*EPF406 10/19/00
Text: USTR Barshefsky on Clinton Administration Trade Policy
(Allusion made to "networked economy" initiative ahead) (3840)

U.S. Trade Representative Charlene Barshefsky says the Clinton administration is preparing an initiative to bring trading partners closer to U.S. policy on trade in the "New Economy" sectors.

In an October 19 speech to the National Press Club in Washington, Barshefsky said the "networked economy" initiative should promote easing trade in the high-technology manufactures and services.

She said it would also promote intellectual property rights protection in the digital environment and foreign capacity-building "to address concerns about an international digital divide."

Barshefsky's speech recounted the trade accomplishments of the Clinton administration, including approval of permanent normal trade relations for China, and looked to the challenges ahead.

Among the challenges are building consensus in the World Trade Organization (WTO) for a new trade negotiating round and persuading the U.S. public to support open trade, she said. Another is integrating Russia into the world economy, she said.

Barshefsky also cited opportunities ahead in negotiations to create a Western Hemispheric free trade area and initiatives for opening trade in Asia, Europe and the Middle East.

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

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

(begin text)

FROM THE COLD WAR TO THE WIRED WORLD:
TRADE POLICY IN THE CLINTON ERA

Ambassador Charlene Barshefsky
U.S. Trade Representative
The National Press Club
Washington, DC
October 19, 2000

Thank you very much.

We are here at one of a few genuinely historic moments in American trade policy. With the President's signature of the legislation on permanent Normal Trade Relations [PNTR] for China, and as China enters the final stages of the WTO [World Trade Organization] accession process, we are nearing the close of perhaps the central debate in American trade policy over the past decade.

PNTR, of course, is not the end of the work. I have just returned from Beijing, where we crystallized for the Chinese the issues remaining in Geneva among all of China's principal trading partners. The United States will proceed, as at each earlier stage, on the basis of an enforceable, commercially meaningful agreement. The timetable for entry, and implementation of PNTR under the law, depends on China's ability to conclude the multilateral process consistent with this requirement.

I am not going to dwell on China today -- we have probably all heard enough about it for the time being. But I use it as a point of departure. Think about the themes we saw play out in Congress in the past months -- the economic opportunities of trade with China; the implications of opening markets in information technologies; the relationship between trade and other deeply held values; ultimately, the place of the WTO accession and PNTR in our broader relationship with China, with all its profound importance for peace and security in the Pacific. These are, in microcosm, the themes of America's broader trade debates of the past eight years.

Throughout President Clinton's two terms, trade policy has had a central place as America considered the great questions: prosperity at home; the technological revolution; the quality of life; the quest for a more stable, peaceful world. And that is my topic today -- the challenges the Administration's trade policy addressed, the changes it brought to the world, and the questions before us as a new decade begins.

PRINCIPLES AND RECORD OF U.S. TRADE POLICY

Much of my remarks today will be a story of change -- from the fundamental importance of trade in our economy, to the adaptation of policy to a new era. But it begins with a set of principles: a philosophy advanced anew by President Clinton and Vice President Gore in 1993, but first articulated in the era of Franklin Roosevelt.

American postwar trade policy, stated simply, has aimed to build a world of open markets under the rule of law. This commitment rests on clear economic logic. Open markets abroad enable us to export, and exports are essential to a strong domestic economy: giving producers wider market opportunities and helping working people specialize in high-skill, high-wage jobs. Open markets at home are equally important; imports create the choice, price and competition that raise living standards -- for all families, but most especially the poor, dampen inflation, and create the competition and efficiency that mean long-term growth.

But our approach relies, as much as on logic and theory, on practical experience with the alternative. It can be traced, appropriately enough in this election season, to the debate between Roosevelt and Herbert Hoover in the Presidential campaign of 1932.

President Hoover's trade policy rested on the belief that -- as Hoover himself put it, calling on Congress in the spring of 1929 to pass the Smoot-Hawley Tariff Act -- America, with its high standard of living, "cannot successfully compete against foreign producers because of lower foreign wages and a lower cost of production." This argument appeals to powerful fears, now as then. In 1929 and 1930 it prevailed, and the result is still remembered today: a cycle of tariff hikes and retaliation which, spreading worldwide under the pressure of financial crisis, cut trade by 70 percent between 1930 and 1933. The result deepened and lengthened the Depression, intensified the era's political tensions, and, in the view of our postwar leaders, contributed to the outbreak of war.

Roosevelt proposed the more generous, confident and also more sustainable philosophy we have maintained ever since -- a commitment to open markets with the twin goals of rebuilding prosperity and restoring peace and stability. As he wrote in his last message to Congress, calling in the spring of 1945 for the negotiations which led to the first GATT [General Agreement on Tariffs and Trade] agreement two years later:

"The point in history at which we stand is full of promise and danger. The world will either move toward unity and widely shared prosperity, or it will move apart."

The resulting GATT agreement joined NATO, the Rio Treaty and our Pacific alliances; the World Bank and the IMF [International Monetary Fund]; the United Nations and the Universal Declaration of Human Rights; as a basic institution of postwar internationalism. Roosevelt called the initiative a chance to "lay the economic basis for the secure and peaceful world we all desire," and he was correct.

Over 50 years, an opening world economy has allowed global trade to expand 15-fold; in turn sparking a six-fold increase in world economic production and a tripling of per capita income. This contributed, together with the advance of science and medicine, to unprecedented social progress: world life expectancy has grown by 20 years; infant mortality fallen by two-thirds; and famine receded from all but the most remote, war-torn or misgoverned corners of the earth. And in political terms, trade policy helped us address questions central to world peace: from postwar reconstruction, to the reintegration through the GATT of Germany and Japan in the 1950s, and up to the present.

THE CHALLENGE OF 1992 AND THE CLINTON ERA

The Clinton Administration embraced Roosevelt's philosophy and its corollaries: optimism about America's ability to succeed in a changing world; appreciation of the contribution open trade can make to prosperity, peace and the rule of law; commitment to American leadership. But we applied them to an entirely new economic and political landscape.

As the President observed in setting out his trade agenda at American University a few weeks after his inauguration in 1993, trade policy would have to be fundamentally rethought for a world fundamentally changed.

America's economic leadership was in question with a sharp recession, growing deficits, and a perhaps subjective but clear waning of public confidence.

The revolution in science and technology was changing economic life before our eyes.

The domestic debate on trade policy was growing more intense, as trade became more important to the economy and our own trade barriers diminished.

The world's political landscape was irrevocably transformed; the end of the Cold War, in lessening political and military tensions, placed economics and trade more clearly at the center of relationships between nations.

The President's response to these challenges asked more of trade policy, and set a more ambitious agenda, than had any President perhaps since the era of Roosevelt and Truman. Over eight years, it has led us to conclude 300 separate trade agreements; pass, together with Congress, five major pieces of trade legislation; launch over 100 enforcement actions; and reach a series of signal achievements which have changed the world's trade environment.

These include historic agreements: NAFTA [North American Free Trade Agreement], the Framework Agreement with Japan and later the Enhanced Initiative on Deregulation, and the Uruguay Round that expanded global rules and opened world markets; the 21st-century agreements of the second term on information technology, financial services, basic telecommunications and duty-free cyberspace; more recently, this spring's trade bill on Africa and the Caribbean Basin; the market-opening trade agreement with Vietnam; the China agreement and PNTR; soon a Free Trade Agreement with Jordan, as part of the Middle East peace process. Together with these, we have created new institutions: the WTO itself; the annual APEC [Asia-Pacific Economic Cooperation] Leaders forum and substantive work toward to free and open trade in the Pacific; the Transatlantic Economic Partnership with Europe; the Summits of the Americas which envisioned and then launched the negotiations towards a Free Trade Area of the Americas.

And when we compare the challenges of 1992 to the realities of today, we see some remarkable things.

I. BUILDING PROSPERITY AT HOME

First, America regained its economic strength; and trade policy, together with fiscal discipline and support for education, had a central role in this.

The achievements of the past eight years created a far more open world economy. Since 1992, we have cut world tariffs more than a third, and virtually eliminated them on information technology goods, pharmaceuticals and other high-value products. We placed industrial quotas on the road to elimination; imposed stricter checks on foreign subsidies; opened markets in areas of special competitive importance to the United States; and, through NAFTA and the more recent expansion of the Caribbean Basin Initiative, cemented our economic relationship with our closest neighbors and largest trading partners.

As a result, American businesses, farmers and working people can sell their goods and services overseas more freely than ever before. We see this in the 74 percent increase in U.S. exports over eight years -- amounting to total growth of nearly $500 billion, with exports topping $1 trillion this year for the first time in our history. This growth means tangible new opportunities for people on the job and on the farm throughout the United States. To cite just a few examples:

-- Until this year, orange growers in California and Florida were barred from selling their crops in China. As a result of the Agricultural Cooperation Agreement we negotiated with China in 1999, China bought 7.6 million kilos of U.S. oranges in the first seven months of this year.

-- In 1993, American photographic film companies sold just over $100 million of their goods to Mexico. By 1999, with NAFTA phasing out high Mexican tariffs on these goods, U.S. exports of film and photographic paper more than tripled; the figure should approach $500 million this year.

-- In the early 1990s, American semiconductor and medical technology firms found Japan one of the world's most difficult markets to penetrate; today, as foreign market share has more than doubled in the aftermath of our agreements, our companies are Japan's market leaders.

On a national scale, this export growth has made up over a fifth of America's overall economic growth since 1992 -- and a third of our growth until the Asian financial crisis. More locally, as America created nearly 22 million jobs, the opening of trade helped make sure Americans also have better jobs, as jobs related to goods exports pay on average 13-16 percent more than non-export related jobs.

Market-opening also reformed our own trade regime -- we abolished tariffs on over two thousand types of goods, and nearly eliminated our non-tariff barriers like industrial quotas. And this too contributes to our economic strength. It has helped make businesses more efficient; kept inflation low as the longest continuous economic expansion in our history continues; broadened consumer choice and stretched the value of a dollar for each of us.

II. THE 21ST-CENTURY ECONOMY

Second, as the opening of today's world economy helped us build prosperity at home, we turned to the negotiation of a series of high-tech trade agreements -- unique in postwar trade policy -- that eliminate barriers across specific sectors worldwide. These make up the policy framework for an era in which trade takes place in the borderless world of cyberspace and concerns weightless products that arrive by wire or satellite beam as much as tangible goods that travel by plane or boat; and for an economy dominated by knowledge rather than physical labor.

We strengthened worldwide protection of intellectual property rights, facilitating research, investment and technological progress. The Uruguay Round, vigorous use of WTO dispute settlement, U.S. law and 28 bilateral IPR agreements, led well over 100 countries to adopt modern copyright, patent and trademark laws; and radically improve enforcement.

We opened markets for high-tech goods. In eight years, with bilateral market-opening agreements from semiconductors to medical equipment and technology, computers, pharmaceuticals, cell phones and other advanced products, and then the global Information Technology Agreement in 1996, we virtually eliminated world tariffs and other barriers to trade in the high-tech manufactured goods at the heart of the globe's information infrastructure.

We spearheaded the opening of services industries critical to the 21st-century economy. With the WTO's General Agreement on Trade and Services, we set a framework of rules for services trade. Then, through the global market-opening agreement on Basic Telecommunications services in 1997, we brought the pro-competitive regulatory principles and open markets that spark investment and competition in America's telecommunications sector to the world. We did the same in another industry later that year with the global Financial Services agreement -- the largest market-opening trade agreement by value ever concluded, covering nearly $60 trillion in banking, securities and insurance assets.

Then the Internet, as in 1998, in association with the development of a broad e-commerce policy, we won commitment from all WTO members to duty-free cyber-space, preserving the duty-free status of electronic transmissions over the Internet.

We are now taking the next steps. At the WTO we have proposed comprehensive reform of trade in agriculture -- still highly protected, especially in Europe -- and attention to the new issues of biotechnology. We have done the same in services, addressing both familiar industries and newly emerging services created by the Internet. And we will soon inaugurate a major "networked economy" initiative -- easing trade in the high-tech manufactures and services at the heart of the world information infrastructure, and addressing related topics such as intellectual property protection in the digital environment and capacity-building to address concerns about an international digital divide. In doing so, as it opens up export opportunities it will help move our trading partners toward the flexible, sophisticated New Economy we have entered at home.

III. THE DOMESTIC DEBATE AND THE QUALITY OF LIFE

Our intense negotiating agenda, and the adaptation of trade policy to the information age, asked us to be more ambitious, and to think about trade in new and creative ways. In a different sense, this was also true of our third challenge -- the intensifying trade debate at home.

Its sources are evident in the sheer physical growth of trade -- since 1993, our two-way trade with the world has doubled, from under $1.3 trillion to over $2.5 trillion a year. This has brought more scrutiny and new perspectives to trade -- as we saw in the rancorous debates on fast track and the Seattle Ministerial Conference -- with particular emphasis on the relationship of core labor standards and environmental protection to trade.

We have proceeded on two bases. First, open trade and economic growth can go together with high labor standards and strong environmental protection. Fears that an opening economy will force us to weaken labor and environmental standards or risk slower growth at home are unfounded. Experience shows this in practice: far from weakening standards, we strengthened them as we pursued expanded trade -- from the Family and Medical Leave Act and the minimum wage increase, to a new Safe Drinking Water Act and the protection of 100 million acres of wild lands -- and America became more competitive rather than less, gaining a greater share of both world exports and global investment.

But second, the strains of development and growth are real. Sweatshops and child labor are global problems; climate change, depletion of fisheries and cross-border pollution present complex challenges. And while domestic policies must be the central means of solving them, we must recognize that trade policy can play a part.

That has been the Administration's commitment from the beginning, in the NAFTA side agreements on labor and the environment, through our proposals to eliminate barriers to trade in environmental goods and services at the WTO; the President's Executive Order requiring environmental reviews of major trade agreements, and the development of innovative means of encouraging worker protections such as our textile agreement with Cambodia, offering greater access to the U.S. market in exchange for labor improvements in Cambodia's garment sector. Very soon, this will be capped by a free trade agreement with Jordan -- the first ever to include specific labor and environmental provisions -- which will join open markets and free trade with other public responsibilities. And all this goes together with commitments to transparency -- reforming policy processes at home, and strengthening public access to international institutions.

IV. AN INTEGRATED WORLD AND A STRONGER PEACE

And so we come to the fourth challenge: as trade agreements and a new era of economic integration helped us achieve prosperity and a higher quality of life at home, they also became central pillars of the political architecture that has replaced the world of the Cold War, promoting the economic integration, mutual benefit and shared destiny that help to strengthen peace.

The reformed and strengthened trading system embodied by the WTO is a case in point, providing stronger rules that -- as we saw during the Asian financial crisis -- help to keep world markets open and prevent cycles of protection and retaliation like those of the 1930s.

Our regional initiatives are also examples: the APEC forum in the Pacific; the Transatlantic Economic Partnership with the European Union; our new trade relationship with sub-Saharan Africa; the beginnings of regional integration in the Middle East. Most ambitious of all, the negotiations begun at the Summits of the Americas, creating a community of freedom, prosperity and shared destiny -- the Free Trade Area of the Americas -- that will unite the 34 democracies of the Western Hemisphere.

And when we think of the contemporary challenges of peace and stability, we think above all of one as profound as any in half a century: that of the reintegration of China, Russia, and nearly 30 other nations into the world economy, as they make the transition from communist central planning to the market. This is the modern equivalent of the reintegration through the GATT of Germany and Japan in the postwar era; and over eight years we see a decisive advance.

For the new democracies of Europe and Asia, in the years since the fall of the Berlin Wall trade policy has helped to cement their internal domestic economic reform, strengthen political stability and support long-term growth. Our 29 agreements on accession first to the GATT and more recently the WTO include no less than 10 with the new democracies -- Albania, Bulgaria, Croatia, Estonia, Georgia, Kyrgyzstan, Latvia, Mongolia, Slovenia and now Lithuania -- and more are to come, as we move ahead with Russia, Moldova, Ukraine, Armenia and others.

Much further east, we have taken the decisive steps toward normalized trade with the nations of Indochina, concluding major trade agreements with Cambodia and Laos and putting the capstone in place with last July's landmark bilateral U.S.-Vietnam agreement. With the Cambodia agreement already in effect, implementation by Congress of the Laos and Vietnam agreements next year will restore a fully normal relationship with the entire region -- helping to close the book on the Vietnam War era, in a fashion that both cements peace and reconciliation with these nations, and contributes to greater economic freedom and opportunity for their people.

Finally, with China, we return to the point at which we began. China's WTO accession, together with PNTR, was perhaps the most important American trade and foreign policy debate of the past decade. It is a landmark achievement in concrete terms: a comprehensive market-opening agreement covering virtually every part of China's economy; and a Congressional debate ending in the full normalization of our trade relationship. It is also a symbolic achievement, as the world's largest nation -- for decades one of the great challengers to the vision of open markets, mutual benefit and integration American trade policy represents -- returns to the trading system it helped to create before the communist revolution; and thus brings us closer to the fulfillment of the vision of economic integration, growing stability and strengthening peace that animated Roosevelt and his successors.

CONCLUSION

Where to from here?

The strategic opportunities and general outlines of policy are already clear. This is the case whether the next Administration pursues fast track or other procedural means of reaching the goal.

They include:

-- the further opening and reform of global agricultural and services trade, and in that connection building consensus for a Round -- a process that has already begun.

-- Russia's integration into the trading system.

-- The framework of rules for the emerging networked world economy.

-- The extraordinary opportunity of a community of open trade throughout the Western hemisphere; and regional economic opening through further initiatives in other regions, in particular Asia, Europe and the Middle East.

-- And at home, expanding public participation and strengthening the consensus for open trade.

Ultimately, this agenda, building on the Clinton record, will complete our journey from the divisions of the Cold War to the integrated and wired world of the 21st century. It will be as demanding as the agenda we began in 1993. But the next Administration will take it up with a healthier economy, a more confident public, and a stronger and more secure nation.

We have these blessings in part because Americans, as under Roosevelt and Truman, faced a moment of promise and danger; and once again in this rapidly changing world, made the more courageous, the more generous and the wiser choice.

Let me close with that; and I thank you very much.

(end text)

(Distributed by the Office of International Information Programs, U.S.
Department of State. Web site: http://usinfo.state.gov)
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