TEXT: BARSHEFSKY TO NAM ON TRADE AGENDA, PUBLIC ANXIETY
(Agenda means little without public support, she says)

Washington -- U.S. Trade Representative Charlene Barshefsky says that without citizen support no accomplishment of an ambitious Clinton administration trade agenda will matter.

In October 15 remarks to a National Association of Manufacturers luncheon, Barshefsky mentioned a long list of strategic trade challenges ahead including protection of intellectual property rights and elimination of barriers to electronic commerce and biotechnology.

She cited the challenge of integrating Russia, China, Ukraine, Vietnam and other former Communist countries into the world trading system.

She mentioned many market access negotiations ahead in the World Trade Organization (WTO) and in regional groups.

But unless ordinary workers fearful of losing their jobs can be persuaded of the benefits of open trade, she said, the many market-opening initiatives will have no use.

"If advocates of open trade cannot address these fears, the most exciting plans will mean little," Barshefsky said.

The trade representative also reported on evidence of plunging U.S. exports resulting from the global financial crisis. U.S. goods exports in 1998 are expected to drop $8,000 million to Japan; $3,000 million to China, Hong Kong and Taiwan, and $20,000 million to the rest of Asia, she said.

"Our trade with Latin America is suffering as well -- the Port of Miami reports a 12-percent drop in two-way trade this year," she said.

Following is the text of Barshefsky's remarks as prepared for delivery:

(Note: In the text "billion" equals 1,000 million and "trillion" equals 1,000,000 million.)

(begin text)

MANUFACTURING AND AMERICA'S TRADE AGENDA

Ambassador Charlene Barshefsky
United States Trade Representative
National Association of Manufacturers
Washington, D.C.

October 15, 1998

Good morning, everyone.

We are preparing for a busy 1999: from our role as chair of the Third WTO Ministerial Conference, to a debate on fast track authority, new multilateral talks and initiatives in each part of the world. Today I will touch upon each of these topics. But my main purpose is to put the agenda in the broader perspective of American manufacturing: its importance to our economy; the possibilities open trade offers to its future, the challenges we face in realizing those possibilities; and the policies which can meet those challenges.

U.S. MANUFACTURING INDUSTRY

I begin with the fundamental point. A strong manufacturing sector is essential to a strong American economy. This is not a theory or a slogan; it is a fact. And the American economy is strong today in large part because manufacturing is strong.

Last year's $1.4 trillion in U.S. manufacturing production made up one dollar in thirty of the total world economy. Our 230,000 manufacturing companies directly support nearly twenty million jobs, and indirectly many more in high-wage service fields. Our manufacturing workers are the world's most productive, and our plants the most technologically advanced, creating the most sophisticated products everywhere from steel to satellites and surgical equipment.

This is a record of remarkable success -- one we must extend into the future to remain the world's most prosperous, competitive and dynamic economy.

THE SECULAR TRENDS

To do so, however, we must recognize the broad trends around us:

These trends make today's world far more integrated than ever before. We benefit from larger markets and greater economies of scale. But our companies, workers and young people face more competition. And the ripples of faraway events, from reforms in Africa to disruptions in the Bangkok real estate market, reach our shores with unprecedented speed and force.

This has affected every part of our economy, but manufacturing most of all. To use a convenient index, imports and exports together are equal to about 30 percent of our total economy. In manufacturing, imports and exports will top 100 percent of the value of production this year.

OUR RESPONSE

The Clinton Administration has responded with a three-part economic strategy.

First, we have followed a sound fiscal policy, which has reduced interest rates and freed resources for capital investment. In the 1992 campaign, President Clinton pledged to cut the budget deficit -- then $290 billion -- in half by 1997. With the 1993 budget, he reached the goal three years early; and two weeks ago, announced our first budget surplus since 1969.

Second, we have promoted top-quality education for a 21st century work force, including voluntary national education standards, hiring 100,000 new teachers, linking every school to the Internet and offering lifelong learning programs and fundamentally improved job training.

And third, we have sought a world more open to our goods and services.

TRADE POLICY RECORD

In the past five years, we completed 260 trade agreements. We have given special attention to our largest trade partners through 71 separate agreements with Canada, the EU, Japan and Mexico: markets which -- though they make up only 10 percent of world population and constitute a third of world economic production outside our borders -- take two thirds of our manufacturing exports. And the 260 include five truly historic agreements:

TRADE POLICY RESULTS

Thus our exports have grown 50 percent, and manufacturing exports have grown fastest of all. And the results bear out the arguments NAM has made about the importance of exports:

Growth -- from 1992 to 1997, our economy grew from $7.2 trillion to $8.1 trillion. Exports accounted for over one third, or $320 billion, of that growth. Manufacturing in particular benefited, with 61 percent export growth helping to create a 28 percent rise in real industrial production.

Jobs -- Since 1992, unemployment has fallen from 6.9 percent to 4.6 percent, and total employment grown from 104 to 1 19 million jobs. Exports accounted for one in every six of these 15 million new jobs, and one in five of our new manufacturing jobs.

Living standards -- Jobs supported by goods exports pay 13 percent-16 percent above US averages. As exports have risen, average real wages are up from $394 per week in 1996 to $424 today.

WHERE TO NOW?

Where do we go from here?

In the future, exports will be even more important than they are today. Nearly four fifths of world consumption, and 96 percent of world population, are beyond our borders. These are the governments, firms and consumers which buy our aircraft, medical equipment and personal computers. We must be able to sell to them to succeed in the next century.

And we have identified a set of strategic issues we must solve to do so. One -- the Asian financial crisis -- is a short-term emergency. The other four are long-term challenges: opening world markets; addressing the trade implications of the end of the Cold War; responding to the scientific and technological revolution; and ensuring that trade policy retains the support of citizens. The balance of my remarks will take up each of these issues.

ASIAN FINANCIAL CRISIS

Let me begin with the Asian financial crisis.

As President Clinton has said, the events which began with the devaluation of the Thai baht in July last year are now the most dangerous financial crisis the world has faced in 50 years. It has devastated the affected countries. Indonesians are threatened with hunger. The Thai Education Ministry reports that 250,000 Thai children have left school. In Russia eight years of reform are threatened. it is a monumental tragedy; and it has hit us very hard as well.

These days about two in five containers leave the port of Los Angeles empty. That is a graphic illustration of the facts: our goods exports to Japan are projected to drop $8 billion this year to China, Hong Kong and Taiwan $3 billion; and to the rest of Asia perhaps $20 billion. Our trade with Latin America is suffering as well -- the Port of Miami reports a 12 percent drop in two-way trade this year.

That threatens jobs and growth all over the country. Therefore, our top priority is to work with the IMF and affected countries for currency stability and economic recovery. The IMF programs provide loans conditioned on reform -- for example in ending policy loans in Korea. We monitor the conditionality closely; in cases such as Thailand which are making reforms, we see good signs.

We are also committed to open markets at home. We will of course enforce our laws against unfair trade practices, adopt sensible policies in case of import surges, and ask Japan and the EU to take their fair share of the burden. But we will remember the lesson of the 1930s, and -- as we ensure that others do not respond with protectionism -- we will refuse to panic and shut off trade ourselves. That would only hurt our trade partners and worsen the crisis.

And we are pushing Japan for fiscal stimulus, financial reform and deregulation, because Japan's recession has hit all the affected countries very hard. As Thailand's exports to the United States rose $600 million in the first six months of 1997, Thai exports to Japan shrank nearly $800 million. Indonesian exports to Japan are down a third, and Chinese exports by $2 billion. Without urgent, immediate action from Japan we cannot get the job done.

I. OPEN MARKETS

I will now turn to our longer-term challenges, beginning with opening markets abroad.

With respect to market access, 50 years of trade policy has accomplished a lot for manufacturing. We have created widely accepted rules, and eliminated many of the barriers which existed when the GATT was founded in 1948. Since then, tariffs, for example, have declined by an average of 90 percent. But we still face considerable obstacles, in both our industrial trade partners and in developing countries.

1. Industrial Trade Partners

With our industrial trade partners, we can do more, from addressing the remaining formal barriers to enforcing our agreements and addressing the more complex regulatory and other technical barriers which are especially troublesome for smaller companies.

This is especially true in Japan, where comprehensive deregulation and market-opening is key to our own ability to export, as well as recovery for Asia. Thus our Enhanced Deregulation Initiative addresses both high-value sectors like autos and auto parts, medical equipment and now energy; and broader questions like transparent regulation and open distribution systems.

Likewise in Europe, we face numerous duplicative regulations which are a special burden for smaller firms. If we can harmonize them, or reach Mutual Recognition Agreements to respect one another's high standards, we can reap large export benefits in a short time. The Transatlantic Business Dialogue, for example, identifies technical barriers which reduced U.S. exports by as much as $3 billion last year. These questions join concerns in other sectors at the heart of our TransAtlantic Economic Partnership initiative with the EU.

2. Developing Countries

In developing countries, we have much more work to do on the basics as well as these complex issues. And in each part of the world, we have an initiative that takes them up.

3. WTO Agenda

Manufacturing also has a stake in our WTO agenda. Our role as Chair and host of next year's Third WTO Ministerial Conference will highlight our economic accomplishments and export potential to the entire world. NAM is already deeply involved in the event, and I hope each of your companies takes part. And the negotiations that follow will address issues with fundamental implications for manufacturing exports.

Global services and agriculture negotiations are already scheduled to resume. The services negotiations in particular have important implications for manufacturing exports -- we find, for example, that exports of goods to China are very difficult without the freedom to set up distribution systems. The service talks can also help us address some of the problems evident at the first phase of the Asian financial crisis -- weak and protected financial sectors, insider deals in construction and properties, lack of competition and transparency, and inadequate professional legal and accounting services -- thus offering potential for a more stable world economy. And we need to look ahead to other complex issues, including government procurement, better intellectual property protection, global electronic commerce, regulatory reform and bribery and corruption.

II. END OF THE COLD WAR

The second great challenge is that raised by the end of the Cold War. That is, the integration of Russia, China, Ukraine, Vietnam and other economies in transition. This is an immense market access challenge, when you consider the size and importance of the countries involved. And for our broader goals of prosperity and a stable peace in the next century, this is no less important than the reintegration of Japan and Germany after World War II.

Here trade policy must both address the market access issues that dominate most of our regional initiatives, and go beyond them to more fundamental questions. Bringing nations isolated for decades into the world economy. Creating functioning markets in economies which only recently legalized private enterprise. Establishing the rule of law where governments operated for decades by arbitrary command. We take up the challenge in two ways.

We offer them an open market by preserving normal trade relations -- or, as we used to say, MFN status. That allows them to create export industries responsive to world demand, and gives them a stake in peace and stability outside their borders.

And we seek accession to the WTO on commercially meaningful terms, addressing all the layers of issues that impede market access for us -- and they are immense, especially for such a large trading economy as China. And for the reforming countries, as Poland and other countries with experience in the matter say, the WTO disciplines are precisely those which help domestic economic reform.

Thus, for example, our WTO negotiations with China address sectoral issues down to 4,000 separate tariff lines. But they also address broader structural issues like subsidies, import substitution and limits on trading rights and distribution; and basic questions of fights and law like uniform enforcement of customs procedures, copyright and trade commitments. We adopt the same approach to Russia and other WTO aspirants.

The talks are often slower than we would like. But the reward justifies a painstaking approach: inside these nations, freer markets, openness to the world, transparency, the rule of law; and beyond, peaceful settlement of disputes, greater prosperity, and a more secure peace.

III. THE 21ST CENTURY ECONOMY

The third strategic challenge is the scientific and technological revolution.

Our goal here, put broadly, is to take full advantage of our technological lead; and to ensure that, as long as we put in the research, we can keep the lead. The fields we must address are practically endless -- everything from aerospace to medicine, materials science, information, agricultural science and well beyond -- but let me mention three areas of particular focus.

First, intellectual property rights. American manufacturing is at the leading edge of technology; thus much of our production derives its value from innovation. And to make innovation worthwhile, we must make sure our products, and often the methods which make them, are not illegally pirated. The Uruguay Round made a fundamental advance by requiring all WTO members to adopt modern intellectual property laws, and we are now devoting great attention to ensuring full implementation on schedule by 2000. The next WTO negotiations will let us go further, to secure protection for new products like genetically engineered plant varieties and digital video discs, and strengthen enforcement of patent and copyright laws worldwide.

Second, global electronic commerce. This is important to all of us, but will be a particular blessing for smaller and middle-sized manufacturing firms, for which paperwork and reaching new customer are greater burdens. We begin with a goal of making permanent the "standstill" we achieved on tariffs on electronic transmissions last May. And we will go on, in regional negotiations and at the WTO, to make sure governments make customs forms and regulatory paperwork available electronically and take other practical steps which ease trade for everyone.

And third, prevention of discrimination against safe, scientifically proven techniques like biotechnology. This is a critical issue for American agriculture, but it is equally important for pharmaceutical companies; for makers of precision instruments who serve farmers and biotech firms; and to preserve the potential for uses of biotechnology in areas we have not yet imagined.

IV: THE SUPPORT OF CITIZENS

This is an ambitious agenda. It covers the oldest tariffs and customs issues; and the newest technological innovations. It addresses every part of the world. And I believe it will do immense good. But it will not work unless we succeed in the fourth and most important challenge. That is, ensuring that trade policy continues to receive the support of the public.

Today, public anxiety about trade is high. We see that everywhere from polling data to the fast track debate in Congress. And it is especially high with respect to manufacturing, where concerns about imports and jobs are most intense. If advocates of open trade cannot address these fears, the most exciting plans will mean little.

The response must begin with a better effort to give the public the facts. The contribution of trade to a strong American manufacturing industry. The importance of exports in our current national prosperity, and the high wages export jobs pay. And the role of the trade system in advancing freedom, transparency and the rule of law. NAM's work in publications like "Why Exports Matter" is an excellent start; but all of us must do better.

We must address substantive concerns: our citizens must know growing trade will not reduce our environmental quality or labor standards. Growth at home can go together with safer factories and a cleaner environment: since 1970, as manufacturing production doubled, the number of workplace deaths fell 60 percent, the percentage of fishable and swimmable rivers doubled, and the number of people living with unhealthy air fell by half. We must now prove this worldwide by addressing the links between trade, labor standards and environmental protection. This is crucial for public support of the trade agenda, most immediately if we are to pass fast track authority next year. Without consensus on this issue we will find that very difficult.

It must address institutional concerns as well. For example, the World Trade Organization has an excellent dispute settlement mechanism, but does not allow ordinary citizens to watch arguments before the panels, or even get the decisions until months later. That is wrong and a natural breeding ground for rumors and misinformation. It has to open up.

And trade policy must be part of a larger economic policy appropriate to a world in which we have greater competition as well as greater reward. Schools must make sure our young people can compete and succeed. Health insurance, unemployment compensation and job training must be there when any worker loses a job. The good fiscal policies, improved education and domestic safety net our Administration has advocated must be continued and strengthened for trade policy to achieve its goals.

CONCLUSION

I cannot overstate how important this is.

Great streams of events are flowing together: the opening of the world economy; the dynamism of science; the political changes arising from the end of the Cold War. If we do not meet these challenges, we lose a chance to strengthen the peace; lose economic opportunities; and fall short of the standard of courage and vision the United States of America should set.

But if we succeed, the rewards will be extraordinary. At home we will see higher incomes for working people. New opportunities for small companies and entrepreneurs. Faster growth and improved prospects for our young people. The further strengthening of the world's largest, most efficient and productive manufacturing sector.

And beyond our borders, a world in which open markets, under the rule of law, let hard work, creativity and initiative find rewards.

Where new technologies help freedom of inquiry and expression to blossom.

And where growing trade gives all nations a greater stake than ever before in a peaceful world.

That is the opportunity before us; and let us not miss it.

Thank you all very much.

(end text)

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