TESTIMONY OF WILLIAM M. DALEY

Before the Senate Finance Committee

February 27, 2001

First, let me say how important it is that the committee address the issues of trade and globalization right now. I congratulate you for moving so early in the year. The significance of these discussions is going to be heightened as the economy slows, and we will need much greater public support for opening markets now than we did when we felt much better about our economy.

As you may know, as Commerce Secretary, I conducted a national trade education tour, visiting many of your states, trying to build public support. It was not an easy sell. So, as the President is now doing with his tax cuts, he and all of us will need to sell trade to the American public in a much more direct way. And I hope that this hearing is the beginning of that process.

Although the benefits of globalization are obvious, too many of us are not acknowledging the concerns of the many Americans who have fears or outright opposition to the globalization which.

The most important thing that can be done by political leaders and business leaders who believe that globalization and free trade has been helpful to people all over the world is to engage our fellow citizens in a better understanding and appreciation and, at the same time, acknowledge the negatives and being honest attempts to address these issues with creative "out of the box" solutions.

So, what I would like to do today is to offer opinions on three trade areas that President Clinton worked on with many of you, and that President Bush has now inherited. In my opinion, we can work on these in a bi-partisan way:

First, the most important thing is to address the concerns of Americans worried about environment and labor conditions around the world.

I remember in 1993 during the NAFTA debate when we talked about labor and environmental standards, a business leader told me: what's all this about putting social issues into trade discussions?

Unfortunately, eight years later, too many people are still stuck with this attitude. There are too many pro-traders who just see the positives ... who are motivated by profit ... and who do not see that labor and the environment aren't just social issues. They are economic issues.

Companies do look at labor costs. Companies do look at environmental costs. These are economic issues that companies do not hide from when they look to see where to build a plant -- and as a country we should not hide from them when we open markets abroad.

In my experience, getting China's entry into the WTO through Congress was twice as hard as getting NAFTA through. And the reason was in both parties -- not just Democrats, but in both parties -- bigger and bigger constituent groups have organized around these issues.

Labor and environmental groups will not go away. We will not build the broad consensus we need on trade unless we work to reach a compromise with them. If President Bush wants to govern from the center, he has to compromise on this, and he has to get support of the business community behind this.

When I was Commerce Secretary, the business community said they were open to supporting labor and environmental issues. But it has to be more than promises -- they have to really do it and work hard to arrive at solutions. I believe many leaders in the business community want to. And labor and environmental groups must compromise as well. They cannot make perfection, whatever it is in their eyes, the enemy of the good.

Second, our Administration laid the groundwork for free trade in this hemisphere. And as the new Administration follows through, I strongly believe fast track authority would help them.

Some think they can make progress without it. Some say we are so focused on tax cuts, forget this right now.

In my opinion, it is not in our interest to have complicated negotiations with a region, and then have to follow it up with 535 negotiations at home. I have experienced recounts, and it is better to vote once.

To be frank with you, the most difficult negotiations are not necessarily with other countries ... often they are with Congress.

And so whether you consider giving the President fast track authority this year, or later in his term, the bottom line should be this: fast track has to be a rpoduct of compromise so there is support for it and therefore a greater likelihood of a trade agreement being passed with a comfortable majority.

Back to my first point, I do not believe American workers, especially in this economy, will put up with anything that continues to open our market and gets nothing in return.

Third, is China. Obviously I hope to see China enter the WTO and to have the commitments it made lived up to.

But the jury is still out. There is no question of the benefits that opening a market of a billion people will bring to American businesses. But as I said last year, this will test China and the world trade system.

We have already seen slower progress than we would like and some serious backsliding on agriculture and other commitments. We knew when PNTR was passed that China's ability to live up to its commitments was difficult but if we have the resources, we can make sure this enormous opportunity is fulfilled and the American people support us.

I cannot say this strong enough. Enforcement is absolutely essential, because if it is not done right, my friend, Don Evans, will be before this Committee being asked: why is China not living up to the agreement? And should we have not known this? It would be bad for our relationship, our economy and the ability to move forward in other areas.

So, in my opinion, these are some of the trade issues Congress and the new Administration will face.

In the last eight years, I think we did a lot of good. We opened new markets and cut world tariffs by more than a third. But this is the 21st century, not the 20th. And we need to get out of the box, and listen to American workers, and build support for our trade efforts.

Thank you.