Remarks by Grant D. Aldonas

Under Secretary of Commerce for International Trade
Before the World Trade Institute of Pace University

May 24, 2001

(As prepared for delivery)

Thank you for that warm introduction, Donna [Sharp, Executive Director of the World Trade Institute of Pace University. I am delighted to join you here in New York during "World Trade Week."

I understand that many of you represent small- and medium-sized companies that want to expand your overseas interests. I applaud that effort and want to assure you that we will do everything we can at the Commerce Department to assist you.

The partner organizations here today share our understanding that we are already competitive in global markets in goods and services. Recognizing that fact and responsibility to it will likely be one of the key indications of who succeeds in American business in the future. You are on the leading edge of that revolution in the way we think about business opportunities and new markets.

New York is a particularly apt place to celebrate "World Trade Week." New York means trade. From the grant of the original charter in 1621 of the Dutch West India Company that led to the settlement of Manhattan, New York has always been at the center of American trade and commerce.

In 1789, the first Customs House under federal authority collected the first customs duty of $774.71 for cargo that included steel, salt and hardware from Italy. In 1871, the significance and prosperity of the New York's port was reflected in the grandeur of the Custom House at Bowling Green - both the original one built in 1787 (which was intended as the residence for President Washington before the seat of government was moved from New York) and the one re-built in 1907 in the same location, where it remained until it moved to this location - the World Trade Center - in 1973.

Today, New York remains one of the busiest ports in the world. New York sends exports of almost every kind to nearly every country in the world and is the world's largest financial marketplace. New York is our third largest exporting state (behind California and Texas), and New York City is our fourth largest exporting metro area (after Seattle, San Jose and Detroit).

In his World Trade Week Proclamation, President Bush noted, that "World Trade Week celebrates trade as an economic and social engine for progress." Today, I'd like to discuss the vision and spirit of our trade policy as they relate to the quality of life for all Americans, and for our friends and neighbors around the world.

The Case for Trade

International trade has provided enormous benefits both at home and around the world. President Bush believes, and I agree, that trade means considerably more than just economic growth, higher-paying and more plentiful jobs, and a rising standard of living in America. Trade is ultimately about freedom.

We are in the midst of a debate that has gone on in this country since its founding. Ever since a New Yorker by the name of Alexander Hamilton penned the Report on Manufactures in 1795, the question has always been whether free trade was in the best interests of all Americans.

Tariffs were a divisive issue in the 1800s, when the Tariff of 1828 - also called the Tariff of Abomination - furthered a regional split between north (which sought protection from foreign industrial imports) and the south, fueling economic tensions that became a factor leading to the Civil War. In 1896, William Jennings Bryan decried the gold standard - the "Cross of Gold" - and attacked tariffs - tariffs that Eastern manufacturers wanted to maintain. The Smoot-Hawley Tariff of 1930 - the last tariff schedule enacted line-by-line by the U.S. Congress - produced the highest tariffs overall in our history, triggering retaliatory tariffs by our trading partners and disrupting the flow of international trade. As former New York Senator Daniel Patrick Moynihan has said, "any short list of events that led to the Second World War would include the aftermath of the Smoot-Hawley Tariff."

More recently, critics of free trade and open markets focused on the advent of the North American Free Trade Agreement and the implementation of the Uruguay Round of multilateral trade negotiations that created the World Trade Organization. The critics argued that the NAFTA and the Uruguay Round would lead to the destruction of American manufacturing and the impoverishment of the American worker. They maintained that trade would encourage a race to the bottom that would erode America's environmental protections. They claimed that these trade agreements would only benefit the powerful multinational corporations.

Well, what happened? Let's look at the hard facts. Over the last decade, while the United States was negotiating and implementing the NAFTA and the Uruguay Round, the U.S. economy achieved the highest rate of sustained economic growth we have seen in a generation. That produced the longest period of uninterrupted economic growth in our nation's history. Inflation fell to near zero; unemployment fell below 4 percent.

Did trade destroy America's manufacturing base? U.S. industrial production was 48 percent higher in 2000 than in 1990. Even America's steel industry, which faces incredible competitive pressures, continues to produce record tonnage.

Did trade lead to the impoverishment of the American worker? The U.S. economy has created 20 million new jobs since the early 1990s. Since 1995, total U.S. private sector productivity has increased 3 percent a year and real wages are up. Exports supported some 12 million U.S. jobs this past year. Workers in jobs supported by these exports receive wages 13 and 20 percent higher than the national average. Estimates of the effect of trade liberalization through the Uruguay Round and the NAFTA suggest that, between higher incomes and lower prices, the average American family of four benefitted to the tune of between $1300 and $2000 annually.

Did expanding international trade opportunities lead to the erosion of environmental protections? To the contrary, the U.S. environmental laws remain on the books and we benefit from cleaner air and water. NAFTA, in fact, proved to be a catalyst for environmental cooperation between the United States and Mexico that did not exist previously.

Were big companies the only ones to profit from trade liberalization? Given who is in this audience, you may not be surprised that our data shows that 97 percent of U.S. merchandise exporters are small- and medium-sized companies.

U.S. export trade has expanded even faster than the U.S. economy. Exports increased from $57 billion in 1970 to $1.1 trillion in 2000 - an increase of more than 10 percent per year and a doubling of U.S. exports roughly every 7 years.

Trade has provided enormous benefits worldwide. WTO figures indicate that tariffs on manufactured goods averaged nearly 40 percent at the time the GATT was created in 1947 and had fallen to below 5 percent by the end of the Uruguay Round. During that same time, trade increased 16 times. The OECD has estimated that the Uruguay Round delivers annually the equivalent of a $200 billion tax cut to consumers throughout the world.

What is still more important, in human terms, is that trade helps lift countries out of poverty. According to the OECD, developing countries with more open markets achieved twice the rate of economic growth of those that kept their markets closed.

In short, the economic case for free trade is unassailable.

The Moral Case for Free Trade

As President Bush has said, however, free trade is about more than just material well-being; it's a moral imperative. The genius of the free enterprise system is that it relies on and encourages human freedom. Free men and women conducting their business in free markets can pursue their own economic destinies and go as far as their drive, dreams, talents and initiative take them. In the end, that requires freedom of opportunity and freedom of choice politically as economically.

President Bush has said that free trade helps create the habits of liberty that profoundly effect a man or woman's view of themselves and their society. With freedom comes the responsibility to account for one's own actions and the obligation to demand from governments policies that unleash human potential. Freedom is not served when governments erect barriers to individuals' success, whether those barriers are political, social or economic.

In the United States, we have come to trust the relationship between economic development and human freedom. Government's role is to create the environment in which our people can succeed on their own merit - to give them the freedom to use their God-given talents to develop a sense of pride and hope. This encourages them to build better futures for their families, their communities and themselves.

I hope it is not lost on any of us that we fought a revolution over high British tariffs and other restraints on our freedom to trade internationally. That's precisely why New Yorkers, on April 22, 1774, followed their friends to the north in Boston, and held a tea party of sorts in New York harbor.

As Secretary Evans noted in his speech to the U.S. Chamber of Commerce's Global Summit on Tuesday, individual rights are inextricably linked to economic freedom. When we trade, when we press for open markets, when we call for a level-playing field, it is ultimately in the interest of all Americans and our friends abroad. That is because the freedom we cherish politically is also the key to our economic future. Freedom is our most important export.

The President's Trade Agenda

With that let me turn to the President's trade agenda and the role I expect the Commerce Department to play in that effort. President Bush recently observed that, "Free trade agreements are being negotiated all over the world, and we're not party to them." There are more than 130 preferential trade agreements in the world today, and the United States belongs to only two. We have to get off the sidelines and back into the game. The President intends to press forward bilaterally, regionally, and multilaterally, to expand our trade and the economic opportunities that it creates for all Americans.

One key element of our strategy is the renewal of the President's Trade Promotion Authority. Trade Promotion Authority provides is a mechanism to ensure that the Congress and the President have agreed on our goals and how they will work together to achieve them - in other words, a vehicle to rebuild the political consensus necessary for our negotiators to reassert American leadership in the trade arena.

We need to move, and we need to move now. Our inaction hurts American businesses, workers, and farmers as they find themselves shut out of the many preferential trade and investment agreements negotiated by our trading partners.

When the President laid out his international trade legislative agenda on May 11, he identified the specific trade negotiating objectives he intends to pursue in order to advance America's interests. That agenda can be summarized simply. Our goal is to eliminate all barriers to the free flow of American goods, services, investment and ideas. That basic principle applies with equal force whether we are talking about soybeans, aircraft, financial services, energy, or software.

What governments do when they establish barriers to trade is mislead their people. They provide a false incentive to invest capital, raw materials, and, most importantly, a person's future in areas that will only be sustained as long as the government maintains those same barriers to free and fair competition. A new American trade agenda must start from that perspective.

Given the current political debate, I would be remiss if I didn't address the topic of trade, labor and the environment. I firmly believe that the real nexus between trade, labor and the environment is that trade contributes to rising standards of living, and rising standards of living are the key to achieving higher labor and environmental standards. Recent studies have confirmed that fact. There is a positive link between rising per capita income, to which trade contributes, and improved labor and environmental performance.

That is why we must ensure that, whatever steps we take with respect to trade and labor and trade and the environment, we do not undercut the most important driving force behind improving both labor and environmental standards - trade and economic growth.

Making Our Case to the American People

Let me close by asking you a favor. Together, we have some challenging work ahead of us. That is true of the work we have to do abroad in opening new markets. It also is true of the work we have to do here at home in setting the stage for further trade liberalization by the renewal of Trade Promotion Authority.

I want to ask you to join me in that effort. I have come here today to ask you to help the President make his case to the American people. Frankly, we have not done enough to explain the tremendous benefits we enjoy in this country thanks to our presence in the world marketplace. We have decades of results confirming the universal rewards of expanding trade and commerce, yet it is clear that many Americans do not share your understanding that expanding trade opportunities is in their best interests.

We have to do a much better job of getting that message across. We have to explain that future generations will enjoy a better life economically, politically and in every other way by expanding our presence in the global marketplace.

The President has put forward his trade agenda. He intends to work closely with Congress and with all of you to get America off the sidelines and back into the game. If we want both to expand the economic opportunities for our children, their children and all to come, and if we want to ensure that our values continue to take root abroad, we must press ahead.

The Chairmen of the House Ways and Means and Senate Finance Committees have indicated that they will markup Trade Promotion Authority before the end of the summer, and we will hope to see a final - and successful - vote before the end of the year. I am confident that we can get there with your help.

In his farewell remarks given on the last day of the 106^th Congress, former Senator Moynihan, then the Ranking Member of the Finance Committee, noted, "the clearest achievement of this Congress has been in the field of foreign trade," and he underscored that it was with great difficulty and at most partial success did he and Chairman Bill Roth "make the connection between world trade and world peace" as part of the debates on trade with China and other trade bills.

Senator Moynihan's point was that the link between open markets and a peaceful world would have been obvious 50 years ago, when participants in the Bretton Woods conference in 1944 strove to design international institutions - the World Bank, the International Monetary Fund and an international trade organization - in support of a lasting peace. That is a connection we should all bear in mind when we reflect on the economic and moral imperatives for trade today.

Thank you again for inviting me to speak with you. I look forward to your questions.