November 29, 2001
Congress Should Put Trade
On the Fast Track
By Henry M. Paulson Jr. Mr. Paulson is chairman and chief executive
officer of the Goldman Sachs Group, Inc.
The House of Representatives will soon vote
on the question of granting the president Trade Promotion Authority, also
known as fast-track approval. Some in Congress have argued that now is not the
time to take up legislation that has encountered such fierce protectionist
opposition in recent years. But in the wake of the terrorist attacks of Sept.
11 and the current economic slowdown, it is all the more important that
Congress move quickly to approve this vital measure.
This bipartisan action would inspire confidence in global capital markets.
It would allow America to be seen as continuing to lead the open trade and
globalization that has been so vital to the prosperity of both developed and
developing countries. And it would send a powerful message that the president
and Congress speak with one voice, and are committed to advancing freer trade
as part of the war on terror. Indeed, approval of TPA would signal that the
U.S. is not only seeking a military coalition, but an economic one.
The benefits of trade hardly need illuminating. America's exports accounted
for approximately one-third of our extraordinary economic growth over the past
decade, and exports now support over 12 million American jobs (nearly three
million more than a decade ago). Jobs supported by exports typically pay 13%
to 18% more than comparable employment.
Trade brings real economic benefits to the U.S. The North American Free
Trade Agreement, and the completion of the previous round of trade
negotiations (the Uruguay Round), now generate annual income gains of $1,300
to $2,000 for the average American family of four. Trade is also fundamental
to economic growth in the developing world. A recent World Bank study shows
that nations open to trade grow 3.5 times faster than nations closed to trade.
The recent experience of countries such as South Korea, China and Chile
underscore that trade is a pathway to prosperity.
Trade is a two-way street, and imports also benefit the U.S. They provide
consumers with more choices and lower prices on a wide variety of goods.
Imports also force our industries to constantly improve and innovate in order
to remain competitive with foreign exporters.
I confess to being a bit mystified by all of the controversy about
extending such a common-sense power to the president. TPA simply says that
when the executive branch completes negotiations on a trade agreement and
submits it to Congress for approval, that Congress cannot amend the agreement.
It must simply vote yes or no.
This is standard procedure in other types of negotiations. Union
negotiators don't reach agreements with management and then allow all their
members to amend and debate. And as I know from 27 years in investment
banking, mergers and acquisitions would never be consummated if, once
negotiated, rather than being sent to a corporate board of directors for
approval, they were sent to be restructured.
The most obvious aspect of the war on terror is clearly military action.
But we can't forget the economic component, and primarily the gains we reap
from globalization. Let's not forget that it continues to be those countries
most closed to trade that are prime breeding grounds for terrorists. Moreover,
to truly wage and win this war, our political unity and military power must be
fortified by the strength of our economies.
Those economies are increasingly at risk. Global prosperity is threatened
not only by the specter of terrorism itself, but by the slump that was
deepening before the Sept. 11. Worse, it is during periods of economic
distress that pressures to revert to economic nationalism and protectionism
are the greatest. This is a recipe for disaster, and it must be resisted
through bold and decisive action.
The two necessary actions are clear: a fiscal, consumer-oriented stimulus
package and TPA. Congress is well on its way to passing a stimulus package,
and should take care to keep it directed at consumers. Although trade won't
provide the sort of immediate boost to the economy that a stimulus package
will, trade will have greater long-term impact.
While each of the previous five presidents has been granted this authority,
it lapsed in 1994. During the seven years the U.S. has been without this trade
authority, other countries have moved ahead without us. Since 1990, the
European Union completed negotiations on 20 free trade agreements, and is
currently negotiating 15 more. Mexico now has eight agreements with 32
countries. Today out of 130 preferential trade agreements and investment
agreements in the world, the U.S. is a party to only three.
This means our exporters encounter higher tariffs -- if not closed markets
-- in other countries. Our own consumers face higher prices and fewer choices.
And the U.S. sits on the sidelines as the rules of the game are set on
everything from e-commerce to agriculture.
Passing TPA is the first, all-important step to restoring U.S. leadership.
It will allow us to move quickly on several fronts. We can complete
negotiations for free trade agreements with Chile and Singapore, build vital
support for the proposed Free Trade Area of the Americas and, most important,
lead a drive for a new round of global trade negotiations.
The stakes are enormous and there has never been a time in our recent
history when American leadership has been needed more. TPA can be a key part
of that leadership, building confidence in the global marketplace by clearly
signaling that the process of globalization will continue with renewed vigor.
It will enhance our economic position in the world and strengthen our national
security. The time for Congress to act is now.
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