts.

There is a lot of debate about how large tax cuts ought to be. I don't think the tax cuts we're discussing now come close to the amount of economic benefit the average American family of four gets through expanded trade.

So it's hard to understand why anyone would oppose legislation to renew the President's trade promotion authority, so we can liberalize trade even more, and provide even more trade-related economic benefits to the American people.

Or why anyone would oppose a democratic institution like the World Trade Organization, which helps us open new markets, and protects our trading interests.

This is an institution that was built by the world's democracies, and is run by the principle of consensus. You can't get much more democratic than that.

Best of all, trade liberalization has helped keep the peace. As nations have become highly dependent on one another for their economic success, the potential for destabilizing world conflict has faded.

You would think that with its enormous contribution to global peace and prosperity, trade liberalization would not need defending.

But unfortunately, thanks to a well-funded, well-organized anti-free trade campaign, the 50-year, American-led effort to enhance global prosperity and peace through reducing barriers to trade is now in jeopardy.

Thanks to the distortions fostered by the opponents of free trade, the increasingly integrated world economy is often seen as nothing more than a source of global inequality and exploitation. The democratic institutions we have created, like the World Trade Organization, are wrongly portrayed as the tools of this exploitation. And, I am deeply sorry to say, they and the people who staff them are even becoming frequent targets of violence.

It's time to set the record straight. That's what today's hearing is about. The American people deserve to hear the truth about free trade and globalization.

And they deserve to know why it is so vital to our future, and the future of our children, that we continue to lead the effort to become more connected with our modern world through trade.

Because that's what globalization really means: the growing interdependence and inter-connectedness of our world through increased movement of goods, services, capital, information, and people.

This hearing will consider two issues.

First, the necessity of restoring the credibility of United States leadership in international trade.

In my judgment, nothing is more damaging to the credibility of the United States in trade negotiations than not renewing the President's trade promotion authority.

Some say that it doesn't matter if the President has trade promotion authority. According to this view, you can still start negotiations without it.

The history of WTO and GATT trade negotiations shows that technically, this is true. You can start negotiations without trade promotion authority, like we did in the Uruguay Round.

But that argument also totally misses the point.

Our trading partners won't negotiate with us in good faith just because we're right on some narrow, technical point.

They will only fully engage with us at the negotiating table when our negotiators have the credibility to back up what they say.

Yes, we finally did get trade promotion authority for the President two years after the Uruguay Round started. But we also ended up with an eight-year round that exhausted everybody, and that nearly fell apart at the end.

If our experience with the Uruguay Round teaches us anything, it should teach us that trade negotiations have become much more complex.

Our trade negotiators should have every ounce of credibility and confidence we can give them in this difficult and challenging environment.

That's why I will fight for legislation to renew the President's trade promotion authority this year, before we start any new WTO trade negotiations, or before we try to move into the final phase of the FTAA talks.

This legislation should provide for broad negotiating authority, so the President can negotiate for the reduction of tariffs and non-tariff trade barriers on a regional or multilateral basis.

The second issue I want to raise today is that we must find a way to rebuild the consensus in favor of free trade.

We must rebuild this consensus at home, and internationally, as well.

An important part of achieving this consensus at home is resolving the debate over labor and the environment.

I believe the distinguished former Chairman of the Finance Committee, Senator Moynihan, had it right when he said labor issues should be dealt with in the International Labor Organization, and not in the World Trade Organization.

As Senator Moynihan has so eloquently argued, the ILO is uniquely competent for this mission. The ILO has won world-wide recognition for its humanitarian work, including the Nobel Peace Prize.

And it displayed its effectiveness through its early public support of the Solidarity trade union in Poland, resulting in the emancipation of that country from its Soviet oppressor.

In terms of the environment, I believe there are things we can do right now to improve the environment through trade policy.

We should, for example, agree to eliminate the use of trade-distorting agricultural subsidies that damage the environment, and lead to increased rural poverty in developing countries.

However, the one thing we must not do is employ trade sanctions to enforce labor and environmental provisions in trade agreements.

This would be a prescription for disaster in terms of rebuilding an international consensus for trade liberalization.

It is an extreme position that is opposed by every developing nation in the world that I know of.

And even British Prime Minister Tony Blair's Labor Government recently said it opposes labor and environmental provisions in WTO trade agreements.

I will strongly oppose any legislation that directly or indirectly involves the use of trade sanctions to enforce such provisions in trade agreements. I will fight such legislation if it is brought before this Committee, and I will work hard to defeat it.

I believe that in the end, though, we will find much that we do agree on, and much that we can do, not as Republicans, or as Democrats, but as Americans, to promote America's vital national interests in trade policy.

I hope that today's hearing will be a good place to start.