TRADE AND GLOBALIZATION

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by  Committee on Ways and Means

TRADE AND GLOBALIZATION
HEARING
BEFORETHE
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
JANUARY 30, 2007
Serial No. 110–3
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COMMITTEE ON WAYS AND MEANS
CHARLES B. RANGEL, New York, Chairman
FORTNEY PETE STARK, California JIM MCCRERY, Louisiana
SANDER M. LEVIN, Michigan WALLY HERGER, California
JIM MCDERMOTT, Washington DAVE CAMP, Michigan
JOHN LEWIS, Georgia JIM RAMSTAD, Minnesota
RICHARD E. NEAL, Massachusetts SAM JOHNSON, Texas
MICHAEL R. MCNULTY, New York PHIL ENGLISH, Pennsylvania
JOHN S. TANNER, Tennessee JERRY WELLER, Illinois
XAVIER BECERRA, California KENNY HULSHOF, Missouri
LLOYD DOGGETT, Texas RON LEWIS, Kentucky
EARL POMEROY, North Dakota KEVIN BRADY, Texas
STEPHANIE TUBBS JONES, Ohio THOMAS M. REYNOLDS, New York
MIKE THOMPSON, California PAUL RYAN, Wisconsin
JOHN B. LARSON, Connecticut ERIC CANTOR, Virginia
RAHM EMANUEL, Illinois JOHN LINDER, Georgia
EARL BLUMENAUER, Oregon DEVIN NUNES, California
RON KIND, Wisconsin PAT TIBERI, Ohio
BILL PASCRELL JR., New Jersey JON PORTER, Nevada
SHELLEY BERKLEY, Nevada
JOSEPH CROWLEY, New York
CHRIS VAN HOLLEN, Maryland
KENDRICK MEEK, Florida
ALLYSON Y. SCHWARTZ, Pennsylvania
ARTUR DAVIS, Alabama
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 occur-
rences are inherent in the current publication process and should diminish as the process
is further refined.
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C O N T E N T S
Page
Advisory of January 23, 2007, announcing the hearing ....................................... 2
WITNESSES
Daniel Tarullo, Ph.D., Professor of Law, Georgetown University ....................... 8
The Honorable Grant Aldonas, William M. Scholl Chair in International
Business, Center for Strategic and International Studies ................................ 14
Gene B. Sperling, Senior Fellow, Center for American Progress, and Director,
Center for Universal Education, Council on Foreign Relations ....................... 23
John Meier, Chief Executive Officer, Libbey Glass, Inc., Toledo, Ohio ............... 34
Harold McGraw III, Chairman, President, and CEO, The McGraw-Hill Com-
panies, and Chairman, Business Roundtable, and Chairman, Emergency
Committee for American Trade, New York, New York ..................................... 40
Lawrence Mishel, Ph.D., President, Economic Policy Institute ........................... 49
SUBMISSIONS FOR THE RECORD
Alexander, Steve, Consuming Industries Trade Action Coalition, letter ............ 101
American Forest and Paper Association, statement ............................................. 103
Central America Black Organizations, statement ................................................ 107
Executive Intelligence Review, statement ............................................................. 113
Generic Pharmaceutical Association, statement ................................................... 117
National Pork Producers Council, statement ........................................................ 124
Ohio Conference on Fair Trade, statement ........................................................... 130
Retail Industry Leaders Association, statement ................................................... 131
Stop CAFTA Coalition, letter .................................................................................. 133
Wallach, Lori, Public Citizen’s Global Trade Watch, statement .......................... 135
Williamson, Donald, Americans For Fair Taxation, Conyers, GA, letter ........... 140
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TRADE AND GLOBALIZATION
TUESDAY, JANUARY 30, 2007
U.S. HOUSE OF REPRESENTATIVES,
COMMITTEE ON WAYS AND MEANS,
Washington, DC.
The Committee met, pursuant to notice, at 10:00 a.m., in room
1100, Longworth House Office Building, Hon. Charles B. Rangel
(Chairman of the Committee), presiding.
[The advisory announcing the hearing follows:]
NG (1)
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ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS
FOR IMMEDIATE RELEASE CONTACT: (202) 225–1721
January 23, 2007
FC–3
Chairman Rangel Announces a Hearing on
Trade and Globalization
House Ways and Means Committee Chairman Charles B. Rangel today an-
nounced that the Committee will hold a hearing on trade and globalization. The
hearing will take place on Tuesday, January 30, in the main Committee
hearing room, 1100 Longworth House Office Building, beginning at 10 a.m.
In view of the limited time available to hear witnesses, oral testimony at this
hearing will be from invited witnesses only. However, any individual or organization
not scheduled for an oral appearance may submit a written statement for consider-
ation by the Committee and for inclusion in the printed record of the hearing.
FOCUSOFTHEHEARING:
This hearing is the third in a series on economic conditions in the United States.
Trade and globalization present opportunities and challenges to a multitude of in-
dustries and sectors throughout the U.S. economy, affecting farmers, workers, busi-
nesses, and even whole communities. This hearing will explore the integration of
markets brought about by globalization and examine how U.S. trade policy can be
used as a tool to shape globalization to maximize its benefits, ensure that they flow
evenly throughout society, including to working people, and to ensure that the forces
of the global economy are harnessed most effectively and efficiently to generate the
maximum amount of broadly based economic growth.
During the hearing, Members hope to elicit responses from witnesses on the fol-
lowing: (1) the philosophy that more trade is always better, no matter its terms or
contents; (2) whether the benefits of globalization are being spread broadly to work-
ing people, farmers, businesses and consumers in the United States, and if not,
what specific changes to U.S. trade policy and international trading rules should be
recommended to maximize the benefits and minimize the costs of globalization; and
(3) what have been some of the most important successes of U.S. trade policy in the
recent past in terms of maximizing the benefits of globalization and minimizing its
costs.
In announcing the hearing, Chairman Rangel said, ‘‘We need a better under-
standing of the winners and losers under our current trade policy. Con-
gress must be an active partner with the Administration in shaping trade
policy to strengthen economic opportunities for American workers, farmers
and businesses and this hearing will provide a framework for future legis-
lative action.’’
DETAILSFORSUBMISSIONOFWRITTENCOMMENTS:
Please Note: Any person(s) and/or organization(s) wishing to submit for the hear-
ing record must follow the appropriate link on the hearing page of the Committee
website and complete the informational forms. From the Committee homepage,
http://waysandmeans.house.gov, select ‘‘110th Congress’’ from the menu entitled,
‘‘Committee Hearings’’ (http://waysandmeans.house.gov/Hearings.asp?congress=18).
Select the hearing for which you would like to submit, and click on the link entitled,
‘‘Click here to provide a submission for the record.’’ Once you have followed the on-
line instructions, completing all informational forms and clicking ‘‘submit’’ on the
NG final page, an email will be sent to the address which you supply confirming your
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interest in providing a submission for the record. You MUST REPLY to the email
and ATTACH your submission as a Word or WordPerfect document, in compliance
with the formatting requirements listed below, by close of business Tuesday, Feb-
ruary 13, 2007. Finally, please note that due to the change in House mail policy,
the U.S. Capitol Police will refuse sealed-package deliveries to all House Office
Buildings. For questions, or if you encounter technical problems, please call (202)
225–1721.
FORMATTINGREQUIREMENTS:
The Committee relies on electronic submissions for printing the official hearing record. As al-
ways, submissions will be included in the record according to the discretion of the Committee.
The Committee will not alter the content of your submission, but we reserve the right to format
it according to our guidelines. Any submission provided to the Committee by a witness, any sup-
plementary materials submitted for the printed record, and any written comments in response
to a request for written comments must conform to the guidelines listed below. Any submission
or supplementary item not in compliance with these guidelines will not be printed, but will be
maintained in the Committee files for review and use by the Committee.
1. All submissions and supplementary materials must be provided in Word or WordPerfect
format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and sub-
mitters are advised that the Committee relies on electronic submissions for printing the official
hearing record.
2. Copies of whole documents submitted as exhibit material will not be accepted for printing.
Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material
not meeting these specifications will be maintained in the Committee files for review and use
by the Committee.
3. All submissions must include a list of all clients, persons, and/or organizations on whose
behalf the witness appears. A supplemental sheet must accompany each submission listing the
name, company, address, telephone and fax numbers of each witness.
Note: All Committee advisories and news releases are available on the World
Wide Web at http://waysandmeans.house.gov.
The Committee seeks to make its facilities accessible to persons with disabilities.
If you are in need of special accommodations, please call 202–225–1721 or 202–226–
3411 TTD/TTY in advance of the event (four business days notice is requested).
Questions with regard to special accommodation needs in general (including avail-
ability of Committee materials in alternative formats) may be directed to the Com-
mittee as noted above.
f
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 pol-
icy, 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 be-
lieve 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 at-
tempting to see whether we can change the image of trade from ev-
erybody in the private sector, in Congress, as well as the Adminis-
NG tration. So, we hope at the end of our discussions that we could
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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 wel-
coming 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 ap-
propriate. 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 di-
rectly 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:]
Prepared Statement of The Honorable Jim McCrery,
a Representative in Congress from the State of Louisiana
Mr. Chairman, I am pleased that you are helping frame the debate in a fair and
open fashion. Trade flows are so deeply imbedded in our economy, and economic ac-
tivity criss-crosses national borders so frequently, that it is no longer sensible to dis-
cuss trade and our national economy separately from each other. Trade is just nor-
mal economic activity that happens to take place between people in different coun-
tries.
We must reject the myth that trade benefits only large, rich multinational cor-
porations. Americans who shop at large retail stores to save money on food, clothing,
and household needs are beneficiaries of trade. And those low prices disproportion-
ately help lower-income families because spending on such necessities is a larger
proportion of their household budget.
American businesses of all sizes are more competitive when they can import goods
and services from overseas to make their products better and less expensive. Trade
also includes American exports, which support 10.4% of total U.S. GDP, and 20%
of the growth in the U.S. economy. One of every ten jobs in the United States is
linked to the export of U.S. goods and services, and those jobs pay on average 13–
18% more than others.
We cannot turn back the clock. It is pointless to think we can control globaliza-
tion, slow it, or stop it. Other countries recognize this and are steaming ahead with
new agreements to increase trade. China, for example, has four bilateral and re-
gional agreements in place and is negotiating five more. The EU has 20 already and
another seven in negotiation. And Japan—long thought of as a ‘‘protectionist’’
power—has five, with eight more in progress.
We should be looking at how we can position ourselves to establish a global eco-
nomic environment that keeps U.S. businesses, workers, and consumers on top. In-
stead of thinking about trade in isolation, we should put it into the context of a
NG much larger debate on our changing economy.
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What specifically should we be doing?
1. Grow trade opportunities: The most compelling argument in favor of our recent
free trade agreements is that they reduce the high tariffs other nations charge on
our products (12% on average, according to the National Association of Manufactur-
ers), while we charge them little or nothing. These agreements also play to our
strengths by opening service markets to us in a dramatic way, helping build our
$66 billion service surplus on $381 billion in exports (a figure that has doubled since
1994). Also, our free trade agreements have reduced our trade deficit by $5.5 billion.
In fact, if remaining global trade barriers are eliminated, U.S. annual income would
increase by an additional $500 billion—or roughly $4,500 per household. The choice
is clear: renew trade promotion authority and give the country a raise. I’m delighted
that the President may ask for a renewal of Trade Promotion Authority as early as
tomorrow.
2. Monitor and enforce trade agreements: We can all agree that our trading part-
ners are not living up to all of the obligations they accepted, and we must take ac-
tion. The Bush Administration has had some important successes in changing that
behavior through bilateral negotiation and—when necessary—taking dispute settle-
ment cases to the WTO, but efforts by many of our trading partners to avoid their
obligations continue to grow. This Committee must remain second to none in push-
ing for trade compliance, so we can enjoy the full benefits of what we bargained for.
3. Help dislocated workers: Our economy sees changes not only from trade but
also from technology, productivity, and demographics. In fact, the Council of Eco-
nomic Advisors estimates that fewer than 3% of long-term job losses are due to
trade. Manufacturing jobs losses are mostly due to productivity gains, which have
increased manufacturing output by 11% in the last 4 years, and overall industrial
production by 41% between 1994 and 2005.
When we talk about workers dislocated because of import competition, we should
be looking at a solution that addresses the problems encountered by all dislocated
workers. Workers impacted by trade are a small subset but have those same charac-
teristics—often they are less educated, older, unskilled minorities, and unmarried.
So, when we are working on unemployment insurance, job training, and job creation
tax incentives that help all dislocated workers and firms that hire them, we are also
working on addressing those who were dislocated specifically because of trade.
4. Encourage savings and investment: Our trade deficit is a narrow measure of
our economic picture. The broader capital account surplus reflects the health of our
economy and its attractiveness to foreign investors, who make a significantly posi-
tive contribution by supplying a source of good ‘‘insourced’’ jobs. Currently over 5
million jobs are associated with such investment, and we should continue to encour-
age this growth. At the same time, because the trade deficit is related to our short-
fall in national savings, we must save more by cutting government spending and
by providing incentives for our citizens to save. We also need to increase investment
by our companies, by taxing them less and by providing incentives to invest.
Conclusion
Mr. Chairman, trade has been wrongly blamed, often in a bipartisan fashion I
might add, for many of our economic ills. We must move toward building a trade
policy in a broad bipartisan fashion.
f
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 discus-
sion like this in many, many years. It is long overdue. I think we
should expect controversy, differences of opinion, and that will in-
clude 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 disequilib-
NG rium in income in this country and in other countries?
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So, I think we should look forward to this and to further hear-
ings. My own judgment is that trade policies really do matter. My
own feeling is that we have had trade policies under this Adminis-
tration that have not been active enough, that have assumed that
trade is an end in and of itself, that market forces will work them-
selves 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 Cater-
pillar. He is going to be talking about globalization, economic pol-
icy, 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 com-
ing 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 impor-
tant 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:]
Prepared Statement of The Honorable Wally Herger,
a Representative in Congress from the State of California
Thank you, Chairman Rangel, Ranking Member McCrery. I am glad we are dis-
cussing the importance of trade to our country’s economy today. Although we hear
much about the impact of globalization on workers, which is the exception and not
NG the rule, trade also conveys enormous benefits to our society through quality job cre-
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