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I think that the overvalued dollar, the long overvalued dollar, was the primary reason that the American businessman went overseas and established plants over there, and that we lost jobs to overseas plants.
Senator, I have heard the bell ring, and I know that my time has expired.
Senator TALMADGE. You in the House are accustomed to being called down on short notice. We in the Senate are not, as a general rule, but in view of the multiplicity of witnesses that wanted to be heard on this, we had to invoke by unanimous consent the limitation of time.
Mr. GIBBONS. I certainly understand your time problems, and I want to close by saying that now is the time to move forward on trade. It has been 12 years since we had a trade bill, but this is a good trade bill, and I know that the Senate will have a great many contributions to make to it.
Thank you, sir.
Senator TALMADGE. Thank you very much, Congressman. We are honored to have you with us.
[The prepared statement of Congressman Gibbons follows:]
PREPARED STATEMENT BY HON. SAM M. GIBBONS, A U.S. REPRESENTATIVE IN
CONGRESS FROM THE STATE OF FLORIDA
I. Now is the time to move forward on trade
A. It is important to maintain the momentum toward a new round of trade negotiations by enacting a good trade bill as soon as possible. These negotiations, by further reducing barriers to world trade, will be of great benefit to the United States both economically and politically. They will also help to improve the climate for cooperative multilateral solutions to other world-wide economic problems. The need for such cooperative action has been made even more urgent by developments such as the actions of the OPEC supply cartel, food and energy shortfalls, rampant world inflation, and the danger of resurgent nationalism. Indeed, the world watches to see whether the United States is going to reassume our leadership in this area.
B. The United States has everything to gain from a new round of trade negotiations. Demand for U.S. exports is high and rising. The elimination of barriers to these exports would benefit us greatly. Also, we are dependent on trade for some of the raw materials we need. We can negotiate now from a position of strength. We have a strong economy and a strong dollar. We have been less affected by the four-fold increase in world crude oil prices in the past year than other nations. II. The Trade Reform Act is a good bill
A. It grants to our able negotiators the strength and flexibility they need to negotiate mutually beneficial trade agreements. Yet it reasserts the power of Congress "to regulate foreign commerce.” It provides for a great many procedural safeguards and consultation requirements to insure that U.S. workers, industries, farmers and consumers are helped rather than hurt by trade decisions. It makes relief from unreasonable import competition easier and quicker to get and more generous. It is an improvement both over present law and over the Administration's original proposal.
B. The trade bill is aimed basically at helping the countries of the free world solve their trade problems and strengthen their economies. We should not
lose sight of this fact. Too many people have tied the fate of the bill to the fate of Title IV, relating to our relations with the Soviet Union. While the bill does not change our laws relating to the taxation of income earned abroad by U.S. firms, this is being done elsewhere. III. It is important for us to move forward in the area of trade
A. Not to do so would be to drift away from the cooperative, multilateral, institutionalized approach to our trade and other economic problems which has worked as well since World War II.
B. Economic relations are at the base of our political relations with other countries. If we do not negotiate to find solutions to these “pocketbook" issues which divide us, we cannot hope to settle our political differences.
STATEMENT Mr. Chairman and Members of the Committee, I appreciate the opportunity to appear before you today to talk briefly about some of the considerations which I believe are very important as you begin to make decisions on the proposed Trade Reform Act.
I notice that the arguments you've been hearing on trade are pretty much the same ones that we on the Ways and Means Committee heard during our five months of deliberations on the trade bill. It was good to see that at least some of your witnesses praised the House-passed version of the bill as an improvement over the Administration's original proposal. I think this is so, and I sincerely hope that the decisions we made and the language we drafted will be helpful to you and may even shorten the time you have to spend marking up the bill.
As you know, the Ways and Means Committee is not known to be a bunch of free traders, and I can certainly vouch for the accuracy of that reputation. It came as a bit of a suprirse to many people, I think, that the trade bill finally approved by the Committee-by an overwhelming vote of 20 to 5—was as well balanced and as carefully drawn as it was. I have talked to both supporters and opponents of a continued expansion of world trade who feel that the bill we approved was, all things considered, quite a satisfactory one.
It grants to our negotiators the flexibility and strength they need to strike sound and mutually beneficial bargains with our trading partners, but it introduces a great number of procedural safeguards and consultation requirements --far more than were requested by the Administration. By providing for Congressional review and even possible veto of important trade decisions, it also gives real recognition to the Constitutional grant of power to the Congress to "regulate foreign commerce."
The House-passed bill is a real improvement over present law with regard to providing relief from the effects of unreasonable import competition. All forms of import relief are made easier and quicker to get and adjustment assistance is made more generous.
I didn't come here to pat myself on the back for the House-passed trade bill. Indeed, there are a few provisions in the bill that I would like to see deleted, and there are amendments which I fought for in the Committee that are not included in the bill. However, the decisions on all of these matters are now in your hands. Noir is the time to move forward on trade
The reason I asked to be heard by you is this: I believe strongly that a continued expansion of mutually beneficial trade among the nations of the world is very important to this country, both economically and politically. Therefore, the timely enactment of a good trade bill is deserving of our best efforts. In fact, such fairly recent developments as world-wide energy and food shortfalls and galloping inflation have made it even more urgent that we continue to assume world leadership in finding cooperative solutions to world-wide economic problems. The proposed trade bill is an integral part of our efforts in this area.
You are, of course, familiar with the traditional arguments on why trade is so important to us, so I won't dwell long on these. Many of you have seen in your own states just how important export business has become to many of our factories and farms. In an era of resource shortages, imports have also become
important to both consumers and producers. Today, more than 14% of our goods are exported, and about 14% of the goods we consume are imported. Some of our industries, such as the aerospace and agricultural chemical industries export 40-50% or more of their production. Moreover, we are dependent on imports for more than 50% of 6 of the 13 major raw materials needed by our industries.
It's no longer possible for us, or perhaps any nation, to cut off trade and investment flows and say that we will "go it alone.” Trade and investment and the operations of the MNC have simply become an integral part of growing economies here and abroad. Our choice is not whether we will "allow these to exist" or not, but whether or not we will barness and regulate these phenomena for our benefit and that of the rest of the world and whether this country will reassume the leadership role in this area that we assumed at the end of World War II.
Some of those who testified before the Ways and Means Committee painted trade issues in terms of black and white. All of us know that this is no longer possible, if it ever was. To be sure, the issues involved in trade are complex and politically sensitive ones. They cut right across employment problems, foreign policy attitudes, and the vested interests of numberless economic groups--and they cannot be solved easily. If they could, it would not have taken the Ways and Means Committee five months to report out a trade bill. Literally cutting off trade and investment, as some have suggested, would not have taken the Committee long at all. However, it soon became clear that such a step would have been no solution at all. Also, we realized that we could dismiss these issues, or not act on them, only at our peril.
The Ways and Means Committee soon found that some of those who testified on the trade bill simply did not want a trade bill enacted and had no interest whatsoever in working with the Committee to come up with a balanced bill. This was hard to understand, since some of these people would benefit greatly by the approval of a good, balanced trade bill. Nonetheless, these people continued to cling to their simplistic and illusionary proposals to virtually cut off trade and investment even after these had been rejected by large margins in the Committee.
It couldn't be more clear, it seems to me, that this country has everything to gain from approving a sensible trade bill and maintaining the momentum toward a new round of international trade negotiations designed to reduce the barriers to trade.
It's a puzzle to me that some people feel that this country should not enter into trade negotiations. It's not going to be easy to work out mutually beneficial trade agreements. Obviously, each country has to give up something for what it gets in terms of reducing the trade barriers that have been erected, and each trade agreement will affect economic interests in the various countries. However, the demand for U. S. products is great world-wide and it is growing fast. There are a great number of barriers to the entry of U. S. exports into other countries and we have everything to gain by at least undertaking trade negotiations and making a real start toward reducing trade barriers.
The U. S. economy is becoming ever more dependent on trade for continued growth and the reduction of trade barriers is becoming ever more important to us. Something which we sometimes tend to forget that our businessmen discovered long ago—is that there's a great wide world beyond our borders which offers tremendous outlets for our products, as well as new sources of raw materials for our industries.
Right now, we can negotiate from a position of strength with our trading partners. Our economy is strong. We have been affected by the Arab oil boycott and the four-fold increase in the price of crude oil this last year far less than countries who are more dependent on imported oil for their energy supplies. The floating of national currencies has provided needed flexibility in the international monetary system, and the strength of our dollar in this new scheme of things reflects the strength of our economy.
It's been the fear of some that our trade negotiators would "sell out" certain American interests. This fear is, I think, baseless, and has been made completely irrevlevant hy those sections of the House-passed trade bill which require prenegotiation procedural safeguards and continuing close Congressional scrutiny of the negotiations and their results.
If we do not move forward in entering a new round of trade negotiations, we bare much to lose besides the opportunity to eliminate or reduce existing barriers to C, S. exports. In the world economy, not to move forward is to drift barkward toward the kind of economic stagnation, resurgent nationalism and isolationism which we knew in the 1930s, and even toward war itself. The sudden emergence of food and fuel shortfalls, rampant inflation, and high-cost oil has made this "drift backward" a potential headlong rush toward trade restrictionism and isolationism.
We saw what happened in the '30s, when we imposed the Smoot-Ilawley tariffs in an attempt to reduce our depression-level unemployment. We found too late that the only result was trade retaliation by the other countries of the world. a worsening world-wide depression and economic conditions which helped lead up to World War II.
It's perhaps not too far-fetched to say that the economic conditions we face today present the same kind of challenge to a peaceful and continually functioning world economy as those of the 1930s.
The four-fold increase in world crude oil prices in the past year is likely to lead to balance of payments deficits for all of the developed countries. Already Te are seeing our $1.7 billion trade surplus of last year pared down by the creatly increased prices we must pay for imported oil-and we are one of the matries of the world least affected by this phenomenon!
Already there are signs that some countries will try to pass their billions of dollars in balance of trade and payments deficits resulting from higher oil prices to other developed countries by import restrictions, unreasonable export subsidies, or competitive devaluations. This simply is not possible. There literally is no place to which these deficits can be passed. They share a common cause and they are shared by all developed countries.
This is to say nothing of the less developed countries. The food, energy and fertilizer shortages and the high prices they face today subject them to the real danger of not only even lower rates of economic growth, but, for some, even famine.
The severity of this problem cannot be overemphasized, for, as we're learned all too vividly in the past, world economic problems which are neglected spread like wildfire. This is more true every day, as countries become ever more interdependent.
We must and of course are making all kinds of different efforts on the international scene to resolve the economic conflicts relating to fuel and food shortages and rampant inflation. Nonetheless, if we do not pass a trade bill and embark on bold international trade negotiations, we will be losing quite an opportunity to resolve what have become urgent and sticky economic issues among nations. Since World War II, we have had a great deal of success in managing trade issues in the institutional framework and under the agreed upon rules of the GATT. The nature of these issues has changed dramatically in recent years. For instance, while import restrictions remain a problem, the management of resource shortages has emerged as a problem of similar importance.
This has not changed the fact that we must look to cooperative undertakings to find real and lasting solutions to these problems. The need for revision of the GATT rules to handle these problems—and for our countries to show the national will to look for multilateral solutions in an institutiopal framework such as the GATT—is urgent, for the danger of economic warfare and a real confrontation between rich and poor nations is great.
Also, it's clear that near-universal cooperation among nations is the only way for us to break the stranglehold of a supply cartel like OPEC.
In many ways, our economic relations with other nations are at the base of onr political relations with them. If we do not negotiate to find solutions to these "pocketbook” issues which divide us, we cannot hope to settle our political differences.
Because of our differences over such things as how to react to the Arab oil embargo, how to treat the Soviet Union, and how to view the Atlantic alliance, we seem to be on a collision course with the Europeans in our political relations. Some wonder if the Europeans care whether they bave any relations at all with us any more. However, I've just returned from talking with members of the European Parliament in Eurone. and I know that the Europeans still look to us for leadership in settling difficult international economic issues.
They are watching us to see whether we have the political will to do any real negotiating on tough trade issues—whether we are willing to raise our sights from the economic irritations which rub against us day after day to a bold new attempt to not only try to resolve these day-to-day issues but also foster a new climate of cooperation in settling troublesome international economic problems indeed, they watch to see whether we are even going to pass a trade bill.
It's also my observation from meeting with the European Parliamentarians from time to time over the past three years that the European Community is stronger, more unified, less concerned about internal matters and better prepared to make the decisions necessary for trade negotiations than they have ever been. I also know that the Europeans have finally abandoned their search for additional reverse preferences.
It's my firm personal belief that the continued expansion of mutually beneficial world trade and the increased contacts among nations which it brings not only redound to our economic welfare, but also help to build peace and understanding in the world. Certainly we've seen that the opposite of this is true trade retaliation and economic warfare can lead to world-wide depression and actual warfare.
It's unfortunate that so much of the attention given to the trade bill has focused on Title IV. All of us are concerned over the conditions under which nondiscriminatory tariff treatment and Export-Import Bank credits should be granted to the Soviet Union. However, the thrust of the Trade Reform Act is to provide an opportunity for the free nations of the world to get together to work out their trade differences. What is most important is that we continue to expand this trade among the free world countries in order to strengthen the U.S. economy and other free world economies.
We should not lose sight of this fact, and the fate of the Trade Reform Act should definitely not rest with the fate of Title IV. Our trade with the communist countries is minimal and unlikely to amount to very much in the foreseeable future. While I believe that trade with these countries in nonmilitary items is desirable as an instrument of ending the isolation of these nonmarket economies and bringing these countries into the community of nations, our economic and political relations with our traditional allies must not be eclipsed by our concerns about East-West trade.
One of the most serious problems we are going to face for years to come is that of severe, world-wide inflation. Trade helps to allocate world resources better and can have a significant effect in keeping consumer prices down and also keeping producer costs down.
Already, nations have begun suspending some of their import restrictions for the stated purpose of combatting domestic inflation. We ourselves have done this, as in the case of our meat import quotas, and Title I of the House-passed trade bill provides a great deal more flexibility for this kind of action.
World-wide inflation makes it even more important that consumers be allowed the chance to purchase less expensive goods from abroad, especially when this does no harm to U.S. workers or industries. We have found that the resources of this world can be quite limited in some ways, and trade helps us to make the best possible use of these resources.
We are a rich country. Our standard of living is half again as great as that of the next richest country. We do indeed have our problems, but even in difficult times we should not forget our responsibilities toward the rest of the world, especially toward the poorest of countries.
Our trade with the less developed countries (LDCs) is of benefit to both them and us. This trade accounts for one-third of total U.S. trade. Last year alone, our trade surplus with these countries rose by a billion dollars, and much of the LDC foreign exchange earnings from this trade is used to buy goods in the United States. The development of the LDCs is of special interest to us, since it not only promotes peace and world stability but also provides expanded markets for U.S. exports,
The LDC's have been especially hard-hit by the greatly increased cost of petroleum products. It thus has become even more important that their products have access to the markets of developed countries, so that they can earn the foreign exchange they need to pay for their energy needs and also the goods they need to develop their economies.