COMMITTEE ON WAYS AND MEANS CHARLES B. RANGEL, New York, Chairman
FORTNEY PETE STARK, California SANDER M. LEVIN, Michigan JIM MCDERMOTT, Washington JOHN LEWIS, Georgia RICHARD E. NEAL, Massachusetts MICHAEL R. MCNULTY, New York JOHN S. TANNER, Tennessee XAVIER BECERRA, California LLOYD DOGGETT, Texas EARL POMEROY, North Dakota STEPHANIE TUBBS JONES, Ohio MIKE THOMPSON, California JOHN B. LARSON, Connecticut RAHM EMANUEL, Illinois EARL BLUMENAUER, Oregon RON KIND, Wisconsin BILL PASCRELL JR., New Jersey SHELLEY BERKLEY, Nevada JOSEPH CROWLEY, New York CHRIS VAN HOLLEN, Maryland KENDRICK MEEK, Florida ALLYSON Y. SCHWARTZ, Pennsylvania ARTUR DAVIS, Alabama	JIM MCCRERY, Louisiana WALLY HERGER, California DAVE CAMP, Michigan JIM RAMSTAD, Minnesota SAM JOHNSON, Texas PHIL ENGLISH, Pennsylvania JERRY WELLER, Illinois KENNY HULSHOF, Missouri RON LEWIS, Kentucky KEVIN BRADY, Texas THOMAS M. REYNOLDS, New York PAUL RYAN, Wisconsin ERIC CANTOR, Virginia JOHN LINDER, Georgia DEVIN NUNES, California PAT TIBERI, Ohio JON PORTER, Nevada
Janice Mays, Chief Counsel and Staff Director Brett Loper, Minority Staff Director
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records of the Committee on Ways and Means are also published in electronic form. The printed hearing record remains the official version. Because electronic submissions are used to prepare both printed and electronic versions of the hearing record, the process of converting between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process is further refined.

Advisory of January 23, announcing the hearing

WITNESSES

Daniel Tarullo, Ph.D., Professor of Law, Georgetown University

The Honorable Grant Aldonas, William M. Scholl Chair in International Business, Center for Strategic and International Studies

Gene B. Sperling, Senior Fellow, Center for American Progress, and Director, Center for Universal Education, Council on Foreign Relations

John Meier, Chief Executive Officer, Libbey Glass, Inc., Toledo, Ohio

Harold McGraw III, Chairman, President, and CEO, The McGraw-Hill Companies, and Chairman, Business Roundtable, and Chairman, Emergency Committee for American Trade, New York, New York

Lawrence Mishel, Ph.D., President, Economic Policy Institute

SUBMISSION FOR THE RECORD

Alexander, Steve, Consuming Industries Trade Action Coalition, letter

American Forest and Paper Association, statement

Central America Black Organizations, statement

Executive Intelligence Review, statement

Generic Pharmaceutical Association, statement

National Pork Producers Council, statement

Ohio Conference on Fair Trade, statement

Retail Industry Leaders Association, statement

Stop CAFTA Coalition, letter

Wallach, Lori, Public Citizen's Global Trade Watch, statement

Williamson, Donald, Americans For Fair Taxation, Conyers, GA, letter

HEARING ON TRADE AND GLOBALIZATION

U.S. House of Representatives,
Committee on Ways and Means,
Washington, D.C.

The Committee met, pursuant to notice, at 10:00 a.m., in room 1100, Longworth House Office Building, Hon. Chairman Rangel (Chairman of the Committee) presiding.

[The advisory announcing the hearing follows:]

Chairman RANGEL. Good morning. The Committee will come to order.

I have been reminded that this may have been the first time in years that we have come together to review our nation's trade policy, globalization, the positive and negative impact, and what we can do to develop a bipartisan policy where we are not talking at each other, but with each other for the goal of taking advantage of the progress that we have made in international trade, and also not ignoring the negative aspects of globalization and what we can do to ease the pain or to avoid it completely.

Soon we will have to deal with the question of trade promotion authority. In addition to that, I think it is realistic enough to believe that the presidential elections may take away the opportunity for this Committee to come up with a bipartisan approach to trade, which of course would include the unions, the trade organizations, as well as the Administration.

Mr. McCrery and I have received very positive responses to attempting to see whether we can change the image of trade from everybody in the private sector, in Congress, as well as the Administration. So, we hope at the end of our discussions that we could come together in an informal way, agreeing at least in part to some approach to trade where it can get a more positive image, and we have more people appreciating that their government will be there with the private sector to assist them if and when it is needed.

I would like to turn it over to Mr. McCrery, since we chatted briefly before the hearing.

Mr. MCCRERY. Thank you, Mr. Chairman. I join you in welcoming the input of not only the witnesses before this Committee today, but members of the Administration who have been working with us to try to discover ways to improve our approach to trade and improve the public's perception of trade, as well as the private sector that you and I have both engaged in conversations with, the business sector, I should say, in trying to address this problem.

Of course, organized labor has been long a proponent of changes in trade policy. So, we are also listening to their points as well. I am hopeful that through hearings like this--and I think the name that you have given this hearing, Mr. Chairman, is particularly appropriate. It is a hearing on trade and globalization.

I believe that many of the negative impacts that we see in our economy, dislocated workers and the like, are not caused directly by trade, but certainly are caused by globalization. So, we ought to be addressing these issues together, as you have chosen to do today. So, I commend you.

I have a full statement that I will submit for the record, Mr. Chairman. Suffice it to say that I believe this hearing will cover a number of areas that we need to be looking at that are not directly related to trade, but nonetheless have an impact on workers and consumers in this country that we need to consider. So, thank you for doing this.

[The prepared statement of Mr. McCrery follows:]

Chairman RANGEL. I would like to yield to Mr. Levin, who is the Chairman of the Subcommittee on Trade.

Mr. LEVIN. Thank you, Mr. Chairman.

As you mentioned, this is really the first hearing, at least, that I can remember where we have really addressed trade policy issues rather than a specific trade agreement. We haven't had a discussion like this in many, many years. It is long overdue. I think we should expect controversy, differences of opinion, and that will include the issue, "do trade policies themselves really matter?".

Mr. McCrery refers to globalization as an overarching issue. We need to confront this question. Within the dynamic of globalization that is here to stay: Do trade policies themselves really matter? Have our trade policies, for example, contributed to the disequilibrium in income in this country and in other countries?

So, I think we should look forward to this and to further hearings. My own judgment is that trade policies really do matter. My own feeling is that we have had trade policies under this administration that have not been active enough, that have assumed that trade is an end in and of itself, that market forces will work themselves out, that there isn't really a role for government, while other nations have seen active governmental policies.

I think we have therefore faced this issue: Is it vital that trade be a two-way street? When it isn't a two-way street, what is the impact on sectors within this country, including manufacturing?

I close with this, Mr. Chairman. The President today is at Caterpillar. He is going to be talking about globalization, economic policy, and he is going to be talking about trade. In a way, I wish the President were not at Caterpillar, but at a different place that has had a different impact from our trade from globalization and from trade policies.

I finish with this. He is also going to be talking today about the importance of renewal of trade promotion authority. In my view, what we need to do is to do what we are doing today, focus on trade policies and on their consequences, and after we work this out and work on some of the trade issues that are going to be coming before us--Peru, Colombia, Panama--after we have considered this, then talk about Trade Promotion Authority (TPA).

To talk first about that before we talk about the need for changes in trade policies in my judgment is putting the cart before the horse. It is important to look at the horse. It is also important to look at the cart.

Thank you, Mr. Chairman.

Chairman RANGEL. Mr. Herger.

Mr. HERGER. Thank you. I want to join in thanking you, Mr. Chairman and Ranking Member McCrery, for this hearing. The issue of trade and globalization is certainly one of the most important issues, I think, that affects us as a Nation and certainly as citizens of the United States.

Globalization is a fact of life. The United States is the number one trading Nation, exporting Nation, in the world, and certainly is incredibly important to the economy not just of the Nation but particularly to the State of California where I am from.

I think it is so important that we be working together rather than against each other, that we be joining forces with labor and meeting these real challenges that we have of the fact that we do have displaced workers, but the fact that we are gaining far more workers and gaining far more jobs, and that we have a far lower unemployment rate than we would otherwise, but work together rather than against each other.

So, again I thank you, Mr. Chairman Rangel. I do have a full statement I would like to submit.

[The prepared statement of Mr. Herger follows:]

Chairman RANGEL. Well, I want to thank the outstanding panel of witnesses that have spent so much of their professional lives in this area. You see the general theme in which we are going. I have talked with Mr. McCrery, and we do hope and expect that if we can get some positive ideas, that we will meet in an informal way with the Administration, with labor, with Members, and see if we can come up with something that can be agreed upon to make globalization less painful and to make America more beneficial.

We will start off with Professor Daniel Tarullo, who has worked in this field. He is a professor. He has taught at Harvard. He has been a part of President Clinton's Administration. He has made an outstanding contribution to the understanding of international economics. I thank you for taking time to be with us.

All of the witnesses' statements will be entered into the record without objection.

STATEMENT OF DANIEL TARULLO, Ph.D., PROFESSOR OF LAW, GEORGETOWN UNIVERSITY

Dr. TARULLO. Thank you, Mr. Chairman, Mr. McCrery. Members of the Committee.

As you have already indicated, it is hard to find a bigger topic than globalization. Globalization implicates important issues of fiscal policy, exchange rate policy, innovation policy, education policy. It also implicates the major issue as to whether the resulting productivity growth and increase in income in the United States is going to be fairly shared among all of those who have contributed to those increases.

In your announcement of this hearing, you posed some questions specifically about trade policy. Although everything is connected, of course, domestic policies and trade policy, I think it is quite useful to focus this morning specifically on trade policies--our trade strategy, what agreements we negotiate, why, how, and what is in them.

Now, this is a big panel and I know you want to get to questions. So, let me just offer a few thoughts and place them on the table in an effort to get the discussion started.

First, so much talk about trade and trade policy, particularly in recent years, has had a binary quality to it. You are either for trade or you are against trade, almost without regard to what is in a trade agreement.

Now, in no other policy area of which I am aware do we favor or oppose things simply by labeling them. You are for tax policy; you are against tax policy. That shouldn't be the case in trade, either.

Second, selection matters. The selection of trade agreements matters enormously. Every administration has limited resources. They don't have an infinite supply of negotiators. Top people in the Administration only have so much time in the day to focus on a limited number of issues. Plus the selection of particular agreements to negotiate has a strategic impact on opening up or closing off other possibilities.

So, one can't simply move from whatever opportunity presents itself exogenously to whatever opportunity next presents itself exogenously. One needs to have a strategy if one is going to provide leadership and move the country forward in the direction one wishes to see it go.

Third, content matters. The content of an agreement matters, and this for several very important reasons. First, the day has long passed when trade agreements were essentially about tariff reduction or reducing quotas or taking care of customs classification issues at the border. You all have seen the kind of agreements that have been presented to you over the last 5, 10, or 15 years.

They now involve domestic policies. They move deeply into the domestic policies of each participant--health standards, safety, environmental law, labor standards, intellectual property, industry regulation. All of these things are either directly or indirectly addressed in many bilateral trade agreements and in the Uruguay round of multilateral negotiations.

When you have that kind of far-reaching trade agreement, it is not only inevitable, but I think necessary, that the Members of Congress and the public focus on the changes that are being effected to our core domestic policies. This is not to say it is inappropriate always to address these things, but asking how they are addressed and how discretion is either limited or granted to domestic governments is an essential part of any Committee's oversight.

Now, the second reason why content matters so much is the nature of the global economy which, as many of you have already commented, is already moving us more closely to a truly integrated economy. In this world, we do not have for most industries the kind of competitive industry that textbooks present us with in first-year economics--that is, lots of producers, with nobody being able to set prices. In the textbook world, all you need to do is remove barriers and everybody competes and the price comes down to an efficient level.

Trade in the 21st Century, and certainly trade among the United States, Japan, increasingly China, and Europe, involves to a considerable extent innovative products and innovative forms of providing services.

When you have trade based upon innovation, upon new products, you almost always have conditions of imperfect competition. You often have conditions of increasing returns to scale, meaning the more you can produce, the more profitable it is going to be for you. You have what people refer to as first mover advantages. If you are the first entity to get out a technology and you can establish the market, it is very hard for people to catch up with you.

So, for all these reasons, the practices of other countries, often mercantilist practices of other countries, matter a lot more than an old style tariff. Let me give you an example.

If a country establishes a standard for a new product, a high-tech product, and the country is big enough to have a domestic market that begins to cultivate the production of that product, and at the same time it is able to foist its standard on the rest of the world, or to exclude the competing foreign product which perhaps operates to different technological standards, then that country is well on its way to establishing what I refer to as first mover advantages.

If you have a trade agreement with that country and you don't address that problem of access for U.S. producers, but at the same time you gave U.S. market access and perhaps assurances of regulatory approval, then you have not only failed to achieve the benefits for American firms and workers that we ought to but you also, at least in some cases, might even produce a net loss for that industry because you accelerate the progress of its overseas competitor.

So, not surprisingly, in this era there are going to be well thought through trade agreements and well thought through trade strategies, and some not so well thought through trade agreements and trade strategies.

This hearing, as Congressman Levin said a few moments ago, is an opportunity to begin a more general discussion so that this Congress and the remainder of this administration can go forward, I hope, with a more strategy sense of where we are trying to take the country internationally, domestically, and at the intersection.

Let me close, Mr. Chairman, by saying that if we can reestablish a consensus on trade, I think there is an enormous opportunity for the United States to recapture its leadership role in international trade, in international economic matters.

Each of the major international post-war arrangements is under stress. The trading system is going to change in the next several years. We have an opportunity to shape the rules that will govern the new trading system. I think--I believe strongly, the only way to do that is with a strong bipartisan domestic consensus.

Thank you very much.

[The prepared statement of Dr. Tarullo follows:]

Chairman RANGEL. Thank you, Professor. We are going to have to try to ask you to stay closer to the 5-minute rule so that we can ask questions.

We are lucky to have Grant Aldonas, who holds the William M. Scholl Chair in International Business. He has a distinguished career in international economic policy. We thank you so much for taking the time to share your views with us.

STATEMENT OF THE HONORABLE GRANT ALDONAS, WILLIAM M. SCHOLL CHAIR IN INTERNATIONAL BUSINESS, CENTER FOR STRATEGY AND INTERNATIONAL STUDIES

Mr. ALDONAS. Mr. Chairman, Mr. McCrery, Members, it is great to be back with you. I have got an enormous amount of respect for the Committee and the task you have in front of you.

If we are going to rebuild a bipartisan consensus on trade, this is where it has to start. Frankly, given the House is the voice of the people, it is where it should start. We need that respect, frankly, for the voice of the American public in this debate.

Before turning to your specific questions, though, I want to emphasize one point. We are not at the mercy of globalization. We control our own destiny. Whether it is through our trade policy, our domestic policies, we can provide the tools necessary to succeed in the global economy. That is going to take an effort by everybody.

Frankly, we can't afford to leave any individual in America behind as a part of that process. I think that ought to be the focus as we go forward through this debate. I think it is a basis on which we can build that bipartisan consensus.

Now, turning to the Committee's questions, you asked whether more trade is always better regardless of its contents. I would say the answer is unequivocally yes, for three reasons.

First, more trade encourages us to specialize in what we do best. That increases our productivity and it raises our standard of living. That is what economic policy is all about.

Second, there is a moral dimension to trade that reinforces the economic effect. Whether it is Mali or Mississippi, encouraging economic development is really about giving folks their economic freedom and the tools to shape their own economic future.

Lifting restraints on trade, whether they are in another country or whether our own, means lifting restraints on economic freedom, and I have to say both the best and the worst of our own history confirms that economic freedom is absolutely essential to the exercise of political freedom as well.

Third, more trade is an indicator of our openness to the global economy. That openness exposes us to new trends and technology, consumer preferences, production methods, and business practices, and that drives innovation. It lifts productivity, and again, it raises our standard of living. All economic evidence confirms that countries that are more open to trade fare much better than those that isolate themselves from the global economy.

Now, what that doesn't mean is that more trade agreements are better regardless of their terms or their content. I think we have sacrificed political support in the country for trade by negotiating agreements that have only marginal value to U.S. exporters rather than focusing on markets that would make a real commercial difference or set precedents that would move the trading system forward in some important respect. is also true that more trade agreements without adequate policies intended to put the tools of the global economy in the hands of earnings volatility American don't make a lot of sense as well.

Now, the Committee also asked whether the benefits of globalization are widely spread. In one sense, the answer to that question is again unequivocally yes. Every day, Wal-Mart takes a lot of criticism, but every day Sam Walton's store is open for business, they are delivering globalization to our doorstep. They are raising our standard of living by lowering its cost.

That matters most to people at the bottom of the economic pyramid, not at the top. That is important to remember as a part of this when our friends in the retailing end of businesses are taking a lot of criticism for what they deliver.

Now, at the same time, there is no doubt that wages for Americans at the low end of the wage scale have not budged at all while incomes earned by the highest quintile in America have grown significantly. Globalization is generating higher returns to education. That shouldn't be any surprise.

So, the question in front of the Committee should be: Do we isolate ourselves in response to that, or do we focus hard on improving our own educational system and encouraging young people to finish their schooling? I think the answer is obvious. We should be investing heavily in education.

The example underscores the basic point of my testimony, which is that much of the tools of grappling with globalization don't lie in trade policy. They do, however, lie in this Committee's jurisdiction, whether it is tax, whether it is health care, or whether it is our adjustment policy.

Finally, you asked what specific changes in U.S. trade policy I would recommend. Let me offer just a few examples.

First of all, unless we see substantial progress in the next month, we ought to declare Doha dead. We ought to move instead toward moving toward a free trade agreement among developed countries within the World Trade Organization (WTO), with an agreement to harmonize our preference systems for developing countries in a way that would offer members of the least sort of effective participants in the trading system the opportunity to have a much larger market into which they could sell.

As a step toward that goal, I would advocate launching free trade area negotiations with Europe and Japan, again including a common approach to rural economic development that does not depend on paying people to produce commodities. At the same time, harmonizing our preference programs for the benefit of the least developed.

As a further step in that direction, I would suggest that in our discussions with the least developed, particularly in Africa, we bargain for a single tariff--they have revenue concerns that need to be addressed--but a single rate of tariff; and beyond that, negotiate for changes in the business conditions in those markets so they can be served both by American companies and by their own domestic companies to further economic progress.

I would launch free trade area negotiation with willing partners in the Asia Pacific region to fulfill the Apex Bohar commitments with a view toward anchoring the United States in Asia as a counterweight to China's influence.

I would launch negotiations with all of our current free trade agreement partners in the western hemisphere in order to harmonize the rules of origin and create a common market, with a specific framework that would allow for the accession of other countries in Latin America and the Caribbean when they are ready.

I would adopt Spencer Bachus' idea of negotiating an agreement on financial services with China that allows our banks, insurance companies, and other financial institutions to enter the Chinese market and create the capital market disciplines that would drive many of the worst distortions out of the Chinese system.

In terms of enforcement, I would focus our efforts, including WTO dispute settlement, on the most serious distortions in the international trading system. I would not be shy about losing cases. Frankly, just like the Justice Department in the days of civil rights, oftentimes bringing cases that highlighted the problems and the gaps in the area of law are just as important as winning cases on behalf of American companies. That is something that we ought to take seriously as a part of our strategy.

In terms of trade promotion, I would focus on what it takes to put American goods in global supply chains. We no longer live in a world of trade between independent buyers and sellers where we are thinking about exporting individual markets. The key for everybody is to try and find their way into a global supply chain. That is what we should focus on well.

Lastly, I would open our own health care market unilaterally to foreign competition. Why? The rising cost of health care is killing our manufacturers and frankly, what we need is more competition in that space rather than focusing on insurance.

Thank you.

[The prepared statement of Mr. Aldonas follows:]

Chairman RANGEL. Thank you very much.

Now we go to Dr. Gene Sperling, my friend, who has been advisor to Presidents and a voice in international as well as national economics. We thank you once again for sharing your views and your time with the Congress and, more specifically, with this Committee. Thank you.

STATEMENT OF GENE B. SPERLING, SENIOR FELLOW FOR ECONOMIC POLICY AND DIRECTOR OF THE CENTER FOR UNIVERSAL EDUCATION, COUNCIL ON FOREIGN RELATIONS

Mr. SPERLING. Thank you, Chairman Rangel, Congressmen McCrery, Herger, Levin, and the Members of the Committee, and Chairman Rangel. Thank you all for the tone that you have set starting out.

I would start with the notion that when we judge economic policy, to borrow from John F. Kennedy, we focus not just on whether we are raising the tide, but whether or not our policies are lifting all boats. I think the critical question that the country wants to know about trade and globalization is: Is it strengthening or hollowing out the middle class? Is it leading to the development or exploitation of poor people here or around the world? I think that is the question of which we need to focus this and other policies.

I also think we do need to come together, as you are suggesting, on a new compact on globalization, a new consensus. I would like to point to three areas that I think we have to do well on together.

One, as Dan was suggesting, or I would perhaps put it, the debate on trade I often say is like divorce court. It is two sides simply marshaling every bit of evidence they can against the other with no nuance, no willingness to look at cost and benefit. Sometimes I have called this the trade over blame game versus the discount pain game. Let me say that I think we have all been a part of it. I want to say I have been a part of it. I regret it.

Five years after the North American Free Trade Agreement (NAFTA), we helped organize an Administration press conference on the strengths of NAFTA. We did nothing but give the benefits. All we did was argue our case. I regret that. I don't think that is the way that we should carry on. I think we need to, as this Committee is trying to do, look at what works and doesn't work, and all sides being willing to acknowledge those benefits and costs going forward.

Secondly, we need to ensure in this new compact that our trade policies are consistent with our values. Let me draw the distinction. It may be painful, but it is one thing when we lose jobs and productions to developing countries because they are at a lower cost, a lower stage of development, and have lower labor and other costs. That is one thing.

It is another thing to lose jobs because countries are participating in a race to the bottom through child labor, through putting labor union officials in jail, through sweatshops. That is a type of competition that is not consistent with our values.

Therefore, I do believe that labor standards do fit and are a critical part of ensuring that the competition we participate is enlightened, and that the country and the public can look and support it. I think labor standards therefore have to stress that countries enforce their laws, that they strive to reach the International Labor Organization (ILO) core labor standards, and there be enough of an enforcement for them to be taken seriously.

Second, however, though, we can't just take a punitive approach to developing countries and look like we are there just to impose our will. So, while we need enforcement, we also need to have positive partnerships like the Cambodia agreement. We need to look at monitoring what is happening on the ground. We need to combine our development strategies so that we are working together to lift up labor rights, safety nets, the universal basic education of countries.

If that is the global--if the first two are more honest debate, and secondly, a compact on our values on globalization abroad, as has been mentioned, a critical part will be having a compact on jobs and economic dignity here in our country. Part of that is unquestionably helping people deal with dislocation. I think there are a few things we need to do.

One, policies from now on have to be universal. They can't be tied to how you lost your job. As Mr. McCrery said, the difference between technology, globalization, and trade, they all blend together. If a worker loses their job, they need help regardless of how they did it.

It needs to be one stop, one place. It needs to be simple. It needs to be broader. It needs to include wage and perhaps help on mortgages, and most importantly, universal health insurance. There is nothing that causes more anxiety than the fear that losing your job will lose your health insurance.

I will also tell you something everybody in this--everybody who runs your office knows. If you go to the public and just say, here are all the things I am going to do once you lose your jobs, they say, that is just a better band-aid or burial insurance.

So, if you want to have--you need to help people ensure economic dignity when they lose jobs. You have to have a strong job compact that focuses on making sure there are not tax incentives for moving jobs overseas, that there is trade enforcement, that we have education and research. These are all part of the compact.

The last thing, and I will go very briefly, is--and this is a big question--is how do we deal with trade going forward before we have implemented this broader new compact? On one hand, you could take the approach that all trade is good and you just have to keep going forward. On the other hand, you could decide to put everything on hold until you have fixed all these things.

I encourage this Committee to instead take a case-by-case approach, where you see if you can make enough of a down payment on some of these things to make some progress. I think it was legitimate for people to vote against the Central American Free Trade Agreement (CAFTA). In that case, I don't think it was as important, and I think the agreement represented a step backwards on labor standards.

I encourage this Committee to think differently on Doha because I worry what the world looks at us as being anti-multilateral, when they look at our reactions on climate change, on international criminal court, on Iraq. I believe that people are starting to think that the United States has lost its desire to work in a multilateral context.

I don't want the United States to be seen as the scapegoat for why something called the development round failed. I also know that for many people who have been skeptical on trade, they cannot vote for this unless there is somewhat of a down payment.

I encourage the Administration to try to work with you on that down payment, to see if they could make agreement on going forward with the Jordan model, on future free trade agreements, on strengthening the ILO, on getting more environmental protections into Doha. This is the type of down payment that I think could be in exchange for a limited--a limited--TPA just for the Doha round so that we are not blamed for killing the agreement.

The last thing is simply to say that I know that many things I mentioned may be policies people disagree with. You can't have it both ways. If the passage of the Doha round is so important to global peace and global economy, every side has got to be willing to make compromises.

Thank you very much, Mr. Chairman.

[The prepared statement of Mr. Sperling follows:]

Chairman RANGEL. Do you think it is possible to do a trade promotion authority with conditions as relates to some of the things that you had mentioned, limited to Doha but at the same time taking into consideration labor and environment?

Mr. SPERLING. Here is what I think. I think that the answer is yes, but I think one has to be realistic about what we will be seen as constructive and what would be seen as blowing up the agreement.

I think it is unfortunate. At this late stage, if one insisted in the Doha Multilateral Round for the first time including labor standards directly in there, that would probably be seen as counterproductive and I think probably killing the agreement.

However, what I do think is that you could have a limited TPA for Doha and do that in agreement with the Administration pushing on environmental where I think you can make progress, and to doing the things they can do bilaterally--on strengthening the ILO, on encouraging the Jordan model on bilateral agreements, on passing the minimum wage without strings.

I think that that could be the type of limited down payment that could justify a limited TPA so that at least we could see how the Doha Round finishes and whether it finishes in a way that is worthy of being called a development round.

Chairman RANGEL. Thank you for recommendation.

Chairman Meier, Chairman of the board and chief executive officer of Libbey since the company went public in 1993. Since joining the company in 1970, Mr. Meier has served in various marketing positions, including a five-year assignment with Durobor, South Africa. In 1990 Mr. Meier was named general manager of Libbey and a corporate vice president of Owens-Illinois.

I want to thank you for taking time out to share your views with us. As I told the rest of the panel, I hope that you consider regrouping in an informal way to see whether we can attempt to get a bipartisan agreement of things we should look into in order to move forward with a different view of trade. So, I thank you for sharing your experience with us.

STATEMENT OF JOHN MEIER, CHIEF EXECUTIVE OFFICER, LIBBEY GLASS, INC., TOLEDO, OHIO

Mr. MEIER. Thank you, Mr. Chairman, Members of the Committee. It is indeed an honor to appear before you today to discuss our nation's international trade agenda. I am John Meier, Chairman and Chief Executive Officer (CEO) of Libbey.

We are the world's second largest glassware manufacturer. We are headquartered and have manufacturing operations in Toledo, Ohio, in continuous operation there since 1888. In addition, we have facilities directly and through subsidiaries in Louisiana, New York, and Wisconsin. Last fall we expanded our distribution facilities in Shreveport, and were honored to have a representative from Ranking Member McCrery's office join us for the announcement. Libbey is a public company, traded on the New York Stock Exchange. We have 3,000 U.S. employees and about 4,000 international employees.

We are an international producer. In addition to our U.S. facilities, we have operations in Mexico, the Netherlands, Portugal, and now China. In addition, we export to over a hundred countries.

Glassware is America's oldest industry, dating back to the Jamestown colony in Virginia. Our company is principally engaged in the manufacture of the kind of glassware, tumblers, stemware, mugs, household glass you would find in your kitchen cabinets at home or at your favorite restaurants and hotels all over the world.

In addition, we make and market ceramic plates, bowls, flatware, and other products. We are a world-class producer, but we face enormous competitive challenges from companies, often supported by their governments, operating all across the globe.

Mr. Chairman, I have submitted prepared testimony for the record, but as your advisory indicated, you had a number of key questions, and I will address those.

The philosophy that more trade is always better, no matter its terms and contents: I am here today not to argue the ideology of trade but the reality of trade. As the Chairman and CEO, I have to answer to the shareholders. I also have to answer to other stakeholders in Libbey--our customers, our workers, and our communities in which we operate.

I take those responsibilities seriously, and I am interested in results, as all of our stakeholders are at Libbey. I do not believe that simply the more trade there is, the better. The terms of trade, the conditions of trade, the content and quality of our trade flows matters. It is a clear and direct impact on this nation's economic strength and our standard of living.

Glassware is the product of high capital investments, cutting edge technology, and well-trained workers. It is added value that produces good jobs, family-supporting jobs. The hourly workers at my company, union members, are paid decent wages and benefits, the kind of jobs that many Americans aspire to.

The really of trade today is far different in that--what is described by theorists. Comparative advantage may exist for basic commodities, but in today's world where transportation speeds products to marketplace all over the globe, where capital flows freely to the place it can find and gain the highest return, where technology can be applied in virtually any environment, competition is not governed by theories and textbooks but by profits and national interests.

The benefits of globalization are they are being spread broadly. I am a corporate executive. I am not an economist. I will leave to the economists and the policymakers the debate about whether the benefits are being spread broadly enough. I will say our first priority must be to have a trade policy that creates growth, jobs, and equity.

During my career at Libbey, which now spans 37 years, every major domestic competitor that I have faced is either out of business, Chapter 11, or up for sale. Why would we allow foreign governments to get away with subsidizing producers, not enforcing their laws, while turning to the remaining producers here in the United States and saying, we need to make it easier for more imports to come to our markets?

Effectively, many of us would tell you we have an eight-lane highway coming into Peoria, only to face a dirt road back to Rio, Jakarta, or Istanbul. The unfair trade practices of other countries documented year after years in the United States Trade Representative's (USTR) annual national trade estimates report and by Government agencies puts my company and manufacturing concerns across the country at a disadvantage--subsidies for energy, gas, and other inputs. Massive intellectual property violations that affects many products that my company makes as well. The continued ability o four trading partners to rebate their Value Added Tax (VAT) to the border at their exports and apply VAT on imports. It has outdated itself.

Some of the fiercest competitors enjoy dramatically lower labor rates. That is in part a function of their level of development. It is my job to find a way to compete against that, and I am fully prepared to do so.

The question of enforcement of labor rates is not a theoretical esoteric issue. I want other countries to enforce their laws across the board. Simple as that. I have been an advocate of free trade in theory. Unfortunately, in reality it doesn't always exist.

More important to me is the assurance of fair trade--support for further trade liberalization understandably weakens in light of continued foreign unfair trade practices and inadequate enforcement of our laws. I want to make sure that the laws that we have and the trade agreements we have entered into are enforced.

I want to know that our support for the multilateral system of WTO does not mean that we allow for rights and obligations to be imposed on us. I want our negotiators to pursue results-oriented trade agreements and with the benefits that they will yield.

Let me quickly address an important issue that always come up, training and adjustment. I recognize that we live and work in a global economy, and technology can be shifted from country to country, and transportation and communication continues to--barriers continue to fall.

Our people are not as mobile. Sure, they may be willing to move from region to region as there are major shifts in regional and State economies. Even that, as we know, causes disruption in people's lives and their communities. Unfortunately, the theorists may treat people simply as assets, just like any other input in the process.

I don't view my workers that way. Every job matters. At the same time, every business leader faces the challenge of balancing requirements. In the face of these challenges, I have shut factories in Canada, in California, and now in Mexico. I don't relish those decisions. I don't buy the approach that training and adjustment is the answer for those affected in the USA.

Those issues are part of the equation. All too often they are the primary approach offered by those who refuse to deal with the reality of today's global trading system and the tough competition that we face. I have workers who hope to be able to keep their jobs and work a lifetime in our facilities. They work hard. They play by the rules. Every three years, we negotiate with our unions.

Among the topics covered is pensions. It is a pension that gives them a set dollar amount based on years of service. Our ability to maintain this feature in the face of already fierce competition from imports is problematic.

If they lose their job, they may jeopardize their dream to a safe and secure retirement. All too often they go to a job that pays less and has fewer if any benefits. Pensions are cut drastically and retirement as they planned it is gone forever.

It is easy to say, get rid of pensions, corporate executives. Cut wages 30, 40 percent. That isn't reality, and frankly, it is not that simple. Of course as the leader of my company I bargain for a contract that treats my workers fairly but will allow my company to survive and prosper.

All we ask for is policies in trade that permit us to go forward in that hard bargaining. We can find a way. Trade policies that open the floodgates further takes that equation out of our hands and dooms many companies and industries with the stroke of a pen, and I find it unacceptable.

What have been some of the more important successes that you have asked for? I believe our negotiators, our policymakers, have been pursuing many of the right goals, and I believe that the creation of the WTO, with multilateral rules fairly negotiated and fairly enforced, was the right thing to do. I believe that seeking to gain China's entry into the WTO was the right thing. in execution, through acts of commission and omission, I believe our trade policy has not adequately advanced national interest.

In summary, what I do know is that I and many of my colleagues in business feel that the cards are somewhat stacked against us and that we are fighting an uphill battle. I want to find the level playing field that everyone talks about. I know that, given that chance, my company and others can compete with the best that anyone has to offer.

Mr. Chairman, Members of the Committee, like many other businessmen and women around the country, I have faith in the ingenuity and productivity of the people of my company. They make great products, but they do not leap tall buildings in a single bound, and they do not run faster than a speeding bullet. They are not supermen.

I simply want them to have a fair chance to compete. The American dream should be available to anyone who works hard and plays by the rules. We need a trading system that respects and rewards hard work and ensures our ability to fight a fair fight, not one that ties our hands behind our back while somewhat blindly worshiping at the altar of free trade.

Thank you.

[The prepared statement of Mr. Meier follows:]

Chairman RANGEL. Thank you, Mr. Chairman. I not only want our businesses to have a level playing field, but I want them to have a fair advantage over other companies. So, we have a lot to work together on. I look forward to working with you.

The next witness is Harold McGraw, Chairman and CEO of The McGraw-Hill Companies and also the Chairman of the Business Roundtable and the Emergency Committee for American Trade. Since my transition, I have had long discussions with him. I want to thank you so much for the assistance and advice that you have given, but more importantly, your willingness to work with this Committee to see, with the Administration, whether we can come up with something that is a lot easier to work with than what we are wrestling with today. So, thank you again, Mr. McGraw.

STATEMENT OF HAROLD McGRAW III, CHAIRMAN, PRESIDENT, AND CEO, THE McGRAW-HILL COMPANIES, AND CHAIRMAN, BUSINESS ROUNDTABLE, AND CHAIRMAN, EMERGENCY COMMITTEE FOR AMERICAN TRADE, NEW YORK, NEW YORK

Mr. MCGRAW. Well, thank you and good morning, Mr. Chairman and Congressman McCrery and Members of the Committee. As the Chairman said, I am Harold McGraw. I am the Chairman and CEO of The McGraw-Hill Companies, and I am here on that behalf as well as being Chairman of the Roundtable and the Emergency Committee on American Trade.

We really, really welcome, Mr. Chairman, and applaud your bipartisan approach--and these are vital subjects, obviously, globalization and trade--because in many ways we are at a defining moment for America's future and its role in the world economy.

Globalization for sure transforms markets, industries, people, economies. The question for the United States is not whether to participate in global integration and the global economy, but how to compete, how to win, and how do we make the benefits of globalization fair and inclusive.

Currently the United States is the largest economy in the world. Going forward, as we all know, we are entitled to nothing. The world is changing rapidly. We either engage and deal with change or we fall behind.

This is about America's competitiveness and economic growth in a global economy. Trade, a critical component, is a subset of globalization. Pursuing a pro-trade agenda is a growth issue.

We also need to enhance U.S. competitiveness through changes in our domestic policies to ensure a competitive workforce, as well competitive cost structures. My written statement provides some recommendations and some examples of the value of these pro-growth policies and the benefits of globalization.

In my remaining time, Mr. Chairman, I will address your questions.

First, trade is vital to the economic growth of our citizens and our economy. In fact, imports are essential to our standard of living and U.S. competitiveness. Without imports, many U.S. households would not be enjoying home computers, fresh fruit in the winter, or a morning cup of coffee.

Imports enable U.S. companies and their workers to compete in the global economy by ensuring access to competitively priced inputs and end products. As our domestic automobile companies recently explained before the International Trade Commission, imports are an important part in promoting their competitiveness overall.

Exports provide U.S. businesses with access to new and expanded markets they otherwise would not have without a global marketplace. They support 15 million American jobs, 10 percent of our workforce. Investment also has strengthened the United States

Secondly, the benefits of globalization are being spread broadly, but we need changes in our trade policy. Consumers benefit from imports, which have led to improved variety, quality, and price of goods. U.S. productivity is supported significantly by global engagement, in part from companies' responses to competition such as innovation and investment in Research and Development and other areas. Workers in firms that are globally engaged receive wages and benefits that are 13 to 18 percent higher than employees in purely domestic firms.

More must be done. We must level that playing field for U.S. companies, farmers, and their workers through multilateral, regional, and bilateral agreements. We need to complete the Doha development agenda negotiations. We need to implement the Peru, Colombia, and Panama trade agreements. We need to move forward aggressively with negotiations with Korea and Malaysia.

We need to revitalize and make bipartisan that congressional/executive/trade relationship, including renewing trade promotion authority. We need to promote enforcement of commitments with China and other key economies. We need to eliminate these regressive tariffs and other U.S. barriers on products such as clothing, footwear, or sugar, which have a particularly negative effect on lower income consumers.

Finally, we need to ensure that those facing the costs of globalization are not left behind. The quickening pace of innovation and the level of globalization has increased worker displacement and the normal phenomenon of job turnover.

For instance, in any given three-month period, we know that we gain 7 to 8 million jobs, at the same time that we eliminate 7 to 8 million old jobs. This is little consolation to workers who lose their jobs or undergo serious disruptions. The response cannot be to freeze the U.S. economy at any one stage.

We need to renew and significantly modernize the trade adjustment assistance program to effectively provide workers and farmers with new skills necessary to compete. These changes also will help spread globalization's benefits internationally, and together with capacity-building and technical assistance will help bring hundreds of millions out of poverty, particularly in Africa and the Middle East.

Finally, there are many, many successes fostered by trade, and we put those in our written statement, Mr. Chairman. Certainly the U.S. information technology industry is one of the most globally engaged of all U.S. industries. U.S. service firms are also among the most competitive in the world. The United States is the leading worldwide exporter of services, with over $380 billion in exports in 2005.  Finally, there are just many, many examples of small and medium-sized companies competing globally with great success.

Mr. Chairman, I applaud your push for bipartisanship, and I hope this means that we have a chance for a new beginning.

[The prepared statement of Mr. McGraw follows:]

Chairman RANGEL. Thank you, Mr. Chairman.

The last witness on this panel is Dr. Lawrence Mishel, who is the president of the Economic Policy Institute. I thank you for coming and bringing a different view to the serious question of globalization. Thank you for sharing your views with us.

STATEMENT OF LAWRENCE MISHEL, Ph.D., PRESIDENT, ECONOMIC POLICY INSTITUTE

Dr. Mishel. Thank you very much, Mr. Chairman. Let me just jump right into the questions you posed.

First, is more trade better regardless of its terms? First, the benefits of trade. Now, economists believe in transactions among consenting adults. I am an economist, and I believe that trade should be given the benefit of the doubt that it provides benefits.

A big question is: Benefits for whom, and whether it is important to put the pedal to the metal of trade liberalization to make us better off. I don't believe that further liberalization has bountiful gains for the American people. We are a very open economy. It is not as if the issue is: Will we have trade or do we not?

Let me also be the skunk at the party, I am sorry to say, to talk about the real costs of globalization and what is really happening out there to people's jobs and wages. As you know, Mr. Chairman, the typical working family now makes less money than it did six years ago. The productivity of this economy has been tremendous in the last 5- or 6-year period, but people's wages are really just a little bit higher. That is for high school workers and for college-educated workers. People are profoundly upset about the economic circumstances, and I think we have seen that in the last election.

So, the question is: How do we address the needs of the American people? The question for this Committee would then be: Does further trade liberalization advance that goal of addressing the needs of the American people, or are there other, higher priorities that we need to seek?

Let me outline the costs of globalization because I think it is usually not talked about. Even economists who deal with this are usually chastised by their fellow colleagues for addressing the costs. You cannot have a conversation with the American people without addressing the things that they see all around them and they experience, the things they hear from their employers, who tell them, you cannot have higher wages or I am going to move your jobs offshore. It is not a matter of economic studies. It is a matter of what people understand sitting around their kitchen table.

The costs of globalization are broad, they are widespread, they are pervasive, and they are large. First and foremost, we see the people who are displaced by trade who have to find other jobs, frequently for less money. That is just a small part of the costs of globalization.

A second cost is the fact that we are now competing with nations across the world. Their increased capacity, our increased competition, lowers the prices of our traded goods. That in turn lowers the wages of the people who are producing those tradeable goods.

Third, employers across the board tend to use the threat of globalization, the need to be competitive, to lower wages. I didn't see anybody challenge the Delphi company when they said, you can no longer earn the wages you have and now can only early $10 an hour. They say, well, that's not true. Globalization really doesn't have those bad effects. in fact, they are really tremendous effects.

Fourth, investment flows overseas, increasing capacity there, helping them improve productivity, and costing us jobs here.

Perhaps most important, the jobs that we no longer have in manufacturing and in the tradeable goods sector means that those people who worked in those sectors are now competing with workers elsewhere, and the young workers can't get those jobs.

That means, as every economist who studies trade, that the costs of trade are the lower wages of all the basically non-college-educated workforce in this country, which is about three-fourths of the workforce. It is not about a small group of dislocated workers. It is about the lower wages of the vast majority.

Those who claim we have big benefits from trade, you can't get big benefits without breaking the engaging. You can't say that there are big benefits without acknowledging that there are substantial costs. We need to look at the costs for the vast majority, not just the costs for the economy as if we are just one consumer and one worker.

We think we need a new approach to globalization. I think the first and foremost starts with what we call a strategic pause. No more trade agreements. Let's get things right in the United States before we press further down this road.

We need to address people's needs for health care. We need to address people's needs for pension. We need to find a way to reconnect the wages and wage growth of people to the growth of the economy and productivity. We need the minimum wage. We need people to be able to have a right to organize a union.

How are people going to accept further liberalization when they are so anxious in their everyday life? It is not all because of globalization. If globalizers don't take into account that the context that your trade policies are operating in are a very anxious group of people who vote, then it would be a mistake.

We need to deal with exchange rate policy, first and foremost. We need targeted investments in energy, education, and new technologies. We need to restore the bargaining power of American workers. We need affordable and accessible health care and pension reform.

We need to freeze programs that encourage importing skilled immigrants rather than allowing Americans to be able to be trained for those jobs. We need to renegotiate a social contract for NAFTA to allow for greater aid flows to Mexico and greater policy autonomy and worker and social protections for all three signatory countries. We need to think about the global architecture for globalization.

We cannot address the costs of globalization with a few middle class tax cuts here and there, nor can we do it with some programs of adjustment, even ones that are generous and high-minded as things like wage insurance.

The issue is not how to take care of a few people that are dislocated and are going to suffer who we need to take care of. The issue is how are we going to address the people's economic needs and what role trade can do to damage them further, or will we have policies that are going to lift everybody together.

Thank you very much.

[The prepared statement of Dr. Mishel follows:]

Chairman RANGEL. Thank you. I am new at this job, and I am 76 years old. So, all this business about pausing and stopping and waiting and--if you were my lawyer, I would ask, can you put this on fast forward? I don't think too many people would see you as the skunk at a picnic. You are just a--we wish you weren't there.

I think that the panel is saying in some form what you have said. So, we can't wait. If we don't give trade promotion authority, we have got to have a good reason for not giving it. I am depending on a lot of you on this panel to share with the Administration that this is a positive first step, or as Gene Sperling said, we want to get out of divorce court into a reconciliation.

If it doesn't work, all it means is that we tried. I am convinced that Mr. McCrery and I are reading from the same page, even though we have different philosophical beliefs. At the end of the day, we don't believe that trade and globalization is in our hands. We believe that we have a responsibility to do the best we can to form a policy that we can better agree on because as long as we are in divorce court, there are no winners in this thing.

So, I hope that each of you might take the time out after hearing each other to send a paper to us to see whether it would warrant regrouping and asking you to use your good offices as you talk with people at the Roundtable, at the Chamber, in the Administration, to let them know that it is embarrassing that we are lauded for just talking to each other. That is how bad it has been.

I agree with you it is a good first step, and I yield to the Ranking Member.

Mr. MCCRERY. Thank you, Mr. Chairman. In fact, Mr. Chairman, I would say that this hearing today signifies that we are now officially out of divorce court and have moved into counseling. I welcome that.

The problems that our country faces because of globalization are real. We shouldn't deny that on either side of the political line. We should come together to try to find ways to address that and make it better.

The question, though, one question, is: What do we do with trade in the meantime? Dr. Mishel, you have suggested a pause. Mr. Sperling talked a little bit about a pause. I don't think his pause was on the same level as your pause, Dr. Mishel.

Let me just ask you a couple questions about where we would go during that pause because you seem to indicate that trade and getting goods into this country that are less expensive to the consumer are--that is not a good thing; that somehow we need to protect American jobs.

I am just wondering if that is your point, and if so, how would you do that? Would you erect higher tariffs on imports to ensure that we can continue manufacturing those items here in the United States? Or would you construct non-tariff barriers that would simply keep out imports?

Dr. Mishel. Well, thank you very much for the question. I am not for either one of those solutions. I am not saying that it is not a benefit to have imports. I am saying we have a trade deficit which is extraordinarily large. We haven't even dealt with the vulnerabilities of the macro economy to that circumstance.

I am talking about the fact that in the current global trading system, there is nothing that keeps--we have broad access to technologies and imports from around the world. It is not--to me, it is not a big problem in this country to have further liberalization or further access to trade. We are the most open economy the world knows. So, we have ready access to that.

The question is--

Mr. MCCRERY. You are not suggesting that we change that posture?

Dr. Mishel. I am saying that we have gone down a road. We are now vulnerable because we have an incredible trade deficit, current account deficit; that we have an American people that are ailing in their economics, in their basic family budgets; that we need to think about what do we do to address their basic needs before we think about further trade globalization. The American people don't need that, and people who want to do that--

Mr. MCCRERY. If, Dr. Mishel--let me just interrupt.

Dr. Mishel. Wait, wait.

Mr. MCCRERY. No. It is my time. Let me just interrupt because I want to get to the point here.

If our very open market here--you don't want to close that. You don't want to change that. Then let's try to boil down the focus to trade here, not currency exchange rates and all that stuff that might affect the macro situation, which I agree with you we need to address.

With respect to trade, the narrow focus of trade, if we have the most open economy for trade, then it seems to me that these bilateral or multilateral trade agreements that we are entering into don't do us much damage, and in fact tend to equalize or level the playing field because in most part, we are taking down tariff rates and non-tariff barriers in other countries so our manufacturers, our service providers, can compete in those other countries.

Is that not the case?

Dr. Mishel. It is just hard for me to see that in order to generate the growth that I think good economic policy needs to generate for the typical American, that pursuing things like CAFTA has much to do with that, that pursuing many of these trade deals has much to do with bettering the lives of the typical working family in this country. I think it is--

Mr. MCCRERY. Okay. If you come up with something, let us know, on the trade front particularly, that we could improve. Let's get to--

Dr. Mishel. Can I just respond to one thing you said?

Mr. MCCRERY. No. Let me--because I am about to run out and I don't want to go past my time. I want to give everybody a chance. I just ran out of my time.

Chairman RANGEL. Go right ahead.

Mr. MCCRERY. Mr. Meier, you said--and I think Dr. Mishel agreed a little bit--that trade adjustment assistance is not the answer. So, I would be interested in hearing from you, not today but maybe if you want to get us something in writing.

What do you think the answer is to help workers who lose their jobs because of globalization?

Mr. MEIER. One thing--

Mr. MCCRERY. Chairman Rangel and I have been talking about, and I have been talking with the Administration about, changing trade adjustment assistance to globalization adjustment assistance so we cast a wider net. It is not directly related to trade, but we try to help workers generally in our economy who are dislocated because of globalization, whether it is trade or not.

So, if that is not the answer, then we can stop those efforts. Don't--because I have run out of time. Mr. Sperling, I would be interested in your thoughts on that as well because you seemed to indicate that you thought we should broaden that net of assistance to workers. So, that would be great if you could help us out with that.

I have a lot of other interesting questions, but I will pass. Thank you, Mr. Chairman.

Chairman RANGEL. Thank you.

Before I recognize Mr. Levin, who is the Subcommittee Chairman, I seriously hope since all of you have a large degree--there is a threat even for the doctor who called himself a skunk--all of you are reading from the same page.

I submit you almost owe it to your country to help us to keep this thing together by coming up with something that business says, hey, it wasn't on my immediate agenda, but it makes a lot of sense.

After you do that, we then would like to meet without the mikes, and sit and talk and see whether we can give the Administration an offer they can't refuse in a bipartisan way.

Mr. Levin.

Mr. LEVIN. Thank you, Mr. Chairman. You and I and Mr. McCrery and others, Mr. Herger, joined in this that the best way to try to restore bipartisanship that is eroded is--maybe it is ironical--taking the lid off our differences, bringing them to the surface. This is the first step in that.

My own view is that what we need to do is not in a sense pause, but really the opposite. That is to try to actively straighten out our trade policies and our trade programs, and do it right away. That relates to Peru, Colombia, Panama. My own judgment is it means to renegotiate certain provisions, which is doable within the TPA time.

I want to concentrate, if I might, Mr. McGraw, on you because in a sense, your testimony comes across as kind of a passive approach to trade. Kind of let it roll and maybe have some kind of a Free Trade Agreement (FTA).

Let me ask you about Korea. Korea has immense barriers against U.S. industrial products, automotive and otherwise. We are negotiating a Korea FTA. Should we insist in those negotiations that they tear down those walls? If you could give me kind of a quick answer because I want to--

Mr. MCGRAW. Yes. The first thing is I am sorry if it came across as passive. There is nothing more passionate on my agenda than the globalization in trade and getting it right.

On the Korean free trade agreement, absolutely. One of the things that opening up a new market--and the whole purpose of a trade agreement--is to bring down walls and make it more competitive for both partners. There has to be a relationship in that part.

So, I do think that with Korea, we do have an opportunity to be able to explain very clearly why--in terms of manufactured goods, why it is very important to have serious--

Mr. LEVIN. Okay. Good. We are going to count on the Roundtable because we are having discussions with the Administration about having that as a major premise, and some measurement. Let me go on. I didn't say you weren't passionate. I said it was kind of passive. Let me pick out a few examples.

You say, "With the changes in the global economy, the simple trade remedy paradigm of a domestic industry trying to protect itself from unfair trade imports with no other ramifications on the large company is rarer and rarer.''

Using an example--I don't want to take that example. Just to--it comes across as saying, when it comes to unfair trade imports, we should not be--industries that are affected by them should not have an activist, aggressive effort. Is that what you mean?

Mr. MCGRAW. No. I think that the whole comment when you are starting to talk about the benefits of imports is focusing once again on having very clear rules and enforcing those rules.

So, no, I don't think in any way that would be laissez faire in any sense.

Mr. LEVIN. Okay. Good. Now let me us read another. "The economic worries of the '80s--the idea that Japan was replacing the United States as the world's technological leader, the loss of U.S. manufacturing jobs, the growing U.S. trade deficit, and the surge of foreign investment in the United States--sparked numerous proposals to limit imports and investment. The debate today echoes many of the grim productions that were voiced then.''

Now, look. We have had a--I don't know if that accurately describes the '80s. I was somewhat involved. Look, we have had a tremendous loss of U.S. manufacturing jobs. True?

Mr. MCGRAW. True.

Mr. LEVIN. So, in that sense, if there is a worry of the '80s, it is a worry of 2007. Right?

Mr. MCGRAW. It is.

Mr. LEVIN. Okay. The growing U.S. trade deficit, we were worried about that in the '80s. It is multiple times that today. Right?

Mr. MCGRAW. Right. Eighty-five percent of our trade deficit comes from countries where we don't have trade agreements.

Mr. LEVIN. Well, we have a trade agreement through the WTO with China, with Japan. We have obligations of China that were negotiated in Permanent Normal Trade Relations. That is a trade--a multilateral agreement is a trade agreement. Right?

Mr. MCGRAW. Well, that was for accession to WTO. That is correct. That makes it binding in terms of WTO rules. Right.

Mr. LEVIN. So, we should actively enforce those provisions.

Mr. MCGRAW. Well, the WTO should actively enforce the accession agreement.

Mr. LEVIN. No. We are the ones who have to file the complaint. Right?

Mr. MCGRAW. Correct.

Mr. LEVIN. Okay. My time is up. I just--and I wanted to quote one other thing, about the lesson of Japan. You say, "When Japan went into a recession more than a decade ago from which it is only beginning to emerge,'' that when they build "walls to protect your own companies and workers, in the long run you end up hurting them.''

I think you would have to acknowledge that in the short run, Japan's industrial policies had some advantages in terms of their development, did it not?

Mr. MCGRAW. Any blanket statement has its implications. Closing borders and going protectionist and any kind of isolationist move is only going to hurt businesses. Japan is a good example. India is another.

Mr. LEVIN. In the long run. I am not talking about isolationism or protectionism. I am talking about government policies. I thank you.

Chairman RANGEL. Let me notice for the Committee that our dear friend and colleague, Mr. McDermott, lost his 97-year-old mother over the weekend. We pray for him.

I would like to recognize Mr. Herger, the Ranking Member of the trade Committee.

Mr. HERGER. Thank you, Mr. Chairman.

The topic of trade and globalization is critically important to our Nation. It is appropriate that we devote a hearing to it, especially given the Members' interest in trade during our earlier hearings we held last week.

In the testimony today, there was a great deal said about the growth opportunities from trade. In particular, some of you mentioned that many well-paying jobs are created in export-oriented industries.

As you know, in California we have an enormous export sector that supports a vibrant economy. All the sector employs more than 730;000 individuals and ships $117 billion in manufactured goods in the world. My own district is one of the richest agricultural areas in the country, and depends on exports of high-quality products.

At the same time, we need to focus on the value of imports in the trade debate. Often the fact that we import is heavily criticized. However, imports are a positive force in our economy, allowing our manufacturers access to less expensive inputs, driving down costs for us as consumers, and keeping inflation in check. To me, this means that we must maintain a balance in our trade policy that allows us to import as well as export.

Mr. McGraw, would you mind commenting or would you like to comment on that?

Mr. MCGRAW. I think you are absolutely right. The benefits of exporting and the benefits of importing are very clear. It makes us more competitive. It allows us to gain different advantages and therefore new jobs in our marketplace.

We talked about 15 million American jobs are associated with exporting. On the import side, once again, the benefits to our competitiveness is quite strong.

I think the issue that we face in terms of American competitiveness is the fact that the pool for low-skilled work in the United States a couple decades ago was very defined. Therefore, we could pay higher wages for some of that work.

What we have seen with the globalization initiative is that the pool for that low-skilled work has multiplied, and therefore it has put downward pressure on some of that wages, and therefore has created some of the inequality that we have seen.

The domestic policy side to support the rise of those imports has got to be focused on domestic policy issues that make our workforce more competitive. That is simply in terms of education reforms in technology, computing, math, science, and those kinds of initiatives, as well as one of the comments that was made here about cost pressures like health care where we spend $4,900 per person compared to $2800 per person in Germany, $2100 in Japan.

So, again, it makes us more competitive but it forces us to rethink some of our domestic policies to combat that competitive threat.

Mr. HERGER. Thank you. Mr. Aldonas, do you have any comments?

Mr. ALDONAS. Thank you, Mr. Herger. Yes, imports get a bad rap. We export so we can import. The goal really is to move in a direction where we are producing what we do best. It is like the old line about Michael Jordan doesn't mow his own lawn. He focused on playing basketball. He got somebody else to mow the lawn as a practical matter.

That is what trade really is about. It is about that specialization, and we need the imports to do it. I am reminded of Ricardo's example, his famous one, where he said England should specialize in cloth, Portugal should specialize in wine, and they should trade. Oftentimes when I hear the debate about trade, I think people got it wrong. They are telling the Portuguese to produce wine and go naked. Right? Export but don't import.

In fact, we want the benefits of the imports in the system. What we really need to focus on, though, is that there are tools that we have to provide to our workers in this economy. Most of those tools don't lie in the trade area. It is our adjustment policy. It is education. It is what we do with tax policy. That is what we have.

We are now facing a demographic challenge where we need every worker to be productive. We are going to have more retirees, fewer workers. The challenge for us to raise our standard of living, we need everybody as a part of that process.

That is why I applaud the focus of the hearing because we need to be pulling everybody along if we are going to continue to raise our standard of living. Imports help by lowering the cost of accomplishing that task.

Mr. HERGER. I thank both of you. I thank each of you for your comments. I think what you concluded with is exactly right on target, Mr. Aldonas.

Again I want to thank Chairman Rangel for this hearing and the fact that if nothing else, hopefully we are beginning to have a dialogue between these forces that have been at loggerheads that really should be going hand in hand to help each other and help our economy and help our workers and those who are hurting in this.

There is many that are gaining, many that are prospering. Together we can do it. Thank you, Mr. Chairman.

Chairman RANGEL. Thank you.

Mr. Aldonas, we also during this period have to find out what language means. When you say it is not in the trade area, it emphasizes that our U.S. Trade Representative represents business. She represents the United States of America. Now, if she has to bring on the Secretary of Education and the Secretary of Commerce, whatever it is that is good for America, then that is what she represents. We can agree on that language.

Mr. ALDONAS. Couldn't agree with you more.

Chairman RANGEL. Great. It is good to be Chairman. Mr. Lewis.

Mr. LEWIS OF GEORGIA. Well, thank you very much, Mr. Chairman.

Mr. Chairman, thank you very much for holding this hearing. I think it is one of the best that we have had on trade in many, many years, I know since I have been on this Committee. I am grateful to you for calling us together for this unbelievable hearing.

I want to thank each Member of the panel for being here. If we listen to Mr. Meier, and I think we may be out of the divorce court and we are moving toward mediation and reconciliation. I was very moved by what you had to say. You sound more like a labor leader than a business leader. I hope I am not getting you in any trouble. If it is trouble, it is good trouble. It is okay.

Would you like to say more, Mr. Meier, about your testimony?

Mr. MEIER. Sure. Thank you, Congressman Lewis.

No, I am not a labor leader, but I respect the values that they bring and I respect the rights of their people. Where my position on globalization and trade in the United States of America comes down, as with many things in life, moderation versus opening the floodgates sometimes is called for and very much in order.

During the Uruguay Round, as tariffs were modified--and I recognize they will be--and they moved. We respected that and we needed to just to it. Where I get concerned representing a small industry, with all due respect, in reading about the Doha Round, much notoriety about agriculture, agriculture, agriculture. It deserves to be heard.

Our industry only employs a little over 15,000 people. My concern at the midnight hour: Will the needs of an industry such as ours, and others, be swept by when I hear discussions of a Swiss formula and a rather rapid implementation of duty elimination?

In due course we will get there. I just don't believe at this time, with the deficits and everything else that we have talked about in this room, that it is a hell-bent for election, let's go in that direction--not that anyone has said that.

I do reflect back on the past negotiations and the way in which our negotiators have found a way to, in a very, I am sure, involved scenario look at the total interest of many and all industries, not to the exclusion of a few smaller ones, which I in this testimony would represent.

Mr. LEWIS OF GEORGIA. Thank you.

Mr. Sperling, I agree with you that when it comes to trade, we need a revolution of values at home and abroad. That is something core, core values.

Could you go into some detail and elaborate? What do you really mean when it comes to core values in trade?

Mr. SPERLING. What I mean is that competition, economic competition in any form, always entails some pain and upheaval. If it was just U.S. companies competing against each other, some win out. Some people lose jobs. Technology changes jobs. We try to structure that in a way that we think is overall a positive sum.

We outlawed child labor. That was not an acceptable form of competition. Jailing workers, union leaders, is not an acceptable form of competition for getting price advantage.

I think that the trick for us is to have those same values when we go globally. Now, if you try to impose on Africa that they be at the exact same stage we have, that they have a $7 minimum wage or something, that would be unfair. They are not at that stage of development. That would not be realistic.

The basic values that are, I think, in the core ILO standards, in our human rights standards on child labor, these are things all countries have agreed on. So, the reason why labor standards are important is it says that when you are competing, yes, we cannot protect you from all the dislocations in the global economy. There may be somebody who can do something as well as we can for cheaper, and we can't protect everybody against that. That is a price advantage that is part of global competition.

If that price advantage is coming from destroying your environment or sweatshops or child labor or from not letting countries have decent labor laws, then that is the type of values that are inconsistent with our values. It is a price advantage by exploiting people in ways we are against.

So, what labor standards say is that when we are opening trade, we are not putting our values on the sideline when we are expanding trade in that--

Mr. LEWIS OF GEORGIA. I am going to run out of time here. I want to try to get another question in here.

There is a perception that our trade policy is hurting hundreds and thousands and millions of our people here at home, and that people are falling farther and farther behind, and the gap, the economic gap, the wage gap, is widened.

How can you destroy or remove that perception? Is trade good in itself?

Mr. SPERLING. First of all, I think a lot of the statistics that Larry Mishel mentioned are ones I agree with. It is not just lower income, non-college-educated people that have not been doing well. There has been enormous wage stagnation, and it has happened at a time with high productivity.

So, I think when people are talking about anxiety and difficulties for average workers in the economy, I agree with them. I think the question is: How do you go forward? My disagreement is that I think that the way we have to go forward is we have to--it can't just be a trade policy.

It has to be, as I said, about first putting the type of values we want in our trade agreements, and then having a strong compact at home that is showing we are not only committed to the kind of globalization adjustment that Congressman McCrery was talking about, which I support, but also that you really are fighting to protect the jobs you can, to create the new jobs that you can, so that you really are saying to American workers, I can't make China and India go away. We can't make all the difficulties involved in global competition go away.

We are waking up every day to make sure you have universal health care. We are waking up to make sure that the tax code doesn't discourage job location here, that we are investing in innovation and resources. If I can say, when you say, is trade good in and of itself, no. I think it does depend. That is what I was saying. If trade is based on price competitiveness by people using child labor or things offensive, then I would say no, that is not good.

I do want to make one point. We have talked just about economics here. Congressman McCrery, I am not for a pause of any kind. What I was for was case by case, like you do in any policy, as Dan said. In any policy you look at the pros and cons.

I felt on CAFTA that that didn't step forward enough on our labor standards. I didn't feel it was so important that we had to vote yes, even though I think it would have helped our relations. On China to WTO, I just could not be more offended by some of their labor practices. They are offensive. We should be pressuring them.

I had to ask myself, and President Clinton had to ask himself, will we have a safer world 30 years from now for our kids if we bring China in or keep them out? It was a case by case. In that case, the foreign policy arguments, I think, were important.

What I just wanted to say in terms of the Doha Round is that I think it is different because the whole world is trying to put together an agreement. Those of us who are progressive, who should care about having disputes resolved by the rule of law, not military force; those of us who believe that we can resolve things in a multilateral way, who don't like the fact that the United States has an image these days of being more unilateral--we should not allow ourselves to become the scapegoat, particularly when the aspiration, whether it succeeds or not, is to help countries like Africa and poor people elsewhere.

So, I do think we have to look at the signals we send. I fear if we send the signal that we are just putting everything on pause, the signal to the rest of the world will be that America is going alone. I just don't think at this stage in our image in the world, that is what we should be portraying.

That is why I encourage the idea of a limited TPA for Doha where the Administration comes through with a limited down payment on some of these things. They can't pass universal health care tomorrow. They can't do everything you want.

If they could make enough of a limited effort to justify a limited trade promotion authority, that could be the first step in showing that we are listening to each other and we are making steps, making some progress, perhaps slowly, but progress together.

Mr. LEWIS OF GEORGIA. Thank you, Mr. Chairman, for being so patient and allowing the witness to go on.

Chairman RANGEL. Mr. Camp.

Mr. CAMP. Thank you, Mr. Chairman. I also want to thank the panel for their testimony.

Dr. Tarullo mentioned in his written statement--he sort of outlined some of the factors of globalization--the revolution in information technology; the rise of other economies, particularly in Asia--and said that these trends would proceed regardless of whether the United States ever signed another trade agreement.

Is that something you agree with, Mr. Aldonas and Mr. Sperling? I would like to hear your comments if you agree with that precept.

Mr. ALDONAS. Absolutely. The fact of the matter is that technology is changing--our economy, actually, relative to a lot of others in the world is not as open in terms of percentages.

What that means is we just have this huge market that is generating competition and innovation on a daily basis. We would see those technological changes, frankly, even if the market wasn't open to the rest of the world, and we would continue to have to participate, grapple with that, try and educate our people to live in that world.

We are better off actually being in an open environment where we can get the benefit from the world economy under those circumstances. It is something that we are going to face.

The other point is I think we are going to see the rise of other countries. It is inevitable. They are acquiring our skills. They now have the chance to compete. That means we have to put in place policies that are gearing to make sure we stay apace.

Mr. CAMP. Thank you. Mr. Sperling, would these trends continue whether or not we entered into another trade agreement?

Mr. SPERLING. Well, I think that we often do underestimate technology, both its good and its dislocative impacts. The travel agents who have lost jobs--and many have--have lost jobs due to the internet, not due to international trade. The same with ATMs and bank tellers, et cetera.

So, I do believe that technology would largely go forward. It is the case that when we have more expanded globalization, I think you get more of the good and probably more of the difficulties. The good comes from the competitiveness that happens when our companies have to compete globally and have to face that competition and that innovation and the pressure. They are more likely to be on the cutting engage.

Yet on the other hand, one of the issues we do see is that it is the connection of technology and globalization that is causing lots of dislocation regardless of the trade. It is my experience that a lot of the anxiety in the economy right now is kind of white collar anxiety due to outsourcing and offshoring to India and other places.

That doesn't really have much to do with your trade agreements. That has to do with globalization and technology. That is to me why in terms of globalization I wouldn't even try to determine whether a person lost their job because of domestic technology or globalization or trade. I think it is going to be too difficult to tell in the future.

If two families are next door to each other, they got three kids, they are the same, they each lost their job, instead of figuring out what was the cause of it, I think we should figure out how we can best help them.

Mr. CAMP. Well, I think both of you have made that comment. I would agree with delinking trade adjustment assistance, as it is described in trade, because a lot of times that is an artificial distinction. So, there is a lot of agreement on some of these concepts that I have heard from the panel that I frankly didn't expect to hear today.

Then Mr. Aldonas, you made a comment and I would like to hear a little bit more about that, if you could elaborate on that. If we could open our health care market to foreign competition, that that would be something we should do. Could you elaborate on what you meant by that?

Mr. ALDONAS. Yes. One of the ironies is when you look at the Massachusetts proposal and the California proposal, the mandates for health insurance, is it is focusing on the downstream market for health insurance. It is not talking about lowering the cost of health care in this country, and I am skeptical that it actually will.

What we really need to do is open up the services market in ways that would drive the cost down. At this point, what you could do is you could provide public health clinics in this country by relying on telemedicine that would reach a broad spectrum of people that go without health care at this point at a much lower cost if we were willing to think in those terms.

The reason I say it is really to be provocative. We need to think about trade as a tool to accomplish the goals we all want to achieve in our society. That is the way we should do it. We should see it in that context.

Mr. CAMP. All right. Thank you very much. Thank you, Mr. Chairman.

Chairman RANGEL. Mr. Neal.

Mr. NEAL. Thank you very much, Mr. Chairman.

Mr. McGraw, in your testimony you offered the classic textbook analysis. There is very little to dispute based upon what you suggested. Let me just cite an example, however, of where the textbook really didn't work very well.

I am sure you are familiar with that mom and pop operation called Danaher Tool. In Springfield, about three years ago, they announced that they were going to close that operation.

Many people in the audience, as well as Members of the Committee, are familiar with the Easco Hand Tool Company, which made the Sears ratchet, arguably the best in the world. Year after year, as a very young man, I used to go to these award ceremonies where Easco would kind of thank but present to Sears and others the annual award that they received by the U.S. Chamber of Commerce based upon the best hand tool in the world.

Well, they decided, Danaher, to close that plant in Springfield, and they said it wasn't competitive. Now, it might raise the rhetorical question of how could it not be competitive? It was operating every single day of the week with three shifts, more than 300 employees, with an average wage of about $14 an hour and decent health care benefits. Many Vietnam veterans and Korean veterans who had come through there.

The corresponding truth here is that they have done their part. They have really done their part in an honorable fashion. Now they find that through no fault of their own, that a plant that was operating seven days and seven nights a week with three shifts is going to close because it is not competitive at $14 an hour.

Where do we go from there, Mr. McGraw?

Mr. MCGRAW. Congressman, first of all, I am not as familiar with it, but I have got the gist of the analogy there. In all markets, they are going to face change. The business has a responsibility to its stakeholders to grow, and find ways to be able to be efficient in being able to do that.

There are times when your efficiency is not going to be competitive to be able to survive. Therefore, you are going to have to be able to do things to improve upon that. The whole question of outsourcing or the whole question of movement of various plants to different areas, I can give you two examples, one in Ireland and one in Dubuque, Iowa.

We had a situation in Ireland where we had created an Information Technology (IT) order fulfillment center because we could use our technology facilities in the States during down periods, and it was very efficient. The Irish government was terrific to work with in terms of the training and in terms of the benefits that we were able to achieve in doing that.

Over a 15-year period--and it was a very difficult decision--we had to close that plant because they just became very, very overpriced and inefficient relative to the competitive pressures to be able to do it elsewhere in a different way.

In Dubuque, we had a situation where--Dubuque has been going through a revival over, I guess, the last 12 years or so. It has been a very economic disadvantaged city. The elders took upon themselves to really renew and revive Dubuque, and they did it through an initiative called the Port of Dubuque Development Center.

In doing so, we opened the first major facility in Dubuque. We did so not because there was Dubuque versus something else; because of the environment, the area, what it meant to our workers and to raise families, and because it had all of that positive behind it.

So, change is always going to take place, and you have to be very sensitive to all the people. Now, the comments about trade adjustment assistance, I think that we have a lot of work to do, and I look forward to working with the Committee on seeing if we can strengthen the framework, first of all. I would also say to you that a good example is what companies do when you have displaced workers. That becomes very important.

For example, United Technologies, they move plants all the time. What they will do to anybody displaced for any trade-related or any globalized initiative is they will offer four years of college paid by them on any subject they want. If you have a college degree, they will pay for a graduate degree in any subject you want. They will also have other kinds of out-service.

We do the same thing. J.P. Morgan Chase does the same thing. So, you have to be competitive to the markets and competitive to where you want to be, but you also have to find very meaningful ways to help the displaced worker.

Mr. NEAL. Just a brief follow-up, Mr. Chairman.

Frequently, business leaders--and understandably so--will point to the Irish economy and they will discuss marginal tax rates, corporate tax rates. There is also very little corresponding emphasis given to the fact that no country in Europe has done better with agricultural subsidies than the economy. That is another very important issue to zero in on.

I appreciate the response that you gave about the whole question of retraining, and I am grateful. Mr. McCrery and Mr. Rangel have both spoken at the need to refocus attention on that issue.

The truth is that those 300 workers, they are really not going to move to Dubuque and they are really not going to move to Iowa. They are going to stay where they are, and what retraining for them has come to mean is lower wage. Thank you.

Chairman RANGEL. We will try to treat that down like Baghdad and we get on with it.

Mr. Becerra.

Mr. BECERRA. Thank you, Mr. Chairman, and thank you to all of you for your testimony.

Actually, before I ask a question of all of you, let me--Mr. Aldonas said something at least in your testimony that I thought was--I agree with, to a degree. In your statement, you say, "In the world of trade policy, imports get a bad rap.'' I think you said that in response to some questions that were asked of you.

We tend to think of exports as good and imports as bad. I think you are right. We have this knee-jerk reaction that unless we are doing the selling, it is not good. That doesn't take into account what is going on all around us. Sometimes it is better for us to buy something than try to make it ourselves at a much higher cost.

Let me give you an analogy here. If we are in a boxing ring and we are boxing with our trading partners because they are our competitors, if we are following the rules that say you can't hit below the belt but they are not, then we are going to have a tough time winning that boxing match if they are constantly hitting below the belt. At least I know I would have a tough time staying up.

China today--maybe things have changed; the statistic I have is probably a year old--in its industrial heartland pays its industrial workers about 65 cents an hour. What is left of our industry, our industrial heartland pays--our industry pays workers in America today about 20, $22 an hour, which by the way is still probably one-fourth of what everyone at that panel makes today and probably about a fourth of what we make today. Actually, for some of you, it is probably a lot less than a fourth of what you get paid. So, 20, $22 an hour is still not going to make you rich, but it lets you live and feed your family.

Maybe China is playing by the rules in that boxing match when it has its industrial workers earning 60 to 65 cents an hour to produce steel or some other product, and then sends it over here to compete against steel made by Americans who are making 20, 22, $25 an hour. Maybe that is a really high wage there.

If it is not, and if that wage is constrained artificially by other things--compulsive labor, no institution to enforce their labor laws--then that is bad trade policy, to allow those types of imports to come into this country.

So, my question to you all now would be this: Does anyone here believe that we should allow a country that uses extensive child labor to send a product produced by children here to this country to compete against products in America that would be produced by American workers? If you do, just raise your hand.

[No response.]

Mr. BECERRA. Okay. Does anyone on this panel believe that we should allow a foreigner to compete with American products if that foreigner produces those goods using slave labor?

[No response.]

Mr. BECERRA. Okay. Nobody is raising their hand. Does anyone on this panel believe that we should allow products to come in under a free trade agreement if that foreign competitor is discriminating against its workforce to produce its product? Say it tells a woman, it is fine for you to sew that garment so long as you are not pregnant; but the moment we find out you are pregnant, you are out of here. Is it fair to have a company or a country that allows its producers to discriminate within its workforce and trade with us?

[No response.]

Mr. BECERRA. Okay. Is it fair for us to have a trade policy with a country that prohibits its workforce to associate and to say, hey, we want to as workers talk to each other, see if we could improve our living conditions with our employer? If a country prohibits its workforce from being able to associate freely, would that be a basis to allow that country to have a free trade agreement with us? If you believe so, raise your hand.

[No response.]

Mr. BECERRA. Okay. No one is raising their hand. Now, final question: If a country had laws that prohibited or, in effect, prevented workers from deciding to collectively bargain with their employer if they choose to--not that they have to, but if they choose to come together and say, hey, we want to negotiate our wages with you based on all of us here at your company, not just individually; if a country prevented a workforce from being able to collectively bargain, should we have a trade agreement with that country? If you believe we should, raise your hand.

[No response.]

Mr. BECERRA. Okay. I saw no hands go up on the five areas that I asked--child labor, forced labor, discrimination, collectively bargaining, and association of workforce.

So, if you don't object to that, I am going to assume--and this is a final question, and maybe a yes or no since my time is now expired--should we include within any negotiated agreement with any country that wishes to have a free trade agreement with us a condition that says that you must abide by those five basic standards when you talk about your workforce? You can't discriminate, you can't use slave labor, you can't use child labor, you must allow people to collectively bargain if they choose to, and you must allow them to associate? Any problem in include those five conditions in a trade agreement?

I didn't hear a yes or no. I am going to assume if you believe it is a no, we should not include those, if you could just raise your hand.

[No response.]

Mr. BECERRA. Okay. Thank you.

Mr. MCGRAW. Congressman, can I make one comment?

Mr. BECERRA. Mr. Chairman, I don't know if--yes, Mr. McGraw?

Mr. MCGRAW. We all wish that people would adhere to the kinds of values that we possess all the time. We would like other people's behaviors to be the most honorable. That is not reality, and that is not the real world.

When you talk about China, China is now the third--on purchasing power parity, the third largest country in the world. It is somebody that we have to deal with, and we have to make sure that we are doing everything we possibly can to encourage better behavior.

So, trying to force China, through isolation, to change something that we know exists isn't the answer. We have to do more to help provide the leadership to encourage better behavior.

Mr. BECERRA. Mr. Chairman, if I could just inquire of Mr. McGraw.

Are you saying, Mr. McGraw, that knowing that China is not abiding by all of these standards, that we should allow them to continue to trade with us? Or are you saying we should try to encourage them to change their behavior?

Mr. MCGRAW. We want to try and encourage better behavior.

Mr. BECERRA. Okay. So, are you saying you would like to be in the boxing ring with China allowed to hit below the belt against America?

Mr. MCGRAW. Well, the issue, Congressman, is we are in the ring with China.

Chairman RANGEL. Mr. Johnson.

Mr. JOHNSON. Thank you, Mr. Chairman. I appreciate this hearing.

I would like to, Mr. McGraw, ask you: We know our services account for over 80 percent of the U.S. economy. Of course, the United States has a services surplus with the world because of our highly competitive firms. people fear that foreign firms can out-compete us there as well, and high-paying service jobs will leave the United States.

It seems to me that this fear is unjustified if we continue to produce more educated and trained workers to maintain our edge. I would like to know if you think we are truly at the mercy of countries with lower-paid workers, or is our destiny in our own hands in creating the best educated workforce to operate competitive firms in a business-friendly environment? Does this need to be part of our trade relations?

Mr. MCGRAW. Yes, I do. I do believe that, Congressman. I think that the comment about the U.S. information technology industry is a good one. We do have and enjoy some of the most wonderful skilled capabilities, and we can demonstrate that around the world.

That doesn't make us the only one. We are having that kind of competition elsewhere. I come back to the domestic policy side again. We have in this country, from an education standpoint, lost a lot of our technical skills. We have not pushed for a lot of the science, engineering, applied mathematics capabilities. Therefore, India today has more engineers than ourselves by far.

One of the problems that we have is that, one, we have to promote better practice so that we do have those technical skills. If you flip the switch right now, it is going to take 15, 20 years to get back to that level of capability that we once enjoyed that helped give us the technology and helped give us the productivity gains that we enjoy.

We need to do things like H-1B visas. We have to double, triple that capability. We need to encourage that technical assistance to be here such that we can then be able to again maintain that kind of competitiveness.

So, I think there is a lot of domestic issues that we need to do to support that continued strength that we have there, but we are not--

Mr. JOHNSON. Those H-1B visas, though, bring foreign guys in here and we train, some of them--

Mr. MCGRAW. Hopefully they stay.

Mr. JOHNSON.--and they go back home.

Mr. MCGRAW. Some will. Hopefully some will stay and work. There are more Chinese students, talented Chinese students, in the U.K. today than there are in the United States.

Mr. JOHNSON. Well, what does that portend?

Mr. MCGRAW. Well, I think that to your comment about leadership in the IT field in particular, I think what you are going to see is more and more IT firms going offshore and developing those kinds of plants and capabilities because they are going to have more access to the skilled talent.

Mr. JOHNSON. So, Microsoft can do it right next time instead of taking five years?

Mr. MCGRAW. Around the world.

Mr. JOHNSON. I would like to pose a question to anybody that wants to answer it. If we have a situation in which U.S. tariffs are practically zero and where one of our trading partners has tariffs of 12 percent or higher, aren't we better off signing a trade agreement that makes the trading partner lower its tariffs? Isn't that precisely the situation we had in the CAFTA debate, in which the United States provided unilateral tariffs to CAFTA while they were able to maintain tariffs against our products? Is that good or bad for us? Yes, sir?

Mr. ALDONAS. It is good.

Mr. JOHNSON. It is good?

Mr. ALDONAS. Absolutely.

Mr. JOHNSON. Okay. So, you recommend getting rid of the Africa Growth & Opportunity Act, the Caribbean Basin Initiative, the Andean Trade Preference Act, and the generalized system of preferences? Those provide unilateral duty cuts.

Mr. ALDONAS. I don't, but I think we are far better off if we engage, for example, with our trading partners in Africa in a true trading relationship. In some respects, when we use those preferences and they are simply exporting to us, think about it. They are isolating themselves from a lot of the other trends in the world.

We want them in our supply chain if they are going to succeed in the world, but that means we have to have an open trading relationship on both sides. So, they are actually better served by negotiating a free trade arrangement rather than relying simply on the preferences.

There are areas where they can facilitate their ability to get into the global economy if in fact they are lowering the cost to put those tools in the hands of people in Mali, for example. One of the debates we have about trade is whether or not we should be changing our cotton programs for the benefit of cotton farmers in Mali.

I will tell you honestly, if all we did was change our cotton programs, the cotton farmer in Mali would not benefit. There is one buyer. It is a Swiss company. The middleman takes all the economic rents. What the cotton farmer needs is a cell phone, more information, and the ability to find another buyer. Reducing the cost of putting a cell phone in that individual's hand, which means trade liberalization, would actually do a lot for bringing Mali into the supply chain that would put the cotton in the shirt on my back.

That is the way we need to start thinking about trade, both in terms of our interest as well as our friends in the developing world.

Mr. JOHNSON. I appreciate that answer. Thank you.

Mr. SPERLING. I--

Mr. JOHNSON. Excuse me.

Mr. SPERLING. I am sorry.

Mr. JOHNSON. If the Chairman will allow you to answer.

Mr. SPERLING. Oh, okay.

Mr. JOHNSON. Okay. Go ahead.

Mr. SPERLING. Again, you talk about the Africa growth initiative that Chairman Rangel I know worked very hard on, and an extension, and many of you did.

It really--beyond the economics, and the economics are important, and I do think it has the potential to help alleviate poverty there if it is done right. We should continually monitor and not assume that it is just automatically going to be good. We should look.

Again, I think that this to agree that exchange also has positive value. I am always struck by what it meant just to people in Africa that the United States made that engagement. It is a meaningful--it is something meaningful. It affects how people look at us and our concern for a world that has broad growth.

I would liked to have also said the same thing with CAFTA, but I guess where I would just disagree is that I do think to the degree in reasonable ways that we can use our leverage of being engaged in our market as an incentive to raise core labor standards, we should--and there are countries there that had very, very bad histories of how they treated workers.

I would have loved to have supported that. I wish we had just used our leverage a little bit more to have encouraged some of those countries to do more so that I think that a lot more people on this Committee on both sides would have felt comfortable voting yes.

Mr. JOHNSON. Thank you, sir. Thank you, Mr. Chairman.

Chairman RANGEL. Mr. Tanner.

Mr. TANNER. Thank you. Thank you, Mr. Chairman, and I want to thank you and Mr. McCrery. This is a breath of fresh air. It is the first time in six years that I know of that we can come in here and have an exchange of ideas as Americans trying to solve a common problem that we face as a country rather than as a political party.

It is really, I think, exciting to be able to have a panel as distinguished as you all are to come in here and give us ideas that the country so desperately needs. I want to thank you for your patience. I will be very short.

I, as you know, believe engagement is better than non-engagement. I think that we have a chance now to begin to assuage, hopefully, some of the programs that have gone along with and are attendant to a top-down approach to trade in that we did not have the able to reach a consensus in this Committee or in the Congress on some of the trade agreements that we have been voting on.

I think we can get a consensus. One of the problems, one of the sticking points to get that consensus from this Committee, which I believe will transfer itself to the floor of the House, is the question of enforcement.

I would welcome you all's--any of your ideas on how we can give the Members of this Committee and the Members of Congress some confidence in the enforcement mechanism so that we can in some instances sell the product to our constituents, which after all is something that is--trade is so easily demagogued.

I know I and others want to engage, and we think it is better--and sometimes I do, anyway--but we need some help on how to craft the deal where enforcement has more meaning to the citizens that we represent than maybe it has in the past. Does that make sense?

Dr. TARULLO. Yes, Congressman.

Mr. TANNER. I welcome any comment.

Dr. TARULLO. Congressman, you have raised an issue which hadn't been raised to this point, which I think bears some emphasis.

It pays people in the government more to conclude an agreement than to enforce one. You conclude it. You get on at least the front page of the business section, and sometimes, depending on the agreement, the front page of the whole paper. Then you go on to something else, and your boss goes on to something else, and the agreement does not get monitored and enforced.

There has been a lot of talk over the last five or ten years about a better monitoring mechanism. I don't know whether there is a better monitoring mechanism, but it sure hasn't shown up in the results. There was a dramatic dropoff over the last six years in initiation of cases in the WTO on behalf of U.S. exporters by the United States Government. I don't understand it. I honestly don't understand why that has happened.

In terms of going forward on enforcement, the Chairman was asking earlier about how you craft a trade promotion authority extension, how you craft agreement over a particular trade agreement that comes before you. I think you are never going to be able to put everything on paper because it is always so forward-looking.

What we need here is a level of trust, which I think by implication every Member of this Committee has suggested maybe hasn't been existent over recent years, so that you are skeptical of what is going to happen once you give authority, and thus you are less inclined to extend it.

So, although I can't suggest a micro-managed approach for you, Congressman, I guess if I were in your shoes, I would want Ambassador Schwab and her deputies up here explaining their monitoring and enforcement program to you; explaining how they filter cases; explaining how they make strategic decisions on what they are going to do; and making some form of commitment to keep your staffs, both sets of staffs, apprised of how they are moving forward.

In game theory, people say you have got to go step by step. One side takes a nice gesture. The other side reciprocates. Then you can go to the next step. That is what I would suggest here.

Mr. ALDONAS. Congressman Tanner, if I could, I have been responsible for those enforcement programs at the Commerce Department. I have to admit I was frustrated for two reasons: One, the relatively unwillingness and sort of the risk-adverse nature of the folks that litigate our cases to take on tough issues, issues that really did break some china. I say that advisedly.

The other thing is that I was frustrated by the fact that a lot of American businesses don't come forward to present cases because they are concerned about market access. Well, my view has always been that is why people in the executive branch bear the responsibility of trying to develop these cases on their own.

That is what I was saying earlier. If you think about what we did in the civil rights era with an awful lot of litigation, it wasn't because there was some individual who was going to come and present the case. It was because we had lawyers at the Justice Department who were going to try and aggressively prosecute certain behaviors. It was consistent with our values.

Let me give you an example which I know will break some china. China still has a Hoku system which binds labor to specific enterprises. That reduces the cost of that labor because they could go elsewhere and find a higher wage. That is a subsidy.

What I would do is challenge the Administration to say, how are you going to take that on? Even if you lose that case in the WTO, what you are highlighting is one of the inadequacies of the rules. Wholly apart from negotiating labor rights, as Mr. Becerra was talking about, I think we have the tools to act more aggressively on these problems now, and we should do it.

It is not going to be American companies that are going to step up to do that. That really is the responsibility of the Administration.

Mr. SPERLING. Just one fact to support what Dan Tarullo had said. In the six years between 1995 and 2000, the Administration at that time brought 65 cases, an average of 11 per year. Since 2001, there have been only six cases bought, less than an average of three a year.

Part of the response to Congressman Becerra, I think, in terms of China was that one of the good things about maybe sometimes even having someone part of--whether we have a free trade agreement with them, having them part of the WTO, is that it does allow you to try to go after their poor practices, not in an ad hoc way but through a legal process.

I think one of the things that was too bad, I thought, was the American Federation of Labor - Congress of Industrial Organizations (AFL-CIO) brought a 301 case on March 16, 2004 with very compelling arguments of the labor abuses. Now, this was the AFL-CIO trying to go through the legal process.

I understand the Administration may have felt that actually putting sanctions on China may have been too divisive in light of all of our other foreign policy issues, but had we just accepted it, had they just accepted that and gone through the investigations, I think that is the kind of pressure you need to do to send the signals that we are not just going to sit back and, just because we have agreed to take you in without the kind of labor standards that we think fit our values, that we are going to at least apply constant pressure and shine a spotlight against those kind of abusive practices, including the one Grant just mentioned.

Chairman RANGEL. Mr. Doggett.

Mr. DOGGETT. Thank you, Mr. Chairman. Thanks to all of our witnesses. I think your testimony has been enlightening, and I think the queries that we have made indicate there really is an interest in a bipartisan agreement in developing a broader consensus to promote trade.

Though I heard the term "fresh air'' mentioned a number of times, and about clearing the air, one thing as I reviewed your written testimony earlier that I found omitted from it is any reference to the environment. That is not surprising because the environment has been largely omitted from any discussion in this Committee for the last many years, and largely omitted, of course, in any meaningful way--other than the ludicrous provisions that were included in CAFTA and some other provisions concerning the environment--from any trade agreements that were presented.

Mr. Sperling, I know that in response to a question that the Chairman asked earlier, you indicated that you think that there could be some room for improvement on the environment in Doha. I wondered if you might elaborate on what else might be done in that area, in your opinion.

Mr. SPERLING. Well, first of all, one can certainly seek to put environmental standards within the free trade agreements that we do. The question that I had looked at is at this late stage in Doha, what could still be done that, as I said, could be more of a down payment on a compact that would justify you giving them some additional time to try to negotiate it.

I actually--I have to, I guess, protect my sources. I went to some people internationally who were very, very knowledgeable about the state of play. I said, is there any way to try to bring more labor standards, which has never been done before, into the Doha Round? They said, I know it is well intentioned, but India, Brazil, it would just blow it up. That would be tantamount to blowing it up.

I said, what about environmental standards? They said, that is different. That is different. I think that if there was a push, there could be some willingness to make some progress. That was why I put that at the end of my testimony.

Again, I have to protect my source, but to say that it is a very knowledgeable person internationally, and a person heavily engaged and who wants an agreement and was willing to say they thought this was an area that the Administration could perhaps get some last-minute gains on.

Mr. DOGGETT. One of the areas that I have offered amendments in a couple of the recent trade agreements that this Committee has considered is in the area of multilateral environmental agreements, and specifically the convention on trade and endangered species.

Do those offer potential not only with reference to Doha but with reference to future trade agreements? Those would be agreements that the countries have already really signed onto and said they wanted to enforce, like the convention on trade and endangered species.

Dr. TARULLO. Congressman, you have identified a lingering problem, not just with the environment but with some other areas as well, where there are multilateral agreements that allow in some cases for restrictive activities by countries in order to enforce the terms of those agreements, which might be argued to be contraventions of a WTO obligation.

I think there has been a consensus--at least among academics, which is maybe why nothing has happened--but a consensus among academics for some time now that we need to clear that up. We need to acknowledge that the WTO should not even be considering sanctioning countries for taking action which is not only approved of, but in some cases required, under a multilateral environmental agreement.

That kind of discrete issue, I think, is probably the sort of thing that Gene has in mind in talking about something that can be done without disrupting what we hope are the end stages of the negotiations.

Mr. ALDONAS. Congressman, if I could add, I think that is absolutely right. Frankly, it is also true of an agreement on slave labor. You might be surprised to know that there is a labor exception inside the WTO. Labor is already there. It happens to be prison labor, and it is driven by competitive issues rather than values.

I have always puzzled over why we don't have a simple exception inside the WTO for blocking goods that are made with slave labor. That doesn't seem like a stretch in the kind of civilized society we want to see in the world. That is where I do think, whether it is that or on the environment, where we have reached that kind of multilateral agreement. We should be able to move forward.

I would say one other thing. I also think--and this is a very sensitive topic trade-wise--we have rules negotiations that are very sensitive because people are worried about making changes in the dumping laws, the countervailing duty laws, things that we would use.

Those negotiations hold the greatest hope to actually accomplish some good on the environment--eliminating fish subsidies, eliminating the over-forestation. All of that relates to subsidies that we can address inside the system. It comes home to roost in a very difficult area of the negotiations.

Mr. DOGGETT. Well, I am all for addressing them there. I think there are concerns as to whether that is sufficient to address either what Congressman Becerra referred to or what I am referring to in the environment. Particularly that is a concern in Peru and Colombia with logging, the amount of illegal logging that is going on.

A number of us have expressed our concern about that Ambassador Schwab, as we have our strong feeling that considering multilateral environmental agreements needs to be an important aspect of new trade agreements and really ought to be considered in renegotiation of some of the agreements that we have out there now.

With climate change as finally being recognized seven years late by President Bush, we need to be aware that the destruction of some natural resources that could occur through and be encouraged by increased trade is counterproductive.

I believe, Dr. Mishel, that your paper that you had attached did make reference to environmental standards that we often hear talk about labor and environmental standards. It is not surprising that most of the emphasis gets on labor because there are so many people that have been impacted and continue to be impacted. I think it is very important that we include the environmental side in this discussion as well.

Thank you, Mr. Chairman.

Chairman RANGEL. Mr. English.

Mr. ENGLISH. Thank you, Mr. Chairman, and thank you very much for sponsoring this excellent and very balanced discussion.

Mr. Sperling, I appreciate your coming back before the Committee. As always, you have given eloquent testimony, so eloquent that I am almost persuaded to believe that the Clinton Administration would have affirmatively accepted the AFL-CIO's complaint against China. I can't quite bring myself to that point, but certainly I believe you are sincere in raising the point.

On the question of core labor standards, Mr. Sperling, I think you have raised a very important point because I think there clearly has to be an interaction between our trade agreements and insisting on some sort of common standard. You reference, of course, the ILO.

I note that the United States is not a signatory to all of the ILO core labor standards. I wonder if that is going to be--with your interest in multilateralism, which I support to some degree, is the ILO going to be the source of these standards? If so, should we be held to being sanctioned if we don't meet all of the ILO standards ourselves? What would be your comment?

Mr. SPERLING. Well, when we, for example, were pushing for the Section 182, which was the ILO standard that we did agree to on the most abusive forms of child labor, we did have to look at some of our own laws. Some of them were touchy, I have to say, because some of them had to deal with fairly young people working in agriculture situations.

I do think that when you are part of this, you have to at least look at your own situation as well. Yes, one of the problems, of course, you always have when you are pushing another country on their labor standards is they come back to you and start saying, not everything is so terrific in your country as well.

Mr. ENGLISH. Sure. So, should they be able to sanction us if, for example, we don't allow management employees to automatically join a union? Should we be sanctionable if, for example, we don't allow a right to strike to some public employees?

Mr. SPERLING. I would not know which would be at the level of sanctions. I do think that when you are agreeing to global standards, when you are signing an agreement, when you are part of the WTO, you obviously have to live by those rules.

My guess is that we in the United States do not have things that would be at the level of being sanctioned. I do think that--what I do want to say about with labor standards is sometimes I think we want them to be enforced so much, and we want to make sure that there are not--intellectual property is treated as a first class issue, and labor standards is treated as a second class issue--

Mr. ENGLISH. Sure.

Mr. SPERLING.--that the message we give is that we want to be somehow punitive to developing countries instead of, I think, trying to have that as a backdrop but then figure out the ways that we can work together.

Mr. ENGLISH. I accept your point on messaging. I guess my point is that when you get into the details and potentially unintended consequences, it is far more complicated than the rhetoric suggests.

Now, Mr. Aldonas, I am very grateful to you for your testimony, and also for the fact that as undersecretary, you were part of the Organization for Economic Cooperation and Development (OECD) negotiations. As past Chairman of the steel caucus, I want to thank you for your efforts, albeit not successful, in bringing the parties to the table to try to come up with a way of rationalizing our over-capacity in steel globally.

Since the OECD negotiation broke down, China has dramatically, and on a scale we have never seen in the history of the world, increased their capacity to produce steel.

One, does this cause you concern?

Two, recognizing your criticism, which I don't fully share, of this Administration's attempts to provide a steel policy, do you see this as a basis for future problems that we should be anticipating today?

Finally, what does this say, given Mr. McGraw's testimony, somewhat critical of our domestic trade remedy laws--what does this say about the need for us to consider strengthening our domestic trade remedy laws and updating them to recognize the new global realities? Mr. Aldonas.

Mr. ALDONAS. I do think we actually have to take a look at the remedies and update them to live with the new global realities. I think that also means we have to be concerned about the knock on effects.

To your basic point, Congressman, I think you are absolutely right about what is going on in China. In terms of the steel capacity, there are two fundamental things. One is you can get a loan that you don't have to repay from a State-owned bank to finance the addition of capacity. You can get more subsidies at the provincial level to keep that in place. The guys who installed the old capacity don't have to repay their loan, they can keep that old capacity in place. Even though it is environmentally unsound, it adds capacity.

We don't need much of a downturn in the Chinese economy for all that steel to slop into the world economy. I think that we need to do--rather waiting for that moment, we need to be aggressive with the tools that we have inside the WTO, particularly the subsidies agreement, to underscore for the Chinese that these distortions are going to create problems for us.

I would rather see us act aggressively now on that front than wait until our industry suffers, frankly. I also think it is healthier to even be using the trade rules that we have, whether it is countervailing duties or anti-dumping, as a way of trying to attack problems and solve them.

It is a little bit like using the anti-dumping agreement in cement to try and encourage an agreement that would clean up a lot of unfair trade practices rather than simply leaving it in place. That is the sort of flexibility that I wish we had under the dumping laws, to try and encourage changes in behavior rather than simply leaving the duties in place.

That is the kind of updates we need to be thinking about as we go forward. The issue of steel in China, I am just waiting to see what is going to happen because frankly, they are adding more capacity than we have capacity in this country. It is going to happen.

Mr. ENGLISH. We are all waiting, Mr. Aldonas. I thank you, Mr. Chairman.

Chairman RANGEL. Ms. Tubbs Jones.

Ms. TUBBS JONES. Mr. Chairman, thank you very much, and thank you for your leadership in giving us an opportunity to have a hearing such as this.

Most everybody knows I come from Ohio, and in Ohio we had significant job loss between 2000 and 2005, in the city of Cleveland alone, about 60,000 jobs. In one of my cities within my congressional district, I currently have a 13.6 unemployment rate. That 4 percent national stuff, I don't know where that came from.

What I want to focus in on, and I don't know because I was out of the room earlier, if anybody has talked about trade adjustment assistance and how do we in the course of our discussion about trade see that people in Ohio, other than the people who have companies that are involved in export business--but the people working on the street don't want to hear anything about trade because they can't seem to understand how it is going to help them improve their lot.

I want to start with Mr. Sperling, and then anyone else who wants to answer the question. Take me back to Ohio and tell me what I can say to my constituents about how we make trade work for American workers in states like Ohio.

Mr. SPERLING. I think probably the single toughest thing for anybody is to have to talk about this kind of larger concept when you are dealing with people who are suffering, feeling anxiety, and most importantly, when you get a kind of downward spiral in a community where it is very difficult, having had plant closures, et cetera, to get the economic activity. I think it is the single most difficult thing.

I think there are a couple things I would say. One, and I put this out as an idea, Mr. Chairman, is that everything that we talk about in adjustment is after you have already lost your job. We don't give many of you any ideas when you feel the threat coming.

Perhaps we need to think more about what kind of preemptive policies we can have so when a community is under threat, we don't just say, well, wait until you have lost your job, or wait till this trade agreement--trade enforcement happens, and then maybe we will have some assistance afterwards.

Perhaps we have to find ways of providing more assistance, more of the kind of empowerment zone approach that Chairman Rangel has worked on, to communities that are being--that are on the verge of the downward spiral so that we can stop before them.

I think that on the adjustment side--we have talked about this some, and I think one of the good suggestions that has been made by the two leaders here is that you need to broaden it beyond trade so that everybody is helped.

I also think, look, there is probably not 8,000 people in the United States of America who, if they lost a job, even know exactly where to go or what the difference between dislocated worker training is and NAFTA FTA and FTA. How are you going to affect people's anxiety? People don't even know where to go. The benefits are staggered a little.

I think we have to have a one-stop system. I think it has to have broader help from helping people not lose their house to wage insurance to, most importantly, universal health insurance. I think that would do a lot to help people, at least in this difficult situation. That is one.

Two, as I said, more preemptive policies. Three--you know this as well as I do--your folks don't want to hear just about what you are going to say once they have lost a job. You need a real active, strong strategy that shows that you are fighting to create jobs and preserve jobs in non-protectionist ways.

I think if you don't have that active component, I am not sure people are going to listen to just what you are going to do for them after they lose their job.

Ms. TUBBS JONES. Who else is anxious to help me out?

Mr. MEIER. I will.

Ms. TUBBS JONES. Mr. Meier, Ohio.

Mr. MEIER. I live in Ohio. We have those same issues.

Ms. TUBBS JONES. About 90 miles from me.

Mr. MEIER. Right. We have those same issues in northwest Ohio.

My comments earlier relative to assistance, it is part of the equation. It is not the entirety of the answer. Let me walk you through a typical employee at my company.

Ms. TUBBS JONES. Okay. Now, wait a minute. I may not have enough time to walk through a typical employee, so you want to make it quick.

Mr. MEIER. It will take 30 seconds.

Ms. TUBBS JONES. Go ahead.

Mr. MEIER. It will take seconds.

Ms. TUBBS JONES. All right.

Mr. MEIER. Twenty years with the company, he loses his job. What pension he thought he was building has quickly evaporated on him. He will not immediately replace that no matter where he goes or how he is retrained.

That is what they worry about. That is really what they are worrying about. I think to the extent that the Committee, and as we all interface and continue to hear each other's opinions going forward, can be proactive in making sure that, as Congress has in the past viewed certain industries as being import-sensitive, and history records that, that perhaps we identify those pockets of the country and those industries where, as we negotiate the WTO Doha Round, our negotiators are increasingly sensitive of what are the total aspects and attributes to give some of these companies a chance.

I am not a proponent of no duty elimination. Duties will be reduced. We recognize that. We can negotiate with our labor counterparts on our business issues, but we cannot negotiate when unilaterally things befall us.

Ms. TUBBS JONES. Mr. Meier, thank you. I am out of time, and I will tell Marcy Kaptur that you said hello. Mr. Chairman, thank you.

Mr. MEIER. Thank you.

Chairman RANGEL. Mr. Weller.

Mr. WELLER. Thank you, Mr. Chairman, and thank you for convening this hearing today.

Economically, the State of Illinois where I come from is an old State. Been around a long time. The communities I represent, Joliet and others, are communities that look at how they can grow their economy. They face the challenges of high energy costs that we have in America compared to the rest of the world.

They also recognize that 4 percent of the globe's population is represented by the people of the United States. We are 300 million people. If we are going to grow our economy, we have to figure out a way to create jobs here at home and sell products overseas.

I have been one of those who has been disappointed that we have been unable to make progress on the multilateral level over the last decade. At the same time, I believe we have made progress on the bilateral level with some pretty good trade agreements.

In Illinois, one out of six manufacturing workers is totally dependent on exports. Forty-two percent of the agricultural revenues of the State of Illinois result from exports. So, clearly, exports are really the future for the part of Illinois that I represent.

November of this year, exports are at a record high, $125 billion for that month. So, clearly, we have benefitted from expanded trade opportunities, from the reduced trade barriers, as a result of the bilateral agreements.

I listen to some of my colleagues. They talk about the need for trade to be a two-way street. I think of the Dominican Republic-Central American Free Trade Agreement we voted on this past year, where essentially, prior to the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA), trade was a one-way street with those countries.

With great bipartisan fanfare, we created the Caribbean Basin Initiative back in the 1980s to keep the Communists out of Central America. It worked. Those countries had the opportunity to penetrate our market and sell to our market with essentially no tariff barriers on their manufacturing goods, no tariff barriers on their agricultural products.

Products made in Joliet, Illinois faced tariff barriers. Agricultural products in Illinois face barriers up to 40 percent. Caterpillar, my biggest manufacturer, which is a company which is a prime example of a U.S. company that very aggressively has pursued the opportunities that these agreements have resulted in, faced a 12 percent tariff on a bulldozer made in Joliet, Illinois. So, clearly DR-CAFTA eliminated a one-way trade and made it a two-way so that Illinois workers benefitted from the opportunity to sell in those markets.

Peru is one of the trade agreements we have before us. Peru, Colombia, the other Andean countries, they enjoy the Andean trade preferences that have passed with bipartisan support, unconditionally, which operate essentially in the same way as the Caribbean Basin Initiative. Their products enter the United States essentially duty-free, but our products suffer high tariffs both in agriculture and manufactured goods.

In Decatur, Illinois and Joliet, Illinois, the big mining trucks, those gigantic vehicles that cost about a million dollars that are used for mining in Peru, suffer a $120,000 tariff because of the current tariff structure. It is almost to Caterpillar's advantage to make that product in Peru and then sell it to the United States because it wouldn't face that tariff barrier when they brought that manufactured good here to this market.

So, clearly, as we look at the bilateral agreements that are before this Congress, the Peru trade agreement is similar to DR-CAFTA in that it eliminates the one-way benefits because it essentially eliminates all the tariff barriers. That $120,000 tariff on that mining truck is gone, which means that U.S.-made, Illinois-made construction equipment will be competitive with the Japanese and our Asian competition. We benefit from that.

Now, Mr. McGraw, some on the left have argued that we need a strategic pause in trade, that we should just essentially shut down any effort to expand additional trade agreements, that we no longer pursue reducing these trade barriers that are suffered by U.S. manufacturers and U.S. farmers.

What are the consequences if agreements like Peru, which would open up a new market for Caterpillar workers--who happen to be machinists and United Auto Workers members in my district, 6,000 of them--what would be the consequences for U.S. manufacturers and U.S. farmers and producers if we initiated this so-called strategic pause to shut down expanded trade efforts?

Mr. MCGRAW. Well, Congressman, I think there is no such thing as a pause in economic development. The world will continue to grow. It will continue to change. It will continue to be challenged. You are either dealing with it or you are not dealing with it.

We deal with various countries. They all are in varying degrees of development. There are times when a country is in such dire shape that it is pure aid that is required to help support their infrastructure in order for them to get started. Maybe it is capacity-building and technical assistance to be able to do that, to help them get to a position where they can start to become more competitive.

We can start to talk about preference agreements. Therefore, we will have preference agreements. We will have aid agreements. We will have all sorts of things, depending upon that country's development. We have come to a time with Peru where it is time to pass a free trade agreement to make sure that the benefits that they enjoy are also the benefits that we enjoy as well.

So, I believe that the time in their development has come that a free trade agreement makes a great deal of sense.

Mr. WELLER. Thank you, Mr. Chairman. I see the red light is on. So, I appreciate your generous allotment of time. Thank you.

Chairman RANGEL. Mr. Larson.

Mr. LARSON. Thank you, Mr. Chairman. Let me join with the other Members in expressing the sentiments to you and Mr. McCrery for the panelists that you have assembled today. It has been very encouraging listening to what they have to say.

Let me further thank Mr. McGraw as well for recognizing United Technologies Corporation and George David, one of the most enlightened CEOs in America, and for the educational training that they provide. Let me command you and your company as well for that most desirous of programs for our workforce.

Let me further add with respect to globalization, I appreciated Mr. Aldonas' comment that in your testimony, you define what it is not in saying that it is clearly not a verb. It is a noun. It is not this all-encompassing, overwhelming tide. It is a series of consequences. It is the consequences that I would like to get to and address.

First and foremost, with respect to a lot of the issues that have been discussed, we talk in terms of tools and education and assistance and adjustment and retraining. Those ring pretty hollow at Augie & Ray's in East Hartford. People are interested in a job.

How would the panel feel about having a permanent infrastructure system in the United States like a permanent Works Progress Administration or a civilian conservation corps where there was always a guarantee of jobs to keep the circular flow of goods and services in this country and keeping benefits intact, number one, similar to something I believe Mr. Rangel proposed, like where you could couple both education, by making sure our school systems were constantly upgraded and technologically fit in a manner in which they could compete in a global economy.

Second, in some of your testimony, Mr. Tarullo and Mr. Sperling, of course, with regard to the social compact, I believe an infrastructure program would be part of a social compact with the people. I believe Mr. Tarullo says it is broken or near broken, or the public feels that it is broken. Mr. Sperling provides some insight and some clear objectives as to how to get there.

The point being this: A, do you feel that it is--that the system is broken? B, if it is, what is this new compact, or do we need a new basic agreement with people fundamentally so that their health care, their education, and their ability to have a job is something that they can count on? That would encompass, of course, a number of the issues with regard to pension security that you have raised in this discussion as well.

To get there, assuming that a lot of you are going to be in agreement with that, how would you pay for it? Should the United States, should the country, be looking at--and particularly, should the Roundtable be looking at, in this era of globalization, global transactions that currently don't come into our domain and revenue that doesn't come into the United States that could go towards it? Should we be considered value-added taxes? Should we be looking at transactions in order to accomplish some of the end goals of health care, education, and jobs?

Dr. TARULLO. Congressman, let me take just a little piece of that question because I know Gene is eloquent on the larger issue of the social compact. I just want to address very quickly your infrastructure point.

That has fallen off the table a bit when people give us the litany of what we need to do in order to enhance productivity. I think it needs to be back on the table. There are two kinds of infrastructure at issue.

One, of course, is dissemination of broadband technologies, some of the modern IT technologies, where we still need work in getting them to all parts of the country and accessible to all people so that they can participate in the increased productivity from those technologies.

Old-style infrastructure--bridges, roads, seaports, airport capacities, the things that actually allow us to get goods and services and people in and out of the country--

Mr. LARSON. It is also tied into our national security.

Dr. TARULLO. They are tied to the national security and to our national productivity. Any of us who lives on the East Coast certainly knows that in our major cities, a lot of the infrastructure is in serious need of upgrading, and in some cases full replacement.

So, I think it surely would provide good jobs. However, it would provide good jobs in pursuit of enhancing productivity for everyone in the country.

Mr. SPERLING. Well, I have too much to say on this so I will try not to say as much.

I just would say that I do think that people have a sense, and should have a sense if they work hard, if they get educated, that there is a degree of economic security they have in their lives. I think that is being shaken right now, and globalization is part of it.

A lot of the remedies are at our disposal. I believe if people felt that they had health care regardless, even when they lost their job, that they--wage insurance is a way to provide some of the protection for the falls, that there was the kind of unified, simple training system that I think the Chairman and Congressman McCrery are talking about--what that affects? It affects dignity. It affects the dignity of people not feeling that their economic dignity is threatened by losing jobs. That is an important part of the compact.

What you are suggesting on the jobs and infrastructure, I don't know exactly what the mix is. I think there has got to be something a lot more active. I think people have to think that we are less passive, whether it is encouraging--there are probably a lot of twofers, like energy innovation, where we can do a lot to both help us have an alternative energy future and create jobs.

Then the final thing I just want to say, not going into every element, is just like we can't have the yes or no on trade/not trade, I think we have to be careful about not having the yes or no on spending/not spending.

Some of the things we are talking about would cost more money. They are done in the purpose of encouraging an open, global economic innovation economy. You have bankruptcy--do you know what bankruptcy laws do in our country? It lets someone know they can go out and be an entrepreneur and they can try to create a job, and if they fail, they are not going to debt prison. So, they are willing to take more risks.

When you provide a roader safety net and more opportunities to create jobs and people to have pensions, that is not like just government spending. That is providing the foundation for people to take more risk and to accept an economy that might be more innovation-oriented and more dynamic.

Mr. LARSON. Thank you, Mr. Chairman.

Chairman RANGEL. Mr. Lewis.

Mr. LEWIS OF KENTUCKY. Thank you, Mr. Chairman.

I would like to go back. Mr. Neal had a statement and a question for Mr. McGraw earlier. He was telling about a community within his district that a company shut down and no hope. Workers couldn't move, and so there they were, stuck.

That hasn't been the case in the district that I serve. There is a small community, Campbellsville, that the town is probably a population of 10,000. The county is something like 22,000. From the fall of 1997 until the summer of 1998, Fruit of the Loom permanently laid off its entire Taylor County workforce. As a result, approximately 3200 people in a county of 22,000, as I just mentioned, were unemployed.

The layoffs had a ripple effect throughout the region, and unemployment hit 30 percent. It looked pretty devastating. Due to the efforts of an active and focused economic development team, the university that was truly part of the community and aid through trade adjustment assistance, Taylor County created 13 new companies to that community within a period of something like two or three years.

They didn't look at their glass as being half empty. They looked at it as being half full. They had 3200 workers who had gotten up every day for years and gone to work and provided a benefit for Fruit of the Loom. The new employment opportunities came from growing local companies, large private companies, a Fortune 500 company, the area's first Japanese facility, and the first Brazilian investment in Kentucky. Insourcing. They didn't just look across the country. They looked across the entire globe for help.

The comeback there is just truly amazing. Through the trade adjustment assistance, and our Ranking Member, Mr. Herger, came down and visited a couple years ago that community and saw firsthand what they had been able to achieve.

My question to Mr. McGraw and maybe anyone else who would want to answer: How common is that, for communities to--and by the way, Campbellsville, the infrastructure there is certainly challenged. There are no four-lane highways into Campbellsville. The highway system is pretty limited.

So, they were kind of in a tough situation. They were able to succeed, and no one had to move. They brought new companies in. So, I am just asking, how common would that be across the country? That is what we are told about trade, that we may lose some unskilled, low-paying jobs, but the opportunities for new, higher-skilled, higher-paying jobs will come along. So, how common is it?

Mr. MCGRAW. Well, you are talking about leadership, Congressman. It sounds like a very good example of how it can work and work very well. It has to do with what the Chairman is talking about, too, in terms of bipartisanship. When business and the local community work together, when the State governments and the municipalities work together and find ways to get things done, they can make progress.

In your very example and the example that I used about Dubuque, Iowa--the problem in Dubuque, now that they have built it up and they are very excited about attracting other businesses to come there, is that they have got virtually zero unemployment.

So, what we have done with them, as part of a process because in building this building, we are going to need more employees to grow and develop, we have worked with the University of Dubuque. We are getting them to get more aggressive in being able to attract people from Chicago and elsewhere to come there. We can give the intern jobs, and we can give all of that.

So, it is a sense of community, that everybody is involved and it is coordinated to be able to get things done. It can work.

Mr. LEWIS OF KENTUCKY. Yes. By the way, Kentucky is the fourth largest automobile-producing State now in the union. A lot of those jobs are insourced jobs. We have 10,000 jobs provided by Toyota, and the component parts industry is tremendous throughout the State and throughout the district.

So, we have brought a lot more jobs in than we have lost through outsourcing. So, for Kentucky, this thing is working.

Mr. MCGRAW. Congressman, I would also say--to your point, too, Gene--is that where you have practices and policies that encourage innovation and creativity and risk-taking, where you have certain support networks like research and development tax credits and the like, you are putting people in a position to be able to succeed.

Mr. LEWIS OF KENTUCKY. Yes. Thank you.

Chairman RANGEL. Mr. Pascrell.

Mr. PASCRELL. Thank you, Mr. Chairman. I appreciated the testimony that we have heard from our witnesses. I hear less of a plea for fair trade. More what I am hearing is honest trade, which I think is an important distinction.

I appreciate the framework moving forward for trade promotion authority, that there appears to be a broad willingness to make some adjustments. I personally just was stunned that President Bush rejected the appeal that some of us made to him personally to not sign a trade promotion authority bill that didn't have 250 votes.

If he would have been willing to say, don't give me a 218 piece of partisan goofiness, we wouldn't be having part of this discussion today, I believe. Deeply disappointing to me, but I feel, with the leadership of our Chair and Ranking Member and the spirit that you are hearing on the Committee, that maybe we can move back from that mindless partisanship in trade.

I am personally interested in some things that we may be able to do, and your reaction. We have focused a lot on manufacturing jobs. People are concerned about the loss of manufacturing jobs. I certainly am in my State.

My impression is that manufacturing jobs are in decline everywhere in the world, that China has lost significant manufacturing jobs as they started to modernize some of the State-owned industries. We are starting to see modern technological advances, as I visited developing countries around the world, where yes, they are having more manufacturing jobs, but they are displacing things in older industries.

So, I am wondering if there are a couple of things we might be able to focus on to jump-start. One, the reference that has been made here to the Doha Round. You have mentioned--I think each of you referenced some of the problems we have got with our antiquated agricultural policies, where we are penalizing American consumers, taxpayers, and apropos my friend Mr. Doggett's comment, the environment because of really agricultural policies that may have worked for the 1940s but no longer work today for the majority of American farmers.

Is it possible that we might be able to take some unilateral action to try and move forward on this when we have a farm bill that is up for reauthorization, that the majority of the benefits now flow to a handful of states. Something like 80 percent of the benefits flow to 22 congressional districts, with the distortions and the hypocrisy.

I am curious if any of the panel has some thoughts about maybe jumping on the farm bill that we will be working on now and trying to weave this into something where the United States might exercise a little leadership that benefits everybody.

Dr. TARULLO. Congressman, I don't purport to be an expert on all details of agricultural policy. I have learned enough to know how complicated it is.

I do have a trade perspective on your question, which is the following: If, as appears likely, we are going to be making changes in our agricultural policies, both to ensure that benefits are actually flowing to family farmers and to deal with some of the environmental issues that you alluded to, it seems to me that we would do best if we could get something for those changes--that is, to get some other countries to change some of their policies at the same time.

That is why many of us have hoped that there was a way to move the farm bill and Doha in parallel so that they could build off one another. That is imperiled right now, of course, with the problems in Doha and the farm bill coming down the line.

So, it may be you will be thrown back on the course of action you asked about. I think it would be best, it would be preferable, if we could wrap those things together. If you are going to make some changes, let's negotiate for Europe and others to make some changes at the same time.

Mr. ALDONAS. Could I add something to that? I think you are exactly right. We need to untie our hands at the negotiating table. They are tied right now by agricultural policies that pay people to produce things as a model of rural economic development.

We would be far better trying to go with a distributed network that Dan was talking about to provide different sorts of economic opportunities in rural America than simply continuing to pay people to produce commodities. Let's remember, communities are the most sensitive and the most risky things to invest your life in because of the vicissitudes of weather, energy prices, all the other things that go with it.

Most of the people where I am from in Minnesota don't expect that the next generation is going to stay on the farm. In fact, what we need to be thinking about is how we achieve that because we really would untie our hands in terms of the broader trade effort.

I want to--I am sorry if I--

Mr. PASCRELL. Well, I see my time has expired. Let me just say--I don't want to impose on the patience of the Chairman, and there are other Members here--I would welcome, if there are any thoughts that any of you may have to toss over the transom. This would be something that I would find a great help.

Mr. Chairman, I noted the reference to infrastructure. I am hopeful that our Committee at some point, using its vast jurisdiction, can look at the opportunities to do a little bit of investment in infrastructure to help provide some other elements of this grand bargain that would both improve the flow of international trade and provide high value, family wage jobs that might have some income security for communities across the country.

Thank you, sir.

Chairman RANGEL. Mr. Brady.

Mr. BRADY. Thank you, Chairman, for holding this important hearing. I come from Texas, the largest exporting State in the Nation, and NAFTA has created enough new manufacturing jobs to fill every seat in the Astrodome twice over. We have seen nearly a billion dollars of clean and water projects along our border we would never have seen without that trade agreement.

It seems to me the principle of free trade is this: If Americans build a better mousetrap, we ought to be able to sell it anywhere in the world without discrimination. If someone else builds a better mousetrap, we ought to be able to buy it for our families and for our businesses.

The choices we have from that principle is one of the reasons that families in America have, I think so much greater purchasing power, enough that the average family goes to the grocery store once a month for free in this country because of the savings of trade--cheaper telephones, cheaper groceries, cheaper television sets, all that goes with it.

I think our problem is how inconsistent we apply trade policy in this Congress. For example, labor and environment are truly important issues we need to resolve, yet in one way, trade preferences, like the Caribbean Basin Initiative and the African Growth and Opportunity Act, labor environmental standards are nowhere to be found.

Yet when we open two-way trade and say it is our time to sell to other countries, to other markets, all of a sudden we erect every barrier that we can imagine. It seems to me that we ought to be able to find a third way, a common ground, standards on those issues, and apply them consistently across our trade agreements.

We give a lot of lip service to fair trade, but in my view--I have not been in Congress as long as Chairman Rangel and other senior Members here, but what I have learned is when someone claims they are for fair trade, what they mean it is fair for their wallet and no one else's, fair for their communities and not yours.

It seems to me that when you have special interests in Washington who basically use fair trade as a veneer to limit what our families can buy or dictate what they have to pay, that we lose.

I think our fair trade focus should be on vigorous enforcement of fair trade rules, the things we come together on, as diverse as this panel is, on what we agree are fair rules, and then we don't cede an inch on enforcing them.

Finally, we talk about trade deficit and encouraging U.S. manufacturing jobs. Just last week in the House we voted to essentially remove American energy workers from the tax code and tax them as foreign workers and foreign companies. We actually discouraged American investment in the American energy industry, and claim that to be important to America's energy security. It makes no sense from a trade perspective, a jobs perspective, or an investment perspective.

It seems to me, and I will finish with this, the prime issue facing Congress--and Chairman, the reason you called this hearing--is what are we going to do as a Congress to extend TPA? Will we pursue it or not?

I heard Mr. Sperling, very respected, talk about a suggestion that we do a limited TPA for Doha and not for the rest. It seems to me just the opposite is the better solution.

Doha is the least productive of our trade pursuits. Our individual agreements have been extremely productive. Our exports are doubling in many of those markets. Those which we have trade agreements in represent a small part of the world economy, 7 percent, but they are half of all of our sales overseas, incredibly productive.

It seems to me that rather than a buy losers/sell winners strategy on trade, it ought to be the investment advice: Don't put all our eggs into the Doha basket, but continue to diversify. Pursue that and diversify the winning ones that are actually helping day by day strategically in sales for Americans today.

So, the question I have for the panel, and I have almost run out of time, as usual, is that at a time where when our American companies go out to compete overseas, three times the world is tilted against us in the rules. The trade agreements we face, three times the world are tilted against us. We don't have that level playing field.

How does unilaterally dropping our negotiating power help create a more level playing field for American companies? How is ceding the trade field by not pursuing an aggressive TPA, how does that open more markets and create fair rules? In other words, how does walking off the field help us win the game?

I open it up to any panelist to respond.

Dr. TARULLO. Congressman, I certainly wouldn't advise--

Chairman RANGEL. While the gentleman's time has expired, since you started to respond, I will yield to you for a response.

Dr. TARULLO. Thank you, Mr. Chairman. Just very briefly, then, Congressman, I don't think most of us have any interest in walking off the field. Personally, I think what we need is a strategy. You want to be on the field. You want to have a strategy.

The selection of whom you negotiate with, the selection of what you negotiate, what the terms of those negotiations are and, finally, the assurance that at the end of the day the benefits that we garner are going to be spread fairly across everyone in America, I think those are the considerations that go into a good strategy.

So, I at least would agree with you. We don't want to be just standing on the sidelines. I think we want to have a pretty good sense of what we are doing.

Chairman RANGEL. Thank you.

Mr. Pascrell.

Mr. PASCRELL. Thank you, Mr. Chairman. Mr. Chairman, thank you for the breath of fresh air on this subject. Particularly I want to thank all of those who have come here to be presenters today.

You are addressing a broken branch of government. If we read carefully Article 1, Section 8, under the war powers and under commerce, who has that responsibility, you are looking at them. If you look back at what has happened over the past--not only in this Administration but in the past Administration, to a lesser degree, we have given up our will to in any manner, shape, or form shape our trade agreements with other countries.

I think that this is dangerous. I think it creates a clear and present danger to two things, and that is the global strategy that we need in order to bring about a better chance at world peace; and second, our own homeland security.

So, this is a very critical issue, as you well know. I am concerned about why folks sent me down to Washington. They sent me there ten years ago so that I could fulfill the obligations of the Constitution of the United States. I raise my hand every two years to do that.

Do you think that under the commerce powers given to the legislature of our forefathers and with the support of the Federalist Papers, do you think that we have--Mr. Mishel, do you think that we have incorporated and complemented and worked to make sure that we have fulfilled those constitutional obligations? Particularly in the area today of commerce, and specifically now trade. Very short answer, please.

Dr. Mishel. No. I think it is important for the representatives of the American people to shape the way that we are globalizing, and rather than to give up your rights to in fact provide a serious input into what is going on.

The measure of our success is not exports unless we also take into account imports. That is like reporting Yankees 9 and another team, we don't even report their score.  Imports are far larger than our exports, and we need to recognize that we have dug ourselves a very deep hole.

Mr. PASCRELL. Gene, are you--where did Gene go? Okay.

Mr. Tarullo, do you believe that this has been a docile Congress over the last ten years, particularly with regard to trade and globalization? Or do you think that the Congress has met its obligations?

Dr. TARULLO. Congressman, one thing I have learned in my time in Washington is not to characterize Congress as a whole. I think you can only characterize output. What I see today is an interest on the part of all of you to try to come together and reach an agreement among yourselves and then, importantly, with the Administration on how to go forward.

I return to what I said in an earlier response. There has got to be trust between the Congress and the Administration. I don't think that has existed. I don't think I am telling any secrets out of school to say I know it hasn't existed between the Democrats in Congress and the Administration on this and many other issues.

I think now, with last November's elections, with the President's indication that he is interested in working in a bipartisan fashion, with the Chairman and the Ranking Member setting the tone that they have, now is the time to put aside what may or may not have happened in the past--for you to figure out what kind of trade agreements you want and you are willing to vote through, to communicate that to the Administration, and for them to have the good faith to proceed with whatever authority you give them to negotiate those agreements.

Mr. PASCRELL. What I have heard so far, Mr. McGraw, today concerns me to this degree. You have all spoken about what we should do when people are displaced out of their jobs. Mr. Sperling addressed the issue, well, maybe we should anticipate some things happening.

That has been the whole problem. We are talking about whether we can get assistance to the people who have been displaced or laid off. We are talking about people 40, 50 years of age who have a very specific frame of life, a standard of living. Then they lose 25, 30 percent of their income capabilities, and we have serious problems not only in cities but in many suburban areas around the country where you have manufacturers.

We have no manufacturing policy in this country. We have none. We keep on fighting over the--re-fighting and revisiting Hamilton v. Jefferson. That battle was settled. We decided we are going to have a multi-faceted economy even though we are losing jobs today.

Mr. McGraw, what do we do before the situation happens? What do we do before folks are displaced in order to bolster that infrastructure we call manufacturing? We have lost that infrastructure, and God forbid if a danger, a real danger, comes to this Nation, I don't know who is going to produce our armor.

How would you respond to that?

Mr. MCGRAW. Well, Congressman, market factors and competitive thrusts and all of those kind of things are going to take place on a business. A business doesn't get into trouble overnight. A business has to anticipate what it is about and what it is doing and how it goes about doing it.

If you are on top of that, then you are obviously developing preventative kinds of measures, especially through education, to make sure that people are developing those kinds of skills.

One of the things that I was talking about in terms of business best practices is that we make sure our employees are obviously going into education programs and the like, and are continuing to develop those kinds of skills.

Mr. PASCRELL. Thank you. Mr. Chairman, can I just have half a second?

Chairman RANGEL. You can have it.

Mr. PASCRELL. Okay. Mr. Meier, I grieve, and I am in sorrow when I hear your situation because I have a situation right outside of my district, a Marcal Paper Company, which has attempted in every manner, shape, or form to live by environmental rules, labor rules, the whole thing. Can't keep up with the competition. One of the largest papers companies in the United States of America. I know exactly what you are talking about, and the frustration on those workers.

Mr. Chairman, this is something we need to address as a full body here because it increases the number of people who cannot hold onto their homes, who lose their job security, their retirement security which follows. It is at the heartbeat.

What has happened to manufacturing in this country is sinful and immoral. I think we need to do something about it. You have friends here, and we need to do something about it together. I thank you for your story today.

Thank you, Mr. Chairman.

Chairman RANGEL. Mr. Ryan.

Mr. RYAN. First of all, I want to thank the Chairman for holding this hearing. I think this is a great opportunity for all of us to expand our dialogue on trade issues and to find a way to move together on a bipartisan basis.

This has been a very enlightening conversation with all the different panelists we have had. As the Chairman knows, I have enjoyed working with him on these issues, and I am pleased we have made great progress while working together, especially on the labor front. Perhaps that is a window of opportunity to move forward with.

In fact, during the last session of Congress--I just wanted to point out a couple points before I get to my question--we worked together quite extensively on trade agreements that we completed in the Middle East region. For example, with the Chairman's help, we passed the free trade agreement through the House with Bahrain that included numerous commitments to strengthen Bahrain's labor laws.

In addition to strengthening their labor compliance regime and better educating workers on their rights, Bahrain committed to introduce education in its parliament to accomplish these five things: provide mandatory reinstatement for workers dismissed for trade union activities; introduce strong penalties for anti-union discrimination; make a public statement regarding procedures for strikes, and engage in consultations should those procedures be amended; allow more than one federation; and allow more than one union per enterprise.

Bahrain has followed through with all of these commitments. Not only did they introduce but they passed four of the five laws I just mentioned. In fact, the only reason that not all of these five laws were passed was the fifth one was actually opposed by Bahrain's labor unions.

So, now these unions are sitting down at the negotiating table trying to work things out. That is significant progress. So, we have shown in the past, just a year ago, that we have been able to come together as Republicans and Democrats around the issue of labor to get something done and to make a difference and to get a free trade agreement. We did this because we had TPA.

As for Oman, we also worked together to help move forward on their labor laws. In conjunction with the FTA, they ratified two ILO conventions, a United Nations protocol, and committed to making eight reforms to its labor laws to meet the concerns that the Democrats on this Committee had raised.

So, today Oman has made substantial progress that we can unequivocally say has made great progress on labor. So, I am very hopeful that this progress can continue. However, if we do not pass extension of TPA, which expires in June, we are not going to be able to have similar successes like we had today.

So, we need to work together on this. We need to find a way that we can pass TPA with labor standards that will provide a template for continued making progress with our future trading partners like we did in Oman, like we did in Bahrain.

There are just a few questions I have and a couple of points that I think we are going to have to consider. We are going to have to have a talk about this in this Committee. That is, we need to be careful.

Yes?

Chairman RANGEL. When you are talking about "we,'' who are you talking about on the Republican side, so that I can get my thinking more clear. Who are the "we'' that was cooperating with the minority? If that worked, I would like to continue that. I can't for the life of me, with the exception of you--

Mr. RYAN. I was going to say, you and I had a lot of--we talked dozens of times about these agreements. I am a Republican.

Chairman RANGEL. I yield back.

Mr. RYAN. Okay. USTR as well, obviously, was deeply involved in dialogue with you.

Chairman RANGEL. I never really wanted to look at her as a Republican. Yes, you can continue.

Mr. RYAN. Okay. Thank you. Reclaiming the little time I have.

Chairman RANGEL. I will give you back the time you lost.

Mr. RYAN. Thank you, Chairman.

The concern is this: If we don't properly craft this, we may properly leave, subject to dispute resolution and trade sanctions, our own labor laws. So, we have to watch out how we do this so that we don't get a backfire on the way we structure our TPA. It would be a bad situation that would undermine the reason we enter into trade agreements, which is to help American workers and business.

In addition, we need to be careful not to adopt a model that would dissuade potential trading partners from negotiating with us in the first place. If we demand too much, we end up with nothing, not even the improvements in labor laws like we had from these agreements I just mentioned.

Worse yet, we may have all of our potential trading partners turn to China for an FTA that is going to be a lot easier to get than turning to us. So, we are in competition with other economic superpowers to get good trade agreements for us. So, we have to find a way to get that fine line.

So, with that, I think we have an ability, between Mr. McCrery and yourself and the great relationship we are starting, with the past that we have had with some Republicans on this side of the aisle with the Chairman, to get--

Chairman RANGEL. "Some'' means more than one.

Mr. RYAN. "Some'' means more than one. Well, sure.

Chairman RANGEL. Who is the other person?

Mr. RYAN. I will get back to you on that.

[Laughter.]

Mr. RYAN. The point is, we can't overplay our hand because if we overplay our hand on the way we write TPA, no one will want to have an agreement with us. We may put our own laws up for dispute settlement. We may put our own laws up for possible sanctions.

So, Mr. Aldonas, I will start with you because you just are fresh from government experience, and then anybody else who wants to chime in. Where is that sweet spot? Where is that area that we can get TPA so that we can have a functioning TPA without putting our own laws up for possible sanctions and so that we can encourage other countries to negotiate with us?

Mr. ALDONAS. I think it lies in whether or not our policies, including our labor policies, are artificially distorting investment and trading decisions.

If in fact what we are using is our labor laws to try and encourage our exports, or we are using our labor laws to track investment, isn't that something we would be--is that something we would be concerned above having in the dock? In other words, if it were focused on in terms of other people's labor practices, is the fact that their practices may distort the decision to invest, the decision to trade?

I think you actually find a pretty good line there because it is also something that is susceptible to the normal kind of trade analysis that we do. We have tools that we can use to come to grips with that.

So, in some respects, while I want us to achieve standards, and if we have multilateral agreements, I could see us saying that ought to be part of the picture in any trade agreement that we negotiate. I also know that in this area, when we are talking bilaterally, I think the single most important thing to be thinking about is whether or not what somebody has done with those practices, environmental or labor, in fact is distorting that investment and trade decision. I think that is a standard we could live with at the end of the day.

Mr. RYAN. Thank you.

Dr. TARULLO. Congressman, if I could, just a couple of thoughts on that. One, I think it is important to note that the list of five standards people often cite is a list that was derived from the Generalized System of Preferences legislation, which in turn was the product of some considerable thought.

My second point is we don't--at least I certainly have never advocated, and I don't think the Chair has, either, putting ILO conventions into our bilateral agreements. I think the point that has been made on a number of occasions is these five labor standards are internationally recognized, meaning we didn't just make them up on our own. They are out there. They have some legitimacy.

The third point I would make is the way that the provisions that people have supported are worded, we talk about a failure systematically to enforce. We talk about a pattern of non-enforcement. We are not just sort of zeroing in every time there is a little problem.

I certainly think the United States should be more than happy to affirm that we do enforce our labor laws. We do enforce our laws. We enforce our labor standards. I don't think we should be worried--I hope we don't have to be worried--about a failure, a pattern of non-enforcement, to gain some sort of trade advantage.

Dr. Mishel. May I just make two quick points, following up? One, let us never forget that we are the largest economy. People need to export to us. We have lots of leverage in all our dealings with other countries.

Secondly, we do have a problem of some labor standards and how they operate in this country. Just last year there was a labor law decision that removed collective bargaining rights from eight million workers such as nurses. If a nurse can direct--an RECOLLECTION can direct an LPN to do something with a bedpan, she now no longer will have access to be able to be represented by a union.

That is, I think, contrary to some very basic standards. I don't see why we shouldn't be subject to those internationally.

Chairman RANGEL. Let me publicly thank the gentleman for the cooperative spirit we did work last year, and I look forward to working further with him.

Mr. Davis. Thank you for your patience.

Mr. DAVIS. Thank you, Mr. Chairman, and gentlemen. I think in the Chair's exchange with Mr. Ryan, the Chair was identifying the famous congressional tendency to say "we'' when we really mean "I.'' It is a congressional thing.

Let me pick up on a point that Mr. Brady made earlier. He was talking about the benefits of NAFTA with respect to Texas and with respect to Mexico. Let me ask you, and I am not sure which of you knows the answer to this question: What is the rate of poverty in Mexico today? Any of you happen to have a ballpark estimate?

Dr. Mishel. Substantially higher than it used to be.

Mr. DAVIS. Well, you anticipated my next question. I was going to ask you what the rate of poverty was at the time that NAFTA was concluded.

Do any of you challenge Dr. Mishel's point? I actually don't know if it is substantially higher, but I think his point is that there has not been a substantial improvement in the poverty rate. Do any of you challenge that point empirically? Mr. Aldonas?

Mr. ALDONAS. Yes. I do. What I think it does is it obscures--

Mr. DAVIS. Can you do it in less than 15 seconds?

Mr. ALDONAS. I will. It obscures too much. What you are seeing is increases in income closer to the United States, where there is more trade, more investment. What you are seeing in places like Oaxaca, farther south, is you are seeing a deterioration of living conditions.

Mr. DAVIS. So, it has been mixed. What about the rate of illegal immigration? Does anyone have a point to make with respect to the rate of illegal immigration in 1993 as opposed to today? Someone has to answer verbally for the record to pick you up.

Dr. Mishel. I would just note that when NAFTA was presented, it was suggested that it would address the problem of immigration. I think it appears to most observers--it appears that way to me that in fact it has exacerbated the situation.

Mr. DAVIS. Does anyone empirically challenge Dr. Mishel's point?

Mr. ALDONAS. Yes. I lived and worked in Mexico in 1980 as a Foreign Service officer. I was punching visas. I will tell you honestly, what has happened is there has been a change in the complexion of the illegal immigration. What we are seeing is less from Mexico, in part because there is more investment there. We are seeing much more that is coming out of Central America and farther south.

Mr. DAVIS. Well, Mr. McGraw, let me pick up on that point. It seems that it is a consensus of the panel that we have had mixed results, if not net negative results, from NAFTA. Why should we expect anything different from CAFTA?

Mr. MCGRAW. I think you have a little bit of a different situation. With Mexico, you had a real focus on certain domestic policies that haven't materialized well. Take education, for example, where we have not seen much change. Rounded numbers now, you have got about 20 million students in elementary school. You have got about 5 million in secondary, and about a million and a half going to higher ed. It is about the same as it was. The reason is that they don't have access to jobs in that area, and therefore the benefits of that kind of education hasn't lent itself.

Mr. DAVIS. Well, I think that is a good narrative. The question is: Tell me why you expect a different outcome with CAFTA.

Mr. Sperling?

Mr. SPERLING. When I talk about, I think, trying to strengthen the debate, I think it is too easy to get into these--the United States created 23 million jobs in the eight years after NAFTA, so therefore NAFTA worked; or poverty went down in NAFTA, and therefore it didn't.

I think we all have responsibility. There are lots of arguments on each side like that. Poverty is a bit worse than it was at the moment we signed it, but it is kind of better than it was at the height of the peso crisis.

Joe Stiglitz, somebody who is very critical of a lot of trade things, would argue that it did help Mexico come back quicker. On the other hand, I think a lot of the things critics said about small corn farmers being devastated in Mexico turned out to be true.

So, I really think that rather than kind of take this did it work or not work, I think NAFTA is, as you said, a very mixed story. I think, for example, I know in the Clinton Administration we felt that the labor side agreements in there were too weak. We never went back to anything that weak again.

Mr. DAVIS. Let me stop you just--

Mr. SPERLING. So, I guess I just wanted to say that I think it is better in looking at NAFTA to try to take--Mr. Chairman, you have created such a wonderful dialogue to kind of do what is so rarely done, where you can look at the pros and cons.

There are some things in NAFTA that went well. There are a lot of things that didn't. Whether you are for it or against it, I think it is better to look at it by kind of breaking up the components. I think you will learn more about what would work or not work in CAFTA.

Mr. DAVIS. Let me quickly shift gears before my time runs out. China has come up several times today. As a lot of you are aware, countervailing duty laws are not applicable against China because of the U.S. Commerce Department's interpretation of the phrase "non-market economy.''

How many of you agree with the proposition that countervailing duty laws should apply to church if they also apply to undeveloped market economies? How many agree with that proposition?

The question was about the application of countervailing duty laws right now because of the U.S. Department of Commerce interpretation that is about 20 years old. Countervailing duty laws apply to market economies. China is not treated as a market economy. At the same time, the anomaly is that countervailing duty laws apply to relatively underdeveloped, in fact very underdeveloped, market economies.

How many of you agree with that state of play?

Mr. ALDONAS. Well, it is a little more complex than that in the sense the countervailing duty law has de minimis provisions for developing countries that offer them benefits. So, in one sense, it doesn't apply with the same force as it does--in the case of China, you have methodologies on the dumping side, which significantly penalize China in some respects, are a surrogate for the countervailing duty law.

I think even under the Doha--

Mr. DAVIS. With the market economies, you get both, do you not? You get dumping and you get countervailing duties?

Mr. ALDONAS. Right. What I would say, having administered this, is that within the framework of the dumping laws, there is a lot of flexibility to try and capture what are the effects of the CVD law.

Now, that doesn't go to your point precisely. I do think that we are at a juncture where you have to make a decision about certain parts of the Chinese economy. There, there is flexibility under the law called something market-oriented sector specific, where you could take a look at the flexibility.

I just want to be clear. Legally, the Commerce Department has the authority to apply the countervailing duty law if it makes certain determinations. I am not sure you need a legislative change to get there.

Mr. DAVIS. They haven't done it.

Mr. Sperling, were you trying to jump in?

Mr. SPERLING. I was just going to say, actually, one of the things--

Mr. DAVIS. They haven't done it in 22 years. Go ahead.

Mr. SPERLING. One of the things Sandy Levin and others pushed in the final stage of the negotiations with China really did come from some of the Democrats on this Committee, was to make sure that the anti-dumping provisions would apply. That was actually, I would say, among the two or three last issues that were pushed as part of getting the WTO agreement.

Chairman RANGEL. Mr. Porter.

Mr. PORTER. Thank you, Mr. Chairman. I would also add that in my 30 days on the Committee, we have had a lot of cooperation. I appreciate it very much. Thank you.

[Laughter.]

Mr. PORTER. I am from the State of Nevada, and we look at globalization and trade a little bit different than some other states in that we are a travel and tour economy, if not the largest in the country or certainly in the world for a destination. Comments are going to be more of a comment and not a question.

I think that we need to look at tour and travel as a major part of our economy. It is about a $90 billion business in the United States. If you look at every State in the union, tour and travel is one, two, and three in every State as far as economic opportunities and tax revenues and/or pure business dollars.

If you look at this industry--and again, I'm bringing it up because you folks are the experts--I think it should also be included as we look at where we are as a country, where we are going. Travel and tour has been reduced since 9/11 to the United States about 17 percent. That is pretty substantial.

We are seeing also tourism and travel as a bellwether for a strong economy. In Nevada, we have created 60,000 new jobs last year. We are building another 40,000 hotel rooms. We soon may well have 200,000 hotel rooms. Our occupancy is about 98 percent. Now, what does that mean? It means that the American people are traveling, and are feeling comfortable about their jobs and about their future.

I bring up the travel and tour--I think many times it is left out of the debate because it is not necessarily a line item in Wall Street or steel or some other major industries. I think it should be included in the future.

Now, if my time allows me, I do have a specific question regarding some of the tax questions. Some say that the cost of labor in a finish product determines whether the product will be competitive. Direct labor costs are often only a small portion of the total manufacturing cost.

With our high productivity, the labor cost per unit for our goods is quite competitive. Don't corporate taxes, tort litigation, and complex regulatory compliance have a far greater effect on our competitiveness?

Mr. ALDONAS. It depends on the product and the industry. There is no doubt it has an impact. Certainly--people would be surprised to know that we have among the highest corporate tax rates in the world right now. People are always stunned when I say that European countries have lower corporate tax rates than we do, but that is the reality, and it does make us less competitive globally.

The other thing I would say is that, particularly in manufacturing where we--efficiencies have drained much of the labor content out of every finished product, whether it is produced here or whether it is produced in China.

The other things that drive competition, even in China, are far more powerful. That is why, when I think about China, I actually think less about wage rates than I think about the other subsidies in the Chinese system, whether it is the nonperforming loans that mean a zero cost of capital for somebody who wants to build a steel mill; whether it is the outright grants, the relief from paying their electricity bills--all those things actually have a powerful effect on the decision to invest.

It is not just affecting the United States. It is affecting all our other trading partners as well. If you looked at wage rates in China, textiles would no longer be in China. It would be in Africa, if it was just wage rates. In fact, there are an awful lot of other things in the Chinese system that are designed to keep the investment there.

One of the things we really haven't focused on are the distortions. The rub here is not always about labor standards. It is really about jobs. It is about employment. One of the things that we should focus on is the distortions that attract investment and jobs to a place like China. Those should the targets of our trade policy, whether it is negotiation, whether it is enforcement, whatever it might be, because I think in part that is a better answer to some of the feelings of insecurity that Americans feel at the end of the day.

Dr. Mishel. Mr. Porter, I am a labor market economist, and I think it is important when we are dealing with the labor side of that, the wage part, that it is really all of the labor embodied in the products, not just what is directly in the last place before it goes overseas.

So, the labor costs embodied in a product are probably far larger than what is directly--the direct labor costs you are talking about; one particular plant, what its labor does.

Secondly, just quickly, I have looked voraciously for any evidence that torts provides any competitive cost that creates an imbalance in this country versus other countries. I have not been able to find it. Every sort of examination of this that I have looked at and done myself, I just couldn't see any relationship. I think it is a really small thing, and is blown out of proportion to anything plausible in much discussion.

Mr. PORTER. Thank you, Mr. Chairman.

Chairman RANGEL. Mr. Pomeroy.

Mr. POMEROY. Thank you, Mr. Chairman. Thank you for holding this hearing. It is very important for us to, from kind of a 30,000 feet level, look at trade issues, not just when we have got something pending and we are talking about the advantages or dislocations that a given agreement might present, but this view is precisely important.

I have been monitoring it through the morning even though I haven't been able to be in this chair. You have been at it for several hours, and I wouldn't even think about asking further questions except for one that I just feel so strongly about.

Grant, it gets to a line that I think is a very interesting one in your testimony. You said, "Your job is to''--you write to us, "Your job is to serve as a mediator between the aspirations of all your constituents and the reality of the economic challenges we face.''

Now, I think some basically mean, well, if your folks don't like trade, you go back and you just tell them how good it is for them. I think there is a reciprocal dimension. First of all, I will accept what you say there. That is true. That is part of our responsibility.

Another part of our responsibility is to bring into Washington, to the macroeconomic view that pervades Washington, the microeconomic reality reflected by the voters we represent. I was astounded when new Members--they got up and introduced themselves at one of the meetings we had. These are people that took often Republican seats, swing districts. It was concern about trade, the economic insecurity that was pervasive in their districts, that people wanted a change and they were able to beat incumbents. This is swing territory, previously Republican represented.

Last week we had the anomalous situation of setting a record for the Dow Jones average, and having 71 percent of the people record themselves as believing the country is on the wrong track, as captured in an ABC poll.

In my opinion, what the Administration has not owned up to is that this macroeconomic view of growth in this country has been detached to whether the average Joe feels like they are getting ahead or not.

Not to talk about--there are two issues to whether they are getting ahead or not. Economic disparity, I am not going to get into that. Economic insecurity is what I do want to make a point on because I believe that people are feeling more and more insecure. I believe economic insecurity is the greatest threat to future globalization of trade.

If we are going to have a pro-trade strategy, Republican, Democrat, Administration, Congress, it has got to go right at this core feeling of insecurity held by the households of this country.

I would be interested in particular--Gene, your testimony speaks to the lot grant. You have kind of indicated the macroeconomic view. I would like you two to play with the issue of what is the priority of dealing with this feeling of economic insecurity that is so broadly felt. I notice that even the economist, conservative economist, had this as a major piece in their deal last week.

One final thing before I yield the microphone and won't talk again. There have been some disparaging comments made about our farm bill and our agriculture policy in this country. Don't believe a word of it. We are rationally based and competing with some of the most heavily subsidized exports in the world, and that is why we have the farm bill. Okay, but that is an aside.

Back to economic insecurity, Grant and Gene, thank you very much. Thank you, Mr. Chairman.

Mr. SPERLING. Well, I don't think there is any question that what we have seen--people can talk about 25-year trends, but the last 10 or 11 years in themselves are instructive, and I think in some ways humbling, because the last five years of the '90s, you saw increased job churning. You saw lots of globalization, lots of change. Yet it had a very pretty face to it; 23 million jobs in eight years. Wages went up across the board. Poverty went way down.

The last five or six years have showed a very different face. You have seen such a divide between productivity and wage growth. We are not just seeing the manufacturing or the low income workers. You are seeing a real threat at the middle. You are seeing real pressure on wages.

I think there is a dramatically more significant fear of falling, in other words taking deep falls when you lose. I think people expect you are going to lose a job at times in your life and it is not going to be pleasant. I think the fear that you may take a dramatic fall in your standard of living, and that sense of downward mobility, is really very difficult for people.

I think the truth is that we have to be honest and that there is no silver bullet here. It really is going to take a comprehensive policy. There are things that you can try to do on the anxiety front--wage insurance, training, universal health care. These are important. Of course, they are just one piece.

I think the type of savings, the kind of universal 401(k) to make sure people are building up savings, these are the things you do at the personal side. I also think we have to still keep stressing higher education even though--and this is the trick--higher education has never been more important, and yet it is less of a sure thing. That is the difficulties.

So, we have to do that side. As I have said before, if you don't have an aggressive job, if your folks back home don't believe that you are fighting for the jobs now and for job creation and have strategies, that you are just about adjustment assistance and long-term investment, I don't think they will listen to you, and I think they may go for more protectionist, less productive strategy.

So, I think it is incumbent on all of us to take that anxiety seriously, realize there is something behind it, and try to come up with the productive things that we can do so that we don't--because I feel if we do nothing and are passive, we will end up either letting people suffer or we will have backlashes, which I think will lead to less productive policies.

I will say, just as an advertisement, that nothing ever documents so much of the statistics we have better than the State of Working America that Larry Mishel has been the author of with Jerry Bernstein for so many years.

Mr. ALDONAS. With your permission, Mr. Chairman.

I have given this a lot of thought, and I appreciate the question because I come at it from the different angle. I think we have refracted our politics through the lens of security, and everybody is more anxious as a consequence. We are anxious about the terms of our engagement in the world not just economically.

I think the Federal Government has fallen down in terms of grappling with basic tasks that even very conservative people like me think is their responsibility, whether it is Katrina, whether it is the borders, whatever it might be. Then on top of that you have this very real wage compression and the anxiety. Gene points out that it is not just a blue collar phenomenon. You add all that together and it is a pretty potent brew.

What I think is most critical is one of the points I was making early on, Congressman, which is that we have to feel like we control our own destiny. What I think is so incredibly important about what you are doing here today, Mr. Chairman, is you are defining the path that would allow every congressman to go to the American public and say, you what? We do control our own destiny. We don't have to be afraid about this, but we do have to have a strategy for how we come to rips with the challenges we are going to face.

If we do that together, I actually think we were find a way of reducing that anxiety. On the other hand, if we don't do that, I think it will grow. It will metastasize, and it will defeat any kind of positive trade agenda.

Chairman RANGEL. Mr. Levin.

Mr. LEVIN. Well, Mr. Chairman, and how good it is to call you that. This is really a breakthrough. You have been here more years than I. I can't remember the last time we had a hearing like this. I think it is a good kickoff to try to open up, take off the lid, and see if we can't do much better. Thank you.

Chairman RANGEL. Thank you.

The Ranking Member asked me to apologize that he had to attend another meeting. You are right, Sandy. This is a beginning. What is remarkable is why people enjoyed being for trade or against trade, I don't know. I guess that is the easiest way to handle complex legislation.

The goodwill that has been evidence of  the private sector, we have to find some way. You had mentioned, Gene, the empowerment zones. It just seems to me if we can identify where America is suffering pain and recognize that there are investments--I don't know, some people call them dynamic scoring. Whatever you want to call it.

If you recognize that if you invest in education, if you keep people out of trouble, if you bring in the private sector, then evidence an international genius in creating opportunities for people, whether in Baghdad or wherever, you come in and you are prepared to say, I am prepared to join the Government and assist my country in recovery here as we do so well in developing countries.

We can designate where the pain is. Gene, we don't really have to make a person whole. They come to a certain age, they just take a hit. They were in the wrong business at the wrong time. I used myself as an example, as someone who--no one would know anyone with a college education.

My grandfather was a big shot uniformed elevator operator in the criminal court building of New York. You couldn't touch him. Then they automated the elevators. He almost died. When he saw his grandson become an assistant district attorney in that building, it eased the pain.

I think, no matter where you go in the country, when a person, a family, and community loses their help and self-esteem, America can do better. Just as we have had problems with communication between Republicans and Democrats, we have had a problem in communication as though business had an agenda that had nothing to do with America. That is just not so because they never differed.

The only way we can get Republicans and Democrats to be able to do the right thing, especially during a time of budget restraint, is that everyone can go home and explain that they are in that bill.

So, I hope that if there is any success in this, tragically it will be historic. You could be a part of that success if some of the things that you stated, not for the Congress but for the country, you can help us in putting this together so that we have more competition, more productivity, more business, more health insurance, more education, and most importantly, where no American feels that they are not going to make it.

It is not too bad being poor if you have hope that in this country, you can make it. So, I think that if this is dramatic in talking about it, imagine what we could do if we did something about it.

Thank you so much for what you have thought, what you have contributed. I will be sending a letter thanking you personally and asking you to just put a couple of pages together so that we can come together in a room without cameras, without stenographers, and see what we can come up with. Thank you so much.

[Whereupon, at 1:52 p.m., the hearing was adjourned.]
[Submissions for the Record follow:]

Alexander, Steve, Consuming Industries Trade Action Coalition, letter

American Forest and Paper Association, statement

Central America Black Organizations, statement

Executive Intelligence Review, statement

Generic Pharmaceutical Association, statement

National Pork Producers Council, statement

Ohio Conference on Fair Trade, statement

Retail Industry Leaders Association, statement

Stop CAFTA Coalition, letter

Wallach, Lori, Public Citizen's Global Trade Watch, statement

Williamson, Donald, Americans For Fair Taxation, Conyers, GA, letter