Testimony by Secretary of Commerce Donald L. Evans

Before the U.S. Senate Commerce Committee

August 1, 2001

Washington, DC

[As Prepared For Delivery]

Thank you, Mr. Chairman, Senator McCain, and Members of the Committee, for inviting me to testify on how to ensure that Americans receive the benefits from our trade agreements and to discuss our ideas for establishing a new American trade agenda.

With your permission, I'd like to make a brief opening statement and submit my written testimony for the record.

Expanding Export Opportunities

President Bush and I agree that trade is the key to increasing prosperity and extending freedom, equality, and security around the world. It is a moral imperative.

Secretary Evans testifying before the Senate Commerce Committee, August 1, 2001.

That said, I never lose sight of the fact that trade is, above everything, a bread and butter issue for all Americans.

With 78 percent of global gross domestic product and 95 percent of humanity outside our borders, it is clearly in our interest to open foreign markets to American exports.

Relationship of Trade and Investment

As you have pointed out previously, Mr. Chairman, both trade agreements and trade barriers are about investment. I understand your concern and the concerns of other members of the Committee and Congress that trade agreements might become a vehicle for encouraging investment abroad. I will come back to that point in a moment. But I also want to make sure we take into account the opposite perspective -- that removing foreign barriers to trade can also eliminate the incentive to invest abroad to avoid high tariffs. The net result is that our firms can maintain investment and production here because they can gain access to foreign markets by exporting.

The vast majority, nearly three-quarters, of total U.S. direct investment abroad is in other developed countries that have high labor and environmental standards, and enforcement. What that underscores is that American capital flows to where there is a positive and secure investment environment.one that provides the rule of law and an acceptable rate of return, rather than being driven by lower labor standards or lax environmental enforcement.

In addition, our exports often follow U.S. direct investments abroad. Studies have shown that for every $1 in overseas investment, an additional $2 in exports to that market tend to be generated.

Trade Promotion Authority

In this regard, we have to get back in the international trade game to break down barriers to U.S. exports and improve job opportunities for American workers. To do that, Congress and the President need to reach agreement on the scope and goals of our trade negotiations. The vehicle to make this happen is Trade Promotion Authority (TPA).

And the sooner the better. As President Bush has observed, "Free trade agreements are being negotiated all over the world, and we=re not party to them." There are over 130 preferential trade agreements in the world today. The United States belongs to only two. Our competitors are busy signing deals while our negotiators sit on the sidelines, and these deals are placing us at a competitive disadvantage.

Both strengthening the President's hand in negotiations and reinforcing the constitutional role of Congress are essential to a successful American trade policy - one that serves the interests of all Americans.

Compliance and Enforcement Are Key

I understand - as you do - that, if we do not enforce our current agreements, we cannot expect support for further negotiations.

I have made compliance and enforcement the highest priority for all the units within the International Trade Administration. Mr. Chairman, I want to thank you for your support for the compliance initiative and assure you that we have been moving ahead.

In terms of compliance, our emphasis is on problem solving and results. I am also committed to aggressively investigate allegations of subsidies or dumping under our trade laws. American workers and farmers can be truly dispirited by the belief that they are not competing on a level playing field.

Export Promotion

We are also acutely aware of the fact that for our economy to fully benefit from new market openings, we need to expand the base of exporters. And that means including every sector of our economy, especially our small businesses. This requires the coordinated effort of all federal agencies involved in export promotion and trade development.

Fortunately, we have the right management tool in place - the Trade Promotion Coordinating Committee (TPCC), which is comprised of 19 agencies. The Coordinating Committee works on behalf of small businesses by coordinating government export promotion programs so that small companies can access them more easily.

Trade Needs to Work for All Americans

Mr. Chairman, we need to engage in a dialogue that will help us move forward as a nation with the full support of Congress for our efforts to open new markets for American goods, services, and ideas.

Americans have always been at the forefront of change and progress ... and we have always prospered as a result. That is what has made us such a forward-looking nation. I believe we can continue to lead in a world that is more active than ever in trade and commerce. And I truly believe that we should do this in a way that provides opportunities to all American workers, business owners, and families.

Thank you for your time and I will be happy to answer any questions you might have.