INTERNATIONAL TRADE ADDRESS
Senator Maria Cantwell Washington Council on International Trade (WCIT) April 17, 2001 Seattle, WA
Trade Policy for a Changing Economy
It's great to be back home and with friends. Spending so much time on the East Coast gives me a constant reminder of the wonderful state in which where we live.
However, I also remember that there is important work to be done in the other Washington to help this Washington maintain our role in our world economy and advance our quality of life. I am honored that you have chosen to send me to the United States Senate and will always remember the landslide victory you provided me!
Being at the head table has given me a chance to join others in congratulating Pat Davis for a job well done as WCIT president.
I know that she has stood tall for what trade means in our lives and has been tireless in helping us understand what needs to be done.
I know she is gratified as I am that Admiral Bill Center has agreed to take this position and keep us on the right trajectory. Pat and Bill, thank you to you both for what you have done and will continue to do for our state in promoting trade.
There are enormous challenges facing us both here and in our nation's capital.
In response we have the great work WCIT does in bringing together members from all sectors of our economy- private sector business, public sector and state government representatives, consular groups and individuals from across the state. Every single one of us has a role to play as we create trade policies and trade practices for a changing economy.
The Northwest knows the benefits of trade more than any other region in the country. Our state has become a supermarket to the world selling wheat, apples, corn and countless other agricultural products around the globe.
In addition to these agricultural exports sales from our healthy aerospace, software and technology-driven industries have made Washington state the most trade-dependent state in the nation, with trade accounting for sixty percent of Washington’s gross state product.
And almost one in every three Washington state jobs is dependent on trade - from machinists, to apple growers, to computer technicians and to most of you here tonight.
Actually, in Washington state it is hard to say whose job is not dependent on trade in some way.
Like you, I know first-hand the value of international trade in the new global economy for Washington companies, consumers and workers - both as a recent member of the high tech business community here in Seattle and also as a policy maker in Congress.
But although I know, as all of you do, the direct benefits of international trade for successful U.S. companies, as representative and Senator for Washington state, I have also seen first-hand the challenges of international trade that needs a stronger more comprehensive framework.
I have witnessed how our role in the new global economy has provided us more high quality high-paying knowledge-based jobs, but I have seen how the movement of manufacturing jobs overseas has tested our ability to embrace change while still meeting the needs of our citizens.
I have also seen how a new international economy has provided American consumers unparalleled product competition, variety, and quality in our domestic markets; but, at the same time, I have seen how anti-competitive practices by foreign companies, high barriers to foreign markets, and lax standards on intellectual property have seriously disadvantaged American companies.
These practices have contributed to a spiraling and unsustainable trade deficit that reached $33 billion last January and may reach over $450 billion this year.
For our country to successfully embrace the vast opportunities of international trade, it is absolutely critical that we address the unique and special challenges of the changing global economy with a trade policy that is fair, comprehensive, and adequate to the particular issues facing the current and future international economic environment.
In other words, we need a comprehensive trade policy that keeps time with the faster pace of the changing economy.
To overcome existing constraints as we seek the benefits of the global economy, we must pay special attention to four critical challenges.
They are protecting intellectual property rights, streamlining US exports, addressing worker displacement, and insuring fair trade through access and competition.
Intellectual Property Rights
First, in creating a legal and regulatory environment for a global trading system we must insist on a framework that protects the motor of the new economy -- intellectual property.
Intellectual property is to the 21st century what coal and steel was to the 19th century.
And, just like in the 19th century when governments would protect ships at sea from pirates, we need to protect the virtual property we send around the world.
Our state has witnessed first-hand how developing and exporting intellectual property in the form of information technology can strengthen our economy. With companies like Microsoft, Nintendo, Adobe, we know we can sell our products all over the world.
But, unfortunately, sometimes the selling isn’t done by Adobe, Microsoft, or Nintendo.
Infringements of intellectual property rights may be one of the greatest threats to our ability to compete in the world IT arena.
Unfortunately, right now, the world trade regime does not adequately protect these rights.
Companies that invest thousands, sometimes millions of dollars and hours of resources should not risk losing their intellectual property through pirating.
Widespread piracy, theft, and copyright infringement are unacceptable in this changing economy where information is a principal commodity.
We simply cannot allow our companies to lose their property due to lax or non-existent intellectual property rights protections.
At the international level, we have taken a number of steps, including implementation of the Trade-Related Aspects of Intellectual Property Standards (TRIPS) obligations under the WTO and World Intellectual Property Organization (WIPO) treaties related to copyright that have come a long way in setting the legal and regulatory framework for intellectual property rights protection.
However, all the laws, regulations, treaties and agreements aren’t worth the reams of paper they are printed on if governments do not take comprehensive steps toward effective enforcement.
And, obviously, current enforcement is not strong enough. A recent industry study estimated that software piracy losses in 1999 for desktop applications alone amounted to nearly $12 billion, including almost $3 billion in the U.S. In fact, industry estimates suggest that pirated programs account for 36% of all desktop applications in use globally.
That’s not right. Unfortunately, the disciplinary measures now in place to punish countries that do not enforce intellectual property rights protections don’t have teeth.
For example, the only hammer we have now is the Special 301 process, in which we put offending countries on "watch lists." Although such listings may deter future investment in listed countries, a listing is a pretty weak hammer.
The current system is simply not strong enough.
We need to press forward on multilateral dispute resolution boards that would establish firm expectations on protection, and have the authority to employ effective punishment that ensures that these rights are protected.
Only with proper enforcement of intellectual property overseas will the international trading system be able to adapt and function in the information age.
Streamlining Exports
The second issue that needs to be addressed is the importance of establishing an 21st century up-to-date system of export controls that effectively protects our national interests, but does not unnecessarily disadvantage American companies.
As it currently stands, the federal government imposes strict export controls on a wide range of commercial goods and dual-use technologies on the grounds of national security, foreign policy, or short supply. Although these controls serve an important policy function, the current system is simply anachronistic -- governed by a legislative framework established in 1979.
Many of you may remember the battles my office and other members of Congress fought on trying to loosen export controls on software with strong encryption capabilities.
As a result, this out-dated legal system often unnecessarily limits U.S. corporations from exporting products commonly available in the international marketplace without enhancing national security.
For example, Apple faced serious and unreasonable difficulties in introducing its new G4 personal computer a couple of years ago. In their efforts to put this personal computer on the international market, the company learned that the current export control laws were such that this personal computer was essentially in the same league as a military supercomputer. And, as a result, its export overseas was technically considered a threat to national security. Thus, Apple was prohibited from selling its personal computer to 52 overseas markets at an estimated loss of millions in potential exports.
This same problem has been faced by many other American companies. It has caused tremendous losses in potential exports and overseas market share.
And, as overseas markets develop increased demand for high technology goods, this situation will only get worse unless we adopt a practical and realistic approach to export controls.
U.S. companies must operate in a fiercely competitive environment, and we cannot afford to have outdated regulations make that competition even more difficult.
For this reason, I am a strong supporter of many positive steps taken in the Senate in the current reauthorization of the Export Administration Act.
This is a bill sponsored by Senator Enzi and Senator Gramm. I am a co-sponsor. The current bill effectively streamlines and improves the export control process, bringing it more up to date.
In addition to including realistic mass-market standards on controls and eliminating the anachronistic MTOPS (Millions of Theoretical Operations per Second) standards for microprocessors, the legislation allows for flexibility that reviews items regularly and removes them if there is not a new justification for continued control.
I am pleased to report that this legislation was passed out of the Senate Banking Committee no a 14-1 vote with the blessing of the Administration and should be before the floor in the early summer.
Make no mistake; I support strong controls on technologies that may directly threaten our nation’s security. I think it is imperative, however, that we support our national security interests in a manner that establishes fairer and more predictable competitive opportunities for U.S. exporters.
Worker Displacement
Last, in developing a trade policy that meets the needs of the new economy, we need to acknowledge and address the basic reality that our structural transformation to a new global economy does cost some people their jobs.
While innovation and change has brought incredible benefits to our economy, the structural transformation has been more challenging.
It requires businesses to chase new markets, workers to continue to upgrade their skills, communities to look for new economic diversity.
As we have seen in the last two decades, there are generally two policy approaches to the disruptions associated with economic transformation:
A Protectionist stance that seeks to halt the changes and force old-economy jobs to remain in our country by raising market barriers; A "That's just the way it goes" approach that simply overlooks the negative consequences of job dislocation - arguing that the benefits of trade outweigh the costs. Neither of these approaches is acceptable.
We should not take the protectionist angle: A key lesson of American economic history is that the broad benefits of innovation and change vastly outweigh the short-term costs associated with disruption.
This lesson is particularly true in this changing economy, where innovation and change are creating more jobs than they are eliminating and are driving increased productivity and wage growth. This transformation will be a very positive development for our economy.
On the other hand, we must not turn our backs on those who bare the brunt of the transformation - the displaced workers - and say "that’s just the way it goes."
As we transform to meet the needs and take advantage of the opportunities in the changing economy --the loss of some jobs while and the creation of others-the government needs to ensure that workers can access a state-of-the-art system of rapid re-employment.
Ensuring that the benefits of innovation and change are spread broadly will require that all Americans, including those not yet engaged in or directly benefiting from economic change have access to the tools and resources they need to get ahead and stay ahead.
This shift to an education system that understands and responds to this changing economy is well underway. We can do more to make certain that such a system responds to all types of learners from all circumstances.
In the Senate, we will be seeking more flexibility for workers by providing:
more loans for part-time as well as full time students, more classes at irregular hours for working students, and more access to child care. I believe that in this changing skill and knowledge-based economy, government must provide every American with access to continuous and affordable life-long education.
As such, we need to dedicate more funds and increase access to worker re-training programs and compensatory benefits for those who have lost their jobs to trade.
This will help them to join the changing economy while still being able to provide for their families, pay for their health care costs, and maintain their dignity.
I strongly support increased funding for Trade Adjustment Assistance (TAA) programs and other private and public efforts to provide effective worker adjustment aid, education, and job-retraining opportunities.
We must make certain the Workforce Investment Act, intended to reform job training at the federal level, is more flexible and creates more partnerships with business and labor.
Also, serious consideration should be given to providing wage insurance to temporarily fill some of the gaps between a displaced worker’s old wage and a lower wage in a new job. This program might also include providing for health insurance covering during periods of sustained unemployment.
Fair Trade through Access and Competition
It is also crucial that this trade policy remains focused on what needs to be the basis of an effective and sustainable international economy - basic fairness in market access and fair competition.
American companies and farmers produce some of the best commodities in the world, but too often they are at a distinct disadvantage in selling their products overseas due to artificial barriers to market access in foreign markets.
In the name of free trade, the United States has the lowest tariff rates in the world, providing the world’s most appealing marketplace for companies who are able to compete on equal terms with American industries.
However, while foreign companies are able to sell to American consumers at import duties that average less than 2%, our companies that want to sell overseas often face trade barriers more than 10 times as high.
These tariff imbalances, as well as other non-tariff barriers to trade, are fundamentally unfair and we must be demand the reduction of all protectionist foreign trade barriers to ensure that our companies and farmers are able to compete overseas as easily as foreign companies are allowed to compete in the United States.
Also, in far too many cases, American companies are hurt by unfair competition by predatory trading practices and foreign government subsidies that sometimes amount to outright government attempts to raid or weaken specific American industries.
These subsidies and predatory pricing structures are anathema to a free trading system and we must work vigorously to oppose such non-competitive practices through bilateral and multilateral negotiations.
However, given the length and complexity of the trade negotiation process, this problem will not be fixed overnight.
In the meantime, it is absolutely critical that we not turn our backs on U.S. companies that are the targets of these unfair practices.
We must aggressively investigate cases of illegal dumping and subsidy practices and be willing to level the playing field through the vigorous enforcement of our anti-dumping and countervailing duty laws. We cannot sit back and allow our nation’s timber mills, farms, and manufacturers to be forced out of business as a result of non-competitive trade.
We must also actively seek to ensure fair competition by assisting our companies overseas and countering aggressive financing programs from other countries through support of such government programs as Ex-Im Bank.
In this case, I am concerned that President Bush is taking a step toward unilateral disarmament by proposing a 25% cut in Ex-Im funds for next year.
These funds - though a miniscule portion of the federal budget - contributed to $15 billion in export sales and thousands of jobs last year.
The Ex-Im Bank is a highly efficient way to increase U.S. competitiveness, especially for smaller companies exporting to higher-risk markets.
Especially at a time of record trade deficits, we need to make sure that we maintain critical programs like Ex-Im - not cut them.
Ensuring fair competition for our companies should not be a political game; it is a commercial necessity.
Conclusion
We are moving toward a new international economy - one that brings unparalleled opportunity, but presents many significant challenges. As we have all seen, the last decades have brought tremendous prosperity to the United States and to the Northwest, in particular.
However, we can already see that the old trade policies are starting to endanger the tremendous potential that the changing economy can bring.
Our inability to properly address the challenges of this economy, and the problems of fair competition and access in international trade have created serious problems for American companies and has led to widespread anxiety and insecurity for workers throughout our country.
With the new Administration, we are at a critical juncture back in Washington, D.C. on the future direction of our trade policy Coming before the United Sates Senate will be several important issues, including:
Trade Promotion (or Fast Track) Authority, Possible bilateral Free Trade Agreements with Jordan and Singapore. And multilateral free trade agreement with South America. In each of these cases, we must confront the social and environmental implications of an increasingly open trading system.
Just as the WWII generation forged a bipartisan consensus that sustained successful trade expansion throughout the Cold War, we must build a new consensus to meet the needs and embrace the opportunities of the changing economy.
With an adequate trade policy, I am confident that Washington state will continue to play an active role in the international economy.
But this will continue to require work not just in Washington D.C. where the dance of legislation continues and new trade negotiations are generated. It is here from Seattle to Sedro Wooley, from Bremerton to Burien.
It is here where trade obstacles are overcome and trade opportunities are grasped every day. We get it and we get it done.
Those of us in this room have made progress but have more to do in helping our smaller exporters identify new markets and take all the steps necessary to close the deal.
We are blessed with numerous trade groups, industry associations and cooperatives who are bent on making us ever more sophisticated in tackling complex problems.
We know we have a local transportation challenge in Western Washington that is impeding our ability to move goods and services. Freight mobility up and down the I-5 corridor is a critical concern. I will continue to work with you as we remove barriers one by one.
We are moving along. Our educational partners have created links between the research laboratory and companies that spur commercialization of products that will be competitive worldwide.
Together we have spurred our schools and community colleges and universities and training programs to capture our human potential. We are shaping a world class workforce which is the indispensable ingredient in our economic success.
Much has been done and much needs to be done. The Washington Council for International Trade will help make certain we continue to get it and get it done. But each of us is a player. Each of us must and will make our contribution so that our state, its companies and its citizens will flourish. Thank you.
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