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Public Statements

Trade and Labor

Floor Speech

Location: Washington, DC

TRADE AND LABOR -- (House of Representatives - May 21, 2007)


Mr. SHERMAN. I thank the gentleman from Illinois not only for recognizing me, but for his leadership in putting together this hour and so many other hours. I thank him also for mentioning that the subcommittee which I now chair has the trade jurisdiction of the Foreign Affairs Committee because there is a great debate in this country as to whether to continue, basically, our trade policy or whether to go in a completely different direction.

On the side of continuation, and those who favor continuation, they want to dress it up a little bit, add a little perfume, try to make it smell a little better, but those who basically want to continue the policy come in two forms. One is what I call ``the chattering classes,'' the lawyers and MBAs, because frankly trade has been a boom to those in those particular groups. The whole world looks to the United States for lawyering, for management, for advanced management classes. And in fact, those at the upper end of business and law have done extremely well under our trade agreements, notwithstanding the effect they've had on America.

The second group are those who took Economics 101 and became so enamored of the theory, so proud that they understood the basic theories, that they chose never to question whether those theories actually applied to real life.

On the other side of this debate are those from the heartland who have seen the actual effects of trade on their districts, and those of us who are just a little skeptical of a policy that has cost America a trade deficit last year of $800 billion.

What does that mean? That means that we bring in the Toyotas and the Volvos and the Mercedes, and what do we give in return? We give IOUs, promissory notes, investment assets, stocks and bonds. So every year we have to borrow $800 billion, and that number will be higher; it was a little less than $800 billion last year, it will be a little more than $800 billion this year. Now, when those Toyotas and Mercedes come over, they are never going back to Germany and Japan. But those promissory notes, those stock certificates, those bonds, those U.S. Government bonds, the private sector bonds, not only do we have to sell another $800 billion of them this year, but we have to fear that they are going to cash in the ones we gave them last year and the year before. The Mercedes are never going back to Germany, but the promissory notes we gave to Germany, they're coming back someday. And so those of us who are not on the front lines in terms of our districts have to worry about what our trade policy has meant.

So why is it that the theory breaks down? Isn't trade good for everyone? And isn't the way to encourage trade and fair access and open markets to negotiate a reduction in tariffs around the world? Sounds great, doesn't it? If you think the whole world operates the way America operates. You see, if you are sitting in

Beijing, and you want access to the American market, then you realize that the only way we in Congress, the only way we in the Federal Government affect the behavior of consumers and businesses is to pass written laws and regulations. And so, if you're in Beijing and you want access to America's markets, you negotiate to change America's laws and regulations. And once you do, then your goods can come flooding into the United States because individual businesses and individual consumers will buy them.

And we, being basically ignorant of the world and in love with our theories,
somehow picture China as just a poor, but larger, version of the United States, a place where their markets will be open if they only will change their written laws and regulations. And so we sign deals, and laws and regulations are changed. And when laws and regulations are changed, the United States, the effect is dramatic. And when laws and regulations are changed in an awful lot of countries, there is no effect at all, because if a society is not a society that follows the rule of law, then when we negotiate for a change in laws, we negotiate for an empty sack. And that is what happens, for example, with China.

Imagine yourself a Chinese business person, and you get a call from a commissar, maybe a member of their Parliament, saying, Don't buy the American goods, buy the French goods, because the French are smart enough to demand fair trade; they are going to insist on balanced trade. If we want access to the French market, we've got to buy their stuff. So buy the French stuff. That will help our international position. Don't buy the American goods.

You get that instruction orally. There is nothing America can do about it. Even with all of our wiretapping, it's highly unlikely that we will ever hear the conversation.

And what happens? We don't sell the American goods. That is where the theory breaks down. A society that follows the rule of law, negotiating for a change in laws with a society that does not follow the rule of law. That is why it is foolish for us to enter into these trade deals.

So, those who want to keep our trade policies pretty much the way they are are a little angry because the facts aren't on their side. Last year's trade deficit was bigger than the year before and bigger than the year before that, and this year's will be still higher. So they resort to ad hominem attacks on people like the gentleman from Illinois and myself. They describe us as simpletons, too dumb to understand their highfalutin theories, as Luddites, as xenophobes, and as people protecting the parochial interests of the heartland and Midwest.

Well, I am certainly no proof of whether we are all simpletons or not; I can't offer you anything there. I'm sure we are going to hear from quite a number of quite eloquent and brilliant legislators who will give the lie to that argument. But I can give the lie to the argument that we are here protecting parochial interests of the American heartland, because, as the gentleman points out, I am from Los Angeles. Our port is doing real well. The goods come into the ports of Long Beach and Los Angeles in enormous quantities in those containers, and then the containers go back empty or filled with raw materials and scrap iron.

And also, in addition to representing the city of Los Angeles and its port, the port isn't actually in my district, but my city runs it, I also represent half the city of Burbank. And if there are any industries that benefit from these trade agreements, there are those industries that don't really produce much of a physical product, but rely on getting paid for intellectual properties, our drug companies and our entertainment companies.

And so, if I was here out of parochial interest, I might point to this or that different industry in my district or my city. And if any district should support these trade deals, it ought to be mine, but no district in America should support these trade deals because they are undermining the value of the dollar, they are undermining the power of America, and, ultimately, they are unsustainable.

For how many years will the world loan us $600-, 700-, $800 billion a year? For how many years will the world send us the Toyotas and Mercedes and expect nothing but pieces of paper in return? The day of reckoning is coming. Perhaps the implosion of the U.S. dollar is coming. But things that cannot go on forever don't, and a trade deficit of $800 billion and growing is simply unsustainable.

I have a lot more to say, but so many others do as well. I will yield back to the gentleman from Illinois.


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