TEXT: DALEY SAYS COMMERCE TO FOCUS ON THREE TRADE OBJECTIVES
(Expanded trade is a key to president's economic strategy)Washington -- U.S. Commerce Secretary William Daley says his department is focusing on three key objectives to advance President Clinton's trade policies for the 21st century that aim to tear down barriers, open markets and expand trade.
In addition, it is essential for the U.S. Congress to grant the president trade negotiating authority to engage U.S. trading partners effectively, Daley said in prepared testimony before the Senate Finance Committee January 26.
"The President also emphasized that we must vigorously enforce our trade laws; provide assistance to U.S. manufacturers who have been hurt by the present financial crisis; and participate with other nations in a new round of global trade negotiations to expand exports of services, manufactured goods and farm products," Daley said.
Daley outlined the Commerce Department's objectives:
-- To promote aggressively and finance adequately U.S. exports.
-- To enforce U.S. trade laws consistent with U.S. international obligations and ensure that existing trade agreements are implemented.
-- To remain engaged with trading partners in new negotiations, eliminate trade barriers, and strengthen the multilateral and regional trade system.
"In general, we must accept a sense of urgency in our drive to promote export activity in the United States," he said.
Daley told the Senate Finance Committee that as exports to financially distressed Asian economies have fallen, the U.S. trade deficit has risen at a rapid rate, "and we are almost certain to set a new trade deficit record again in 1999. The deficit with Asia accounts for about 70 percent of our global trade deficit."
While the trade deficit is rising because the strong U.S. economy has enabled consumers to buy more goods and services from abroad, the financial crisis in Asia has prevented U.S. trading partners from buying U.S. exports. This situation demonstrates "the need for recovery in Asia," Daley said.
Following is the text of Daley's remarks as submitted for the committee's record:
(Note: In the text "billion" equals 1,000 million, and "trillion" equals 1,000,000 million.)
(begin text)
Prepared Statement of the Honorable William. M. Daley
Secretary of Commerce
before the
Committee on Finance
United States Senate
January 26, 1999I. INTRODUCTION
Thank you, Mr. Chairman, and as always it is a pleasure to meet with the Committee. I am particularly pleased to be here today because this hearing shows the Committee's concern for the trade position of the United States and demonstrates the Committee's intent to work with the Administration in addressing the challenges we face. This year is one in which the Congress and the Administration must work together in a nonpartisan manner. The jobs of American workers and the future of our economic growth depend on this cooperation.
The Asian financial crisis has slowed growth and affected the world economy, including American farmers and workers, as well as on other key emerging markets, such as Brazil. Along with the rest of the Administration, the Commerce Department supports the efforts of our trading partners to work their way out of the current financial crisis and restore growth to their economies. We have urged Japan to open its economy, reform its financial system, and stimulate domestic demand; we have encouraged Korea to open its markets and follow the prescriptions of the International Monetary Fund (IMF) stabilization package; and we have worked closely with Russian officials to help them adopt market-based reforms. At the same time, President Clinton and I have made it very clear that we will not stand by and allow U.S. workers, communities and companies to bear the brunt of other nations' unfair trade policies.
The Asian crisis is cutting deeply into our exports. We do not like it, but we understand that Asian countries cannot afford to buy our products as their economic tragedy cut deeply into their living standards. Mr. Chairman, we are working to ensure that other countries markets remain open and to seek further trade liberalization. Our markets are open to them, and they must do the same for us.
There is much progress to be made. We still have market access concerns with American-made flat glass in Japan. American soda ash, power generators, and telecommunications equipment markets in China remain limited despite their 1992 commitment not to engage in import substitution practices. We see Korea refusing to treat American companies fairly in competing for contracts for the huge new airport they are constructing.
These matters must be addressed by our trade policy. Our support for an open trading system has always been contingent on fair trade rules, strong trade remedy laws and compliance with our trade agreements. We have been enforcing our laws and our agreements as vigorously and as expeditiously as possible and will continue to do so with Congress's help. In addition, we need trade negotiating authority so we can negotiate a more open and level playing field. We look forward to working together with this Committee on these matters.
II. THE SETTING
Mr. Chairman, let me now turn to discuss the economic and trade situation that faces us as we near the end of this millennium.
While we face many trade challenges, we cannot forget that fair and open trade has provided remarkable benefits to the world and the U.S. economy. Since the formation of the World Trade Organization (WTO) and its predecessor, the General Agreement on Tariffs and Trade, (GATT), in 1948, world trade has grown 15 fold and tariffs have been reduced by 90 percent. Where the trade club once comprised only a handful of developed countries, the WTO now comprises 133 members -- most of them developing economies. Trade has contributed to enhanced global understanding, world-wide economic development and the solidification of democracy in many countries.
U.S. exports have been at the forefront of our economy, and through 1997 provided one-third of all our economic growth. Jobs supported by exports of goods pay significantly more than the average U.S. job. Good jobs and good wages are the keys to an expanding economy and a rising standard of living.
As we meet today, our economic expansion is entering its 94 month -- the longest peacetime expansion in history. Employment is at record levels, and unemployment is at nearly a 30-year low. Inflation is low and economic growth and productivity are strong.
Still, we face challenges. As exports to the financially distressed Asian economies have plummeted, our trade deficit is rising at a rapid rate, and we are almost certain to set a new trade deficit record again in 1999. The deficit with Asia accounts for about 70 percent of our global trade deficit.
However, we must appreciate what this deficit represents. The main reason the trade deficit is rising is that our strong growth enables us to buy hundreds of billions of dollars of goods and services from abroad, as well as the many trillions of dollars of goods and services we produce at home -- while many of our trading partners are caught in recessions and have sharply cut back the goods and services they can buy from us. Most of the trade deficit is due to a sharp drop in exports, highlighting the need for recovery in Asia. The American economy has demonstrated its resilient capacity to respond to faltering foreign demand for our exports by shifting capital and labor to non-export sectors, keeping U.S. growth and employment strong.
But we cannot ignore areas of concern. Thousands of firms and workers have been hit hard by the impact of the Asian crisis on our exports, which fell 15 percent to Asia last year. We must look ahead and work hard to ensure that foreign markets are as open to our goods and services as ours is to those made abroad. We must also equip our firms with the information and resources to compete effectively in foreign markets. Finally, we will actively enforce U.S. trade statutes to ensure that every foreign exporter to the United States follows the rules and does not dump below-cost exports on our markets or unfairly subsidize its exports to us in a manner that injures U.S. firms and workers.
By far our two largest deficits are with Japan and China. Last year we ran an estimated deficit of $63 billion with Japan and $58 billion with China. Measured in dollars, the $5 trillion Japanese economy accounts for 70 percent of all of Asia's production of goods and services. There is simply no substitute for strong domestic measures by Japan in order to boost its demand, which is essential for a recovery of intra-Asian trade as well as U.S. exports to Japan and Asia. The deficit with China continues to grow, going from $18 billion to nearly $60 billion in six years. The causes for the growth in this deficit are many, but clearly real and sustained access to that market for U.S. firms is a major objective.
The global financial crisis is hurting American manufacturing, and that Crisis needs to be solved. It is also imperative that ways be found to head off future crises. That is why Secretary Rubin's efforts to develop a new global financial architecture are so important. But our trade architecture needs attention as well.
Trade is certainly having an impact on U.S. manufacturing jobs. Total employment in the United States in December 1993 was at an all-time high of 132 million American workers -- representing the creation of a net 1.7 million new jobs in just one year. Almost all of the job expansion was in America's thriving services sectors. Manufacturing, though, did not fare as well; and over the last year 237,000 manufacturing jobs were lost. Many of these job losses were related to the decline in America's exports to Asia. What makes this particularly troubling is that export-related manufacturing jobs are among the highest paid jobs we have, paying 13-16 percent more than the overall U.S. average.
III: AMERICA'S TRADE POLICY IN THE 21ST CENTURY
The Administration has a trade policy in place designed to respond to these and other challenges that will face America as we move into the 21st century.
President Clinton outlined the principal elements of the Administration's trade policy in his State of the Union Address last week. The President stated that "we ought to tear down barriers, open markets, and expand trade." The President also emphasized that we must vigorously enforce our trade laws; provide assistance to U.S. manufacturers who have been hurt by the present financial crisis; and participate with other nations in a new round of global trade negotiations to expand exports of services, manufactured goods and farm products. To maximize the likelihood of success of our trade policy, it is essential for Congress to grant the President the trade negotiating authority he needs to effectively engage our trading partners.
I intend to continue working with Secretary Rubin and Ambassador Barshefsky to pursue open markets everywhere because that is where our economic future lies. Expanded trade is a key element of the President's strategy for a strong U.S. economy. This Administration fundamentally believes free and fair trade will create a level playing field that will secure the benefits of global integration for American workers as well as the 96 percent of the world's population that lives outside our borders.
The Department of Commerce is working to advance the President's trade policy by addressing three key objectives.
First, we will aggressively promote and adequately finance our exports. Thousands of smaller companies are not coming near their export potential We need to help them.
Second, we will enforce our trade laws in a manner consistent with our international obligations and ensure that our existing trade agreements are fully implemented.
Third, we will work to remain engaged with our trading partners in new negotiations, eliminate trade barriers, and strengthen the multilateral and regional trade system. We can ill afford to rest on past accomplishments in an age when standing still means falling behind.
1. Expand Trade Promotion to Enhance Export Growth
The first point I want to make concerns the depth of our commitment to promote our exports. Thousands of smaller and medium-sized enterprises (SMEs) are not coming near their export potential, nor are they able to take advantage of the opportunities available to them. In general, we must accept a sense of urgency in our drive to promote export activity in the United States. In addition to the jobs and revenues it generates, exports create loyal clienteles, and shape consumer preferences and market standards that multiply business opportunities in the future.
Helping small businesses export is one of the central missions of Commerce, as these firms offer great potential for export growth and are the most likely to need assistance. If we are to succeed in restoring the contribution of exports to our overall economic growth, we need to enlist the drive and creativity of our small business sector.
We are focusing on delivering our export products and services over the Internet and maximizing our use of e-commerce and video-conferencing to bring distant markets closer to home. One exciting concept we are working with is called the virtual `gold key', employing the Internet to bring U.S. exporters and foreign buyers together without the expense of setting up and attending a full-scale show or mission.
In the past fiscal year we have begun using technology to reach traditionally underserved exporting communities through a series of conferences made available to exporters across the country by satellite broadcasting. These events reach deep into America's rural communities thanks to our special Rural Export Initiative.
We are expanding the U.S. Export Assistance Center (USEAC) network and dedicating one individual in selected domestic field offices as a small and medium-sized enterprise outreach specialist. And we are establishing formal linkages between the National Institute of Standards and Technology's (NIST's) Manufacturing Extension Partnership centers and the International Trade Administration's (ITA's) Export Assistance Centers to identify and assist "export ready" manufacturing firms. We are also beginning to work with the National Governors Association to increase our already close relationship with the states on export promotion efforts.
Our 105 Export Assistance Centers regularly co-sponsor 'Basics of Exporting Seminars' in partnership with a variety of public and private sector partners. In addition, USEAC staffs regularly participate as visiting lecturers in undergraduate and graduate-level international management courses throughout the United States and its territories, In addition to augmenting the training provided by our partners, our USEACs constantly recommend focused training possibilities to their clients. Vital issues like the Asian financial crises, the implementation of the euro, opportunities in Northern Ireland, Y2K, and e-commerce have all been the focus of conference series held across the United States by our offices.
Our educational efforts are not necessarily directed only to U.S. companies; we also attempt to reach out to importers of U.S. goods. For example, together with the American Business Information Center, our staff in Japan has undertaken outreach to small and medium-sized Japanese importers to show them how to find U.S. vendors and exporters via Internet. These efforts reached 800 Japanese importers in ten Japanese cities in 1998.
Since the Asian financial crisis began, our overseas Senior Commercial Officers in East Asia have provided weekly "snapshots" of the economic and commercial situation at their posts. We share these with our client companies through our USEAC network.
We have further expanded our export promotion assistance by consolidating both general and country-specific counseling and information services within the Trade Information Center. Now callers to 1-300-USA-TRADE can receive even more help. In order to guarantee that this increased information will be available to SMEs, the Center has upgraded its websites extensively to include country-specific information on most regions of the world, including ongoing information on the Asian financial crisis,
As Chairman of the Trade Promotion Coordinating Committee (TPCC), I am working together with other agency heads in a coordinated fashion to respond effectively to real-time market dynamics in emerging markets, increase our outreach to SMEs, and promote and foster e-commerce. The TPCC is also developing and undertaking strategies to help U.S. exporters take advantage of new Opportunities created by the introduction of the euro, as well as Latin America's pursuit of regional market integration.
President's Initiative to Promote Manufacturing Exports: Let me highlight a number of our more targeted export promotion initiatives. This month the President announced a new initiative to expand and enhance the Administration's export promotion efforts to reflect these new global realities and respond to stepped-up export advocacy by other countries. By expanding the availability of export credit, reaching out to new customers and markets, and delivering higher quality services to U.S. exporters, we can increase U.S. manufacturing exports and protect high-wage jobs. This $108 million initiative will support $1.8 billion in new U.S. manufacturing exports that will sustain or create 16,000 high-wage U.S. manufacturing jobs. There are five components to the in~itiative.
-- Increase funding for Ex-Im Bank by 10 percent. Ex-Im Bank will use this money to help meet the demand for financing capital equipment and aircraft exports in developing markets, expand its insurance and guarantee programs to keep U.S. products flowing to emerging markets and expand environmental technology exports that create U.S. jobs while protecting the environment.
-- Increase funding for Trade and Development Agency-funded feasibility studies to allow additional opportunities for U.S. firms to enter the planning stages of major export- generating infrastructure projects.
-- Provide a new type of political risk insurance through the Overseas Private Investment Corporation (OPIC) to make possible up to $1 billion in new export-generating investment. Let me note here that multi-year reauthorization of OPIC, a vital TPCC agency, will be critical to promoting U.S. private sector efforts in many developing markets and emerging economics. We strongly urge Congress to reauthorize OPIC before its current authorization expires in September 30, 1999.
-- Expand the number of commercial officers overseas, increase the number of manufacturing- related trade missions, and improve coordination between the U.S. and Foreign Commercial Service (US&FCS) and the Manufacturing Extension Partnership to begin delivering export promotion services to all of the Department's small business clients.
-- Support greater participation by U.S. industry and government in international standard- setting bodies, assigning attaches in key overseas markets to promote product standards that help expand U.S. exports, and increasing the Department's efforts to help these countries establish the legal and regulatory "infrastructure" to promote transparent commercial transactions.
Let me emphasize this last point U.S. exporters continue to face intense and well-funded efforts by foreign governments to promote their own standards and product certification processes in target markets, creating barriers to market entry for U.S. products. One example of our recent efforts in this area involves Third Generation Wireless Standards. Along with Ambassador Barshefsky, Secretary Albright, and FCC Chairman Kennard, I have sought assurances from the European Union that it will support the outcome of the industry-led standards-setting talks for the Third Generation Wireless Standards at the International Telecommunications Union (ITU). In reply to a letter we sent last month, Commissioner Bangemann reaffirmed the EU's support for the outcome of the ITU's industry-led, multilateral negotiation. However, we felt the response fell short of addressing several specific U.S. concerns regarding Europe's acceptance of all standards that are adopted by the ITU. We will therefore continue to press for an outcome that is satisfactory to the U.S. industry. I was pleased that the President's initiative included $9 million to support our standards strategy. Two agencies of the Department -- ITA and NIST -- will cooperate on this initiative to make it easier and cheaper for U.S. exporters to sell their products in developing markets.
Recognizing the pivotal role of trade finance in helping U.S. firms compete overseas, the US&FCS implemented a significant change in the way it operates in the domestic field. The USEACs now are regularly co-staffed by International Trade Officers from the Small Business Administration (SBA), along with Ex-Im Bank Finance Officers. Combining the trade counseling of the US&FCS with the financial assistance provided by Ex-Im Bank and SBA is one way we are working to ensure that small and medium-sized companies can compete internationally. Our proposal to improve linkages between USEACs and MEP centers is also a logical extension of this effort.
Trade financing will also be essential for restoring trading relationships. Commerce has worked with Ex-Im Bank, the Department of Agriculture, and other partners in the TPCC to meet U.S. exporters' demand for financing support in light of the credit crunch in Asia. These programs now support over 20 percent of U.S. exports to Thailand and South Korea, up from just four percent a year ago. Our strategy is to maintain trade finance liquidity in the Asia region; assist in the privatization of projects, particularly in the infrastructure area; and encourage these countries to liberalize their markets and undertake essential structural reforms.
We are also helping U.S. exporters adjust to the financial crisis by strengthening their position in other dynamic markets where U.S. goods and services continue to enjoy good prospects.
Europe: On January 1, 1999, 11 of the 15 members of the European Union (EU) created a new currency, the euro. The resulting two market has more than $6 trillion in GDP. Our goal is to ensure that U.S. companies have a competitive edge in vital European markets, and that our businesses are fully equipped with the requisite marketing and financial information to seize these opportunities.
In order to raise the level of awareness among U.S. firms of opportunities in Europe, Commerce has conducted a major series of seminars around the country. In these seminars, we give U.S. firms expert advice and timely information on the euro. This is especially important to small and medium exporters who may otherwise lack access to he information they vitally need.
The introduction of the euro is an integral part of the European Union's larger economic strategy to increase the competitiveness of its firms and stimulate greater investment and growth across Europe. Europe will and should set its own growth strategy, and reforms that produce higher growth in our European trading partners should be good news for Americans. We export more than $100 billion a year to the European Union, and the European subsidiaries of U.S. firms sell many multiples of that amount every year in the European market. Growth in Europe, in short, is good for American firms and workers.
In addition to the ongoing efforts that we have implemented over the past year, the Department will conduct a public assessment in six months of how U.S. companies are faring under the euro. We expect this assessment to be a tremendous resource to companies interested in evaluating the EU as a possible market for their product or for companies looking for ways to improve their business processes and expand business in the EU.
Mr. Chairman, one constant in U.S. trade policy is our strong economic partnership with the European Union. While we have disagreements from time-to-time, such as our current dispute over bananas, our bilateral trading relationship remains the largest in the world at about $300 billion in two-way trade. And we are aiming to strengthen this relationship even further through the Transatlantic Economic Partnership, or TEP, which is aimed at reducing remaining barriers to transatlantic trade. A Joint Action Plan for these government-to-government talks was announced at the December 18 U.S.-EU Summit and calls for cooperation and negotiation on multilateral and bilateral issues, such as dispute settlement, transparency, trade facilitation, industrial tariffs, intellectual property, procurement and regulatory cooperation.
The Commerce Department has also been the U.S. Government lead for the Trans-Atlantic Business Dialogue -- TABD -- since its beginning in 1995, and we have been greatly impressed with the valuable contributions it has made to liberalizing transatlantic trade, including its tireless work to improve regulatory cooperation. The TABD Small Business Initiative is a collaborative effort between the United States and the European Union to facilitate international trade between U.S. and European businesses. Commerce staff has been designing matchmaking missions to Europe and supporting European Union-led missions to the United States. We have also supported TABD partnering events by actively promoting the events to US&FCS customers who might benefit through participation. We are looking forward to another very productive year working with the TABD in 1999.
One of the most critical trade issues we face with Europe concerns implementation of the European Data Protection Directive, which could lead to disruptions in millions of cross-border data flows from Europe to the United States. Any such disruptions could have a significant impact on trade between the U.S. and Europe. We have been working closely with the European Commission and U.S. industry to seek a resolution to the issue that will allow data flows to continue unimpeded while ensuring that personal data receives adequate privacy protection. We hope to be able to conclude the discussions successfully as soon as possible.
South and Central America: The devastation wrought upon Central America and the Caribbean by Hurricanes Mitch and Georges was unprecedented. The cost in lives, disruption of social services and destruction of infrastructure is staggering. My Department will play a major role in the Administration's effort to assist in the economic reconstruction of Central America.
Last week, a Commerce assessment team, comprised of representatives from the National Oceanic and Atmospheric Administration (NOAA), ITA, and my Office visited the region to assess damage and determine the role of the U.S. private sector in the reconstruction effort. The NOAA contingent met with its counterparts in Central America to discuss ways to improve climate prediction and methods of disaster preparedness to preclude the level of damage and loss of life in future natural disasters. The findings from this mission will be presented at a business roundtable that I will host in early February and will also serve as the basis for a subsequent commercial reconstruction business mission to the region in March. ITA's interest is not only in the actual reconstruction, but also in the transformation of the region into a healthy, viable economic structure with up-to-date commercial and legal frameworks.
Looking beyond the nations affected by the tragic Hurricanes, I see countries whose long-term commitment to lowering trade barriers and introducing competition will help them weather the current financial crisis. Given these prospects, we are intensifying our export promotion efforts through a number of new and ongoing initiatives. Again, we are happy to see that the trade finance agencies are stepping up their activity in the region.
Another important factor is the involvement of high-level U.S. Government officials in promoting U.S.-Latin American partnership. Over the last two years, I have embarked on five trips to Latin America. Commerce has also established an Inter-Americas Center in Miami to take advantage of that city's status as a gateway to Latin America and the Caribbean.
Through new programs, we have been able to expand the way we promote the export of U.S. products and services across the world. One key example is the increased emphasis that our officers place on advocacy. By bringing the significant personnel resources we have in place around the world, we are improving the competitive position of U.S. companies when they compete head to head with foreign companies on major projects.
Advocacy: Another key focus of our export promotion efforts is advocacy on behalf of U.S. firms for specific contracts and projects. Foreign governments have been employing aggressive tactics to help their firms expand exports. Foreign governments are particularly effective in using their high-level officials as advocates for firms seeking business contracts from developing nations. It was not until 1993, with the creation of the National Export Strategy, the Advocacy Center, and the Advocacy Network, that the U.S. Government realized that international business lost by American firms was far too important to ignore, and that our non-interventionist strategy was tantamount to unilateral economic disarmament.
The Advocacy Center at Commerce is a unique, central coordination point that marshals the resources of 19 U.S. Government agencies in the Advocacy Network to ensure that sales of U.S. products and services have the best possible chance abroad. The Advocacy Center provides a novel, creative approach to promoting U.S. exports. Advocacy Center project managers work one-on-one with small and large U.S. exporters. Firms of all sectors and sizes are learning that the best way to ensure sales growth is to enter global markets now. In addition to supporting large U.S. companies, the Advocacy Center has consistently provided small- and medium-sized U.S. companies with high-level United States Government advocacy.
More than 50 percent of the U.S. companies that have received direct support from the Advocacy Center are small- or medium-sized businesses. Hundreds more have benefited from its services as subcontractors and suppliers on large-scale infrastructure projects. With the Advocacy Center's assistance, these companies have won billions of dollars in business both directly and as subcontractors for larger projects. For example, during fiscal year 1998, small- and medium-sized businesses accounted for one-third of the Advocacy Center's more than 60 advocacy successes. These companies accounted for an estimated $330 million in U.S. export content. Since the inception of our aggressive advocacy program in November 1993, over $1 billion of advocacy successes are attributed to small- and medium-sized companies.
To further promote small- and medium-sized businesses, the Advocacy Center will establish an Advocacy Coordinator to implement a strategy designed specifically to create additional small- and medium-sized advocacy successes in the export market.
2. Ensure Enforcement of Trade Laws and Compliance with our Agreements
My second point about our trade policy is the critical importance of aggressively enforcing our trade laws in a manner consistent with our international obligations, especially regarding steel, and enforcing compliance with trade agreements.
Trade Laws and Steel: This Administration is focused on the challenges we are facing in the area of steel. The President's recent report to Congress outlined a number of Administration efforts to address the steel issue: supporting efforts to restore economic growth in Asia and Russia; import monitoring; foreign subsidy monitoring; and the vigorous enforcement of our trade laws. We will continue to work closely with the Congress and all of our industries and workers to ensure that the economic cases abroad do not result in a crisis at home.
We at Commerce are pursuing an aggressive program to ensure that American steel producers and workers are not injured by unfair foreign competition. We are currently enforcing more than 100 antidumping and countervailing duty orders on steel products from a number of countries. When we received antidumping petitions on hot-rolled steel from Russia, Japan and Brazil in September, I immediately shifted resources to ensure that we could expedite the investigations. We initiated the cases early, and we are on scale to issue preliminary determinations in these investigations by February 12 -- which is an unprecedented 25 days early.
Also for the first time, we made an early critical circumstances determination in the Japanese and Russian investigations, which is designed to prevent import surges when a petition is filed. This will allow for the imposition of duties on imports of hot-rolled steel back to November 12, 1998, if dumping is found.
When the global financial crisis began, we started an extensive monitoring program that closely tracks imports and prices in key import-sensitive sectors, such as steel, to help us formulate a swift response to potential import surges. And, in the past week, I obtained approval from the Office of Management and Budget for early public release of preliminary steel import data from the Census, so that we can share these preliminary data with the industry. We have also relied on these data to keep up the pressure on our trading partners, the EU and Japan in particular, to adequately respond to the financial crises in Asia and Russia.
Additionally, we recognized at the onset of the crisis that countries might resort to subsidies in an effort to export their way out of trouble. We, therefore, expanded our subsidy monitoring program. For example, we stepped up our joint efforts with the U.S. Trade Representative to confirm that the Korean government is not subsidizing the steel industry generally and Hanbo steel in particular and to encourage the sale of the government's one-third stake in Korea's largest steel producer, POSCO.
In addition, we recently issued tough new countervailing duty regulations that will strengthen our ability to combat unfair subsidies. We considered carefully the comments we received from the steel industry and Members of Congress in preparing the regulations.
Let me emphasize that the United States has a critical economic interest in seeing financial stability return to Asia and Russia. If and when our trading partners return to prosperity, increase transparency, and adopt market-based reforms, they will be much less inclined to violate our trade laws. In the meantime, as the Administration has made abundantly clear, we will remain vigilant in enforcing all of our trade laws.
Trade Compliance Center: Mr. Chairman, we understand that the bulk of our export losses is due to the economic downturns in Asia and elsewhere. Still, while non-compliance with trade agreements by our trading partners is not a primary reason for our trade deficit, this Administration will not allow it to be a cause for further deterioration in the trade balance.
Wherever we discover a violation or restriction of our access, the Administration moves aggressively. This is the mission behind the Trade Compliance Center (TCC) that we created in the Commerce Department's Market Access and Compliance unit two years ago to seek compliance by our trading partners with their obligations. The TCC relies on the country and industry desk expertise in Washington, contacts in the field and overseas in our Embassies to accomplish its mission. In addition, I have asked over 150 associations to name compliance liaisons to work with the TCC in a partnership to identify and resolve compliance problems.
Working carefully and closely with the Trade Enforcement Unit at the office of the U.S. Trade Representative (USTR), the TCC coordinates compliance advocacy efforts that are aimed at full foreign implementation of trade agreements short of dispute settlement where possible. The TCC supports USTR in developing information and strategies when dispute settlement cases are necessary.
For example, a current case is a Korean procurement for escalators and elevators for the new $6 billion Inchon International airport -- the largest in Asia. A U.S. firm, a world technological leader in elevators and escalators, was told it was ineligible to bid. We have pressed Korea to acknowledge that our bilateral agreement under the WTO Government Procurement Agreement (GPA) applies to contracts by its airport construction authority. Our understanding that it was covered was a basis that enabled us to reach an agreement when Korea joined the GPA. We are prepared to take this matter to dispute settlement in the WTO if we cannot resolve this issue.
In addition, Department of Commerce analysts and country specialists are working in cooperation with USTR staff and U.S. business to enhance efforts to obtain trade compliance and market access in several areas of concern. One is the European aircraft market, where the European Commission has proposed a regulation that would prevent many U.S. aircraft from being used or sold within the European Union because they use "hushkits" or replacement engines to comply with international noise standards even though these products meet the very noise standards to which the EU itself agreed. We are also working to obtain market access in the Philippines where the use of a certain kind of plumbing pipe made by small U.S. manufacturers is prohibited while a similar product by Philippine producers is evidently freely sold.
At the Department of Commerce, we are taking every effort to obtain full compliance wherever we see a problem. But if we cannot obtain compliance on the part of other countries the Administration will not hesitate to seek enforcement either through the World Trade Organization or through the use of U.S. trade laws.
Market Access in Japan: Our bilateral trade relations with Japan have shown mixed results in the past year. While concrete progress has been made under the deregulation initiative, our medical technology, semiconductors and cellular phone agreements, and on banking and securities, problems have cropped up in sectors such as insurance, rice and flat glass.
I am also disappointed that the Japanese government denies access through a wide array of barriers, including anticompetitive and restrictive business practices; non-transparent, discriminatory standards; discriminatory procurement policies; and a business environment that protects domestic companies and restricts the free flow of foreign goods and services into the Japanese market.
U.S. access to the Japanese market remains restricted in sectors ranging from autos and construction to glass and insurance. Our access has been undermined by continuing anticompetitive practices in the Japanese economy or by overly narrow interpretations by Japan of the agreements' provisions. Reversing these situations remains a trade policy priority for the Administration.
Anticompetitive practices are still tolerated to too great an extent in Japan and allow Japanese companies a protected home base from which to export. Flat glass is a case in point. After years of keeping out American flat glass from Japanese markets, for example, Japan finally entered into an agreement with the United States in 1995 aimed at promoting a more open market with fair opportunities to compete in Japan. Today American glass manufacturers still have only a 1-2 percent share of the Japanese market, despite the fact that Japanese companies freely admit U.S. glass not only is better and technically superior -- but is also less expensive than Japanese glass even after U.S. companies ship it across the ocean. Compare this figure to the 10-20 percent and higher market share that the U.S. flat glass industry enjoys in other countries' markets.
In addition, I have been disappointed with Japan's recent actions on several critical issue, for the international economy. From its failure to support tariff cuts in the Asia-Pacific Economic Cooperation (APEC) forum to its current efforts to retie substantial parts of its overseas economic assistance, Japan's record is not what one would expect from the world's second leading economy. And its falling imports from those Asian nations seeking to recover from the crisis shifts an even larger burden to the United States.
Japan's recent fiscal decisions are encouraging. It will be important to implement these fully and rapidly. Japan is in a serious recession. The Japanese Government has formulated an economic recovery program, and we hope it works. But recession is no reason for Japan not to fully implement its trade obligations, open its markets, deregulate its economy, or to do its part to absorb imports from recovering nations.
China: Total two-way trade with China has grown from $5 billion in 1980 to $75 billion in 1997 -- more than fifteen fold -- since relations were first normalized, making China our fourth largest trading partner. U.S. imports from China, which have grown exponentially and outpace U.S. exports five to one, account for the lion's share of total trade. Our most recent figures through November show our exports at $12.9 billion and our imports at $65.8 billion. In light of this burgeoning deficit, our trade policy and compliance efforts must address aggressively the problems of access to China's markets and any abuses of our existing trade relationship.
While some elements of China's trade regime have improved, with overall reductions in tariffs, overlapping non-tariff barriers to trade continue to hamper market access. Burdensome export performance, local content, technology transfer, equity, and other investment requirements constrain investor options and long-term investor interest. New restrictions over the past eight months in a variety of sectors (telecommunications, power generation, pharmaceuticals, retailing), as well as foreign exchange controls, added to existing restrictions (insurance, distribution, telecommunications, and services overall, agriculture), irritate the overall commercial relationship.
The best solution to these problems would be a commitment by the Chinese to market openness and WTO accession on a commercially meaningful basis. The United States has been engaged on China's accession to the WTO since 1986; negotiations began to intensify in 1994 and have continued to the present. Progress has been made in a variety of areas, including tariffs, the Agreement on Trade-Related Aspects of Intellectual Property Rights, and trading rights. However, much more remains to be done, including a solid market access package which satisfies our concerns for greater market access for manufactured products, agricultural goods and services. We have maintained all along that China's accession will be driven by the quality of China's offers, not a preconceived deadline or timetable.
But while we continue on this process, we must push for the full measure of the trade rights for which we have already bargained. This includes the 1992 Memorandum of Understanding on Market Access. Importantly, Mr. Chairman, China promised in the 1992 agreement that it would not maintain import substitution programs or policies. Here we have some significant concerns. We intend to pursue these concerns vigorously, while we simultaneously continue to support and work for China's commercially meaningful accession to the WTO.
For example, the Department is reviewing the concerns raised by the American Natural Soda Ash Corporation alleging Chinese import substitution measures keep out U.S. soda ash even though it is of superior quality and much less expensive than domestic production. China has also publicly stated that certain types of power generating equipment used in Chinese power projects must be of Chinese origin -- harming exports of very competitive U.S. equipment. And, recently, the Chinese authorities issued detailed instructions and targets for substituting Chinese for foreign telecommunications equipment.
Last month I co-chaired the 12th session of the U.S.-China Joint Commission on Commerce Trade (JCCT) with China's Minister of Foreign Trade and Economic Cooperation Shi Guangsheng. The JCCT, established in 1983, is a government-to-government forum that meets yearly to enhance senior level dialogue on and expand U.S.-China commercial relations. The concerns of our exporters and investors and how to resolve them in the near term have been a focal point of the JCCT meetings and my discussions with Minister Shi. Industry, represented by individual companies and industry associations, participated extensively in JCCT proceedings.
Over the course of our meetings, we agreed that our companies and enterprises in China would meet to discuss market restrictions they face on power generation equipment, pharmaceuticals, telecommunications, services and equipment, retailing, foreign exchange, and in a host of other areas. However, we still need government-to-government consultations to augment these discussions. Working with Ex-Im Bank, we also announced our intent to appoint a U.S. trade finance officer in Beijing to advance project finance discussions, provide enhanced and expanded support to U.S. exports and projects, and help address the trade deficit. In addition, we agreed to hold further information exchanges and seminars on export controls, expand sectoral cooperation, and deepen our dialogue on commercial law. This spring, we will organize a major conference on enhancing joint efforts in the area of standards, testing, and certification, and the first ever multi-agency infrastructure mission to China.
Progress in trade relations is more important that ever to our overall relationship with China. Without progress, we face managing and coping with a rowing source of irritation.
Anti-Bribery: Before we leave the subject of compliance, we should reflect on a momentous achievement that has gotten far too little public notice. Twenty-one years ago, the United States Congress passed the Foreign Corrupt Practices Act (FCPA) -- a courageous and farsighted unilateral action. Bribery is a pernicious act that undermines democracy and robs the poor. This Administration placed a high priority on getting the world's largest industrialized countries up to our standard, to ensure that our firms would no longer labor under a competitive disadvantage in international trade. Finally, with the strong support of the business community and members of Congress, we have achieved that goal with a new Organization for Economic Cooperation and Development (OECD) convention.
Thirty-four nations have agreed to enact criminal laws that will follow closely the prohibitions found in our FCPA. Now, the world's largest economies must outlaw the bribery of foreign public officials in international business transactions.
The OECD Working Group on Bribery is monitoring the progress that the parties to the Convention are making towards its effective implementation. The Administration will devote sufficient resources to this exercise so that no party will get a free ride at the expense of U.S. exporters. The Commerce Department is committed to ensuring that the other parties to the Convention live up to their obligations.
In the next year or two, we will also focus on the WTO, on Latin America, on Asia, and on getting developing countries to reform their legal systems.
The WTO's Government Procurement Agreement is a tough agreement under which countries agree to open, on a reciprocal basis, much of their government purchases and commit to operate their procurement systems in an open and fair way. Because of its high standards and reciprocal market opening requirements, its membership has not been large. Consequently, we hope to conclude a WTO agreement on transparency in government procurement later this year which would not require specific purchases to be opened to international bidding. We want it to address how governments publish laws, and regulations, and procurement opportunities. We would like to have governments establish clear criteria for how proposals will be evaluated, and most importantly, award contracts based on those criteria.
We have also been involved in the Inter-American Convention, negotiated in the Organization of American States (OAS), which requires countries to criminalize the bribery of foreign government officials. We signed this agreement in 1996 and President Clinton sent it to the Senate for ratification last year. We hope to see action on it in the near future.
We also want to work with the countries in Asia to address the problems of corruption. Tow of the major countries -- Japan and Korea -- signed and ratified the OECD Convention.
Implementation and enforcement may be problems in both cases, but we will urge them to play a leadership role on the issue in the region.
It seems logical that APEC should be the forum for our efforts, as it has agreed to pursue transparency in government procurement and has begun drafting nonbinding principles for adoption on a voluntary basis. At the APEC leaders meetings in New Zealand in September, we will pursue this further.
Finally, when Premier Zhu visits the United States this year, we want anti-corruption efforts on the agenda. In December, I met with the Chinese, and we agreed to hold a seminar in China this year on how to control corporate corruption.
As important as these agreements are, we also have to find ways to work toward domestic reforms in countries with the most serious problems. As I travel around the world, I always raise this issue with my counterparts. For 20 years the Commerce Department has conducted seminars around the world on anti-corruption and the rule of law. We have organized training programs. We set up resident advisors on government procurement and ethics. We have worked particularly in Eastern Europe, the former Soviet Union, and the Middle East. I want to expand this program in other parts of the world.
3. Continue to Tear Down Barriers and Strengthen the Global Trading System
My third point concerns our continued need to bring down barriers to U.S. exports and to demonstrate our commitment to strengthening the multilateral and regional trading system.
As the President has said many times, we cannot create enough good jobs and increase wages if we do not expand trade. And, trade negotiating authority is an important mechanism to achieve this goal. While we may be able to begin negotiations, the lack of fast track can affect the momentum of negotiations, and its prolonged absence ultimately delays our trade agenda.
Mr. Chairman, we must ensure that the WTO built-in agenda -- encompassing, among other issues, talks on agriculture, services, and intellectual property rights to begin this year -- stays on track. WTO members must ensure that the WTO continues to be an engine for increased trade liberalization as we move into the next century. The 1999~ Ministerial is going to prove to be very important for the World Trade Organization, and I am proud that Ambassador Barshefsky was unanimously chosen by her colleagues in the WTO to chair this meeting.
We must move ahead with tariff reductions. Work on sectoral tariff cuts begun in the APEC forum must move ahead in the WTO. In addition, we need to work on reducing the gap between bound tariff rates and applied tariff rates. It is simply inconceivable to me that a country can apply a tariff of 10 or 15 percent to our exports for years -- high as that may be -- yet face no penalties under international trade rules for raising that tariff to 70 percent when it chooses to offer protection, for example, to a new investment. We must get those bindings down.
WTO members must deepen their commitment to services liberalization, which is also part of the built-in agenda. Many countries need to move from standstill commitments made in the Uruguay Round to elimination of barriers to services trade.
Continued emphasis needs to be placed on further protecting intellectual property rights in the WTO. We need to ensure that certain less developed countries fully implement their intellectual property rights obligations even as we look at expanding those obligations.
Increased attention must be given to addressing problems caused by technical barriers to trade. Many WTO members continue to struggle with properly implementing their obligations in this area and these technical barriers are quickly becoming more important impediments to doing business overseas than tariffs.
Finally, we must push for expanded participation in the WTO Agreement on Government Procurement and work to improve transparency in government procurement around the world.
Latin America and the Caribbean: The United States has been at the forefront of free trade negotiations with our partners in this hemisphere (the Free Trade Agreement of the Americas (FTAA)) -- negotiations designed to open new markets for U.S. exports. Greater access to the dynamic Latin American market is a major objective for U.S. trade policy. Since tariffs in the countries of the FTAA are four times as high as ours, it makes sense for us to tackle them. For the first time in 1997, our export sales to Mexico surpassed those to Japan, making our North American Free Trade Agreement ~(NAFTA) partners our first and second largest export markets. In just six years (1991-1997), U.S. exports to Latin America and the Caribbean Basin, including Mexico, have more than doubled, from $63 billion to $134 billion. Latin America and the Caribbean (excluding Mexico) was the only major region with which the United States recorded a significant trade surplus in 1997. There is no other part of the world where the United States is so competitively positioned.
The Administration has long been committed to the Caribbean Basin Initiative (CBI). Chairman Roth's omnibus trade bill approved last year by this Committee included CBI enhancement, and the House has also considered several proposals. The devastation wrought by the hurricanes in Central America and the Caribbean underscores the importance of rapid passage of this legislation. When the Presidents of Central America came to Washington in December, they told us the most important thing the United States could do to support the reconstruction in the region is to pass CBI enhancement.
We cannot afford to be complacent while Europe and Asia are actively courting the Latin American and Caribbean regions. The EU has agreed with Argentina, Brazil, Paraguay and Uruguay (the Southern Common Market, or Mercosur) to negotiate a reciprocal agreement. The largest trading partner of the Mercosur is the EU which also is negotiating agreements with Chile and Mexico.
Africa: Sub-Saharan Africa is emerging from years in which it was largely an afterthought in U.S. foreign economic policy. President Clinton's historic visit to Africa last March stimulated a process of expanded partnership between the United States and Africa on several fronts, including the commercial front, and the result will be a brighter future for Africans and Americans.
The U.S. Government is focused on Africa as never before. The African Growth and Opportunity Act legislation introduced in the last Congress energized the policy debate about Africa and stimulated new thinking within the Clinton Administration. We expect the bill to be reintroduced shortly, and we hope the 106th Congress enacts it promptly.
Meanwhile, the Administration is moving ahead to implement those portions of the President's Africa Initiative, the Partnership for Economic Growth and Opportunity in Africa, which do not require new legislation. These measures include: debt reduction, new Overseas Private Investment Corporation investment funds, and technical assistance. The Partnership aims to help integrate Africa into the global economy, and to build lasting commercial ties with the region's emerging markets.
The Department of Commerce is fully engaged on Africa. Next month, I will make my fifth visit to Sub-Saharan Africa as Secretary of Commerce, for the meetings of the U.S.-South African Binational Commission and Business Development Committee in Cape Town. I co-chair the Commission's Trade and Investment Committee with my South African counterpart, Minister of Trade and Industry Alec Erwin. We will continue our discussions on how to further build the U.S.-South African commercial relationship.
Just last month I led a Presidential Business Development Mission to South Africa, Kenya, Cote d'Ivoire, and Nigeria. The Mission, comprised of 15 U.S. firms, two Members of Congress, and representatives of three U.S. Government trade finance agencies, was a major milestone in our efforts to forge a commercial partnership with Africa. I look forward to continuing our commercial dialogue with African leaders in March at the ministerial-level Dialogue for African Partnership in Washington.
Mr. Chairman, these are what I view as the critical elements of our trade policy: providing our dynamic exporters with help and tools to enter markets, enforcing our trade laws and ensuring compliance with our agreements, and working to knock down trade barriers through negotiations and strengthen the global trading system.
IV. CONCLUSION
Before closing, I want to mention some additional matters that warrant our attention and will be critical to sustain our trade policy objectives. This involves the need to address that situation of those who have to date not shared equally in the benefits of trade. I understand there will be a separate hearing to discuss labor and environmental issues, but I want to make two basic points today.
First, the Commerce Department has an important role to play in aiding U.S. firms that must adjust to changing trade patterns. Our Economic Development Administration implements the Trade Adjustment Assistance (TAA) Program for Firms which, through a national network of 12 Trade Adjustment Assistance Centers, certifies the eligibility of firms, conducts a rigorous diagnosis of the firms' operations, and provides technical assistance, on a cost shared-basis, designed to develop new methods, markets, and products. A recent independent evaluation conducted by the Urban Institute concluded that the program is effective in helping firms recover from the loss of sales or production caused by foreign imports. This year, the TAA Program for Firms will come up for reauthorization, and Commerce is committed to working with the Department of Labor and the Congress to reauthorize this important program.
Second, we need greater education throughout the country about the importance of trade to our domestic economy and future prospects. Every man or woman who has lost a job to trade knows it and feels it intensely, but so few of our workers who owe their jobs to international trade are fully aware of its beneficial impact. We must do better about educating our nation about the objectives of trade and trade policy. We must convince our workers that trade can be on their side, and that it speaks to their needs as much as to those of CEOs.
Of course, if we are to make that argument, we must work to ensure it is a reality by taking better account of concerns expressed by labor unions and environmental groups. As we head to a new century let's stop fighting the old fight. As President Clinton stated last week in his State of the Union Address, "Somehow we have to find a common ground on which business and workers and environmentalists and farmers and government can stand together." What we should be doing is finding ways to improve trade, and the environment, and labor standards -- all at the same time. One way of doing so is to strengthen the working relationship between the World Trade Organization and the International Labor Organization, an issue in which members of this Committee have been quite interested for some time.
Perhaps then, when the worker on the factory floor can see trade working on his behalf just as it does for the CEO in the executive suite~, all the elements of a successful trade policy will have come together.
I want to close, Mr. Chairman, by noting that on the 15th Street side of the Commerce Department is engraved a quote from a wise American forefather, Benjamin Franklin. It says, "Commerce among nations should be fair and equitable." That was wise policy guidance in his time, it is equally wise today, and it is the goal we are pursuing.
Thank you, Mr. Chairman.
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