Remarks to the Washington International Trade Association on Asia-Pacific Economic Cooperation

(Washington D.C.)- U.S. Rep. Sander Levin (D-MI), Chairman of the House Ways and Means Subcommittee on Trade, today delivered remarks to the The Washington International Trade Association.

Below is the text of Mr. Levin's remarks prepared for delivery:

Remarks of Sander M. Levin,
Chairman of the Ways and Means Subcommittee on Trade,
on Asia-Pacific Economic Cooperation

The Washington International Trade Association
Wednesday, December 15, 2009
As prepared for delivery

Change is surely in the air in Washington.  

There is not yet what might be called a “framework” of trade policy.  But there are characteristics in the Administration’s approach to important policy issues that in my opinion are relevant to trade.

So in considering how the United States and the Obama Administration should and will proceed specifically in relation to APEC and TPP, I suggest that it is useful to look at some threads that run generally through policy considerations under this still quite new Administration.

I. Some Common Characteristics in the Administration’s Approach to Policy

1. Whether it is the economic crisis, the threat of terrorism, climate challenges, or trade, the need to engage internationally is clear to this Administration. 

Trade among nations is increasingly vital for all nations. The challenge is how to respond effectively to new international dynamics and combine internationalism with national needs.

2. Like the other issues, trade confronts changing conditions and complexity.  

With trade rapidly expanding among nations with very different conditions, old doctrines are not an automatic, effective answer.  Trade imbalances do not necessarily work themselves out or necessarily lead to a nation responding simply by moving up the economic ladder of more advanced products or services.  There are likely two sides to most trade issues.  Not everything is simply a ‘‘win-win.”

Rather than take the simplistic view, we as policymakers must confront the realities of changing conditions and complexities in trade policy.

3. A Misuse of labels.

Discussion becomes stale when reduced to a battle of labels.  Trade especially is prone to fall quickly into a battle of “free trade” vs “protectionism.”

One example is the controversy over climate change border adjustments.  Border adjustments are only necessary if other major emitters fail to act.  If other countries fail to act, border adjustments make environmental sense because they address the very real problem of “carbon leakage.”  And they also make economic sense so that major emitters who fail to act do not gain a competitive advantage as a result of their refusal to address this global challenge.  Nevertheless, some immediately dismiss border measures as protectionism and even compare them to “Smoot-Hawley.”

Another example occurred when the U.S. Chamber of Commerce recently stated that there were real concerns about China’s manipulation of its currency.  (Currency manipulation is perhaps the most major example of  “protectionism” today.)  But then the Chamber immediately went on to say that the response must avoid ‘protectionism.’ 

A third example relates to the so-called “Buy America” provision inserted by Congress in the Recovery Act.  It was basically a re-enactment of a law going back to 1979, which implemented the GATT government procurement agreement.  Underlying the 1979 law and the Recovery Act provision is the principle of reciprocal market access:  we give a trading partner access to our procurement markets if they agree to give our suppliers access to their procurement markets.  When Canada objected, commentaries labeled the provision as protectionist – and ignored the fact that when Canada became a party to the WTO GPA, Canada excluded its provinces from coverage.  That is why Canada is now complaining.

Provisions relating to market access are surely not “protectionism.”  These surely are issues deserving active and logical discussion, not stifled by immediate labeling or mislabeling.                    
  
4. There is a need to distinguish between means and ends.

Trade is not an end in and of itself.  It is a means to an end, which means shaping it so that it promotes prosperity and conditions that spread that prosperity widely.  This Administration has properly made enforcement of existing trade agreements a priority.  This is the right course of action for U.S. businesses and workers.  Enforcement is a necessarily element of a rules-based trading system – an element of the rule of law.

5. The more complex the issues, the greater the need to consult meaningfully and broadly.

Therefore, trade issues need much more effective and meaningful consultations between the Administration and Congress, both to derive sound policy and for practical political terms (to secure congressional approval).

I believe these threads that run through the Obama Administration’s approach to all policy issues suggest that, in a word, trade policy needs a new balance.

II. Moving Forward on APEC and TPP

Here is how I believe these points apply to the specific topic of this meeting on APEC and TPP.

1. The U.S. needs to engage internationally with other Asia-Pacific nations in APEC in addressing trade issues.

No one can doubt the importance of Asia for global economic growth.  Anyone who so doubts will be left behind tomorrow.  Two-way goods trade between the United States and the other APEC countries has increased almost 150 percent since 1994, to $1.9 trillion in 2007.  And, as of last year, there were 152 agreements in force in the region, 21 awaiting implementation, 72 being negotiated, and 81 being explored. 

I am pleased that the United States will host APEC in 2011.  This will be an opportunity to showcase our strong interest and commitment to the region.

2. This can provide an opportunity for the United States to help stimulate the Asia-Pacific nations to confront major issues affecting their economic relationships.

These major issues include the need for a rebalancing among economies—including more home consumption in some nations and less consumer debt and long term debt in ours and others.  The issues also include addressing currency manipulation by some countries, which is now forcing other nations including Vietnam to take troublesome remedial steps.

I was encouraged to hear that the APEC leaders in Singapore recognized the need to address global imbalances to avoid another global economic crisis.

I was also pleased that APEC is making progress on addressing non-tariff barriers (NTBs), and on liberalizing trade in environmental goods and services.

3.  Participate actively in the TPP negotiations. 

It is worth noting that, taken together, the TPP block would be our ninth-largest trading partner.

4.  Address in the TPP negotiations the realities relating to trade.

The United States has an FTA with several of the nations—Peru, Chile, Singapore, and Australia, and those FTAs differ from one another in some respects.  TPP provides the opportunity not only to further promote the high standards of our recent FTAs in the Asia-Pacific region, but to update, where appropriate, our existing FTAs to the high standards of our most recent agreements.

More importantly, it gives us an opportunity to craft a 21st Century agreement.  We should take a look at all issues and see if there are ways to improve upon our existing agreements.

As to New Zealand, there are issues which need to be addressed including agriculture, while acknowledging that the United States might well have negotiated earlier an FTA except for a misguided resistance by the Bush Administration on an issue entirely unrelated to trade.

Vietnam’s active participation in the TPP negotiations provides important opportunities, but the challenges must be confronted head on.  Vietnam’s efforts to transition from a non-market economy are to be commended, but work remains to be done.  There are also major agricultural and IPR issues.  There is also the fact that as part of its legacy as a command economy there is not a free labor market in Vietnam.  Workers do not have their basic international rights, but must belong to an organization tied into the ruling party.

A discussion about worker rights in Vietnam will make clear why many of us have pushed the importance of worker rights.  It can be seen in the experience of the United States with Cambodia.  Years ago the Clinton Administration negotiated an agreement with Cambodia that provided it more access to the U.S. apparel market, conditioned upon workers having their basic rights.  Giving workers their rights helped improve their living standards, gave them hope they could become part of the middle class (and U.S. producers might have an added market for their goods), and helped break down other features of the lack of democracy in Cambodia (as has historically happened in many nations including our own). 

The industry that has become an essential part of the Cambodian economy is now threatened by competition from a huge nation where workers do not have their international rights.  And, relevant to TPP, there is concern of heightened competition from Vietnam if workers are without their rights and companies decide to shift production there from Cambodia because labor is much cheaper.

So negotiations with Vietnam will exemplify how trade issues are not simple, that there must be an understanding that international trade conditions are interactive, that trade issues are not single but multifaceted and that there is a mutual interest for the United States and its negotiating partners (and for nations beyond) in having provisions that affect the basic rights of workers.

5. An effective growth strategy requires an export strategy – and one that confronts the realities of trade barriers.

The Administration has recognized that export growth is necessary for U.S. economic growth and for rebalancing the global economy.  And the reality is that the United States is among the most open economies in the world, whereas many of our trading partners maintain a variety of tariff and non-tariff barriers to U.S. exports of goods and services.  This has been true of the economic iron curtain maintained for decades by Korea against U.S. manufactured products, which is why as a matter of principle and practice, there must be revisions in the Korea FTA to ensure that the Korean regulatory and tax structure no longer can be a barrier to American manufactured products, with a strong dispute settlement system. 

Similarly, in the important effort to make progress in WTO negotiations, it is necessary to provide meaningful new market access for U.S. goods and services exporters, and there must be far more attention than there has been to addressing non-tariff barriers. 

The same will be true of the TPP negotiations.  We will need to address not only tariff barriers, but also non-tariff barriers – as the APEC leaders recognized in Singapore.   

6. Consultation with Congress.

The Administration notified Congress yesterday of its proceeding with negotiations on TPP.  A major purpose of the notification is to assure Congress of vigorous continuing consultation with the Congress on the negotiations.   The importance of meaningful back and forth between USTR and others in the Administration and the Congress should not be overstated, especially in view of the lack of effective discussions with the Bush Administration during its negotiations of still pending FTAs. 

These consultations will also be very important in the context of continuing World Trade Organization (WTO) negotiations. 

Conclusion

The Obama Administration has re-engaged importantly in a number of key foreign policy and global economic issues.  It is vital that the Administration and Congress engage in a common effort to create a new trade policy that responds actively and effectively to new globalized conditions and challenges.