STATEMENT OF DAVID L. AARON
Thank you Mr. Chairman and Senator Baucus for inviting me to testify today at the Committee's first trade hearing of the 107th Congress.
I hope my advice today does not come as ill grace from a recently departed trade official of the previous Administration. My only defense is that my views were not entirely fashionable in the last Administration either.
In the brief time that we have this morning I would like to address our trade negotiating priorities, our strategy, the substance of what we want to accomplish, and the process for achieving these objectives.
Priorities. I believe that our first, and most immediate priority, should be to resolve our bilateral trade problems with Europe. Second, we should re-energize our free trade agreement efforts both bilaterally and regionally with the FTAA. Our Third priority should be a broad effort at further global liberalization in the WTO.
My reasons for this order of priority are these: Multilateral liberalization in the WTO cannot go forward without the leadership of both Europe and the United States. Current bilateral trade disputes are poisoning that relationship and must be resolved. It is difficult to imagine successfully negotiating further agreements in the WTO when the current ones are not being observed.
At the same time, progress on regional and bilateral free trade agreements can help maintain momentum for further global liberalization in the WTO, just as the conclusion of NAFTA gave important stimulus to the successful conclusion of the Uruguay Round. FTAs can set higher standards and establish important precedents for broader multilateral measures. Too many developing countries still do not see the merit of trade liberalization and have become obstructionist in Geneva. FTAs are a way of demonstrating the value of more economic openness.
Strategy. To pursue these priorities, I suggest that first the new Administration undertake a high level initiative to resolve the gamut of US-EU trade difficulties. Only a comprehensive, political level effort is likely to break the current impasse on bananas, beef, FSC, Airbus, GMO's and so forth. This should be accompanied by acceleration of the Free Trade Area for the Americas timetable and the rapid conclusion of FTA's with Jordan, Chile and Singapore.
In contrast, our approach to the WTO should be deliberate and cautious. The reality is that US leverage is limited, because we are already the most open major economy in the world.
As a result other countries are focusing their demands on such things as our fair trade laws - which should remain inviolate. We therefore must proceed with extreme caution and avoid premature concessions just to launch a round.
Substance. As for the substance of what we should seek in negotiations, liberalization in agriculture should be paramount -- particularly an end to export, and other trade distorting subsidies. Second, we need to greatly liberalize services which are now the largest sector of the US economy and the area in which we actually generate trade surpluses. Third, we cannot ignore tariffs on goods. They are still too high in many parts of the world. They must be reduced and bound at a lower level. Finally, we have to give appropriate consideration to the relationship between trade, the environment, and labor standards.
What do I mean by that?
First I believe the self-evident link between these issues needs to be recognized and institutionalized by the WTO. A committee on trade and labor, is an obvious step. Together with the committee that already exists an trade and environment, these bodies could examine and make proposals on key issues such as how to prevent more open trade from creating a race to the bottom in labor and environmental standards. They also could develop rules to encourage higher standards everywhere while preventing such standards from becoming unwarranted obstacles to trade. Meanwhile we should also be pursuing these issues in our bilateral and regional negotiations.
I am encouraged that the Business Roundtable and the National Association of Manufacturers and other business groups are examining positive options with regard to trade labor and the environment. I believe that this issue stands where Human Rights did 20 years ago - when Human Rights were considered tangential to foreign policy and the United States branded as naive and overbearing in pressing the matter. I hope it does not take 20 years for environment and labor standards to take their rightful place in the pantheon of international trade law.
Process. The process we follow in moving in this direction will be vital to our ultimate success. Our goal should be a broad consensus that will strengthen our negotiators hand, not a narrowly supported mandate that could come unraveled by the next Congressional election. Such a consensus should be the point of any "fast track" legislation. If we cannot achieve a broad consensus now, our negotiators would be better off pursuing agreements to the point where concrete proposals can be put before the Congress as tangible justification for fast track.
Thank you Mr. Chairman. I look forward to the Committees' questions.