SPEAKERS CONTENTS INSERTS
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44–878 CC
1998
REPORT CARD ON NAFTA
HEARING
BEFORE THE
SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY AND TRADE
OF THE
COMMITTEE ON
INTERNATIONAL RELATIONS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
FIRST SESSION
MARCH 5, 1997
Printed for the use of the Committee on International Relations
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COMMITTEE ON INTERNATIONAL RELATIONS
BENJAMIN A. GILMAN, New York, Chairman
WILLIAM GOODLING, Pennsylvania
JAMES A. LEACH, Iowa
HENRY J. HYDE, Illinois
DOUG BEREUTER, Nebraska
CHRISTOPHER SMITH, New Jersey
DAN BURTON, Indiana
ELTON GALLEGLY, California
ILEANA ROS-LEHTINEN, Florida
CASS BALLENGER, North Carolina
DANA ROHRABACHER, California
DONALD A. MANZULLO, Illinois
EDWARD R. ROYCE, California
PETER T. KING, New York
JAY KIM, California
STEVEN J. CHABOT, Ohio
MARSHALL ''MARK'' SANFORD, South Carolina
MATT SALMON, Arizona
AMO HOUGHTON, New York
TOM CAMPBELL, California
JON FOX, Pennsylvania
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JOHN McHUGH, New York
LINDSEY GRAHAM, South Carolina
ROY BLUNT, Missouri
JERRY MORAN, Kansas
KEVIN BRADY, Texas
LEE HAMILTON, Indiana
SAM GEJDENSON, Connecticut
TOM LANTOS, California
HOWARD BERMAN, California
GARY ACKERMAN, New York
ENI F.H. FALEOMAVAEGA, American Samoa
MATTHEW G. MARTINEZ, California
DONALD M. PAYNE, New Jersey
ROBERT ANDREWS, New Jersey
ROBERT MENENDEZ, New Jersey
SHERROD BROWN, Ohio
CYNTHIA A. McKINNEY, Georgia
ALCEE L. HASTINGS, Florida
PAT DANNER, Missouri
EARL HILLIARD, Alabama
WALTER CAPPS, California
BRAD SHERMAN, California
ROBERT WEXLER, Florida
DENNIS J. KUCINICH, Ohio
STEVE ROTHMAN, New Jersey
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BOB CLEMENT, Tennessee
BILL LUTHER, Minnesota
JIM DAVIS, Florida
RICHARD J. GARON, Chief of Staff
MICHAEL H. VAN DUSEN, Democratic Chief of Staff
Subcommittee on International Economic Policy and Trade
ILEANA ROS-LEHTINEN, Florida, Chairperson
DONALD A. MANZULLO, Illinois
STEVEN J. CHABOT, Ohio
TOM CAMPBELL, California
LINDSEY O. GRAHAM, South Carolina
ROY BLUNT, Missouri
JERRY MORAN, Kansas
KEVIN BRADY, Texas
DOUG BEREUTER, Nebraska
DANA ROHRABACHER, California
SAM GEJDENSON, Connecticut
PAT DANNER, Missouri
EARL F. HILLIARD, Alabama
BRAD SHERMAN, California
STEVEN R. ROTHMAN, New Jersey
BOB CLEMENT, Tennessee
TOM LANTOS, California
BILL LUTHER, Minnesota
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MAURICIO TAMARGO, Chief of Staff
YLEEM D.S. POBLETE, Professional Staff Member
AMOS HOCHSTEIN, Democratic Professional Staff Member
JOSE A. FUENTES, Staff Associate
C O N T E N T S
WITNESSES
The Honorable Ira Shapiro, Senior Counsel and Negotiator, Office of the U.S. Trade Representative
The Honorable Regina K. Vargo, Deputy Assistant Secretary for the Western Hemisphere
Mr. Ron Carey, General President, International Brotherhood of Teamsters
Mr. Bob Nicklas, Legislative Department, International Brotherhood of Teamsters
Mr. Willard A. Workman, Vice-President, International Division, U.S. Chamber of Commerce
Mr. Paul DiMare, Farmer and Owner, DiMare Homestead Incorporated (also representing the Florida Tomato Exchange)
APPENDIX
Prepared statements:
The Honorable Amo Houghton
The Honorable Ira Shapiro
The Honorable Regina K. Vargo
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Mr. Ron Carey
Mr. Willard Workman
Mr. Paul J. DiMare
Additional material submitted for the record:
Mr. James Cathey, Chairman, and Mr. Lee Frankel, President, Fresh Produce Association of the Americas
Mr. Wayne Hawkins, Executive Vice President, Florida Tomato Exchange
Mr. Edward Wytkind, Executive Director, Transportation Trades Department, AFL/CIO
Letter from Mr. Thomas J. Donahue, American Trucking Association, Incorporated, to Charles A. Bowsher, Comptroller General of GAO
''The True Cost of Winter Vegetables,'' by Rafael P. Oeler of the Ninety Miles Film Company
Letters to President Clinton concurring opening the U.S.-Mexico border
Supplementary responses from The Honorable Ira Shapiro to The Honorable Bob Clement and The Honorable Brad Sherman
Mr. Gerald M. Bell, Director, Commercial and Property Lines, National Association of Independent Insurers
REPORT CARD ON NAFTA
WEDNESDAY, MARCH 5, 1997
House of Representatives,
Subcommittee on International Economic Policy and Trade,
Committee on International Relations,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:07 p.m., room 2172, Rayburn House Office Building, Hon. Ileana Ros-Lehtinen, chair of the Subcommittee, presiding.
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Ms. ROS-LEHTINEN. The Subcommittee will come to order.
The debate has been brewing in Washington over the last 3 years concerning the North American Free Trade Agreement (NAFTA) and it is indicative of a much larger debate taking place throughout our Nation. It underscores the need to address the concerns which have arisen about the impact of NAFTA on our U.S. economy before proceeding to further expand it.
In December 1994 at the Summit of the Americas held in my hometown of Miami, Florida, the three partners of NAFTA—the United States, Mexico and Canada—proceeded to extend an invitation to Chile to enter into the negotiations toward joining the free trade agreement. The Clinton Administration went on to express its view that Chile's inclusion in NAFTA would be a significant first step toward the creation of a Free Trade Area of the Americas by the year 2005—a goal that was established by the countries participating in the Miami summit.
Last week, as we know, the president of Chile visited Washington to discuss various issues which are key to the relations between his country and ours. At the top of his agenda, the potential accession of Chile into NAFTA and the outlook for ''fast-track'' authority to be granted by the U.S. Congress.
This, then, is a timely issue. It is a matter of importance to the American people, to the constituents that we, as Members of Congress, are here to serve. The pertinent U.S. Government agencies, some of whom are represented here today, are in the process of preparing an assessment of NAFTA's 3 years in effect, a report that was congressionally mandated. This Subcommittee will hold another hearing on NAFTA when that report is due.
However, if there are problems with NAFTA—if there is evidence to show that the reality is that it is not meeting the expectations set forth during the negotiations; if the problems are systemic or are procedural; if, in fact, there are no problems and the animosity toward NAFTA is simply due to lack of information or inaccurate data; then we must act and act now before it is too late to correct the situation.
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In its ideal form, NAFTA was to open the borders of the three countries to liberalized trade which would stimulate economic growth in the three partner countries. It would open previously protected sectors in agriculture, energy, textiles and automotive trade. It was to open the U.S.-Mexico border to trade in services with specific guidelines in the field of financial services, transportation services and telecommunications. It was to lay the foundation for future North American economy based on high living standards, full employment and free and fair trade. It was set to improve working conditions and establish mechanisms to safeguard workers' rights in all three participant nations. Furthermore, its proponents argued that it would curtail illegal immigration into the United States from Mexico and would provide for a clean environment.
In essence, it was poised to be a miracle cure for many of the economic ills of the United States. However, as is usually the case with most ''save all'' cures, it was too good to be true. Serious deficiencies in the agreement have continued to afford Mexico an advantage over the United States by maintaining a low wage strategy, coupled with weak environmental, health and safety standards.
While some of the agreements have improved the original accord somewhat, the changes have not been sufficient to repair the endemic problems. As a result, the United States is recording trade deficits with most of its NAFTA partners, although as recently as the 1991 to 1994 period, the United States reported trade surpluses with Mexico.
There is evidence of flight of capital and labor, along with a redistribution of income within the U.S. economy which has been described as detrimental to the overall U.S. economic situation. Reports focusing on unemployment figures alone show the number of U.S. jobs lost due to NAFTA as of October, 1996, totaling 600,000.
This is but a sample of some of the issues that have been raised against NAFTA. Our witnesses in the second panel today have experienced firsthand numerous other problems which need immediate attention if we are to ensure that our citizens are not hurt by NAFTA.
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In sum, the minimum requirements of NAFTA, and of any other trade agreement which our country enters into, is that it first does not harm. That is, even if the United States does not actually benefit from it, at least we should not suffer for it.
This is what we are here to determine today. Has the United States won or lost with NAFTA? For this purpose, we have invited a diverse group of witnesses who will provide their differing assessments of NAFTA's implementation and we thank them for being here with us today.
I would like to now recognize any other Member of our Subcommittee for any remark that they might have.
Thank you.
If not, we will first hear from the congressional panel and we are privileged to have Congressman Amo Houghton appearing before us, who will then be followed by Congressman Dave Bonior. Thank you both.
Amo.
Mr. HOUGHTON. Thank you very much, Madam Chairman. It is always a privilege and a pleasure to be with you. You have operated a wonderful Committee on Africa and I know you are doing a great job here.
I must say right off the bat that I am a big NAFTA supporter and so I want to show my true colors right away. I am not going to get into a numbers game. I have some testimony here which I would like to submit for the record.
Ms. ROS-LEHTINEN. Yes, we will be happy to accept the submission.
Mr. HOUGHTON. But I would like to talk about some general things.
The first thing is that there are some people that really do not like NAFTA—viscerally, biologically, chemically—they do not like it. And I have really great respect for some of my friends in the AFL/CIO and for Ross Perot and for Pat Choate and people like that and I understand where they are coming from. I just do not happen to agree with that. I think the only thing which I can do is to bring to the table a sort of a position of being a hardhat on trade because the company that I used to work for, because of the Japanese issue dumping of the products, virtually lost money for the first time in the early seventies in this century and that was because of dumped Japanese products into this country. So I understand the flight of capital and the flight of jobs and I hope I am sensitive to these conditions.
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However, I did start a group, along with the IUD, which is the Industrial Union Department of the AFL/CIO, called Labor Industry Coalition on International Trade and I think we began to wrap our hands around issues, both from a management and a labor standpoint, which were helpful.
Let me just talk about several issues, the first is my district. I come from upstate New York and I know that there have been some problems. I know there was a company called Smith-Corona. It closed up its doors and went down to Mexico. I happen to think that most of the reason was for management purposes, for marketing purposes, not because of the flight of that company toward cheaper labor. But they did go to Mexico. And there are other examples where there are some problems.
However, on balance, I would like to feel that we have gained enormously from the trade with Mexico and, particularly, with the absence of the Maquilladoras. And that is, of course, what NAFTA fixed. I mean, there were not these little free trade unfair pockets which brought in products from the Far East and then with a small contributed value, moved those products into the United States almost as if it were another State. And I have taken trade groups down to Chile and to Argentina and we had a very successful one in Mexico and, as a result, the job creation from those and other records, I think has been on the plus side rather than the minus side. So what I am saying is, from the area I know best, which is in terms of products or geography, NAFTA has been a plus.
Let me just talk a little bit about the Maquilladoras. The Maquilladoras were these free trade areas I referred to earlier and they were really a problem. And they were a problem in an industry I know a little bit about, which is the television industry. The Japanese would bring products into the United States at a dump price. The dumping, ultimately and laboriously, was proved. The tariffs were raised. And what they did then is to divert the product to Mexico, add a small amount of contributed value, and brought it back into the United States through the Maquilladoras process. That is all out now. That was unfair and everybody agrees it was unfair.
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So what has happened, really, since NAFTA on that particular product line is that the tariff has been increased here and so therefore the products coming from Japan cannot come in. They cannot come in any more from Mexico because of the absence of those little free trade Maquilladoras areas. So, really now, 90 percent of the large television—which is really what we consume, which is the 19-inch and larger—is made here in this country. For example, there is a little plant in State College making glass and they are increasing their production to the extent that they are putting $150 million into capital, another 1,000 jobs. That makes glass. The glass then goes to a little town called Horseheads, New York and Horseheads has a company called Toshiba. They make the tube. They are also adding the equivalent number of capital dollars and jobs.
Those products then—the glass and the tube—go down to Mexico and are made into a set. But 60 percent of the value of that set is in the tube. And then they come back into the United States. That never would have happened before. What would have happened is it would have come through the Maquilladoras directly from the Far East or, even before that, products would have come from the Far East.
Now you can say, ''Well, that is only Japan because that has some sort of an order against it. What about Malaysia or Thailand or other countries like that?'' Because of the economics of NAFTA, there is a 14-percent benefit in terms of manufactured products which now precludes all that from happening. So investment, job creation and all those things which happen to have hurt a company that I used to work for now are all changed. And I can give you other examples of that.
Let me just say a couple of other things. That I have always felt, since I was in business, that there was a competitor out there and we sometimes feel as if we are in this country that we can make a decision because there is no other country like it. We were a superpower. We can take our own mind. We can define the legislation any way we want. I do not happen to believe that. I think we are in competition with the diet. We are in competition with the Bundestag. We are not out there all by ourselves. And let me give you an example.
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We went down to Chile—this is an all privately-sponsored trip—in November after the election and Chile is dabbling with the idea of joining the thing called Mercusur. Mercusur is a South American trading partnership. We do not have all the time in the world to decide on fast track with Chile because Chile would like our market and, obviously, the greatest asset we have is this precious market. But, at the same time, they do not need it. They can go to Argentina. They can go to Brazil. They can go to other places. So timing is very important and we must make a decision whether we want to continue these regional relationships such as we have with Mexico and Canada to Chile and Argentina and other people like that who want to be part of our team here.
Another thing I think is important—and this is really my last point—is that you must look at a trading agreement in the long term. That is what it really has been geared for. We have had the collapse of the peso, the numbers have been swamped by that very unusual monetary adjustment. We cannot rely on them. NAFTA really is not going to be scheduled to be fully effective until January of the year 2000. And also, if you take a look at some of the statements which come out of the White House about the ten million new jobs which have been created in the last 4 years, some of that has got to come from NAFTA-related areas.
So I believe that this is a good treaty. I believe that we ought to really think of ourselves as part of a world in which 95 percent of the customers for this country are outside the United States. And we must do those things which will consolidate our base and I think NAFTA is one of them.
Thank you very much.
[The prepared statement of Mr. Houghton appears in the appendix.]
Ms. ROS-LEHTINEN. Thank you so much, Amo. We appreciate it.
We are honored to also have with us Mr. Bonior from Michigan, who is the House Democratic Whip. Thank you, Dave.
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Mr. BONIOR. Thank you, Madam Chairperson. I appreciate your having this hearing. I want to commend you for that and for your tireless commitment on this issue. I also want to say how honored I am to be with my friend and colleague, Mr. Houghton, who is one of the most serious and well thought of Members in this body and who, when he speaks, I certainly listen. And while we may have a disagreement on this issue, I value his judgment and his thinking in this institution very much.
I want to thank you for giving me the opportunity to appear here today. Four years ago this country had a very major debate over NAFTA and those of us who fought for a better treaty back then—one that protects labor rights and human rights and the environment—are just as determined to make sure that the faults of NAFTA are addressed today.
This debate is moving into a new phase. Supporters of the NAFTA agreement now want to expand NAFTA into new countries. But expanding NAFTA now would be like building a new room onto your house when your kitchen is on fire and your roof is collapsing. Before we expand NAFTA, we have to fix it. And, believe me, there is a lot to fix.
This is no longer a question of theory. NAFTA has had 38 months to prove itself. Most of us have waited patiently. We have not loaded our guns during that 38-month period and shot our fire at the treaty. We wanted to see if it would work. We hoped that it would work. But we have seen the effects that NAFTA has had on our families and our jobs and on our country. And it is not good news.
I believe that NAFTA has been, for the most part, another failure. Our trade deficit with Mexico is now a record $16 billion and I know the peso has something to do with it, but let me just tell my friends who are into that argument that even before the collapse of the peso, 5 or 6 months prior to that collapse, the deficit was increasing with Mexico. So it is not just the peso.
And, by the way, on the peso issue, we argued vehemently—those of us who opposed NAFTA 38 months ago—that, in fact, that was one of the deficiencies, that it did not consider the value of the peso in the discussion of NAFTA and it certainly should have been a very important part of any agreement.
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Using a very narrow definition by the Department of Labor, more than 100,000 Americans have lost their jobs to NAFTA. And using the proponents' own formula, as the Chairperson mentioned in her opening statement, about 600,000 Americans have lost their jobs. Now, these trends were in place long before, as I said, the peso devaluation.
If the peso devaluation were the only reason, other nations would suffer trade deficits as well. But Japan and other European nations have maintained their surpluses before, during and after the peso crash. It is primarily the agreement, not the peso, which is causing our deficit. Ninety percent of the companies who promise to create jobs have not. Sixty-five percent of the workers who were laid off ended up with lower paying jobs. Fifty-seven percent of Americans now say their purchasing power is worse than it was before NAFTA. And, most importantly, and I want to emphasize this, the Labor Department found that 62 percent of companies are now using Mexico and other low-wage nations as bargaining chips to drive down wages. It is happening all over the country.
In Mexico, the situation is even worse. The Mexican economy, as a whole, has collapsed. Along the border, production has soared but wages have fallen by 25 percent. Workers in the Maquilladoras no longer make a dollar an hour. They now make 70 cents an hour. And workers who try to form unions are still being fired and thrown into jail.
Madam Chairperson, I was just there a few weeks ago. I went down to the Maquilladoras outside of Tijuana and I can tell you things are not better. They are worse. They are worse from a wage standpoint. They are worse from these workers—wonderful workers, wonderful people trying to make a living for their families—being arrested when they try to shut a line down that is causing bodily injury to their relatives' hands and fingers. People protesting and then being arrested, then being fired.
The situation is not good. It is not good from an environmental standpoint and I could spend a good hour with you on that, but I know we do not have the time. But I would love to get into the discussion about the environmental degradation that continues along our border.
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NAFTA has not created a consumer market in Mexico. It has created an export platform. As a Nation, we now ship more consumer goods to Switzerland than we do to Mexico. A good example is the auto industry. From 1994 to 1995, production in the Maquilladoras for the domestic Mexican market plummeted by 72 percent. The production for export to the United States grew by 36 percent. We are selling fewer cars in Mexico and shipping more back here and, as a result, our trade deficit in the auto sector ballooned to more than $15 billion.
Meanwhile, the environment is suffering the consequences. Families along the border continue to live near, bathe in and drink the water that American Medical Association has called—and I quote—''a cesspool of infectious disease.'' This is the AMA.
The North American Development Bank, which was set up to fix these problems, we all remember that debate. That was going to solve some of the environmental problems on the border. But after 38 months, the bank has yet to make a single meaningful loan for the public good. And, what is more, NAFTA has helped create what some called a waveline border check. Eleven thousand trucks now pass over the border from Mexico every day and for every truck that gets inspected, 199 do not. They are just waved through and God knows what is on them. Every single week seems to bring another story of corruption at the highest levels of the Mexican Government.
Is this tragic? Of course it is. Is it permanent? No. We still believe that NAFTA can be a force for progress. We always believed that. We still believe that it can create a consumer market in Mexico. But before we even think about expanding NAFTA to other countries, we need to fix the flaws in it. We need to give workers the same kind of labor and health protections that we gave companies for things like intellectual property. We need to include labor and environmental standards in the core agreement, not in any side agreements. We need to raise Mexico's standards to our level and not lower ours to theirs. And we need to make non-compliance subject to sanctions, not just consultations.
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We need to remember this is not just about markets and trade barriers. This is about jobs and living standards. It is about human rights and it is about human dignity. Workers on both sides of the border are mistreated by multinational corporations and indifferent government. But they remain brave and they remain hopeful. Until they have a voice to fight for themselves, we must continue to be their voice, Madam Chairman.
There are more people in this Congress who voted against NAFTA 4 years ago than voted for it. And the many who voted for it say they would never vote for it again. Before we expand NAFTA, we have got to fix what does not work. We believe we can. We are going to work hard in the months ahead to do just that.
And if I could just end with this note—my friend from New York State mentioned the television industry and I had the chance to go to a community, colonia, near the Panasonic plant and the Samsung plant and I want to tell you that while they are producing these television sets for export into this country primarily, the workers who are making those sets are working for $5 and $6 a day and then they go back to homes which I visited in colonia that are disparate in their construction, often without running water, without sanitation facilities and, of course, next to facilities and factories and shops that spew chemicals and poisons into their rivers and streams in which they bathe and take water. It is a really sad situation and I think it is incumbent upon us to do all that we can to fix this NAFTA before we go on and offer it to other countries.
I thank the gentlelady.
Ms. ROS-LEHTINEN. Thank you so much, Mr. Bonior.
Mr. Gejdenson, the Ranking Member, could not be with us today because of a long-scheduled conflict. However, we will be entering his remarks into the record as well as any other Member who would like to enter them.
[At press time the statement had not been submitted.]
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Ms. ROS-LEHTINEN. And, based on a previous agreement between Sam and me, we decided that because of the number of witnesses and the time restraints we will only have one question from each side following the congressional testimony. On our side we will have Mr. Brady and Ms. Danner on the Democrat side.
Mr. Brady.
Mr. BRADY. Thank you, Madam Chairman.
I am a Member from Texas and from the Houston region and, obviously, our State is a thermometer for the NAFTA agreement, both in trucking issues and environmental issues and in the immigration problems that occur because there is not a strong economy on the Mexican side. And, without question, the trade agreement is not perfect. But wouldn't you agree—and either of the witnesses feel free to reply—that this is a long-term issue? That the goal here is to create a predictable set of rules that allow business to invest in both countries that allow them the type of consistency to create jobs?
I have noticed that within our sectors, institutions that create jobs support NAFTA. Those who accept jobs often have problems with them. And since the goal here is to strengthen the economy of all the countries involved, I guess the bottom line is isn't it extremely premature to make any assessment of NAFTA at this time? I mean, it is not fully implemented. We are creating a trade vehicle. We have barely put the chassis together and have not seen yet how it performs long-term. Wouldn't you agree that it is premature to be making significant decisions when we have not yet seen the results?
Mr. HOUGHTON. Would you like me to answer, or Mr. Bonior?
Mr. BRADY. Yes, please. Yes, sir.
Mr. HOUGHTON. Well, I agree with you. I mean, clearly, we do not want to have our country end up as a warehouse for products we cannot afford to buy and that is a given. But you have to remember that there is really a very close allegiance of the Mexican people to the Americans. As an example, $7 out of $10 of imported products comes from this country. They want to buy from us. They want to be friends with us. And I know that the environmental laws are not perfect, and I know the labor laws are not perfect, and I know they should have more health care, and I know there should be better pensions, and I know there should be better eating standards and the whole thing like that. They are working up on this and the perfect example is to go to a place like Monterey. Monterey and, obviously, Mexico City, are the two key areas, Monterey being the industrial base. And it is moving and it is changing.
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But I think that when you take a look at a program like this, you cannot look at it in only a few months and I agree with you. It has to be over a longer term and that is what the whole concept of NAFTA was.
Mr. BRADY. Thank you, sir.
Mr. BONIOR. We have had 38 months to look at this and if we are going to take the position that there is no need to correct any of this, then we are in for a horrendous, horrendous experience in the next couple of years. I would just commend to you a book that William Greyer just wrote, ''One World, Ready or Not: the Manic Logic of Global Capitalism.'' And we in this country can only for so long continue to be the purchaser of surplus goods from places like Mexico and China. And it is catching up with us. It is catching up with us in the loss of good wage jobs. It is catching up with us in terms of the huge trade deficits that we are piling up that are reaching alarming proportions.
Long-term? Yes, we should look at it from a long-term perspective. But the missing piece, I think, in your statement, sir, was setting up rules for business. What about setting up rules for workers? What about setting up rules for the vast majority of people who have to suffer in a situation in which they cannot organize, they cannot assemble, they are restricted in their free speech, they are thrown in jail if they attempt to do so.
And, with all due respect, we are going backwards over there. We are going backwards in many respects on labor and environmental standards. We are not moving forward. And so I think that both of those pieces—the environmental piece as well as the labor piece—need to be a part of any future agreement and any corrections in order for the Mexican workers to harmonize up on standards and health with what we have here in the United States.
Mr. BRADY. Thank you, Ma'am.
Ms. ROS-LEHTINEN. Thank you so much, Mr. Brady.
Ms. Danner.
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Ms. DANNER. Thank you, Madam Chairman.
I respect both my colleagues. Obviously, they have differing opinions and I fall on the side of Congressman Bonior. And my question to you, Amo, will ultimately be how long do you think that it should take because you said we have not had a long enough period of time, but we have had over 3 years.
Let me just say that 2 weeks ago over 300 people in my district learned that their jobs were going to Mexico. They manufacture shoes. And in talking with my staffers about it, I learned that we will have immediate help from the Department of Labor because any employee in shoe manufacturing, is assumed if they are displaced by someone in Mexico, immediate help is available. We do not have to go through the general loops and hoops that we have to go through in most instances. In effect, it seems to me as though the Department of Labor has said, ''If you are manufacturing shoes in America, you may lose your job to Mexico. But we are going to help you just right away without a lot of preamble to it.'' That is very sad.
Just prior to that, several months ago, Lee Jeans, also in my district, announced that they were moving their manufacturing operations of over 400 jobs to Mexico. I personally spoke with the chairman of the company that owns Lee Jeans, Vanity Fair, and he told me that they were almost forced to go to Mexico. That they were forced to leave the country because their competitors were doing it and if they were going to remain competitive, they had to leave the country also.
I have had others leave the country. Sherwood Medical. They did not really tell us where they were moving their equipment. We only know they moved it out of the United States, so we are told. I cannot find any evidence at all of anything that has been a plus for my congressional district in NAFTA and I am very concerned about it.
Rather like David, I, too, have had an opportunity to go to Mexico and I am sure that you probably have, too. I saw the people who manufacture televisions down there. One gentleman who was wearing very proudly his Zenith T-shirt. But he is never going to have an opportunity to watch television because he does not have any electricity in the home he showed us. He showed us his home very proudly. They literally sweep the dirt out of their home because they are living on dirt. And when it is raining, they live on mud and in mud. It was just beyond belief.
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We saw people who work and live in these colonias who were drinking water from streams that had dead animals in them. I mean, the human rights violations down there, I could go on and on about different stories that we were told as we visited the different colonias and talked with the different people. It is very difficult for an American worker to compete with someone who will work for cents per hour and who will work with no safeguards whatsoever.
I believe that over 3 years, it seems to me, to be adequate and I will not even get into the issue that I feel very strongly about being a Member of transportation with regard to the trucks. But my question is, how long do you think we should take to look at this issue and rectify some of the problems that exist?
Mr. HOUGHTON. Well, Ms. Danner, I do not know. How big is a pile of stones? You just do not really know. I think that the authors of NAFTA recognized that it was going to be a multi-year process, at best. And, as I said earlier in my testimony, that this thing really is not supposed to kick in full speed until January of the year 2000.
Now, all the problems will not be solved by that time and there are going to continue to be problems. But there are problems such as you described in Mexico and Malaysia and Thailand and Indonesia and places like that and we should be concerned with jobs. There is not any question about it. But I think that some of the companies that I have seen operate have been able to translate their technology as they move out of low technical areas—and this does not necessarily help the shoe or the fabric industry—but they have been able to supplement jobs in the high-tech area.
For example, there have been some consumer products in our area that have moved outside the United States. Not to Mexico but to other places. Where, at the same time, there have been two or three major expansions in terms of optical fiber in our area. Those jobs happen to pay three times what the other jobs did, despite the fact they are both unionized, because of the high technical content of this thing. So I think it is going to be a long time, but we just have to understand that these countries are trying to pull themselves up by their bootstraps.
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And you may be right in terms of rats running around and dirt floors and things like that. I have not seen that in the plants with which I have been associated in Mexico. And now, granted, they are particularly around the metropolitan areas such as Mexico City and Monterey. These people who live in, probably not the type of house that you or I would live in, but reasonable housing. They do not have dirt floors. They buy a lot of American products. They walk around in American-style clothes. Those are the people, obviously, that are going to make the difference in the economy uptick in Mexico.
Ms. ROS-LEHTINEN. Thank you so much. Thank you.
I know Congressman Houghton is needed in another Subcommittee so we are going to excuse him.
Mr. Bonior, if it is possible, Mr. Sherman just has a quick question.
Mr. BONIOR. Sure.
Ms. ROS-LEHTINEN. If it is possible for you to stick around for a few minutes.
Mr. BONIOR. Yes.
Ms. ROS-LEHTINEN. Thank you so much, Amo.
Mr. HOUGHTON. Thank you very much.
Mr. SHERMAN. When we have a completely open market, NAFTA-designed, with another country, naturally when there is an American factory, that factory has to compete with the concept of moving those jobs to another location where there may be different wages and different environmental standards. And it makes some sense for us to perhaps have free trade agreements with countries that have democratic institutions so that the people there will insist upon high environmental standards and other countries that protect worker rights so that they are going to have wages coming up to our level.
David, I wonder, when you think in terms of democratic institutions, environmental protection and worker rights, whether countries like Australia and Sweden come to mind, or do you think in terms of Chile and Brazil as being good partners?
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Mr. BONIOR. Well——
Mr. SHERMAN. It is a rhetorical question.
Mr. BONIOR. It is. And Chile has made some progress, I think we have to recognize that, in terms of democracy but I take your point.
What we are saying, and we are trying to get the Administration and our colleagues who are on the other side of this issue to focus in on, is that there has to be at least a minimum standard in the environment and on worker rights and on human rights.
You know, when the Europeans did the European Union, entry into that was conditioned upon countries meeting a certain standard. They did not allow Spain and Greece into the European Union, and Turkey, until they met a certain standard and those countries agreed with it and they worked toward that standard and they actually got some support from the other European countries to meet that standard and then they worked out the problems. What we are doing here is quite unprecedented and, in fact, is lowering our standards or certainly our workers' standards and wages in this country to a situation which we are finding a widening income gap between those who have and those who have not in America. And it is very, very dangerous.
And so, just to conclude, I would suggest that what we are offering here is an opportunity for workers on both sides of the border to win. Right now, workers on both sides of the borders are losing. The corporations.
And I might just add, parenthetically here, that these multinational corporations, some of them with great names that we have been familiar with all of our lives, have really no shame. No shame in what they are doing down on the border in the Maquilladoras area. Some of them even from my home area.
They go down there, they pay these pathetic wages. They provide very little opportunity for these people in a variety of different ways. And these are modern facilities.
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Amo talked about seeing these factories and these facilities and the people working as being clean and modern. They are clean and modern, for the most part, in the Maquilladoras areas and many of them are. They are state-of-the-art. And the workers, the Mexican workers, are very good workers. But they are not getting rewarded for what they are doing and, of course, they cannot afford the product that they are producing, as Pat Danner just indicated.
So until we deal with the basic ability for them to organize and collectively bargain for a decent wage, as our workers struggled to do at the early part of this century, we are not going to see the democratization process in the workplace or in the political sector that is necessary for us to have an equal partnership similar to what we have with Canada.
Thank you.
Ms. ROS-LEHTINEN. Thank you so much, David. We appreciate you being here today with us.
As our next panel gets settled, I would like to proceed with their introductions. Leading the discussion will be Ambassador Ira Shapiro, who serves as senior counsel and negotiator in the Office of the U.S. Trade Representative. Previously, he has served as the USTR's general counsel playing a major role in the negotiation of the NAFTA side agreement and the completion of the Uruguay Round. Ambassador Shapiro served in the government prior to his tenure at USTR when he worked as Minority staff director and chief counsel to the Governmental Affairs Committee, counsel for the Senate Majority leader and chief of staff, Senator John D. Rockefeller.
He will be followed by Regina Vargo, who serves as Deputy Assistant Secretary of Commerce for the Western Hemisphere. She is responsible within the Department for the implementation of the U.S.-Canada Free Trade Agreement and prior to this position, she served as the director of the Office of NAFTA. During this tenure, she earned two gold medals, the Department's highest award, for her contribution to the NAFTA negotiations and for her role in developing the Export Mexico Program.
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We thank them both for being here today and we will begin with Ambassador Shapiro.
STATEMENT OF AMBASSADOR IRA SHAPIRO, SENIOR COUNSEL AND NEGOTIATOR, OFFICE OF THE U.S. TRADE REPRESENTATIVE
Mr. SHAPIRO. Thank you, Madam Chairman, for the opportunity to appear here today to discuss the NAFTA. I think that an inquiry on NAFTA after 3 years is certainly well worthwhile and the first panel and some of the comments remind me that there are very few subjects still that are as controversial as the NAFTA. You often feel like you are talking about not only two different views of a trade agreement but two different views of our economy and related issues. And David Bonior, particularly, and Ms. Danner have raised so many issues that there will be some danger in being able to confront them all effectively.
But, since personal notes usually get introduced here, let me just offer one personal note. I spent most of the 1980's trying to think about what a democratic trade policy would look like if the Democrats ever got into power. I thought that our trade policy, and a lot of us thought that our trade policy, in the seventies and eighties was not working. That we were involved in one-way trade so that we were an open market and the other markets were closed to us. It was a carryover from the 1950's and 1960's when our prosperity was something we could take for granted. And a lot of us—and that includes a lot of my friends in the Congress, the AFL/CIO, the UAW—thought quite a bit about what a trade policy might look like or what it would take to restore U.S. competitiveness if we ever got the chance to do it. And, frankly, I would argue that we have done a pretty good job in the last 4 years and that we have had a fair amount of unity in doing it, with the exception of NAFTA.
NAFTA is the one issue that still divides people who are absolutely committed to a strong U.S. economy and a strong trade policy. But we come down on two different sides. So I would like to start, having stated that background, in looking for a little common ground here which often does not exist on NAFTA.
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And let me say first, Congressman Bonior put forth a number of issues and I would just like to state a few questions to hang out there as we talk about this. The first is, I think, whether Congressman Bonior and others' description of where our economy is now is accurate. Is it accurate to talk about this job loss? Is he reflecting the economy that you understand to be in our country today?
My answer, by the way, will be no.
The second is an overriding question—whether we would somehow be better off without NAFTA. I would ask whether we would be better off without NAFTA or whether Mexico would be better off without NAFTA. And I think I am going to answer that, or at least suggest that the answer is negative there, too.
The third question, though, is—because he talks about changing NAFTA, a different NAFTA—the third question is whether the NAFTA that he is seeking is attainable. Whether it is possible somehow to have a trade agreement in which we specify labor standards, environmental standards, pensions, the sort that he is describing. And I do not think, for a variety of reasons, that is realistic, but it is a difficult subject to get through.
And the last, I suppose, since we have heard concerns about the Mexican people, is whether they would somehow be better off without NAFTA. And I think, basically, the answer to that is no as well.
Let me start by saying that NAFTA——
Ms. ROS-LEHTINEN. It worries me when the yellow light comes on and you start that phrase saying, ''Let me start—''.
Mr. SHAPIRO. Well——
Ms. ROS-LEHTINEN. That is a problem.
Mr. SHAPIRO. Congresswoman, I suppose I should have asked how much time I really have. Five more? Or five total?
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NAFTA has been a key component of our trade policy. It was not a favor we did Mexico. When we looked at trade when we came into office, we found the terms of trade with Mexico were not right. That the Mexican market was too closed to our products. And that the barriers to all kinds of U.S. products were too high. When we passed NAFTA and when Congress implemented NAFTA, most of the changes, the overwhelming number of changes, were required of Mexico because they had to change their trade regime and we did not change ours.
Now, the second thing, since I am conscious of what the Chairwoman said, is this question of our economy today. It seems our destiny to debate not only NAFTA, but the condition of our economy. Today our economy is the envy of much of the world because of its job creation rate and its low inflation rate and its strength across the board. We set the pace in diverse fields. Our industrial production has been up 18 percent in 4 years and we have expanded industrial capacity to the highest level since the 1970's. We have come back in sectors that were in deep trouble 5 and 10 years ago—autos and auto parts, steel and semiconductors, machine tools. Our performance has been quite strong in much of the Nation.
But, if you look at certain parts of the industrial midwest, there has been a particularly strong renaissance and I wish Congress Bonior was here because I do not intend to bring these points up in his absence, but Michigan, of all the States in the Nation, Michigan has the fastest rate of income growth for the last 4 years. Michigan's unemployment, I think, is at 4.9 percent. The income growth rate is 5.8 percent and there has been a significant pocket in which there has actually been shortage of skilled workers.
Now, throughout the upper midwest, there has been a renaissance on in terms of production and in terms of manufacturing and exports have played a crucial part in that resurgence. I appeared with Governor Jim Edgar of Illinois in Chicago last year and he stated that NAFTA was working for the benefit of Illinois workers and their families. In the first——
Ms. ROS-LEHTINEN. If you could summarize your statement now. Thank you, Ambassador.
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Mr. SHAPIRO. I will try. I am sorry.
Three things I will say quickly, or relatively quickly. The first is, NAFTA proved to be a buffer against a loss of exports for us when the peso prices hit. The Mexican economy came back much more rapidly. Mexico did not close their market to our exports. They went on with their NAFTA commitments.
In the 1980's, we lost 50 percent of our exports when they had a financial problem. This time, we lost 9 percent and snapped back in 18 months.
The second thing I would simply say—and I would obviously like to get into more in length—the labor and environmental side agreements that we insisted on as part of the NAFTA have started to have positive effects. By no means have they transformed the situation in Mexico as yet. But the labor side agreement has brought important freedom of association issues to the fore in Mexico and they continue to be the serious subject of debate there. For instance, the Mexican Supreme Court found recently that State laws restricting union organization in State government is unconstitutional. And in my written statement, I would like to submit a list of examples——
Ms. ROS-LEHTINEN. Thank you. We will be glad to enter your statement into the record.
Thank you so much, Ambassador. We appreciate you being here with us.
Ms. Vargo.
STATEMENT OF REGINA K. VARGO, DEPUTY ASSISTANT SECRETARY FOR THE WESTERN HEMISPHERE, DEPARTMENT OF COMMERCE
Ms. VARGO. Thank you very much, Madam Chairman, for the opportunity to appear here today. I do have a longer statement I would like to submit for the record and will try to summarize a few key points here.
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The U.S.-NAFTA trade relationship is the largest one that the United States has in the world. Our NAFTA partners both buy and sell $3 out of every $10 that the United States exports and imports. Almost one third of the current trade levels that are taking place between the United States and NAFTA is new trade that has taken place since we implemented NAFTA 3 years ago. We think NAFTA has met its objectives of expanding and protecting U.S. exports to Mexico and Canada.
While NAFTA phases out tariff barriers over 15 years, most of the trade that is taking place within NAFTA is already duty-free. Next January, the last tariffs between the United States and Canada will be eliminated. Mexican tariffs, which had averaged about 10 percent prior to NAFTA, will now average less than 6 percent, with tough rules of origin that reward companies for using North American parts and labor, an incentive that increases as these duties are phased out.
Tariff barriers are only one impediment that has kept U.S. companies from market access. Just as significant can be non-tariff barriers. That has certainly been the case with the Mexican auto regime. In 1993, we estimated that removing Mexico's auto restrictions would open up $1 billion in new export opportunities for U.S. auto companies, and it has. In 1996, the United States exported 51,000 new passenger cars and 31,500 new trucks to Mexico valued at $1.2 billion, despite the situation within the Mexican economy.
As Ambassador Shapiro has suggested, in contrast to the 1982 Mexican economic crisis, U.S. exports to Mexico fell by only 9 percent in the year following the 1994 peso devaluation, despite a drop in the Mexican economy of 7 percent. This is the case because NAFTA locked in Mexico's trade opening and its economic reforms. NAFTA helped the Mexican economy get back to a much quicker and stronger recovery than most forecasters predicted with the return of Mexican economic growth of 5.1 percent last year—a very impressive record from the debt they were in. Our exports reached a record $57 billion and their growth is accelerating. If these trends continue, the trade deficit will narrow this year and our market share will grow.
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Responding to further privatizations and new opportunities, U.S. exports of capital goods increased 17 percent last year. U.S. exports of industrial goods rose 21 percent. And the Zedillo Administration is forecasting economic growth of 4 percent next year for the Mexican economy with the interesting point being, I think, that half of this growth is seen as coming from a pickup in domestic consumption in Mexico as employment levels and real wages begin to rise.
U.S. imports from Mexico also set a new record in 1996. Mexico's exports enabled it to weather the economic crisis and pay back 3 years early its debt to the United States. Some of these imports are substituting for imports from other sources and some relate to co-production agreements which strengthen U.S. competitiveness. Both of these are issues that we will be examining in the larger NAFTA study due to Congress on July 1 of this year.
In discussing NAFTA, it is also important to remember that the U.S.-Canada relationship is the largest in the world. Unfortunately, last year the Canadian economy was marked by relatively low growth and a high unemployment rate and a falling Canadian dollar depressed demand for U.S. products, which nonetheless still managed to reach $134 billion. Like Mexico, Canadian economic growth will pick up this year.
Now, there is a lot of discussion about winners or losers within NAFTA. But I think it is interesting to note that about half of U.S. trade in both directions, with Mexico and with Canada, takes place in just three industries—motor vehicles and parts, industrial machinery and computers, and electric and electronic equipment—and that regionalization under NAFTA appears to be intensifying local specializations within industries, rather than discretely allocating industries among countries.
Finally, recognizing the benefits of freer trade, many countries in Latin America have formed regional trading agreements, such as Mercusur, that have seen significant increases in internal trade as their barriers come down, just as we have seen in NAFTA. But we are not members of those agreements, setting our exporters at a competitive disadvantage. And to cite just one example, Southwest Bell recently chose to source from Northern Telecomm in Canada $180 million in telecommunications equipment for a project in Chile, rather than from U.S. suppliers, because it would save them nearly $20 million in tariffs, thanks to the Free Trade Agreement that Canada has negotiated with Chile.
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Madam Chairman, we need to address these competitive disadvantages and create a Free Trade Area of the Americas based on principles that put our firms and farms on equal footing with their hemispheric competition.
In closing, I would just like to say at the Commerce Department we have been very active in providing information on these new opportunities for U.S. exporters and smaller firms and there is a tremendous amount of interest out there for that. I might just note one point. Last year, we provided over 74,000 documents alone discussing what the market opportunities in Mexico were.
I think the record shows that NAFTA works for U.S., Mexican and Canadian firms and workers. It opens new market opportunities. It helps enhance our competitiveness in the markets of our NAFTA partners, in our domestic market, and in overseas markets. And it has aided the Mexican recovery.
Thank you and I would be happy to answer any questions.
[The prepared statement of Ms. Vargo appears in the appendix.]
Ms. ROS-LEHTINEN. Thank you. Thank you so much, both of our panelists.
We have been joined by Congresswoman Marcy Kaptur, who, due to a schedule conflict, could not be here with the earlier panel. But we are honored that she has joined us now.
Marcy, thank you.
Ms. KAPTUR. Thank you, Madam Chairwoman and Members of the Committee. It is a pleasure to be with you today, especially on a subject near and dear to the hearts of the constituents that I represent and I want to commend you for your interest in helping prepare a report card on NAFTA. If it is truly to be a blueprint for the hemisphere then now, over 3 years since its passage, it probably makes a great deal of sense for us to be very objective in our measurement of its results.
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Let me say that, in my own view, NAFTA is causing serious structural damage inside this economy and it is also creating instability in North America as a whole. Some corporations have benefited in both nations from this situation. However, in the aggregate, I believe NAFTA has really worked to, unfortunately, provide a tarnished blueprint for the hemisphere. And my own perspective today would be for us to go back to renegotiate certain provisions of NAFTA to make them work before we then extend it to include other nations. And I would like to discuss that a bit.
A bill that I introduced today, along with over three dozen colleagues on a bipartisan basis, the NAFTA Accountability Act of 1997, builds on the momentum we developed in the last 104th Congress when we obtained over 110 co-sponsors over a 2-year period. We now have over three dozen on the first day of introduction. So I think that there is a growing consensus within the Congress, within our membership, that there are parts of NAFTA that are definitely not working and, with the help of committees such as your own, we can right the situation.
Let me review some of the provisions of our bill. We asked the Administration, the executive branch, to actually measure against certain performance standards how NAFTA has actually worked. And if NAFTA lives up to those standards, terrific. If it does not, then we ask the Administration to renegotiate in the following areas:
One concerns the trade deficit—the account balance with the nations of Canada and Mexico. It takes a look at the job situation for our people as well as the other countries. It takes a look at environment. Human rights and democracy, immigration, the whole question of truck standards and truck safety and also illicit drug trade. And we ask for certification in these areas. In addition, there are agricultural provisions in our measure and currency provisions because of the difficulties——
We had tried to get courtesy provisions in the original NAFTA bill. They were not allowed in by the Committee and then we were faced with the peso devaluation. So we have provisions in the NAFTA Accountability Act that deal with that.
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I wanted to say a word about some of these. The testimony covers them in full. But let me talk about the trade deficit.
Now, is there an overall chart there for the overall U.S. merchandise trade—OK.
If you look at this chart, that gives you a sense of what has been happening to the United States over the last 25 years in terms of our overall trade accounts. You will see that the trade deficits this country has been amassing are growing larger and larger as the share of GDP, in real terms and nominal terms. And they are coming in waves and they are getting deeper.
If one were to estimate, taking the $150, $160-billion dollar trade deficit from last year and the NAFTA account, our deficits with Canada and Mexico, are $40 billion of that $160 billion—25 percent and growing. That cuts off, shaves, 1 percent off GDP in any year. So if we grow at a weak 2.5 or 2.7 percent, 2.8 percent—we are creating jobs and temporary work with no benefits, restaurant jobs, health care jobs, the three major job growth areas over the last 5 years—what you are doing is, you are trading off good jobs with good wages and benefits for the substitutional jobs in our marketplace and the fact that wages are not rising and benefits are not rising means that we are actually having a pulldown in our own standard of living across this country. The significance of this 1 percent off a low GDP growth rate is extremely significant to the people of this country.
Now, we were told that NAFTA would give us a trade surplus in the first year. It has not only not given us a trade surplus, it has given us the worst historic deficit with both Mexico and Canada that we have ever had. Each billion dollars of trade, the Administration agrees, translates into about 20,000 jobs. So when you think about a $40-billion trade deficit with Canada and Mexico last year, you are beginning to talk real jobs. If you look at the number of certified applications over at the Department of Labor, under NAFTA TAA, it is now 111,000 people in this country that have been certified to receive that assistance, taxpayer subsidy dollars, because they have lost their jobs due to NAFTA. This says nothing about what is happening inside Mexico and I could talk about that for an hour and I will not.
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Ms. ROS-LEHTINEN. Why don't we go through those really quickly, Marcy, if you could.
Ms. KAPTUR. All right.
Ms. ROS-LEHTINEN. The rest of the charts.
Ms. KAPTUR. If we could put up the chart next of Mexico. The one that is on the ground. Yes.
This gives you a feel for, in some ways, like our own trade deficit, if you look what happened in Mexico, there is a debt crisis every 5 or 6 years. And you see where NAFTA is signed there. There were trade surpluses that preceded NAFTA's signing. Once it was signed, the trade deficits have gotten deeper every year—$15.4 billion, $16.2 billion with Mexico.
And, Tim, if you could put up the other graphic of Canada, you will note also that our trade deficit with Canada has doubled. The Canadian situation is a little bit different than the Mexican situation. But you can see, if you look at the trade surplus that existed with Mexico, $1.7 billion in the blue arrow, that is now translated last year into a $16-billion deficit with our country and with Canada we have doubled in terms of the deficit situation. So we are talking about real lost jobs in this country and then there are internals going on in both Mexico and Canada that are not written about very much but which are very, very important.
The automotive sector is absolutely the most significant one in terms of U.S.-Mexico trade. And I guess about $15 billion of that trade deficit relates to automotive. It is interesting how the Administration—and more than one Administration, by the way, has done this—they always talk about exports. Exports, exports, exports. Well, in the checkbook there is also the debit side of the ledger, not just the asset side.
And if you look at pre-NAFTA, the trade represented by the arrows there, both in cars and trucks, you will see that we did have a deficit with Mexico at that point. But in automobiles, it has now doubled. And in trucks, it has gotten eight times worse. Eight times worse. So our theory that, no, this was not the development of a consumer market in Mexico, this is the development of an export platform through which goods are outsourced from this country into Mexico as well as other countries. And then you turn back into this country. The Mexican people have not been able to improve their standard of living with the peso devaluation and all the rest and so what you have is a very serious trade imbalance that hurts millions of people across the continent, including well over probably three-quarters of a million directly in our own Nation.
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I will submit the majority of testimony——
Ms. ROS-LEHTINEN. We will be glad to submit that in the record.
Ms. KAPTUR [continuing]. for the record, Madam Chair, and one recommendation I would make is that the Committee seriously look at our NAFTA Accountability Act. It is a very measured way of forcing a report card on NAFTA's various provisions so we can look at the information objectively, repair it where it is not working, and not permit expansion until we fix what is wrong with this agreement.
[The prepared statement of Ms. Kaptur appears in the appendix.]
Ms. ROS-LEHTINEN. Thank you so much, Congresswoman. Thank you to the panelists as well.
I will begin, first, with Mr. Manzullo, who will be followed by Mr. Hilliard.
Mr. MANZULLO. Thank you very much. I just have three short comments. Then, unfortunately, I have to go back to my office for another meeting.
I think when you look at NAFTA in terms of simplification, I always call this a good 10–4. Products that were manufactured have been manufactured in the United States. They were sent to Mexico and paid, on the average, a 10-percent tariff. Products manufactured in Mexico are sent to the United States and paid, on the average, a 4-percent tariff. And the big 10–4 is that under NAFTA, they would be reduced to zero. That really is the basis of NAFTA. It is a reduction of the tariff rates between the countries to zero. Before NAFTA, Mexico had a tariff rate of 2 1/2 times that of the United States. That is really what NAFTA is about. It is reducing those tariff rates.
The second thing is, what NAFTA did—and Ambassador Shapiro pointed it out very succinctly—back in 1982, when Mexico had a crisis, they lost six-tenths of 1 percent of their GDP and yet they threw up their import barriers and U.S. exports to Mexico fell by 35 percent. Then in 1983, the Mexican GDP had another hit of 4.2 percent decrease. And, again, the Mexican Government threw up their shields and American exports reduced by 25 percent. And then in 1995, the biggest crisis of all when Mexican GDP fell by 7 percent because of the NAFTA agreement, U.S. exports to Mexico fell by only 13 percent. So I think, if you look at in terms of the general philosophy of NAFTA and the purpose for which it was intended, it is good. It is making sense because, with the latest problem in Mexico, if we did not have NAFTA, they would have cut off the borders and we would have had a lot of American products that would have not have been able to go to Mexico.
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I guess we could talk about trade deficits all we want but we have to ask the question, would the trade deficit have been any greater without NAFTA. We do not know these things and all I can do is I can take a look at manufacturing sector by manufacturing sector. I represent a congressional district that has over 1500 manufacturing facilities. We export everything. We have the No. 1 dairy in the county in the State of Illinois, the fastener capital of the world, things that lock, snap, hinges, bolts and things. Those things get shipped to Mexico that are used for assembling Mexican automobile plants and then they come back to the United States, what we call imports here. So it is a huge picture.
But here we are in the United States. We are talking about NAFTA as causing the loss of all these jobs and when I talk to the employers, they cannot find workers. Unemployment is at 4, 4 1/2 percent. If we have lost 800,000 workers, where are these workers going to come from? Manufacturers are desperately trying to find people to carry on these jobs. So I just want to make a comment that, from a practical aspect and looking very simply at NAFTA, this appears to be working.
And, Marcy, I appreciate what you are showing here. But those cars, before NAFTA, we only sent about 2900 cars. Then after 1993, we are sending 46,000. And, sure, they are sending a lot more back to us but one thing this could never take into consideration is how those fasteners and bolts and hinges and screws and pins and all these little things that are manufactured by big and small manufacturers all find their way south of the border and suddenly they come back up to us and, for some reason, after NAFTA, we are at some of the lowest unemployment in history. So to say that American jobs have been lost on NAFTA—sure, some have lost but I think, on the whole, we have done OK.
Ms. KAPTUR. Mr. Manzullo, how would you respond to the 111,000 Americans that have now applied for TAA and received it? They should take their medicine and swallow it?
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Mr. MANZULLO. Well, it is not so much due to what has happened in Mexico, Marcy. I have an article here, for example, that was in the Washington Times. It is a little bit dated but it talks about some of the people that applied to TAA. Some figures show it at 19,000. Some show it at 51,000. But I think you have to take a look at the net loss and then ask yourself would these jobs have been lost whether or not NAFTA went into effect anyway. I mean, we simply have to ask that question. I do not think they would be because the purpose of NAFTA was to reduce barriers to make it cheaper for American goods to be sold to Mexico. And, as Mr. Shapiro stated, that is exactly what is happening.
Ms. KAPTUR. Well, I think, with all due respect to the gentleman, I think you hit the nail on the head when you said the fasteners are sent to Mexico. They are put in vehicles that are sent back to the United States and they are u-turn goods there, not the development of a true consumer market in Mexico. I think you hit the nail on the head.
Mr. MANZULLO. Thank you.
Ms. ROS-LEHTINEN. Thank you.
Ms. KAPTUR. You hit the fastener on the head.
Ms. ROS-LEHTINEN. Mr. Manzullo and Congressman Kaptur, in the interest of time, because in the third panel we have two folks who need to make their flight, I am going to try my best to adhere to the 5-minute rule.
Mr. Hilliard.
Mr. HILLIARD. Thank you very much, Madam Chairman. I want to direct a question to Ambassador Shapiro.
I notice on page three of this statement you said that NAFTA has played a vital role in helping trade expansion strengthen the U.S. economy. I also heard during your testimony—and correct me if I am wrong—that you attribute our good economy and our low unemployment rate to NAFTA when you were talking about the statement that Mr. Bonior made. And with our trade deficit being what it is with Mexico and with the theory that economists have that for every billion dollars in trade deficit, so many jobs are lost to our economy, I would just like to know how you reconcile your testimony and your statement with that well-known economic theory.
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Mr. SHAPIRO. Mr. Hilliard, essentially along the lines of to what Congressman Manzullo was referring. We have a very strong economy right now, particularly in some of the industrial States.
Mr. HILLIARD. Because of NAFTA?
Mr. SHAPIRO. No, no. Because of a lot of things that we are doing right in our economy. NAFTA is only——
Mr. HILLIARD. You think that NAFTA is one of them?
Mr. SHAPIRO. NAFTA is a positive. I would not say it is a huge positive. I would say it is a positive. It is part of our overall trade strategy.
I would say, basically, in response to Ms. Kaptur's point, we will confess—we count exports and imports differently because you can count exports and you know when you export something how many jobs it creates. With imports—and my testimony goes through this—some imports go into domestic production. Some imports come in in short supply situations. Some imports complement production. There are all kinds of reasons why not every import can be equated with a job loss.
But the other thing I wanted to say about the trade deficit—and I know we all think about trade deficits—you look at Japan, you look at a country where you have chronic trade deficits, and I think, over the years, you can say you have a market access problem. If your trade deficit changes sharply, as this one did in 1 year, I think you have to look for a different explanation and the explanation in this case was, the Mexican economy went into a recession three times deeper than the last one we had. A very deep recession. Their currency collapsed and that changed the trade balance. I would much prefer to have our economy and a trade deficit with Mexico than their recession. And so there are a lot of things that go into this.
But one point I just wanted to make, with the Chair's indulgence—because some of these numbers can be interesting——
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Ms. ROS-LEHTINEN. Indulge you until the red light comes on.
Mr. SHAPIRO. Thank you, Madam Chair.
We heard a lot from NAFTA opponents about how investment was going to go into Mexico to drain investment from the United States. So I think this number is relevant. The total foreign investment in Mexico in 1995 was $7 billion. $2.1 billion of foreign investment from the United States into Mexico. In contrast, our country had $60 billion of foreign investment here and our total investment, three-quarters of which was business, was $1.1 trillion.
Now, I think that illustrates some of the problems that the opponents' numbers have here. We turn out to be a generator of investment in the United States and a magnet for other people's investment. There is no investment flight to Mexico and so I use that as just one example of the fact that some of these numbers need to be looked at quite closely on both sides.
Ms. ROS-LEHTINEN. Thank you so much.
Mr. Brady.
Mr. BRADY. Thank you, Madam Chairwoman.
I agree. The numbers are a little confusing. I know that last year, 1996, our exports grew some 23 percent. Mexico's imports grew less than that, about 18 percent. I guess it depends upon the timeframe and the descriptions that they are using to crunch the numbers to make their story.
But today, earlier, we heard assertions that poverty in Mexico and low wages along the border, environmental issues, all have occurred and, in part, occurred because of NAFTA. But as a delegate from Texas where we have been dealing with environmental issues for decades and decades, low wages, non-existent wages, where we have dealt with immigration and poverty in Mexico, we see NAFTA as the potential to increase those wages to try to build an economy in Mexico to help to shape the environment along the border, all of which, without the dollars that drive them, we are, just like in inner cities, going to have trouble handling it.
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So I would ask the Ambassador, do you believe that NAFTA is the cause of poverty in Mexico—low wages, environmental problems along the border States?
Mr. SHAPIRO. Obviously, I do not. I think there are some serious conditions in Mexico that will take years to overcome. I think NAFTA can contribute positively to that. The Mexican Government has started to contribute positively, too. I think we had a setback. Both NAFTA countries certainly had a setback from the peso crisis, although the recovery has been good in the last year. But I think that this is a longer-term process. I would say on the environmental side, we all know that the conditions at the border are not acceptable in any way.
But if you look at some of the infrastructure projects that we have only begun to fund through the NAD Bank and through the border commission that we set up, you will find wastewater treatment projects on a scale that we have never had before. The San Diego facility—and I talk about it in my statement—will, we believe, for the first time in 50 years, provide a permanent solution to the sewage problem in Tijuana. We all know that these environmental problems were years in the making and it is going to take some time to improve the situation. We also know that even in our own country it takes time to deal with some difficult environmental problems—cleaning rivers, dealing with toxic wastes.
The question really remains whether there is any evidence that we or the Mexicans would be any way better off without NAFTA and without some of the cooperative efforts that we have put in place. I have detailed them in the statement. I cannot go through them all. But I think all of us—and I know the opponents of NAFTA feel the same way—you have to ask yourself whether the situation would be somehow better without the framework of cooperation and the framework of expanded trade that we have put in place so far.
Mr. BRADY. Thank you, sir.
Thank you, Madam Chairwoman.
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Ms. ROS-LEHTINEN. Thank you so much. And thanks to Mr. Clement who has been so patiently awaiting. Thank you, Bob.
Mr. CLEMENT. Thank you, Madam Chairman.
And, Ambassador Shapiro, it is a pleasure to have you here, and Ms. Vargo and Congresswoman Marcy Kaptur. And I might say for her, she truly represents her people at home. It is a pleasure to serve with you, Marcy.
Ms. KAPTUR. Thank you.
Mr. CLEMENT. This question is to the Ambassador and Ms. Vargo, but please feel free to comment, Congresswoman, and please keep your remarks brief, if you could, because I have three questions.
My first question. There are a number of companies, including my home State of Tennessee, who have become frustrated with the high occurrence of cargo theft and truck hijacking while operating in Mexico. Is the Administration currently working with Mexican officials to protect these drivers and cargo?
Mr. SHAPIRO. Congressman, I can say that we are working on this problem. But I would like to give you a fuller answer from the Department of Transportation, who has been doing more of this.
Mr. CLEMENT. Is that the same answer for you, Ms. Vargo?
Ms. VARGO. Yes.
Mr. CLEMENT. OK.
My second question. Public Citizens Global Trade Watch reports that more than 600,000 Americans have lost their jobs due to NAFTA. Are these figures correct? If so, what more can we do to stem this job loss and protect and to create new jobs for Americans?
Mr. SHAPIRO. I think the 600,000 figure is completely fallacious. I would guess it is based simply on multiplying the trade deficit by a certain number of jobs in a way that I do not think is representative of anything. I know some of the opponents of NAFTA have used 100,000 because those are the number of workers that have been identified for trade adjustment assistance. Even those, I would note, and any number of thousands is of concern, but even those, I would note, refers to all people who are affected by the trade and not necessarily by NAFTA. I am told that only 5,000 of those have come forward for the training that results. But certainly the 600,000 number has no basis.
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Ms. Vargo.
Ms. VARGO. I would like to just add one thing to that because so much of the concern about NAFTA seems to be reflected in the trade balance and I think it is important to point out that at any given time, the biggest determinant of a trade balance, more than anything, is going to be the relative economic growth rate for the two countries. When your economy is growing, you are going to have a demand for imports and you are going to pull them in. If you are growing faster than your trading partner, you are likely to develop a situation where temporarily you will run a deficit. When the deficits are chronic, when they seem structural, you get concerned. But that is not the case that we have with Mexico right now, given the depth of the recession that they have.
The easiest way to point out this disconnect between a trade balance and a job impact is just to look at the last year. Mexico made an incredible swing in its trade balance, Madam Chairman, on the order of $20, $30 billion. And yet they suffered over 1.6 million unemployed in that recession.
By contrast, you are correct, our trade deficit did increase with Mexico and with Canada. Yet Canada has an unemployment rate of 10 percent. We have one of our lowest unemployment rates in, what, almost a decade? We have created roughly 9 million new jobs since NAFTA went into place. So it is important that we not fixate on the deficit.
Mr. CLEMENT. Thank you.
Ms. ROS-LEHTINEN. OK.
Ms. KAPTUR. Madam Chair, might I respond to that?
Mr. CLEMENT. All right.
Ms. KAPTUR. Does the gentleman have an additional question?
Mr. CLEMENT. Yes, I have one more question. Let me ask the one more question and then you can respond to both.
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Fourteen months ago, the Administration delayed implementation of NAFTA provisions that would allow Mexican motor carriers to operate anywhere in California, in New Mexico, Arizona and Texas. It is my understanding that the safety and security concerns that led to this decision have not been resolved and remain just as serious. Is the Administration considering removing current restrictions?
Mr. SHAPIRO. I think, Mr. Clement, there were strong feelings on both sides of the issue when we made the decision in December, 1995. And over the course of the 14 months, the Department of Transportation and Customs working with the affected States, we believe, have made substantial progress in improving our enforcement efforts along the border and improving the safety regimes of all our NAFTA partners. We will not open the border until we are satisfied on the question of safety and we have made no decision at this time. But we do recognize the need to resolve the issue and we are hopeful and hope that we can do it in a way that does not in any way threaten the safety or security of anyone.
I want to, if I could, submit for the record, Madam Chairman, a description of everything that has happened in the last 14 months.
Ms. ROS-LEHTINEN. We will be glad to enter it.
Mr. SHAPIRO. And supplement the record in that way.
Ms. VARGO. I think you covered the main points.
Ms. KAPTUR. I just wanted to place on the record, if I might, Congressman Clement, listening to the Ambassador—one of the troubling aspects of NAFTA for me as a citizen of this country and a Member of Congress is the short shrift that is given by this Administration to those in our country who, in fact, have lost their jobs and, Mr. Ambassador, lost them to outsourcing to Mexico. Whether you are talking about Thompson Electronics in Indiana, tomato growers in Florida, Delphia workers in Warren, Ohio, the Administration has to stop the denial.
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We have thousands, tens of thousands, of people in this country that have lost their jobs. Now, big people admit mistakes and if we are going to get this to work right, you cannot not recognize the people in this country that have been harmed, with all due respect. And I think that NAFTA is such a major blueprint, it could not have been done perfectly at first. But to be insensitive to the people of this country that are hurting—and, by the way, you mentioned not taking advantage of training. I should give you some of the letters I have received from around the country of the kind of training that is being offered. If the Department of Congress cannot be more sensitive to our own citizenry, how can we hope to be sensitive to the people of Mexico that are being hurt by this agreement?
I think, on the job front, the evidence is very clear. On the trucking issue, let me just say—and I am sure others have stated this for the record—that we only actually check one of every hundred trucks coming over those borders and one of the provisions in our NAFTA Accountability Act has to do with the trucking provisions. We are very concerned about inspection, particularly in view of the drug trade and some of it flies over, it does not get trucked over, as you know; but also the certification of drivers, the drug testing for those drivers and the types of safety equipment that are going to be necessary to drive on our roads. I am very worried about what the Administration is going to do in this area, if anything, and so I am glad the Congressman asked the question.
Ms. ROS-LEHTINEN. Thank you so much.
And for the last Member to ask questions of this panel, thank you so much, Mr. Sherman, from California.
Mr. SHERMAN. First, I want to compliment you not only on your presentation but on really cool charts and particularly illustrative, the chart that talked about our trade deficit worldwide because during the 1980's, the foreign policy establishment told us that our trade deficit was mostly our fault because we were running a large U.S. budget deficit that led to the import of capital, higher U.S. dollars, you know the routine. Well, we have cut the Federal deficit and we have enlarged the trade deficit simultaneously. And so I am waiting for the foreign policy establishment to tell us, once again, with a different reason, why the trade deficit has nothing to do with our trading partners or trading relationship.
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I want to focus my questions on Chapter 11 of NAFTA and address them to the Ambassador and put forth the following scenario. Under NAFTA, if a country expropriates foreign investments, it is actionable. The company that lost the investment is entitled to be compensated and it is even detailed as to what currency and with interest and all that.
So if, for some reason, in a particular country there was an expropriation, that country should compensate the party that lost property. But if they failed to do so, would one of the other signatories to NAFTA have any liability at all?
Mr. SHAPIRO. Why don't you answer?
Ms. VARGO. OK.
Mr. SHAPIRO. I always turn to the person who knows the answer.
Ms. VARGO. Now, the way that provision works is the investor has to have a dispute with the government, such as over an expropriation, and actually that provision was written in order to make the Mexican Government subject to binding arbitration. The way the Mexican law works, a foreign investor cannot ask their home government for help in any case that takes the Government of Mexico to the Mexican courts. So we said, ''Fine. We would rather U.S. investors in Mexico have the option to use binding arbitration than to go to Mexican court anyway.'' And if Mexico were to fail to honor such an award, it would be a violation of the NAFTA. I think, at that point, the U.S. Government would step in. Up until then, it is a private matter between the investor and the Mexican Government.
We have not yet had that situation. But should it arise, the U.S. Government would be able to take the Mexican Government to dispute settlement for failure to honor the obligations of the agreement, which could allow us to put pressure on the Government of Mexico (including the withdrawal of trade benefit to provide compensation). Mr. SHERMAN. The people from my district are not looking for an opportunity to provide compensation.
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Ms. VARGO. Short answer—we are not going to be responsible to pay a company if they do not get financial compensation from the Mexican Government.
Mr. SHERMAN. So we have your personal assurance, you are absolutely certain——
Ms. VARGO. Yes.
Mr. SHERMAN. The U.S. Government will not be liable for a single dollar of property expropriated in Mexico under NAFTA.
Ms. VARGO. It is not part of the agreement, no.
Mr. SHERMAN. A related question goes back to the issues of truck safety that Bob brought up and that is, I represent a border State. I am particularly concerned that trucks that are too large and too old, driven by drivers that have no particularly effective regulation, are going to be causing automobile accidents. And there is no effective way to make sure that there is proper insurance. Now, monetary compensation does not really compensate for a tragedy like that. But is there any provision in NAFTA that would have the U.S. Government step in and pay someone who was terribly mangled by a poorly trained and poorly licensed driver from Mexico on our streets driving there pursuant to NAFTA?
Mr. SHAPIRO. Well, Congressman, let me say, first of all, that in the detailed material that I would like to submit to the Committee, much of what the Department of Transportation has been working on in the last 14 months is an effort to ensure that no Mexican driver who ever drives in the border States, if the border is open, no Mexican driver would be any less qualified in every respect than his U.S. counterpart. Similarly, that the vehicles would be held to the same standard. And this has been work that has been going on for, as I say, more than a year in very detailed ways to assure that this comes about.
Now, with respect to the exact question you have asked in terms of liability, I do not think so. But I would have to check.
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Mr. SHERMAN. If the Chairwoman would indulge me—it would have an awful lot more credibility if the Administration would put the U.S. Government's money where its mouth is and say that anyone who suffers damage as a result of one of these NAFTA truck cargos, who is able to establish that either the driver did not meet U.S. standards or the truck did not meet U.S. standards, would, if they could not recover from the trucking company, be able to recover from the Federal Government. To expose the people of my State to risks, it at least ought to call for compensation. And if you are correct and there is not a single Mexican driver or a single Mexican truck on the roads of California that fails to meet our standards, of course such a provision would cost you nothing.
Mr. SHAPIRO. I appreciate the thought and I will discuss it with others. I am correct in saying that that is the goal for which the DOT has been working for 14 months so that if we reach the point where we have concluded that the border can be opened, that safety levels of both vehicles and drivers would be at that level, that, of course, requires much different kinds of inspection facilities and intensified inspection recordkeeping and any number of other things that are detailed in here.
Ms. KAPTUR. Congressman Sherman, a 15-second comment, if I might. It was interesting that during the peso bail-out negotiations that the taxpayers of the United States became the insurance company for Mexico and there was a guarantee given then, unprecedented, no vote of Congress. Maybe they could do the same in the area of trucking to assure that the drivers in your State are also insured by the Treasury of the United States.
Ms. ROS-LEHTINEN. Thank you, Marcy, Regina and Ira. Thank you for excellent testimony. We really appreciate your patience and thank you so much for enlightening us on your views. We look forward to having you back when we do our followup hearing in July.
Our third panel is headed by Ron Carey, general president of the International Brotherhood of Teamsters. Fresh out of the Marines in 1956, Mr. Carey went on to work as a UPS driver and 2 years later was elected shop steward. This began a long career working for labor rights, which included serving as the president of one of the largest UPS locals in the country and the negotiations for the first 25-year and pension at UPS for its members. We appreciate Mr. Carey being here with us and we know that a number of our panelists have planes to catch and we will try to adhere to the 5-minute rule.
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Following Mr. Carey is Mr. Willard Workman, vice-president for the International Policy of the U.S. Chamber of Commerce. Mr. Workman is responsible for the formulation and the implementation of the Chamber's policy positions on international economic and trade issues. He also serves as vice-president for the Center of International Private Enterprise, a Chamber-affiliated group dedicated to assisting emerging private sector and market-oriented groups in the developing world. Previously, he served as special negotiator for the International Trade Controls at the U.S. Department of State and also as director for strategic planning and policy in the Bureau of Export Administration.
Our final witness today is Mr. Paul DiMare, who owns and operates DiMare's Company operations. His companies operate in my congressional district of Homestead, Florida, as well as two other Florida cities, Ruskin and Tampa, as well as St. John Island in South Carolina and Boston and in Indio, California. Mr. DiMare has been an industry activist since his early days in our State of Florida. He is past president of the Florida Tomato Exchange and the Florida Tomato Committee. He is currently chairman of the Florida Farmers and Suppliers Coalition.
We welcome all three of you gentlemen for being here today.
Mr. Carey.
STATEMENT OF RON CAREY, GENERAL PRESIDENT, INTERNATIONAL BROTHERHOOD OF TEAMSTERS
Mr. CAREY. Thank you.
On behalf of the 1.4 million members of the Teamster Union, I want to thank you for the opportunity for my testimony today.
The NAFTA trade deal, and I use the term ''deal,'' has left a clear trail of winners and losers. Multinational corporations have won big by exploiting Mexican workers and destroying good jobs in the United States. The result—working families have been the losers. Now the Administration is preparing to implement the trucking part of NAFTA. If that happens, even more workers will become victims of this trade deal as jobs are eliminated and real wages are eroded.
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As you know, in December 1995, the Clinton Administration delayed the trucking part of NAFTA because of concerns over highway safety, the environment, and American jobs. Fourteen months later, those problems still exist. Currently, trucks from Mexico are confined to a 20- or 30-mile strip along the border where freight is picked up by American drivers for delivery in the United States. The trucking part of NAFTA would give unsafe trucks from Mexico immediate access to the four border States and to all of the United States in the year 2000.
Before I continue on with my very brief testimony, I have asked Bob Nicklas, a member of my staff, to give you a brief review or view of his visit in February to the border crossing at Laredo, Texas. This area is one of the busiest entry points for Mexican trucks into the United States.
Bob.
STATEMENT OF BOB NICKLAS, LEGISLATIVE DEPARTMENT, INTERNATIONAL BROTHERHOOD OF TEAMSTERS
Mr. NICKLAS. The photos you are about to see were taken on February 12, 1997.
Ms. ROS-LEHTINEN. Sir, if it would be possible, just to use—right. Because the transcriber needs to have it go through her earpiece.
Mr. NICKLAS. The photos you are about to see were taken on February 12 and February 13 of this year.
Can everybody on the panel see?
This is a picture of the four custom inspection booths at Laredo's downtown Lincoln Bridge. About 4500 trucks a day cross into the United States at Laredo and these four booths right here handle almost all of the traffic. The average inspection time is 3 to 4 minutes. In that amount of time, Customs must enforce 600 regulations for 60 different agencies. That includes whether the driver has a legitimate border crossing card, whether or not they have adequate insurance, how long they have been driving, and, of course, what is inside the truck, including drugs.
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This is a more panoramic view of that same inspection area. These are the Custom booths back here. This is the truck inspection area in the front photo. You will notice a couple of different things. There is only one scale for weighing 4500 trucks a day. You will notice another thing, which is that no truck is being inspected. This is the area where the cars are parked that would prevent any truck from actually going through the inspection area. You will also notice that the inspection area is totally removed from the flow of traffic and that the consequence of the first three things is that the trucks are totally bypassing the inspection area.
This is a photo of the lower level of the same Customs compound and what I would like you to focus on is this center area where right now you see no activity. While we were standing taking photos, several Department of Public Service personnel noticed that I was taking photos and that I was standing with a former Customs inspector. Within minutes, this lone officer right here took these highway cones and set up a very impromptu inspection area for our benefit. About 10 minutes later, the lone officer was gone and the traffic continued to flow through the border uninspected.
We went back to Laredo to the same spot the next morning, just to make sure that we could believe what we saw. And, as this photo shows again, no trucks are being inspected. There are vehicles parked in the inspection area and the trucks are going right around them.
The short moral to the story is that standards mean nothing and the inspection of trucks means nothing, in terms of what is inside them, unless we have strong enforcement, and we do not.
Mr. CAREY. Thank you, Bob.
Ms. ROS-LEHTINEN. Mr. Carey.
Mr. CAREY. What you saw in these photos sums up what I consider the phony promises about NAFTA and these promises are being made to working families all over this country. We were promised that NAFTA would create employment. But more than 420,000 jobs, American jobs, have been lost since it took effect in 1994. We were promised greater prosperity, but our trade surplus with Mexico has turned into the largest trade deficit with that country in our history. And isn't it ironic that I heard testimony where every time you mention trade deficit, there is hedging, ''Do not talk about that, that is not really the issue here.'' But the trade deficit does have a meaningful impact in terms of jobs, in terms of this economy.
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We were told that NAFTA would improve wages. But big corporations have used it to drag down the standards of living for many working families. We were told NAFTA would help workers, but the wages have gone down since NAFTA was passed. Now we are being told that under the trucking part of NAFTA, our roads will be safe, drugs will be stopped at the border and working people will benefit. It was a lie when NAFTA was passed and it is a lie now. There is no enforcement at the border. These trucks are a ticking time bomb on our highways. They are a ready-made pipeline to bring more drugs into our schools and into our neighborhoods. The NAFTA trucking provisions serve no purpose except to let American trucking companies replace hard-working middle class workers with low-wage exploited Mexican workers.
This government is supposed to represent American workers. If that holds true, then the NAFTA trucking delay should be made permanent and trucking provisions should be renegotiated to protect working families on both sides of the border.
Thank you very much.
[The prepared statement of Mr. Carey appears in the appendix.]
Ms. ROS-LEHTINEN. Thank you so much, Mr. Carey. We appreciate it.
Mr. Workman.
STATEMENT OF WILLARD A. WORKMAN, VICE-PRESIDENT, INTERNATIONAL DIVISION, U.S. CHAMBER OF COMMERCE
Mr. WORKMAN. Thank you, Madam Chair. You have my statement. I would like to submit it for the record.
Ms. ROS-LEHTINEN. Yes. We will submit all of the statements.
Mr. WORKMAN. Then I will briefly summarize my comments.
First, I would like, for the Subcommittee's benefit, to put NAFTA in context. Not many people in this country realize it, but trade over the past 25 years has become increasingly important to our economy. In 1970, trade—that is not only exports but also imports—believe it or not, some people in the import markets also have jobs—imports do, in certain instances, create jobs—but, at any rate, in 1970 trade accounted for 13 percent of the U.S. Gross Domestic Product. In 1995, it accounted for 30 percent. By the year 2010, it will probably be on the order of at least 40 to 45 percent. So we are looking at something that, like it or not, we are in the global economy and it is going to have an impact on us in a lot of ways—some of which we may be able to foresee, some of which we may not.
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In my membership—and I come from an outfit that represents an underlying membership of about three million companies, 96 percent of them are companies that employ less than 100 workers, 71 percent of them are companies that employ less than ten workers, only 4 percent of them are what would be classified by some as big business and, the way we counted it at the Chamber, big business is someone that employs more than 100 workers. So whether that meets the definition of a multinational, I am not sure.
But, in any event, in our membership things that we have seen since NAFTA went into place, since the Uruguay Round Agreement was adopted, there has been a remarkable shift in the way the small- and medium-sized companies in our membership look at trade and how trade can affect them, either positively or negatively. They have looked at some studies, and I will be glad to provide the copies of the studies for you, but, to summarize them—companies that are engaged in trade, principally those that export, their workers' productivity is, on average, 20 percent higher than those who do not work in trade or do not engage in trade. The wages are 15 percent higher in exporting companies than in non-exporting companies. A company that engages in trade, particularly a small- or medium-sized company, is 9 percent less likely to go bankrupt in a given year. Their employment rate, among exporting companies, is 20 percent faster than among non-exporting companies.
That being said, and the thing that is really interesting to me, looking at some of our small companies in the membership, in 1987, only about one in ten manufacturers with fewer than 100 workers exported at all. In 1992, one in five did.
Another interesting point to make, and I think this has some significant implications because we have had some so-called protectionist companies in our membership and the attitude is changing significantly—between 1994 and 1996, the share of small- and medium-sized companies that got 10 percent or more of their sales from exports doubled from 27 percent to 51 percent. That is a remarkable shift. In talking to these people on an individual basis, they point almost without exception to one thing about why did they even get involved in international trade and they say NAFTA. A lot of them had, in the first year of NAFTA, incredible positive experiences. In the second year of NAFTA, during the peso crisis, they were sobered, to say the least. By the third year of NAFTA, eight out of ten of them are back in Mexico, in Canada, and, interestingly enough, are looking forward to the rest of the hemisphere. So I thought I would bring that to the Committee's attention.
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Again, you have my testimony and I would close just by making one point. I think it was Congresswoman Kaptur who earlier said that NAFTA is the blueprint for the hemisphere. I have been to the Mercusur countries as recently as last November and I can assure you that NAFTA is not the blueprint for what is going to happen in this hemisphere. We missed that opportunity. When the Clinton Administration refused to take the fast track trade negotiating authority that a Democratic Congress had given to Ronald Reagan and to George Bush and we sat on our hands for the past 2 years, the rest of the hemisphere has moved on. The Mercusur countries—Paraguay, Uruguay, Brazil and Argentina—constitute 60 percent of the GDP of South America. Chile is already an associate member. Bolivia is already an associate member. So we are not going to have NAFTA, as much as we in American business would like to have seen NAFTA as the blueprint. This clearly is going to be the situation in the future, if we get the negotiating authority, where it is going to be a negotiation between trading blocks. So it is not going to be NAFTA as the hub and Chile and Argentina and Brazil are spokes added to that hub. That is not the way it is going to work.
So, in our view, we have already had a missed opportunity. We think that NAFTA works. As I said in my testimony, we would give the agreement an ''A.'' We would give the governments—not only the U.S. Government but the Mexican Government and the Canadian Government—a ''B'' in terms of implementation.
There is an issue with trucking. We know there is an issue with trucking. I find it interesting that the State governments that are responsible for highway safety, the Governors of Arizona, New Mexico, Texas and California last December wrote to the President saying that they were comfortable with the procedures that had been put in place and to lift the 20-mile ban.
Finally, I would bring to your attention another item and then I will leave my summary. NAFTA provides for tariff reduction. In certain areas, we have seen a tremendous boom on all sides of the board—Canadian, U.S. and Mexican—in the initial early harvest, if you will, in certain sectors. We used the tariff acceleration provisions in the old U.S.-Canada Free Trade Agreement to both countries' benefit. They have never been exercised to our Members' satisfaction in NAFTA. We would like to see all governments go back, look at that and, rather than having to wait until the year 2010 for full tariff reduction or lowering, let's see if we cannot speed it up.
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Thank you, Madam.
[The prepared statement of Mr. Workman appears in the appendix.]
Ms. ROS-LEHTINEN. Thank you so much, Mr. Workman, for your testimony.
I am honored to have Mr. DiMare here with us, a constituent from my congressional district who has been very active in the agricultural sector of our State and of our Nation and also in the audience is Mr. James Humble, who has represented many property owners, especially in the South 80 area, and we welcome both of you. And, Mr. DiMare, we look forward to your testimony.
STATEMENT OF PAUL J. DIMARE, FARMER AND OWNER, DIMARE HOMESTEAD, INC., (ALSO REPRESENTING THE FLORIDA TOMATO EXCHANGE)
Mr. DIMARE. Thank you, Madam Chairperson. I feel privileged that you have asked me here today.
I sat in my chair and listened to a lot of the statements by mostly government people, people working for associations that do not represent American people, the American worker. I am a small businessperson. My family is the fourth generation of farming in the United States. Came from Italy. I have seen something happen to this country that I do not believe people realize. American jobs are disappearing. Good-paying jobs.
I have listened to all the statistics and they are the most phony statistics I have ever heard. When they sold NAFTA they said, ''We are going to create jobs.'' It was a win-win. Win for Mexico, win for the United States. They never sold it on the basis that we were going to have a deficit with Mexico. You could not sell that to the American Congress. How could you tell them that we were going to have a deficit and that we were going to have a trade agreement with a country that is a Third World country? Impossible. So you sold it on the basis that we were going to have a win-win.
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We had a positive trading balance with Mexico previous to NAFTA. Always had a trading surplus. We turned the first year to a $16-billion trade deficit. Using the President's numbers, that is a loss of 300,000 jobs. Those are the numbers he sold to you people. I listened to Carla Hills at every hearing that was on C–SPAN. Those are the numbers that they used. ''We are going to create 20,000 jobs for every single billion dollars in trade.'' Well, you lose them the same way as you gain them when you have a deficit and people forgot about deficits in this country. We have $180-billion trade deficit this year. We are now $1.9 trillion in trade deficits since 1973.
General Motors is now the largest single employer in Mexico with 26 plants. Eighty-six thousand people they employ. Our great General Motors. This has been an escape. Every trade agreement this country has made has been an escape for the multinationals to move out of this country and set up deals in foreign countries with slave wages and no regulations and human rights violations and child labor. What kind of a country are we that we want to be an affluent society and earn good wages but we want to buy products from people that are paying their people nothing? Is that what people want?
I want to make $40 an hour, or $47.50 is what General Motors' wage base is with their benefits and thank God it is, but we want to buy shirts from people that make 20 cents an hour? You cannot live in that kind of society. Eventually, you will not have a job and that is exactly what is happening to this country. We are losing our manufacturing base.
I told somebody if they shut down the whole agricultural deal in Florida, Florida will be hurt. I will find something else to do as a person because that is the way I was brought up. But I want to tell you something. As an American citizen, if you congressional people do not do something about trade in this country—and NAFTA is only one of the problems that we have—if you do not sit there and honestly look at it with a true picture instead of listening to these politicians that are coming here from NAFTA and the State Department, I do not know who they represent. But they do not represent these American people that I come from.
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And when Senator Dole went and ran in New Hampshire and all of a sudden he came up and said, ''Geez, I did not know American jobs and the economy was a problem,'' he found out it was a problem. If you are sitting there and lost that job that Congresswoman Kaptur talked about—whether it was 100,000, 10,000 or two million—which there are probably about three million jobs right now because if you multiply the $180-billion trade deficit we had this year it is over three million jobs lost—that is after you take out the ones gained for imports—this is the net. I created so many from exports and we forget about imports. This is the net number. You have lost over three million jobs this year in this country that are high-paying jobs. How are you going to replace them? Service jobs? Sorry.
Service jobs pay one third of manufacturing jobs. We have gone, since 1973, 31 percent of our total labor force in manufacturing to 15 percent. That is a total disgrace. You cannot run a country on service jobs.
The Labor Department has just announced the next largest growth job in the United States for the next 10 years. Do you know what it is? Cashiers. Oh, that is a big-paying job. I am going to be a cashier. Isn't that a wonderful minimum-wage job? Where is our base of manufacturing? You cannot run a country—God forbid we would have to go to war again. Where are we going to make all these products?
We have turned over the tail sections and the landing sections of our 737's and 747's to China to make for Boeing. Isn't this dangerous? Isn't this a national disgrace that a country that will probably be our next adversary in a war, China, is going to make planes for Boeing? And we have turned over the technological knowledge in the tool and die industry to these people. You people are not scared of that? Are you naive to think that the Americans are always going to survive? There has been no country in the world that has ever been No. 1 that you could knock down to two or three and never come back again. Remember that. There have been some tremendous countries. We are a very young country. Do not ever let this country go. And, believe me, every country is biting at our tail to put us down.
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Mexico, of all countries, that is the worst bunch of bandits that I have ever dealt with. Not the Mexican people, the Mexican politicians. They are crooks through and through. They are involved so deep into dope and corruption. We did something for who, the Mexican people? If you wanted to do something for Mexico, why didn't you put a minimum wage in for Mexico so the people could enjoy it, not the 30 or 40 families that are billionaires down there.
There are over 24 billionaires in Mexico. The largest amount of billionaires in the world are in Mexico in a country that has nothing. How did they get this money? Legitimately? Did you forget the $100-billion trade deficit we have with dope every year? You do not add that onto the deficit? That is cash. I guess we do not count that. So that just goes into pockets. You do not think all these people are putting all this money into Washington lobbying for all these effects for the benefit of the United States, whether it is Malaysia, China, Korea, Japan. Mexico spent a fortune to lobby for NAFTA.
Who hired some of the best people out of this Congress that retired and out of the Trade Department to represent them? How can you let these people come back here and say that this is what is good for the United States? The United States. What is good for this United States is American jobs. Whether it is 1,000 or 300,000, there never should be a chance for an American to lose his job to anybody.
I want to free trade like Japan. I will trade with anybody. I think Americans can trade. Let me trade with Japan. They are an isolationist country. They have a $60-billion trade deficit with us. Germany. Those are the countries I want to trade with. Italy. England. France. Countries that are not Third World countries. Third World countries. What are we going to sell Malaysia, capital goods to build our products to send back here?
I come from Boston. We had a textile industry and a shoe industry that is all gone and I heard the promises, ''Oh, they are going to come back. Do not worry.'' When is our trade deficit coming back? Where is our surplus coming to? It has not come back since 1973 and this is 24 years. Now we are going to hear the same story, after 38 months, that Mexico and NAFTA is going to be a change down the road? How? What are they going to buy? Those people have no money. There are no consumers. You have to have consumers to buy consumer products. They are buying capital goods to manufacture the products to send here. Then it is going to become a shipping platform, you can believe that, for China, Japan, Germany. They are going to build the products right there. Why? There are no duties. The first thing I would do if I was in Japan, I would say, ''Let's build a factory in Mexico so that I can ship it into the United States with no duties.'' That is the problem.
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Do I worry about Mexico? Mexico is not my problem. I am worried about everybody else that is going to go in there, including the multinationals from the United States. I do not worry about Mexico competing against us. I worry about the multinationals and the foreign countries going in there.
It is a disgrace what has happened to this country. Not only there. Believe me, this is just the tip of the iceberg. If you people do not grab hold of the American jobs, I am going to tell you right now, there is going to be an uprising in the inner cities of this country. You have to have jobs—good-paying jobs. That is how you send your kids to school and buy homes. You do not do it on service jobs. I am not going to work at Wal-Mart or I am not going to work at Burger King and I am not going to work at these people that pay $5 an hour. They are nice starter jobs. That is not a job to raise your family on. You have to have manufacturing jobs. And without them, we are dead as a country.
I thank you, Madam Chairman.
[The prepared statement of Mr. DiMare appears in the appendix.]
Ms. ROS-LEHTINEN. Thank you so much.
Mr. DiMare, how would you say that the result of the anti-dumping action that we remember last year was brought to the U.S. International Trade Commission in the finding of dumping against Mexican producers—the Department of Commerce entered into a suspension agreement. I know that you have been very involved with the tomato industry. Do you think that this suspension agreement has been working, or are you satisfied with the way that this case was settled, and do you think that there has been sufficient attention and response given to this problem, specifically in the agricultural area?
Mr. DIMARE. That particular area, in seeing how the stop-gaps in NAFTA were supposed to work, which was supposed to go to the ITC, the International Trade Commission on 201's, we filed twice under 201 in front of the ITC—one being this past year, one being 2 years ago. We lost both times. I am just going through a history of this because I think you should know what has happened with the International Trade Commission. That is a panel of six people, as you know, three Democrats and three Republicans. Supposed to watch over American industry that is hurt by foreign trade. Great watchdog that it is, has ruled twice in favor of American industry. Great job since 1986. Once for Harley-Davidson and once for the corn-growing industry. There have been many cases brought before them. They have never ruled in favor of any of the American industries.
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Do you know some of the industries? Tool and die. Said it was not a problem. We have now lost 70 percent of the tool and die industry. Flatware. Said it was not a problem. All the flatware people have gone but Oneida. I mean, these are the case after case after case that has gone in front of them and said there was no problem. ''You people do not have any competitive problems with foreign countries.''
Ourselves, we lost. They said, ''You do not have any problem at all.'' Since 1991—I will give you some numbers—we were 69 percent. Florida was 69 percent of the total U.S. production of tomatoes. During the winter, we are 95 percent. Mexico was 12.9 percent. In 1995–96, which is just last season—when we finish our season it is usually June—we became 35 percent. We are less than half. Mexico is now 49.5 percent. They are up 400 percent. So, in a 4-year period, we have gone in half and Mexico has increased 400 percent. ITC says, ''We cannot see a problem. You people are not shrinking. You do not have a problem whatsoever. Rule against you.''
One thing we did get. It was a four-to-one vote, one person abstained. The one person that voted with us, Lynn Bragg, wrote in a statement, published, that this is a total disgrace the way the ITC is handling this case. If this is how they are interpreting the law of the 201, no American company will ever win a 201 case in front of the ITC. This is not what Congress meant. Congress meant aid to companies that are being hurt by imports and we were one of them. We lost.
We filed a dumping case at the same time. Commerce found that, after a long period of time, there were 17 percent margins for dumping against Mexico on tomatoes. During the period of negotiation, they entered into a suspension agreement. If you know anything about suspension agreements, really, the American industry does not have anything to do with it. It is between the American Government and the Mexican growers or Mexican manufacturers, as it would be. And they came to an agreement with a floor price. It is a very minimal price. Our cost is $7.50 to $8 a box to produce tomatoes. The floor price came in at about $5.25. So, as you know, that price certainly is not going to make us any money. We cannot even get our money back. But it did keep suppression of the pressured market. It kept the market from coming to $1 and $2, which it did a lot of times out of Mexico.
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It has been working very, very well during the past 3 months. We had one problem this past month during a 3-week period where Mexico shipped in a tremendous volume of product after rains that they had down there and the product was poor. Written into the agreement, there are not supposed to be any prices below the reference price which is 20.68 cents a pound. Commerce has taken it upon themselves, we feel, not to enforce the letter of the law which said that this price would be after all adjustments for quality, backfilling and whatsoever. They have let them adjust these below that price. They have now written a letter saying they do not know where they are. So they got us hung up saying that we have it interpreted your way and a letter to the Mexicans saying, ''We really do not agree with you either, so we are both in suspension and do not know what is going to happen. We hope we can have it ratified.''
But, along with that and out of the past NAFTA, and I firmly believe this, Congresswoman, I do not think NAFTA could have passed without Florida. And the reason I say this is that the time that you people were trying to pass NAFTA, it was a Democratic president and a Democratic Congress. The Democrats were not for free trade. The Republicans, basically, wanted free trade. And in order to get that, the President—and I have his letter and I am going to put it in the record—from the President of the United States to our Congressman at that time, Tom Lewis, who held out the delegation, except probably for Gibbons, that said they would not vote for NAFTA unless the agricultural industry, the fruit and vegetable industry in Florida, had got some sort of protection to keep them from getting killed. And I want to read it because I think it is very, very important to show that this NAFTA could even have been passed because, I am telling you, Florida was not going to vote for it during that time.
''I know you have been a leader in assuring that under NAFTA our fresh vegetable industry is not adversely affected by unforeseen price changes. I strongly believe that the volume-based snap-back of the existing agreement, coupled with the automatic price monitoring and expedient import relief procedure will be the law after NAFTA is passed. We will provide very effective price and volume discipline. I am committed to take the necessary steps to ensure that USTR and ITC take prompt and effective action to protect the U.S. vegetable industry against price-based import surges from Mexico. I want you to know that I am personally committing to ensuring that this system is enforceable and effective. We will work to ensure against unfair pricing by importers.'' It is dated November 16, 1993, by Bill Clinton. This was written to get our congressional delegation to vote for NAFTA and we released them, as an industry, against my better judgment, believe it or not, because I did not know about it until afterwards that they had released them. I never released them because I never believed any of the people that we were dealing with at the time. And it has come to prove that.
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Ms. ROS-LEHTINEN. Thank you.
Mr. DIMARE. This was done to release them so that you people could get enough votes to pass it. If you tried to pass NAFTA today in Congress, I do not believe you could even get enough votes to get it on the floor. I just believe it is that bad. I do not think any trade agreement today can be passed. People in America are fed up. Talk to the American people. Do not talk to the politicians. Do not talk to these people that are coming up from Commerce and all these people that have these high-falutin' ideas——
Ms. ROS-LEHTINEN. Thank you, Mr. DiMare.
Mr. DIMARE. I am sorry. It just will not be done. It will not pass.
Ms. ROS-LEHTINEN. Thank you. Thank you so much.
Mr. Sherman.
And, by the way, Mr. Carey had to get his flight and he is represented by Mr. William Hamilton, the director of the Department of Government Affairs, and then Mr. Bob Nicklas, who you heard before, of the Legislative Department.
Welcome to both.
Mr. SHERMAN. I would like to thank Mr. DiMare for pointing out that when NAFTA was sold to us, the proponents of NAFTA never hesitated to say so many billion dollars of exports leads to so many jobs. Now that we have a deficit, all of a sudden that becomes phony accounting and you cannot do it that way.
But, aside from my earlier comments here, believe it or not, I am pro-trade and I think we will become a richer country with trade—fair trade, open trade. The problem I have is that invariably every time we figure out a mechanism to increase exports by a billion dollars, the only mechanism that is given to us is entering into an agreement that leads to increasing imports by $2 or $3 or $4 billion. And I like to address my question to Mr. Workman.
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Can you give us things we can do to help your members export, leaving aside entering into agreements that will simply open up the most open market in the world even further? What can we do to be more aggressive to help your members export?
Mr. WORKMAN. Well, there are a number of things. But before I get to that, I want to talk a little bit about the trade deficit. And there is no question that it is a problem. But we should look at what is the trade deficit. One-third of the trade deficit is imported oil. Nobody wants to talk about that. That dwarfs the $16-billion trade deficit——
Mr. SHERMAN. But, Mr. Workman, I have a limited amount of time.
Mr. WORKMAN. OK.
Mr. SHERMAN. So I cannot respond to everything you say.
Mr. WORKMAN. What can we do——
Mr. SHERMAN. Mr. Workman—except to point out that when I was growing up, this country was productive enough and rich enough and capable enough in its international trade to run large surpluses that paid for our oil, paid for our foreign aid program, paid for our involvement in the world. And, yes, there are going to be categories where you are not going to grow bananas in Minnesota. We are going to import bananas. We are not going to reach full energy sufficiency. But we once had a country, and we once had a group of international relationships, that allowed us to, on balance, run a surplus. And to say that, ''Yes, we would be running a surplus if only we could grow bananas, if only we could find enough oil in the United States so we did not have to import a drop——''
Mr. WORKMAN. Well, I grew up at the same time and in the 1950's, when the United States alone accounted for 50 percent of the industrial output of the world, I would suggest to you that those times will never come again because in the 1950's, you did not have a Germany that challenges us as being the top exporting company in the world. You did not have a Japan. So I think those times are past.
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You asked me originally what could you do to help American business, particularly small business, export. I think there are a couple of things that you need to do. One, I think you need to give the executive branch a clear mandate and authority to conduct trade negotiations and I think you ought to keep it, in the immortal words of my chief petty officer in the Navy, ''Keep it simple, stupid.'' Do not clutter it with a lot of non-trade related objectives which are laudable in and of themselves. But, first of all, give them trade negotiating authority.
Second, I think, although we would like it to be, it is not a perfect world. Our competitors' companies have assistance from their governments that we do not have. So the Eximbank, I know it is referred to as corporate welfare in some circles, but we in the business community happen to think that it is a pretty good deal because one of the reasons for it is you cannot get an Eximbank loan unless you can prove you are going to keep jobs in the United States.
Similarly, the Overseas Private Investment Corporation, something that no one ever understands, is actually a good thing for the American taxpayer. The fees are paid for by American companies but they operate in providing political risk insurance in countries that the commercial market will not. Last year, I think they turned back the U.S. Treasury a profit of $208 million. Not a bad deal on the whole for the taxpayer, plus it helps promote exports, it promotes jobs in this country. So those are just a couple of things off the top of my head.
The last thing, I would hope, is that someone here would review the whole concept of imposing unilateral economic sanctions. They do not work. The only people that we hurt are American companies who lose customers, who lose suppliers, and they rarely achieve the purposes that they are intended for. I think we need to rethink this whole concept of unilateral economic sanctions and start over again.
Mr. SHERMAN. If I can just respond for a minute, Mr. Workman, it might surprise you but I believe in this very Committee I spoke out in favor of OPIC and the Eximbank. I do not believe that we should disarm ourselves in the battle for world trade.
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You talk about the importance of giving the President fast track, et cetera, and I might be in favor of that if we just added one thing and that was a provision that said that after the agreement was in place, if in any of the first 10 years, on a cumulative basis, we lost out, that we would automatically pull out of that agreement. To give the President the carte blanche to go negotiate something without a guarantee that, as a result of it, either trade would remain on pretty much the same terms or our deficit surplus situation would improve, is asking us to give carte blanche with no guarantee.
And, unfortunately, when the Administration asked us for fast track, they are not going to give us any assurance that the trade agreement where the rubber meets the road—I had to say that because the Teamsters were represented here—is going to lead to an improvement, or at least a neutral situation with our overall trade surplus and deficit.
Madam Chairman, you have been very indulgent.
Ms. ROS-LEHTINEN. Thank you so much.
And Mr. Brady for the final question of the day.
Mr. BRADY. Thank you, Madam Chairwoman. And I am a little puzzled by this note that I received from the Chair that says Mr. DiMare is usually very shy. Please try to draw him out.
Ms. ROS-LEHTINEN. We feed them with strong opinions down in south Florida. It has to be the water.
Mr. BRADY. There are actually two issues I think we agree on. One is the truck safety issue. It is a real concern in America, especially along the border States. Without question, we need more resources to address it and it is interesting that compliance enforcement is almost an assumed part of almost every regulation standard and law that have passed in this country. Except, in this case, it is seen almost as a surprise that we have to apply and reserve and send resources to the States where that truck safety is a real issue. And it is not, in my opinion. It is one that is solvable and does not take away all the other advantages of free trade. But it is one that we have to address immediately.
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The second issue we agree on is jobs. It is how we get there that is the issue. Over the last three decades, 80 percent of our new jobs in America have come from exports. Mexico is buying about three dollars out of every ten that is being bought by this country. Ninety-five percent of all the consumers lay outside the American border. Long-term, if we are to find jobs for our constituents, if we are to help trade jobs for union members, it is absolutely essential that we take the steps now that allow our businesses to be in a position to compete for that trade and to compete means you have to open up your own borders as well.
I guess my point in this whole comment, more than a question, is that long term, if we want to look our children in the eyes and tell them we are taking steps now to allow American companies to compete where the consumers are and where the purchases are for our products to keep our manufacturing base and our informational base and distribution base, we have to—although it is not easy always—take steps like NAFTA to bring that about and this is one of the many steps to do that. But I hope we do not lose sight of the whole overall perspective which is, we do not have a choice if we want to trade jobs long-term for American workers.
Yes, sir.
Mr. HAMILTON. May I respond?
Mr. BRADY. Please.
Mr. HAMILTON. First, President Carey asked me to express his apologies that he could not stay till the end and will certainly be willing to respond in writing if there is anything you specifically need.
But this notion of cross-border freight shipment is not brand new. We have had trade with Mexico long before we had NAFTA and we have always been able to handle that in a fairly intelligent way and that is, historically, Mexican freight coming into this country has been dropped at the border. American trucks have then picked it up and carried it to its destination. Conversely, export traffic into Mexico has been handled the same way. We have dropped it at the border. The Mexican companies have picked it up and taken it. There is nothing new here.
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Now, there are ways you can fix or try to fix the enforcement problem at the border. California has just spent $28 million for new inspection facilities. It is a beginning. But it is a drop in the bucket. As a Texan like yourself, I am ashamed to say that Texas has not done much in that direction. Our situation in Laredo is pitiful. In El Paso, it is not much better. Del Rio is a joke.
Texas can spend a lot of money—its money or the Federal Government's money—to build up its enforcement mechanism and maybe, instead of stopping one out of 200 trucks for inspection, maybe we will stop five out of 200, or ten out of 200. And maybe we will catch 20 percent of the drugs and 50 percent of the hazardous materials over the next 50 years or so.
But there is a much cheaper, simpler way to handle that problem. Not the larger problem. Not the overall trade deficit problem. But the trucking problem can be solved by simply amending the agreement to ensure that materials coming into this country from Mexico are handled by Americans once they get into this country and that materials going out of this country into Mexico are handled by Mexicans. It is pretty simple. Pretty straightforward. Pretty cheap. And I would commend the Committee to take a hard look at that possibility and see if, particularly since the President seems to want to extend the madness and have a new fast track authority and have an extended NAFTA, then maybe as part of the bargain Congress requires him to do that.
Mr. BRADY. Mr. Workman, your comments?
Mr. WORKMAN. That is an interesting concept. It assumes that we can unilaterally amend a contract that we signed with two other parties. And, as an old trade negotiator, I am curious as to why would the Mexicans and the Canadians want to agree to go back to basically where they were in 1992?
Mr. BRADY. And I did not intend to start a free-for-all here at the panel, Madam Chairwoman. But I appreciate the comments from both people.
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Mr. HAMILTON. Well, do you want me to respond, since he raised the question?
Ms. ROS-LEHTINEN. One minute?
Mr. HAMILTON. Sure.
Ms. ROS-LEHTINEN. Thank you.
Mr. HAMILTON. The Mexican trucking industry is against the current arrangement. The Mexican trucking companies are against the arrangement that was negotiated. Frankly, as an organization that lives and exists to negotiate agreements, I find it baffling that the Bush Administration would have negotiated such a sorry deal or that the Clinton Administration would have bought into it. And there is nothing wrong with admitting that we made a mistake and backing up and trying to fix it. I think significant elements of the Mexican people would support that. The overwhelming majority of the American people would.
Ms. ROS-LEHTINEN. Thank you so much. Thank you to all three panelists for giving wonderful testimony. We will have some other Members who might submit questions for the record and if you could respond to them, we would appreciate it. Thank you.
The Subcommittee is now adjourned.
[Whereupon, at 4:32 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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