*EPF403 12/14/00
Text: Barshefsky on Clinton Administration Trade Policy Record
(Attention to quality of life matters, she says) (4140)

U.S. Trade Representative Charlene Barshefsky says that trade agreements with environmental protection provisions demonstrate that policies aimed at protecting quality of life and policies aimed at prosperity through open markets are compatible.

In a December 14 speech in Washington to the Democratic Leadership Council on President Clinton's record on trade, Barshefsky argued that many attacks against open trade are based on one central unfounded fear:

"That the dirtiest and least responsible companies will win advantages; that an opening world economy will force nations, including the United States, to accept pollution and exploitation or lose exports, investment and jobs."

Experience has shown, she said, that the developing countries that have embraced open trade have achieved the level of prosperity necessary to protect the environment and enforce labor laws.

Poverty and political tensions persist in South Asia, the Middle East and Africa, areas where trade barriers remain highest, she added.

Barshefsky viewed the recently negotiated U.S.-Jordan Free Trade Agreement as a model for future agreements, noting that it neither imposes new standards nor bars change of each country's existing labor and environmental laws.

"But it also maintains the principle that, as we develop a free trade relationship based on law and binding agreements," Barshefsky said, "we should not undermine the very foundation of these agreements, or gain illusory competitive advantages, by avoiding enforcement of our existing laws."

Following is the text of Barshefsky's speech:

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

(begin text)

THE RECORD AND THE ROAD AHEAD
Ambassador Charlene Barshefsky
U.S. Trade Representative
Democratic Leadership Council
Washington, DC
December 14, 2000

Thank you very much.

Let me begin by saying that we have a busy agenda for the month ahead. In Washington, we have opened negotiations on Free Trade Agreements with Singapore and Chile. At the WTO in Geneva, we are developing -- with approval from the vast majority of countries -- our Networked World initiative, adapting the trading system to the emerging world of information technology. We are continuing the multilateral discussions on China's WTO accession. And we are presenting the most ambitious services trade liberalization proposal ever developed, covering ten major industries from accountancy to environmental services, audiovisual services and telecommunications. And this month in Miami, we hope to complete a rough-cut first draft of the main chapters of the monumental Free Trade Area of the Americas agreement.

But we are also, of course, approaching a moment of transition and a new Administration. And so our meeting today is a time to reflect on the record of the past eight years, and look ahead to the debates of a new decade.

A MOMENT OF TRANSITION

We are all aware that a new President will take office in rather extraordinary circumstances, and -- in trade as in every other field -- faces an unusual political challenge. But we should also remember that the new President's inheritance is extraordinary largely for the blessings it offers. He will take office:

-- In an era of general, though not universal, peace abroad;
-- As head of a government whose fiscal health and reputation have been restored;
-- At a peak of domestic prosperity unmatched in 225 years of American history, and with an economy more competitive and innovative than ever before;
-- And at a moment of great public confidence in our country's fundamental strength and long-term prospects.

This is a remarkable inheritance; and it is by no means an accident. It reflects, in great measure, the policy choices President Clinton outlined in 1992 -- drawing much from the work of the DLC and the Progressive Policy Institute -- and set in motion over the past eight years. They include the 1993 budget and its restoration of fiscal discipline; a strengthened commitment to education, job training and lifelong learning; and among other notable economic achievements, a trade agenda as ambitious as any in six decades.

THE CHOICE OF 1992

The trade agenda is especially interesting, because it represents not only a series of specific policy choices, but part of a broad response to a moment of profound and radical change. As President Clinton took office:

-- America's economic leadership was in question, with a sharp recession, growing deficits, and waning public confidence in our long-term competitiveness.
-- 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.
-- And the world's political landscape was irrevocably transformed as the end of the Cold War not only lessened political and military tensions, but eroded the assumptions beneath long-standing alliances and great power relationships.

These converging trends, as the President observed in setting his trade agenda in February of 1993, confronted us with a decision about our country's economic prospects and role in the world comparable to only two others in the 20th century.

It was a moment of risk, he said, comparable to that after World War I, when weariness with political leadership brought the rejection of the League of Nations treaty and withdrew America from European and Asian politics. Economic pessimism was inseparable from political isolationism: it was evident in President Herbert Hoover's view that America, with its high standard of living, "cannot compete successfully against foreign producers because of lower foreign wages and a lower cost of production." This theory led us to a series of tariff hikes, capped by the Smoot-Hawley Act in 1930; and ultimately a worldwide cycle of protection and retaliation that deepened the Depression and intensified the political tensions that led to war.

But this was also a moment of opportunity like that which emerged after the Second World War. Between 1945 and 1949, under Roosevelt and Truman, optimism and confidence in American ideals reshaped the world, creating the institutions which have promoted political stability, economic development and the advance of American values ever since: the United Nations and the Universal Declaration of Human Rights; NATO and our Pacific alliances; the IMF [International Monetary Fund] and the World Bank; and not least, the commitment to open trade under the rule of law embodied by the trading system known then as the GATT [General Agreement on Tariffs and Trade] and now the WTO [World Trade Organization].

The choice before us in 1993 was a choice between two fundamentally different views of America and its role in the world: it was a decision to set a course for a new era of political isolationism, nationalism and mercantilist rivalry on one hand; or for a new era of internationalism, which would keep faith with the ideals of Roosevelt and Truman, while updating them to fit a changed world. And the course President Clinton set is clear throughout the Administration's foreign policy record:

-- In the reform of our overseas alliances through the enlargement of NATO and the revised defense guidelines with Japan;
-- In the willingness to grapple with political crises as complex and difficult as Northern Ireland, Bosnia and the Middle East;
-- In our support for Mexico and Asia in the financial crises of 1995 and 1997-99; and
-- In a trade policy, based upon open markets under the rule of law, which has touched every major sector and each part of the world.

THE TRADE POLICY RECORD

Looking back over eight years, the sheer volume of work is remarkable: the negotiation of over 300 separate trade agreements; five major pieces of trade legislation and 38 smaller bills; over 100 enforcement actions; 31 new economies joining the GATT and now the WTO on the foundation of our bilateral agreements with each of them; and the creation of new institutions and negotiating fora, from the WTO itself to the annual APEC [Asia-Pacific Economic Cooperation forum] Leaders meetings, the Summits of the Americas, the U.S.-Africa Ministerial series, and the Transatlantic Economic Partnership with the EU [European Union].

Within these hundreds of agreements is a set of signal achievements that have fundamentally changed the world trade environment: the North American Free Trade Agreement; the U.S.-Japan Framework Agreement and our subsequent negotiation of 39 separate market-opening agreements with Japan; the Uruguay Round that opened world markets and created the WTO; global high-tech agreements eliminating tariffs on information technology goods, opening world markets for basic telecommunications and financial services and guaranteeing global duty-free cyberspace; then the African Growth and Opportunity Act, expansion of the Caribbean Basin Initiative, our landmark trade agreement with Vietnam, the U.S.-Jordan Free Trade Agreement, and our historic bilateral agreement on China's accession to the WTO, together with passage of PNTR [permanent normal trade relations] last fall.

THE VIEW FROM 2000

What do we see today? Let me suggest five major changes.

World markets are more fully open. Since 1992, we have cut world tariffs by over a third; placed industrial quotas on the road to elimination, imposed stricter checks on subsidies; opened markets worldwide in areas of special importance to the United States; and cemented our economic relationship with our closest neighbors and largest trading partners. We have also reformed our own trade regime -- eliminating tariffs on 2,000 types of goods, liberalizing and in some cases eliminating quotas, and further liberalizing some of our leading services industries.

The United States is more prosperous. In a more open, rules-based world market, Americans are succeeding as never before. We see this in an eight-year export increase of over 75 percent -- in hard numbers, nearly $500 billion -- in American exports of good and services, with this year's export total topping $1 trillion for the first time in our history; in the shift of the American economy toward higher-paying jobs; and in the rising living standards inherent in a more open American economy, as imports stimulate the competition that means better prices for consumers, lower inflation, and wider choice.

The world trading system is broader and stronger. Today's WTO is an institution whose rules have wider scope, covering agriculture, services, intellectual property rights and more; whose membership has grown to 140 countries; which gives us greater ability to enforce our trading partners' commitments; and which, as we saw in the Asian financial crisis, gives the world stronger defenses against cycles of protection and retaliation at moments of crisis or political pressure.

We have laid the foundation for the 21st-century economy through an infrastructure of law and policy that encourages technological advance and helps us capitalize on our greatest strength: committing WTO members to strong intellectual property rights protection that supports research and investment; eliminating tariffs worldwide on information technology goods like computers and semiconductors; liberalizing high-tech services industries -- for example, telecommunications and financial services -- especially suited to trade in the emerging world of electronic commerce; and guaranteeing that electronic transmissions over the Internet will remain duty-free.

And trade policy has contributed to the search for a lasting peace. As our negotiations opened markets, they also helped cement reform and the rule of law in new democracies -- from Albania to Bulgaria, Cambodia, Croatia, Estonia, Georgia, Kyrgyzstan, Latvia, Lithuania, Mongolia; soon Moldova as well. They have helped to set a framework for American foreign policy in Asia, Africa, and the Western Hemisphere through APEC's commitment to "free and open trade in the Pacific," the African Growth and Opportunity Act, and the negotiations on the Free Trade Area of the Americas. And our trade negotiations are today accelerating economic reform and integration into the world economy for our one-time Cold War rivals; China; Vietnam, Laos, Cambodia; in coming years, Russia. In all of this, American trade policy -- though updated to fit a new era, covering a wider array of issues and a new set of trading partners -- fulfills the goal Franklin Roosevelt set for it in 1945: to "lay the economic basis for the secure and peaceful world we all desire."

THE AGENDA OF THE NEW DECADE

So we come to the present; and as we look ahead, the strategic outlines of the trade agenda are clear.

Next year, the new Congress will consider at least six major bills: implementation of the U.S.-Vietnam Trade Agreement and a similar agreement with Laos through approval of annual NTR; Free Trade Agreements with Jordan, Singapore and Chile; a renewed and expanded Andean Trade Preferences Act. The new Administration and Congress will also need to decide whether the procedural device of "fast-track" negotiating authority remains necessary. Beyond these decisions, the coming year will be a critical point in longer-term negotiations:

-- The third Summit of the Americas, next April in Quebec, will review a first draft of the main chapters of the Free Trade Area of the Americas agreement and turn to the political choices that will complete the work by 2005 at the latest, and ideally no later than 2003.

-- The WTO has already begun negotiations for comprehensive reform of global agriculture and services trade and will consider broadening them into a full negotiating Round.

-- China's WTO commitments will come into force, and the task of monitoring and enforcement will begin.

-- The Networked World initiative we launched in October will form the foundation for a second generation of high-tech trade policy -- addressing electronic commerce, high-tech goods and services trade, intellectual property rights in the digital environment, and the technical assistance programs that can address an emerging international digital divide.

-- The Free Trade Agreement with Singapore, which may be expanded in Asia, begins the implementation of APEC's vision of free and open trade in the Pacific; similar opportunities may emerge in Europe, Africa and the Middle East.

-- And recent progress on Russia's WTO accession offers the prospect that in the next Presidential term, one of the last truly major world economies still outside the trading system will become a WTO member.

This makes up an ambitious and profoundly important agenda. And while its general outlines are clear, the new Administration will put its own stamp on the work; so let me now turn to a different issue, but one of equally basic importance to trade policy in this new decade: and that is the debate at home.

THE GLOBALISATION DEBATE AND THE CRITICS OF TRADE

The past eight years saw policy, negotiations, and the sheer physical volume of trade move ahead at great speed. To put it in perspective, in the 216 years between 1776 and 1992 our two-way world trade grew to $1.2 trillion; since 1992 it has more than doubled to $2.5 trillion.

This, perhaps inevitably, has brought with it an intensifying debate over trade and trade policy at home. The debate has played out, often in rancorous terms, in Congress, on university campuses and on TV; and it is here to stay. It played a significant role in the Congressional discussion of fast-track authority between 1995 and 1997 and the WTO's Ministerial Conference in Seattle last winter. And it raises a critique of trade policy which we must address squarely.

The modern critics of trade have, I believe, four principal concerns:

(1) Fears arising from the pace of economic change, as technology in particular, but also in part trade, transform our economy and with it familiar jobs and industries.

(2) Uncertainty and sometimes fear about the role and authority of international institutions, including the WTO.

(3) Concern for the global environment, as rapid industrialization in developing countries heightens strains on the world's natural heritage.

(4) Humanitarian sympathy in the face of suffering overseas, as the urbanization that goes with development makes poverty, child labor, inhumane working conditions and other social problems not in fact more prevalent -- as the Labor Department's research shows, child labor, for example, is always most common in economies which remain dominated by subsistence agriculture -- but certainly more visible.

These separate concerns unite in one central fear: that the dirtiest and least responsible companies will win advantages; that an opening world economy will force nations, including the United States, to accept pollution and exploitation or lose exports, investment and jobs.

THE CENTRAL FEAR MISTAKEN

This is a serious charge. Were it proven correct, we would face a most painful choice: on one hand, a generally more prosperous and peaceful world; on the other, a healthier and more equitable world. But experience tells us that the charge is unfounded and the choice is false.

At home, trade policy in the 1990s went together not with weaker but stronger standards. As our negotiating agenda proceeded and the U.S. and world markets opened, we worked with Congress to pass the Family and Medical Leave Act, the minimum wage increase and the new Safe Drinking Water Act. We drafted stronger clean air rules. We signed the Kyoto Convention on climate change and guaranteed the protection of nearly 100 million acres of wild lands. And America became not less but more competitive: our share of world exports rose; a long-time deficit in direct investment became a surplus -- as foreign firms, attracted by our open markets and reliable rule of law, invested over $200 billion in the U.S. last year alone; unemployment fell and wages rose at all levels of the economy.

Abroad as well, the record is clear. No part of the world has developed without participating in trade: as Southeast Asia, Central Europe and Latin America opened to the world, they grew more rapidly, reduced poverty, and built more stable, peaceful regions; in South Asia, the Middle East and Africa, where trade barriers remain highest, poverty and political tensions persist. And no country can adopt modern labor and environmental policies without development. The experience of newly industrial economies all over the world -- South Korea, Spain, Taiwan, Chile and others -- is testimony to this: participation in trade has helped them develop the high-wage industries that reduce poverty; and a more affluent society is able to create the scientific infrastructure and professional civil service essential to effective environmental protection or labor law enforcement.

Fears that trade spurs a "race to the bottom" are therefore mistaken. At their base, they rest on the same unjustified pessimism as President Hoover's fears about our ability to compete with lower-wage countries seventy years ago. A contemporary trade policy based upon fear of the poor would be as misguided and destructive today as was Hoover's in 1930; and a trade policy based upon open markets under the rule of law is entirely consistent not only with peace and prosperity, but with a rising quality of life.

VALID CONCERNS

But this is not to say that there is no justice in, or room to act upon, the concerns of the critics of trade.

All can agree that some parts of American society have not won the full benefit of our prosperity: inner cities and Indian reservations; those with less education; much of rural America. Government and private companies bear responsibility to respond -- through safety nets that assist those in need; unemployment insurance and health care; development programs that link isolated areas to markets through transport and telecommunications, and make them more attractive for investors; and commitments to education, job training and life-long learning that enable more Americans to take advantage of the opportunities the modern economy offers.

And all can also agree that the modern world economy has space for reform. Its institutions -- this is certainly true of the WTO -- are often given to outdated and opaque procedures which always raise suspicion and can, at least in principle, easily be remedied. In substantive terms, sweatshops and child labor are global problems; climate change, depletion of fisheries and cross-border pollution present complex challenges to science, government and economic policy.

TOWARDS CONSENSUS

These are not issues we can simply ignore. A decent society is judged on its treatment of the least fortunate; and we have no more important responsibility than care of the environment we hold in trust for future generations.

We must begin, however, by recognizing that trade policy cannot be the sole or even the central means of responding to these concerns. Trade tends not to be their cause, and isolation from trade is no solution: those countries which actually are isolated from trade and the world economy -- North Korea and Burma today, the Soviet Union and Maoist China in earlier decades -- also often have the most deplorable records on labor and environmental issues. Domestic policies, supported as necessary by international technical assistance, must be the principal means of addressing these issues. But trade can play a part; and this has been the Administration's commitment from the beginning.

On environmental issues, the NAFTA [North American Free Trade Agreement] environmental side agreement was our first step, with valuable effect in such areas as protection of migratory birds and water pollution. We have since moved on to proposals at the WTO to strengthen environmental protection as we open trade, through eliminating environmentally damaging subsidies -- for example in fisheries and agriculture -- and removing barriers to trade in environmental goods and services. We have accompanied this with procedural reforms to strengthen transparency in policy development at home and created a legal framework for systematically integrating environmental concerns into trade negotiations.

Likewise the NAFTA labor agreement is a first step, leading to our largest bilateral labor initiatives anywhere in the world. Our enforcement of GSP [Generalized System of Preferences] labor conditions, and our textile agreement with Cambodia -- offering greater market access as Cambodia improves respect for labor rights in the garment industry -- have effectively used trade incentives to promote reform and offered us policy lessons for the future.

Our recent Free Trade Agreement with Jordan is a further evolution -- which may offer a model, although not the only one, for a policy that can win consensus in the United States and abroad. The U.S.-Jordan Free Trade Agreement, to begin with, is what its title implies: a comprehensive Free Trade Agreement. It abolishes all tariff and non-tariff barriers to industrial goods and farm products. It creates a free trade area in services. And it is the first Free Trade Agreement ever to address electronic commerce. It is also the first agreement to have undergone a formal environmental review before completion and to include provisions on labor and environmental issues.

These latter provisions are carefully designed. The agreement restates the commitment both countries have already made to strong environmental protection and to the ILO's [International Labor Organization] core labor standards. It neither imposes new standards nor bars change or reform of each country's existing labor and environmental laws. But it also maintains the principle that, as we develop a free trade relationship based on law and binding agreements, we should not undermine the very foundation of these agreements, or gain illusory competitive advantages, by avoiding enforcement of our existing laws. And the FTA is accompanied by a separate technical assistance agreement that will offer practical help through cooperative efforts in improving environmental policies. Altogether, it is a rigorous and comprehensive free trade agreement, and one which, fully respecting sovereignty, also addresses environmental and labor issues in an entirely pro-trade manner.

CONCLUSION

This agreement, therefore -- and likely, for example, a similar agreement with Singapore -- is a lesson in the compatibility of policies that protect the quality of life with policies that build prosperity through open markets. It is only one step toward consensus, of course. Much remains to be done and said before the globalization debate reaches its conclusion; and the debate itself is only one of many political and technical challenges to the trade agenda of the new decade.

But as we recognize the difficulty and profound importance of this agenda -- building the hemispheric community; responding to the emerging world of high technology; the work toward a new Round at the WTO; the negotiations with Russia; the next steps in Asia, Europe and Africa and the Middle East -- we can look ahead with confidence. And that is not only because the work is already well under way, but still more because the most important decision has already been made.

In 1993, we faced a fundamental choice: about our belief in ourselves in a difficult time; about America's role in the world at a moment of radical change. President Clinton and Vice President Gore ensured that we made the right choice. The record of the past eight years flows from it; the work of the next decade will do so as well. Of the many blessings the new Administration will inherit, this choice -- of confidence, of optimism, of leadership -- is among the most profound.

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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