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Consumer Interests in the Global Trading System

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National Economic Council

Remarks to Consumer Federation of America
Lael Brainard
Deputy National Economic Adviser
March 16, 2000

I have been asked to discuss consumer interests in the world trading system following the Seattle WTO Ministerial. One thing is as true after Seattle as before. Our country, and particularly our consumers, benefit enormously from our active engagement in the international trading system – both by shaping that system to reflect our values and through the expanded prosperity it brings.

Benefits of Trade

The U.S. economy provides its citizens with living standards that are higher than those in other major industrial economies – per capita income in the United States is 40 percent higher than the average for other high-income countries. We are able to sustain such high living standards, in part, because Americans engage extensively in international trade. Over the course of the current expansion -- the longest ever in peacetime -- trade's share in U.S. GNP has expanded to almost 25 percent, the highest it has been at any point in the past hundred years.

And it is consumers – and particularly lower income consumers – that benefit directly from access to wider choice and greater quality at lower prices due to the expanded competition from imports. Imports stretch tight household budgets. However, the full trade liberalization story, particularly the import side of it, rarely seems to get its due in most countries.

Consumers in Japan pay 134 percent more for food than American consumers and EU consumers pay fully one third more. These large discrepancies reflect in large part the fact that we enjoy tariffs on agricultural products that are only one fifth the average in the rest of the world.

And recently, our ability to import has also provided an anti-inflationary safety valve – meaning less inflation and helping us to simultaneously maintain steady growth with historically low unemployment. Foreign competition creates incentives for U.S. businesses to price their products more competitively. Economists think these factors are an important part of the story underlying the strength and resilience of the current economic expansion.

Trade Legislation

Nevertheless, trade liberalization is an increasingly sensitive issue across the political spectrum. The Congress has not passed significant trade legislation in over five years. This year, Congress is poised to consider some important pieces of trade legislation, which the President believes are win-win propositions for America's consumers and producers – even as they advance our values.

We recently sent to the Hill a proposal to grant China permanent normal trade relations treatment as part of the process of their joining the World Trade Organization. This is not a free trade agreement. It is a one-way agreement requiring China to open its markets to us, while we maintain the same degree of openness that already exists. This means more exports for American farmers, workers and companies. The U.S.-China WTO agreement is strong, comprehensive, and enforceable, covering all agricultural products, all industrial goods, and a broad range of services. It will now be easier for U.S. companies to export products to China directly, and to compete directly in this vast market. This Agreement will also strengthen our ability to assure fair trade and to defend our agriculture and manufacturing base from import surges and unfair pricing. It will enable American companies to sell Chinese consumers products made by American workers here at home without being forced to divulge sensitive technology or export a single job. As the President says, it is an economic no-brainer.

But it is more than that. WTO accession will advance market-oriented economic reform, the rule of law, and economic freedom in China. It will more deeply integrate China into a rules-based global economic system, which will in turn increase its stake in peace and stability.

Let me give you an example of how this agreement will bring more openness. Ideas cannot be shared without the basic means to communicate them. This agreement will make the basic modern tools of communication much more widely available throughout China. While only 12 percent of households in China have telephones, that percentage is expected to grow to 22 percent by 2003. Each year over the past few years, China has installed enough phone lines to replace networks the size of Pacific Bell. The number of Chinese Internet users is also exploding. At the beginning of last year, there were approximately 2 million subscribers. By the end of this year, industry analysts predict over 20 million subscribers.

This growth will be fueled by the foreign participation in China's telecommunications sector made possible by the WTO accession agreement we negotiated. Currently, the Chinese government forbids domestic firms from forming joint ventures with American companies to provide telecommunications services. Now, under WTO, China has agreed to permit Chinese firms to partner with foreign firms, and vice versa. U.S. and other foreign companies will for the first time be able to provide telecommunications services to Chinese citizens directly. And as part of this agreement, China agreed to provide market access to Internet service and content providers.

This agreement will make the tools of communication cheaper, better, more reliable, and more widely available. It will mean that Chinese citizens will not be forced to go to a government-owned and controlled entity to get your telephone and telephone service. It will mean that when a U.S. firm installs an intra office e-mail for its Chinese employees, they can be in daily touch not only with his colleagues in China but with potentially thousands of employees here in the United States. Chinese citizens can increasingly communicate with each other and with the outside world, in ways and in such volume that no amount of censorship, monitoring and control can turn back.

Even before it takes up the question of China PNTR, Congress hopefully will at long last resolve its differences over two other important trade bills, those extending trade preferences to Sub-Saharan African countries and the Caribbean Basin. These bills are also win-win propositions advancing our values even as they advance economic opportunity. They will promote partnerships between US textile and Caribbean apparel operations and create new commercial opportunities in relatively untapped but expanding markets in Africa. And they will bring hope and opportunity to some of the world's poorest through a hand-up not a handout.

Honoring Our Values

Those of us who believe in the manifest benefits of trade have a special responsibility to acknowledge that global integration poses new challenges. We must ensure that the still-evolving international economic system honors our values.

In the late 19th and early 20th centuries, our own economy underwent accelerated integration at the national level, driven by the communications and transportation advances of the day. The federal government, responding to consumers and workers, came to recognize that a greater degree of interconnection between states necessitated a greater need for common rule setting at the national level. Otherwise, we would risk a race to the bottom, a bottom in which state governments could not uphold fair labor standards, regulate product safety, protect the environment or collect enough taxes to invest in schools and roads.

Global integration poses a similar challenge at the international level today. At a time when the world is coming together and man-made and natural barriers to trade are coming down, it becomes vital to prevent a race to the bottom. We must not and will not build a global economy in which capital races from jurisdiction to jurisdiction, playing off its greater mobility to the detriment of environmental, consumer, and worker protections.

For global economic integration to be sustainable, it needs to be balanced and honor our values in these areas. That is what the President means when he says that we need to put a human face on the global economy. We have begun to make progress, but the pace admittedly has been slow.


Most immediately, we believe the WTO must address concerns about openness and transparency, which many consumer associations have raised. This is particularly true for dispute settlement, where the current practice is to close arguments to the public. Historically, the practice dates from an earlier era, in which dispute settlement largely meant mediation and negotiation. But today, dispute settlement is a more adjudicative process. And in such a process, what once was privacy becomes a harmful secrecy that reduces public confidence in decisions.

This is something we hope to change. As a first step, at our US-EU Summit in December, we proposed that the EU join with us, as the largest users of WTO dispute settlement, immediately agree to open the arguments in our transatlantic disputes. Our hope is that the EU will see this as an area in which we can act quickly in response to a broadly shared concern.

Sustainable Development

We must also ensure that trade liberalization contributes to sustainable development and pursue trade liberalization in the new round of trade negotiations in a manner that is supportive of our commitment to high levels of protection for the environment.

That is why we have said we will take into account environmental implications throughout the course of the negotiations. In a new round, we will perform a written environmental review of its likely environmental consequences, with public input and sufficiently early in the process to be taken into account in formulating our positions in the negotiations. We have encouraged all WTO members to perform such reviews and are pleased that several have indicated their intentions to do so.

The President has also signed an executive order requiring careful assessment and consideration of environmental issues in trade negotiations more generally, including through detailed written reviews of environmentally significant trade agreements. The EO for the first time institutionalizes procedures to ensure the timely consideration of environmental issues in the development of U.S. negotiating positions. It will require reviews for multilateral trade rounds, free trade agreements, natural resource sector agreements, and other trade negotiations.

We have also proposed that the WTO's Committee on Trade and Environment be given the role of helping throughout the round to identify, discuss, and inform national deliberations and the negotiating groups on the environmental implications of the negotiations. We will press to ensure that each negotiating group addresses the environmental issues relevant to its work.

Consumer Protections

We also want to ensure that trade rules do not undermine the legitimate right of governments, including at the state and local levels, to establish and achieve their chosen levels of environmental and consumer protection -- even when such levels of protection are higher than those provided by international standards -- in a manner consistent with our commitment to science-based regulation.

We believe that WTO rules recognize that there can be legitimate differences of view on scientific and technical issues in the development of health, safety, and environmental measures. WTO dispute settlement decisions in this area already reflect a considerable degree of deference to domestic regulatory authorities on scientific and technical matters. For example, in determining whether a measure is based on sufficient scientific evidence, as is required under the WTO Agreement on Sanitary and Phytosanitary Measures (SPS), dispute settlement panels have found that there need only be a demonstration of a rational or objective relationship between the measure and the scientific evidence to satisfy the requirement.

The United States will use appropriate opportunities to work to ensure that WTO jurisprudence continues to accord such deference. We are confident that WTO panels will show such deference to U.S. regulators given the integrity, rigor, and open and participatory nature of the U.S. regulatory system.

And we will continue to support consumers' rights to make informed purchasing decisions – whether it be on the environmental effects of a product's manufacture or the country of origin. We have actively promoted market-based mechanisms to ensure apparel is not made in sweatshop conditions, such as the Apparel Industry Partnership, and have recently initiated broad outreach to respond to consumer's demand for more information on how their food is produced.

Labor Standards

Worker rights are another core value that must be woven into the fabric of global economic activity. There are major differences of opinion on how this should be done. We have proposed establishing a WTO Working Group on Trade and Labor to pursue dialogue and analysis on the relationship between trade, labor, and development. We are also seeking to enhance the institutional links between the International Labor Organization (ILO) and the WTO, including by granting the ILO observer status at the WTO. And we are strengthening the ILO's and our Department of Labor's capacity to help countries remedy child labor and implement labor protections through major increases of funding for such programs.


Finally, if we want our values to be shared widely, we must work to ensure that the economic benefits of global integration are shared as widely as possible among and within countries. This requires us to recognize that trade alone is not enough to guarantee sustained growth in the developing world. Sustained growth requires broad access to basic education and health care and democratically accountable public institutions. Developed countries can make a difference here by working with developing countries, international institutions, and the private sector to leverage domestic efforts in each of these areas.

The World Bank, UNICEF, the OECD and others have set 2015 as a target for making access to basic education universal. There can be no better investment in a child's and a country's future. No better way to make the global economy work for all. That is why the President has requested a significant increase in funding to improve access to basic education in poor countries – so that children can go to school instead of work. Our hope is that international financial institutions and private sector corporations and foundations will join and leverage these efforts.

Each year, the developing world loses millions of lives – and billions of dollars -- to killer diseases like AIDS, malaria and tuberculosis. We have the technology to find vaccines against those diseases, but the pharmaceutical industry simply has not had a sufficient incentive to develop products for customers too poor to buy them. That is why the President has proposed a tax credit to say to private industry – if you develop these vaccines, we will help pay for them. We hope the World Bank; other nations and the corporate world will help meet this challenge. That is also why the Administration has pledged to implement US trade laws as they relate to intellectual property in a sufficiently flexible manner to respond to public health crises, such as the HIV/AIDS crisis in Africa.

We can also help countries help themselves by lifting their crippling burden of debt. The Cologne Debt Initiative that was launched by the G-7 last year commits international financial institutions and creditor nations to reduce the foreign debt of the world's poorest and most indebted countries by as much as 70 percent. Last fall, the President pledged that the US would forgive 100 percent of the debts these countries owe us in the context of this program. We are pleased that some other creditors have made similar pledges and some countries have begun to receive the benefits of this expanded debt relief, which will be applied toward basic human needs like education and health.

We believe that if we address each of these values --- openness and transparency; environmental and consumer protection; worker rights; and shared progress --- at the same time that we press forward with trade liberalization, we will begin to achieve the President's objective of putting a human face on trade.

This is bound to be a long and complicated process. However, the Administration is determined to make progress where progress is possible, taking guidance and inspiration from civil society groups like yours, which have been at the forefront of efforts to balance our trade objectives with our social values.

Thank you.

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