[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]





                    THE TRANS	PACIFIC PARTNERSHIP: 
                    PROSPECTS FOR GREATER U.S. TRADE

=======================================================================


                                HEARING

                               BEFORE THE

                  SUBCOMMITTEE ON ASIA AND THE PACIFIC

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 4, 2015

                               __________

                           Serial No. 114-14

                               __________

        Printed for the use of the Committee on Foreign Affairs


Available via the World Wide Web: http://www.foreignaffairs.house.gov/ 
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                                 ______
                      COMMITTEE ON FOREIGN AFFAIRS

                 EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida         BRAD SHERMAN, California
DANA ROHRABACHER, California         GREGORY W. MEEKS, New York
STEVE CHABOT, Ohio                   ALBIO SIRES, New Jersey
JOE WILSON, South Carolina           GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas             THEODORE E. DEUTCH, Florida
TED POE, Texas                       BRIAN HIGGINS, New York
MATT SALMON, Arizona                 KAREN BASS, California
DARRELL E. ISSA, California          WILLIAM KEATING, Massachusetts
TOM MARINO, Pennsylvania             DAVID CICILLINE, Rhode Island
JEFF DUNCAN, South Carolina          ALAN GRAYSON, Florida
MO BROOKS, Alabama                   AMI BERA, California
PAUL COOK, California                ALAN S. LOWENTHAL, California
RANDY K. WEBER SR., Texas            GRACE MENG, New York
SCOTT PERRY, Pennsylvania            LOIS FRANKEL, Florida
RON DeSANTIS, Florida                TULSI GABBARD, Hawaii
MARK MEADOWS, North Carolina         JOAQUIN CASTRO, Texas
TED S. YOHO, Florida                 ROBIN L. KELLY, Illinois
CURT CLAWSON, Florida                BRENDAN F. BOYLE, Pennsylvania
SCOTT DesJARLAIS, Tennessee
REID J. RIBBLE, Wisconsin
DAVID A. TROTT, Michigan
LEE M. ZELDIN, New York
TOM EMMER, Minnesota

     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

               Jason Steinbaum, Democratic Staff Director
                                 ------                                

                  Subcommittee on Asia and the Pacific

                     MATT SALMON, Arizona Chairman
DANA ROHRABACHER, California         BRAD SHERMAN, California
STEVE CHABOT, Ohio                   AMI BERA, California
TOM MARINO, Pennsylvania             TULSI GABBARD, Hawaii
JEFF DUNCAN, South Carolina          ALAN S. LOWENTHAL, California
MO BROOKS, Alabama                   GERALD E. CONNOLLY, Virginia
SCOTT PERRY, Pennsylvania            GRACE MENG, New York
SCOTT DesJARLAIS, Tennessee

                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

Claude Barfield, Ph.D., resident scholar, American Enterprise 
  Institute......................................................     4
Ms. Tami Overby, senior vice president for Asia, U.S. Chamber of 
  Commerce.......................................................    21
Mr. Scott Miller, senior adviser and William M. Scholl Chair in 
  International Business, Center for Strategic and International 
  Studies........................................................    33
Ms. Celeste Drake, trade and globalization policy specialist, The 
  American Federation of Labor and Congress of Industrial 
  Organizations..................................................    40

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Claude Barfield, Ph.D.: Prepared statement.......................     7
Ms. Tami Overby: Prepared statement..............................    23
Mr. Scott Miller: Prepared statement.............................    35
Ms. Celeste Drake: Prepared statement............................    42

                                APPENDIX

Hearing notice...................................................    80
Hearing minutes..................................................    81
The Honorable Gerald E. Connolly, a Representative in Congress 
  from the Commonwealth of Virginia: Prepared statement..........    82
The Honorable Tom Marino, a Representative in Congress from the 
  Commonwealth of Pennsylvania: Questions submitted to the 
  witnesses for the record.......................................    84

 
    THE TRANS-PACIFIC PARTNERSHIP: PROSPECTS FOR GREATER U.S. TRADE

                              ----------                              


                        WEDNESDAY, MARCH 4, 2015

                       House of Representatives,

                 Subcommittee on Asia and the Pacific,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The committee met, pursuant to notice, at 3 o'clock p.m., 
in room 2172 Rayburn House Office Building, Hon. Matt Salmon 
(chairman of the committee) presiding.
    Mr. Salmon. The hearing will come to order. I would like to 
thank the witnesses for participating in what promises to be a 
lively hearing. I look forward to hearing from you about our 
trade opportunities in Asia. And I want to thank Ranking Member 
Sherman. We approach trade quite differently, but I am looking 
forward to having this debate and having a great group of 
testimonies from the members of the panel.
    The scale of our economic ties with Asia is vast. Three of 
seven of our top trading partners are in Asia. Three of our top 
six holders of U.S. Treasury bonds are in Asia, where their 
combined ownership exceeds $2.5 trillion. Trade, especially 
U.S. economic and trade policy in the Asia Pacific will be one 
of the major issues this Congress will deliberate. Increased 
U.S. presence in the region through the Trans-Pacific 
Partnership would greatly improve the American economy as well 
as provide considerable diplomatic and strategic benefits.
    Let me start off by saying we live in a globalized world. 
That has already happened. Nothing is going to change that 
whether anybody here likes it or not. It is only right for the 
United States to take advantage of the opportunities that 
globalization can afford us, especially as it can improve the 
livelihoods of Americans and improve trade and labor conditions 
abroad. Excluding ourselves from a monumental trade agreement 
that has clearly distinguished itself from previous FTAs would 
be unproductive and detrimental to our interests in Asia. The 
TPP would provide comprehensive and high standard guidelines 
for trade and commerce in the Asia Pacific. A robust and 
comprehensive TPP has the potential to improve our economy and 
provide consistency and stability in Asia.
    When Congress passes TPP, the world will know we are 
dedicated to economic prosperity through the facilitation of 
strong and inclusive rules-based, market-oriented economic 
growth. While the details of the trade agreement are still not 
public, I am confident that TPP will address issues such as 
preventing state-owned enterprises from having an unfair 
advantage in a market, or setting clear rules of origin, or 
constructing safeguards to protect intellectual property. I am 
also confident that TPP will foster job creation by 
incentivizing industry to invest in domestic production and 
manufacturing.
    Opponents of free trade will say our country will be 
flooded with low cost imports. It is important to note the 
United States already has relatively low tariffs and minimal 
other trade barriers, with 70 percent of our imports already 
duty free.
    We should not be worried about imports flooding our market 
after TPP has passed. Instead, TPP will help lower trade 
barriers for U.S. manufacturers and companies that are seeking 
access to other countries, providing U.S. trade and investment 
opportunities with other countries.
    If the United States does not participate in a 
comprehensive multilateral agreement in Asia, we may lose out 
on opportunities for growth and influence in the region. China 
is leading the way in pushing for an alternative regional 
economic and trade agreement called the Regional Comprehensive 
Economic Partnership, or RCEP, which excludes the United 
States. Reports have indicated that negotiations may focus on 
broad issues and avoid sensitive areas, so it will likely to be 
a lower standard trade agreement. Additionally, the agreement 
would facilitate intra-RCEP trade by lowering tariffs among 
participating countries, but it would the exclude the United 
States from those trade benefits.
    As China takes the lead in proposing alternative economic 
futures for Asia at the exclusion of the United States, the TPP 
would reassert our presence in the region. Through TPP, we 
would be able to shape rules and introduce U.S. practices to 
countries like Vietnam to improve conditions for human rights 
and labor practices, or provide environmental protection and 
intellectual property rights protection clauses. We would not 
see those types of provisions in a China-led trade agreement, I 
can assure you.
    China can allege that the United States is rebalancing to 
Asia purely to achieve military outcomes, but the successful 
negotiation and implementation of a TPP agreement will counter 
Beijing's notions that we are only focused on the security 
rebalance to Asia as well as reassure allies and our friends in 
the region that we are a reliable economic partner. After all, 
the United States has been, and will continue to be a Pacific 
power.
    I look forward to hearing our distinguished witnesses this 
morning and hope they will be able to address how the TPP would 
set guidelines that would improve our economic strength both at 
home and abroad and tell us what steps are necessary for a 
successful outcome.
    I now yield to Mr. Sherman, the ranking member of the 
subcommittee, for his opening remarks, and then we will move 
quickly to questions because we have a few members that have to 
get to airplanes. Thank you, Mr. Sherman.
    Mr. Sherman. Mr. Chairman, we are having this hearing as 
many of our colleagues are leaving. Just because all the seats 
are not filled does not mean that this matter is not of 
critical importance.
    A look at the economics of the various trade deals leaves a 
stark picture. We were told that giving most favored nation 
status permanently to China would increase our trade deficit by 
$1 billion. That estimate was off by over 30,000 percent. We 
were told that the Korea deal would reduce our trade deficit. 
It increases it. And now we can't even find an economist who 
says that this deal will reduce our trade deficit or increase 
jobs, so instead they are telling us that somehow this 
increases national income. But of course not the income of 
those who need jobs.
    The economic case for this agreement is so incredibly weak 
that even with the vast majority of economists already on the 
payroll of those who are pushing it they can't make an economic 
case. And so we are given other reasons. We are told isn't it 
wonderful to have a deal with the rules that came from the 
United States? And it is true that many of the approaches 
behind this agreement were written on Wall Street.
    That we should take pride in such rules is like turning to 
citizens from Madrid and saying take pride in the Spanish flu, 
because these rules have decimated millions and millions of 
American middle class families. We need fair trade, not what is 
called free trade.
    And the choice is not between the status quo and digging in 
further. But instead we have the lowest tariffs; many of them 
we can raise in an effort to force countries to adopt fair 
trade, results-oriented trade agreements. When you are in a 
hole, and we have the biggest trade deficit hole imaginable, it 
is time to stop digging.
    Then we are told, oh well, yes, it is a terrible economic 
deal, but think of how it helps us geopolitically against 
China. No, this is a deal that helps China. First, look at the 
rules of origin in the Korea agreement, and what we would 
expect to see is rules of origin here. Goods that are 65 
percent admitted made in China, which means they may be 70, 80, 
90 percent made in China, they get a ``Made in Korea'' tag put 
on them that is the value added in Korea; they come into our 
country duty free and we get no benefits, no access to the 
Chinese market. This is a free trade agreement on steroids with 
China one way.
    Then the agreement says nothing about currency 
manipulation, so it enshrines the Chinese idea that currency 
manipulation is just fine. And those who violate the law by 
refusing to designate China as a currency manipulator come up 
with a PowerPoint presentation to show me that China is 
cheating but they are cheating less so let us not do anything 
about that. Folks, imagine trying that on your spouse. Honey, I 
am cheating less. Here is my PowerPoint demonstration, 
mistresses per month sharply declining. Wouldn't work. Cheating 
less is not a good way to argue that we should continue this 
process. So the idea that we can give away jobs and that proves 
how geopolitically strong we are is rather crazy.
    And finally we look at statistics. Every time a statistic 
points in the direction this costs jobs, I hear, they hire a 
dozen economists to tell me, well that statistic, you don't 
like that statistic. It has a flaw. What you also see is that 
if a deal increases our imports by 2 billion and increases our 
exports by 1 billion, we are told it is a great deal because it 
is 3 billion more in trade. Or told it is a great deal because 
it is $1 billion more in exports. Nobody--I mean I am a CPA. I 
don't expect everybody to be CPA, but even in elementary school 
you learn how to add but you also learn how to subtract. And 
that fact is that if exports help, imports have the opposite 
effect.
    Finally, Secretary Kerry in this room said that this deal 
will not be a race to the bottom. Then why are we including 
Vietnam? Thirty cents an hour, that is the bottom. And we are 
told, well this deal will get us free access to their markets. 
Vietnam has no freedom and has no markets. And so finally 
Secretary Kerry says, oh, but we will have labor standards in 
this agreement. I will want to hear from our witnesses whether 
they would sell a life insurance policy to someone trying to 
exercise labor rights in Vietnam. And if so, I am going to make 
sure that they are never allowed to work for an insurance 
company or an insurance regulator.
    I yield back.
    Mr. Salmon. Thank you, Mr. Sherman.
    We have a very distinguished panel of four experts today, 
and we are just thrilled that you could be here. Thank you, and 
thank you for your patience.
    Dr. Claude Barfield is a resident scholar at the American 
Enterprise Institute. Dr. Barfield covers trade, intellectual 
property and technology policy, and was previously a consultant 
for the Office of the U.S. Trade Representative.
    Ms. Tami Overby currently serves as Senior Vice President 
for Asia at the U.S. Chamber of Commerce. She is also the 
president of U.S-Korea Business Council and has spent decades 
living in Asia. Thank you.
    Mr. Scott Miller is a senior advisor at the Center for 
Strategic and International Studies. He holds the Center's 
William M. Scholl Chair in International Business and 
previously served in roles with the U.S. Trade Representative 
and Department of State. Thank you, Mr. Miller.
    And Ms. Celeste Drake is the Trade and Globalization Policy 
Specialist at the American Federation of Labor and Congress of 
Industrial Organizations. Ms. Drake, a lawyer, previously 
served on congressional staff and as a judicial clerk. Thank 
you, Ms. Drake.
    And we are going to start with you, Dr. Barfield, and then 
we will move to my right, to your left, and that is not a 
political spectrum or anything like that necessarily. But we 
are really appreciative to have you here. You all understand 
the lighting system. When it goes amber you have a minute left. 
We are going to try to stick to those times because we would 
like to get as many questions as we have, and we have a couple 
of members who are trying to beat the snowstorm. So thank you 
very much, Dr. Barfield.

STATEMENT OF CLAUDE BARFIELD, PH.D., RESIDENT SCHOLAR, AMERICAN 
                      ENTERPRISE INSTITUTE

    Mr. Barfield. Thank you very much, Mr. Chairman, and thank 
you very much for inviting me. I will be happy to answer some 
of your and Mr. Sherman's questions on the economic side, but 
because in talking with the staff and because this is the 
foreign relation committee and not the Ways and Means Committee 
my testimony is largely on the geostrategic implications of the 
Trans-Pacific Partnership and other regional agreements.
    And I will be very brief. And I want to start with a 
quotation from Thomas Schelling, a Nobel prize winner of a 
couple of decades ago, who said that the stakes of U.S. trade 
policy have always reached beyond the economic realm. Trade is 
what most international relations are about. For that reason, 
trade policy is national security policy.
    The point in my longer testimony that I try to make is 
summed up in this kind of theme. Whatever Mr. Schelling thought 
about trade policy and economic policy, trade policy really 
stands at the intersection between what one might say is the 
high diplomatic and security policy, our national interests in 
that regard whether it is in terms of an individual other 
nation or a region and domestic politics.
    How will these trade agreements affect our workers, our 
businesses? And that juxtaposition is something that Presidents 
since the late 1980s when the United States moved away from 
just having a trade policy that was with the GATT, and then 
ultimately the WTO, to trade policies that really affected 
individual nations and now the regions.
    And so in the 1980s and through the Obama administration, 
when the Obama administration is trying to decide who we will 
have a trade agreement with and for what reasons, yes, the 
Trade Representative is there, but so is representatives from 
the Secretary of Defense, the Secretary of Commerce, from EPA, 
from other cabinets and other sub-cabinet representatives. The 
point is that this affects interests that are beyond just our 
economic interest.
    And this goes back just--and I will briefly, quickly come 
up to the Obama administration--I mean this started 
particularly with what we are looking at today with the TPP in 
terms of Asia with the Secretary of State James Baker under the 
first George Bush who reacted to a proposal by Japan and 
Malaysia to have an intra-Asian regional agreement by saying 
famously that the United States does not intend to allow a line 
to be drawn down the middle of the Pacific with us on one side 
of it and the nations of Asia on the other.
    And you move forward from the Bush administration to the 
Clinton administration where with NAFTA, with APEC, with the 
Free Trade of the Americas you had a strong push also to push 
democratic values, changing political institutions as well as 
the economic underpinning. With the Bush administration and the 
post-9/11 period, trade policy became a part of the white 
Defense paper in 2003. So you have had across different 
administrations this connection between geostrategic policy on 
the one hand and the trade policy on the other.
    Let me just briefly talk about the Obama administration 
because it is the most fascinating, I think, example. Famously, 
Mr. Obama came into office saying that he would have opposed 
NAFTA. He did not agree with the Bush trade agreements that had 
been negotiated after 2001. And yet within several years, the 
President himself and his administration turned around. Part of 
that admittedly, the first year they were dealing with an 
economic crisis, part of that was economic.
    The President's advisors kept pushing him saying that trade 
and certainly exports and more trade agreements will really 
help our economy as a plus to what we are doing domestically. 
But the other thing that occurred was that in the Pacific area 
the diplomatic and security situation was deteriorating. It was 
when Mr. Obama came to office that you began to have this 
increased activity of North Korea, the launching of missiles 
across the East and South China Sea, of threatening Japan, and 
at the same time that China changed from this so-called 
peaceful development to a much more vigorous and assertive and 
belligerent policy.
    So it was actually cutting across our relations with some 
of our, and as we see even today with some of our chief 
allies--with the Japanese, with the Philippines, with even 
Vietnam, Malaysia and Indonesia. So that really what the 
administration faced was as it preached to the world that we 
were pivoting and that we were rebalancing in Asia, if you did 
not have an economic component, which is what the TPP really 
stands for, the Asians would really not take you as quite 
seriously as they do now with the TPP and if it becomes a 
successful agreement.
    So that we find the Obama administration really in some 
ways has come full circle, and this starts with the President 
himself who to his credit today, I think, is really, he said a 
year or so ago that he was all in for the United States as a 
Pacific power. He is, I think, all in for the TPP, and I 
congratulate him for that. Thank you.
    [The prepared statement of Mr. Barfield follows:]
    
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    Mr. Salmon. Thank you.
    Ms. Overby?

 STATEMENT OF MS. TAMI OVERBY, SENIOR VICE PRESIDENT FOR ASIA, 
                    U.S. CHAMBER OF COMMERCE

    Ms. Overby. Thank you very much for the opportunity to 
speak on behalf of the U.S. Chamber of Commerce and share our 
views of our members. I believe all of us can agree that 
economic growth and creating good jobs are the nation's top 
economic priorities.
    Approximately 17 million Americans are unemployed, 
underemployed or have given up looking for work. Participation 
in the workforce stands at 63 percent, the lowest level since 
1978, reflecting a significant level of discouragement. There 
are many policy options Congress will consider to improve this 
dire situation. International trade should be prominent among 
them. After all, outside our borders are markets that represent 
80 percent of the world's purchasing power, 92 percent of its 
economic power, and 95 percent of its consumers.
    The most immediate and important trade opportunity before 
us is the topic of this hearing, the 12-country Trans-Pacific 
Partnership Agreement. This agreement would link countries in 
North and Latin America with important markets in Asia 
representing nearly 40 percent of global GDP. As U.S. companies 
scour the globe looking for consumers, Asia stands out as 
brimming with opportunity. Over the last two decades, the 
region's middle class grew by 2 billion people and their 
spending power is greater than ever. That number is expected to 
rise by another 1.2 billion people by 2020.
    According to the IMF, the world economy will grow by over 
$21 trillion in the next 5 years with nearly half of that 
growth in Asia. U.S. businesses, workers and farmers need 
better access to those lucrative markets if they are going to 
share in this dramatic growth.
    But American companies are falling rapidly behind in Asia. 
While U.S. exports to Asia increased steadily from 2000 to 
2010, America's share of the region's imports declined by about 
43 percent. In fact, the growth in U.S. exports to Asia lagged 
overall U.S. growth in that period.
    One reason many companies have lost market share in Asia is 
that many countries maintain steep barriers against U.S. 
exports. A typical Southeast Asian country imposes tariffs that 
are five times higher than the U.S. average while its duties on 
our ag products soar into the triple digits. In addition, a web 
of non-tariff and regulatory barriers block market access in 
many of these countries. Trade agreements are crafted to 
overcome these barriers, and without them U.S. goods and 
services and the workers that provide them will continue to be 
blocked from these lucrative opportunities.
    But the U.S. disadvantages do not end there. Other 
countries are plowing ahead with trade deals that are leaving 
America on the outside looking in. China, India and 14 
countries are negotiating a trade deal called the Regional 
Comprehensive Economic Partnership that does not include 
America. This agreement does threaten to draw a line down the 
Pacific and put American workers, farmers and businesses that 
you represent on the wrong side of history.
    The TPP is not only America's best chance, it is our only 
chance to ensure that America is not left out as these 
countries in the most economically dynamic region of the world 
pursue new trade accords among themselves. Unlike RCEP or the 
many 350-plus trade agreements already in force around the 
globe, the TPP promises to set high new standards and establish 
new rules for trade and investment that will generate greater 
benefits for all participating countries.
    TPP is a chance to introduce ground breaking disciplines in 
emerging areas so that trade and investment rules can keep pace 
with a rapidly evolving global economy and increasingly 
sophisticated behind-the-border measures that governments are 
increasingly using to block our access and obstruct market-
based competition.
    In order to provide American workers, farmers and companies 
with these opportunities, Congress must first approve 
legislation to renew trade promotion authority. With TPA we 
simply cannot enter into new agreements. We are excited to see 
that Congress and the administration are focused on TPA and 
working hard to prepare legislation to renew it in the coming 
weeks. TPA is a critical element of an economic policy which 
spurs economic growth and job creation in America.
    The agenda is clear. The U.S. cannot afford to sit on the 
sidelines while others design a new trade architecture for 
Asia. A comprehensive, ambitious and enforceable market opening 
TPP has the potential to create an explosion of trade and new 
American jobs and would demonstrate continued U.S. leadership 
across this important region. It is an exciting vision which on 
the right terms can be an economic shot in the arm for the 
United States and for our friends and allies in the region. It 
can send a clear, unmistakable message that Americans' 
leadership is in the Pacific to stay.
    The U.S. Chamber of Commerce looks forward to working with 
the members of this committee to secure a commercially strong 
TPP as soon as possible. Thank you.
    [The prepared statement of Ms. Overby follows:]
    
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    Mr. Salmon. Thank you.
    Mr. Miller?

 STATEMENT OF MR. SCOTT MILLER, SENIOR ADVISER AND WILLIAM M. 
 SCHOLL CHAIR IN INTERNATIONAL BUSINESS, CENTER FOR STRATEGIC 
                   AND INTERNATIONAL STUDIES

    Mr. Miller. Thank you, Mr. Chairman and Mr. Ranking Member, 
for the opportunity to present my thoughts on prospects for the 
TPP.
    I believe a completed TPP would be beneficial to U.S. 
interests. First, it would form the largest free trade area in 
which the U.S. participates with the opportunity to expand its 
membership. Second, it would establish a modern set of 
commercial rules for the Asia Pacific where U.S. firms have a 
large and growing interest. Third, it would reinforce U.S. 
presence in the region. It is an important economic complement 
to our security posture.
    The United States has compelling economic interest in the 
Asia Pacific. The Asia Pacific as defined by the 21 APEC 
economies would be home to three largest economies in the 
world--the United States, China and Japan. In addition, there 
are 15 economies worldwide with over $1 trillion of gross 
domestic product. Eight of those fifteen are APEC members.
    This is an area that which over the past decade or two has 
demonstrated very strong economic growth and relative 
stability. Among the 21 APEC economies there is already a high 
level of economic integration. There are many regional trading 
arrangements of which the United States is a party to a few of 
them, but there is about $10 trillion a year in goods and 
services traded around the Asia Pacific.
    TPP holds the promise of three major benefits to the U.S. 
economy--modernized rules, improved market access and a durable 
new commercial architecture in this fast-growing region. Let me 
focus in particular on the rules because it came up in your 
opening comments.
    Mr. Chairman, you mentioned globalization and the fact that 
this economic change is a given in our lives. I think the point 
that I would make is over time trade rules made for a different 
time become either outmoded or incomplete for changes wrought 
by this technology. We certainly live in a time of great 
technological progress. The technological progress particularly 
in transportation, communication and information flows have led 
to rapidly falling barriers in the flow of goods, people, ideas 
and culture.
    It is something, globalization is the usual way to refer to 
it, but this technological change has changed both the way we 
trade and what we trade. How has it changed the way we trade? 
Well, 50 years ago when the GATT was founded and shortly after, 
most international exchange took in the form of arms length 
transactions between unrelated parties. What technology allows 
today, particularly communication and information technology, 
is a very high degree of firm to firm coordination in trade. 
The UNCTAD estimates that 80 percent of global merchandise 
trade is actually firm directed, so the unrelated party 
transactions that were the basis of the GATT are no longer the 
reality of modern trade.
    So how we trade today and the way we operate is organized 
around the global value chains and firm communication, so it is 
a very different mode of operation.
    In addition, what we trade has changed because of 
technology. Some goods and services previously thought non-
tradeable including, say, accounting services, are now in fact 
tradeable goods. More importantly, there are goods that frankly 
didn't exist 20 years ago when the last round of the GATT was 
completed that are now in the traded system.
    A good example is digital services. In 1994, there was 
essentially no commercial use of the Internet. At that time 
digital trade exports or digital services exports from the 
United States were insignificant. Today, digital services 
exports are roughly double agricultural exports for the United 
States. In 2011, digital services exports were $356 billion 
versus $136 billion of total farm exports.
    So we have types of trade today that were unimagined even 
at the time of the last GATT round. Modernizing rules in areas 
like cross-border data flows and regulatory cooperation are 
critical to the way the modern trading system functions. That 
is really one of the important reasons for being at the table 
in TPP. They are vital to the U.S. firms which are often on the 
leading edge of this commercial innovation. As Tami mentioned, 
TPP will also improve market access for U.S. exporters 
particularly in the five partner economies where we do not have 
FTAs now.
    And finally, TPP is intended to have an open architecture 
expected to incorporate new members which will help reinforce 
U.S. high standards for commerce in the region and have 
positive spillover effects for the United States, our allies 
and our partners in the region.
    I thank you for your attention and I look forward to your 
questions. Thank you.
    [The prepared statement of Mr. Miller follows:]
    
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    Mr. Salmon. Thank you.
    Ms. Drake?

STATEMENT OF MS. CELESTE DRAKE, TRADE AND GLOBALIZATION POLICY 
 SPECIALIST, THE AMERICAN FEDERATION OF LABOR AND CONGRESS OF 
                    INDUSTRIAL ORGANIZATIONS

    Ms. Drake. Thank you. Chairman Salmon, Ranking Member 
Sherman, members of the committee, good afternoon. I appreciate 
this opportunity to testify in the prospects for greater trade 
under the proposed Trans-Pacific Partnership. I have submitted 
written testimony for the record and will summarize my comments 
here.
    I am going to start with the premise that some of you might 
find surprising, and that is that American workers support 
trade and in fact we want more of it. While it is true that we 
oppose the recent Colombia and Korea trade deals, it is also 
true that we strongly support GSP and AGOA which promote 
imports through tariff reductions.
    For us, the real question is not whether to trade but how 
to trade. In other words, what rules will govern and who 
benefits? Some say the TPP is a fight between the U.S. and 
China to write trade rules. It is not that simple. Is the 
``we'' really the people of the United States, writ large, or 
is it global corporations, many of whom invest in and produce 
in China, and other economic elites who hold about 90 percent 
of the U.S. trade advisor seats? For China, a real problem is 
getting it to abide by any rules. Fourteen years after China 
joined the WTO it is still not compliant and why would new 
rules be any different?
    For the nearly 13 million working families the AFL-CIO 
represents, the question we ask is whether taken as a whole the 
Trans-Pacific Partnership will make lives better for people who 
work. There is little doubt that a completed TPP will increase 
trade flows, which do not necessarily mean better lives for 
workers. Better wages and working conditions do. Trade rules 
from NAFTA onward have contributed to stagnant wages and 
increasing inequality.
    How can a trade deal help? The most important thing the TPP 
can do to help create jobs and raise wages is to address 
currency manipulation. A Japanese official recently warned that 
such a move would kill the TPP. But we have real doubts about 
the value of a TPP that fails to address currency. This is 
critical. If the TPP leaves countries free to use currency to 
create trade advantages, the mammoth, job-killing $500 billion 
U.S. trade deficit is only likely to grow.
    We are also looking for commercial rules that will help 
reduce the deficit. This means strong rules of origin on 
everything from cars and car parts to aerospace parts and 
clothing. It also means meaningful, easy-to-use rules to 
prevent unfair competition from government subsidized firms 
that compete against our firms, for instance, by producing 
steel products. It also means intellectual property provisions 
that strongly support American innovation and creativity 
without putting health at risk or bleeding taxpayers dry.
    We support balanced investment rules, not investor to state 
dispute settlement. ISDS sets up a separate but unequal system 
of justice that operates outside U.S. courts and U.S. law 
available to foreign investors only. This corporate court 
undermines the ability of elected officials to make policy 
choices.
    And though the quality of a trade deal does not turn solely 
on labor provisions, inadequate standards, poor enforcement or 
both contribute to an economic imbalance that leaves workers 
behind. The TPP's labor rules must require compliance on day 
one or it sends the message that the commitments aren't 
serious. If the TPP's labor rules are entirely discretionary, 
allow for infinite delays or no action at all, they will not 
help workers gain the voice they need to raise wages and make 
their jobs safer.
    The GAO has already recognized inadequate U.S. oversight 
and monitoring of labor provisions in prior trade deals, even 
ones using the so-called May 10th Standard. Workers, whether in 
Mesa, Arizona, Mexico City or Hanoi, cannot afford to have 
their governments ignore fundamental human rights, including 
the right to join together and seek a better life.
    Some of the TPP countries are extremely troublesome in this 
regard whether that means restricting the right to free speech, 
to join a union, arresting people who wear Santa hats or 
stoning homosexuals, all of these raise concerns about the 
ability of these countries to be fair trading partners, to meet 
international standards and to develop an economy with the 
basic fairness to create a functioning middle class.
    These are human rights questions, moral questions, but also 
deeply economic questions. To us, the questions about the TPP 
are far too complex to merit a grant of Fast Track which 
requires Congress to commit sight unseen to an up or down vote 
with limited debate. That is why we urge you to increase your 
leverage over the TPP by rejecting the unaccountable Fast Track 
model. We cannot afford to get this wrong.
    I thank the committee for its time and would be pleased to 
answer any questions you may have.
    [The prepared statement of Ms. Drake follows:]
    
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    Mr. Salmon. Thank you, Ms. Drake.
    I am going to start it off with a round of questions. My 
first question would be that the administration often mentions 
21st century trade issues as a goal of TPP. What are these 
issues and why are they important to the U.S. economy?
    Dr. Barfield, would you like to take a first crack at it?
    Mr. Barfield. I think Scott went into this in some degree. 
There are issues that he talked about in terms of the new 
digital economy, of moving--and I should say that what has 
happened is that as the trade negotiations have gone over, over 
the decades, you have gone from trade barriers such as tariffs 
that were outside the border to the kinds of things that you 
find inside the border of regulations. And now we have new 
technologies such as the new digital economy which trade rules 
to date have not handled.
    And so the term ``20th century agreement'' means that you 
are really looking at issues that have not been looked at 
before or only briefly looked at such as regulatory issues 
whether it is health and safety, whether it is environment or 
whatever. So it is in inside the border and regulatory 
framework that you are trying to change in the direction of 
allowing the free flow of trade and investment.
    Mr. Salmon. Thank you.
    Ms. Overby, did you, or Mr. Miller did you want----
    Mr. Miller. If I could add briefly. Yes, I agree with 
Claude. Classically defined as the electronic commerce and 
telecom issues, cross-border data flows being the most 
important for business operations, not just Internet firms and 
high tech firms but all firms operate with a lot of 
coordination. And free flow of data is critical to operation.
    Second, in competition policy, which has been an older 
subject of trade, one of the things that is added in the TPP is 
the consideration of state-owned enterprises and how to treat 
state-owned enterprises and how to manage their competitive 
neutrality to make sure they operate the way that normal 
competitive companies do. I would also add regulatory 
cooperation or regulatory coherence is an important part. This 
is one of the behind the border issues that is a bigger part of 
trade frictions today than it was one or two decades ago.
    Finally, in the intellectual property chapter, there is 
good work going on for safe harbors for Internet service 
providers which is consistent with U.S. law and practice, as 
well as measures to protect high technology innovators in 
foreign markets.
    Mr. Salmon. One other question, Mr. Miller. Would those 
safeguards on these issues, whether for intellectual property 
or any of the other issues that you mentioned, would they 
happen if we are not part of it?
    Mr. Miller. It is unlikely. The United States has raised 
these issues. Frankly it is U.S. firms that are on the frontier 
of commercial innovation in these sectors. Mostly, in most 
trade negotiations economies raise the issues that are most 
important to their industries, and for the U.S. companies these 
come to a high level that probably wouldn't happen if we were 
absent from the TPP negotiations.
    Mr. Salmon. One of the arguments against TPP is that our 
trade deficit with FTA partners has actually increased in 
aggregate. However, my understanding is our overall trade 
deficit peaked in 2006 at $760 billion. Since then it has 
actually decreased to $505 billion. So trade balances with FTA 
partners have actually improved at least as far as I am reading 
the statistics. Is the trade deficit issue of particular 
concern to the negotiators? And should it be?
    Ms. Overby, would you like to address that?
    Ms. Overby. Thank you. Mr. Chairman, the trade balance is 
actually a poor measure of success of U.S. agreements. In 
macroeconomic terms, the U.S. overall trade deficit reflects an 
imbalance in our consumption and our savings, not our trade 
agreements. Until we save more than we consume, the U.S. will 
continue to run a deficit on a global basis. However, if we 
take as a group, the U.S. ran an aggregate trade surplus with 
its FTA partner countries in 2012 and 2013, and this surplus 
has grown since then. In fact, the U.S. has recorded a trade 
surplus in manufactured goods with its FTA partners for each of 
the past 5 years according to our Department of Commerce. This 
surplus reached $27 billion in 2009 and has expanded to $61 
billion by 2013.
    Mr. Salmon. Thank you.
    I just have time for one more question. The issue of 
currency manipulation, is there any evidence that by itself 
currency manipulation is damaging to our economy?
    Mr. Miller. I am no expert on this matter, but I will take 
the advice of Fed Chairman Janet Yellen who was asked about 
currency manipulation and trade agreements at a recent Senate 
Banking Committee hearing. She mentioned, acknowledged the 
issue was an issue, but said that it was the United States had 
defensive issues here and that managing, doing her job of 
managing U.S. fiscal policy might be constrained if we were to 
negotiate this in trade agreements.
    I would note also there are certain things that are 
important to trade and affect trade that we don't consider in 
trade agreements. I would note farm subsidies is one of those. 
I don't think there is any debate that farm subsidies do have 
an effect on farm pricing, but the United States has never 
negotiated them within a bilateral free trade agreement.
    Mr. Salmon. Ms. Overby?
    Ms. Overby. Yes. On currency we agree. Currency 
manipulation is a very serious problem in international trade, 
and we are encouraged that the administration and Congress are 
working to find solutions. The Chamber's view is that disputes 
over currency deserve a full airing, but the questions are what 
is the right forum, and what measures can be effective? 
Historically, governments have tackled currency matters in a 
very broad fora such as the IMF, G20 or G7. This is because 
governments have seen currency valuation and current account 
imbalances as global in nature and not effectively addressed 
with a single partner or a small collection of partners.
    Most international policymakers and experts want to be sure 
that we don't tie the hands of the Fed or the Treasury 
Department with enforceable currency provisions in TPP or any 
U.S. trade agreement. Our institutions need to be able to 
determine our own monetary and fiscal policies and be able to 
respond in a crisis. The other TPP partners have as Mr. Sherman 
mentioned indicated that they do not want currency provisions 
in an agreement.
    Mr. Salmon. Thank you, I have run out of time.
    Mr. Sherman?
    Mr. Sherman. Just for the record, using ITC data, our trade 
relationship with our FTA partners most recent statistics, $180 
billion deficit in merchandise plus 70--see, I can add and 
subtract--billion in services. That is $110 billion trade 
deficit with the FTA countries.
    I do serve on the House Financial Services Committee, and 
have for 18 years. There is a huge difference between setting 
your interest rates for your own national economic growth on 
the one hand, and intervening in currency markets to push down 
your currency and steal jobs on the other. And only when those 
two are conflated could somebody say, oh, we better not talk 
about currency manipulation, somebody will try to tie the hands 
of the Fed.
    And I would point out that the statistics I gave you don't 
even count the re-exports, situations where goods are brought 
into the United States for transit often to a Latin American 
country. We are told that this agreement is going to help us 
vis-aa-vis our national security relationship with China, but 
we are also told China might join the agreement. You can't 
argue it both ways.
    But when it comes to national security in China and the 
idea of binding us to other Asian nations let us look at the 
situation. We are already devoting all of our procurement and 
research dollars at the Pentagon to figure out how to fight 
China for the benefit of Japan, Korea, et cetera, over some 
relatively useless Pacific islets, rocks. And so we are going 
to spend and perhaps die for their territory and now we have to 
give them a lot of jobs to get them to let us do it. That is, 
if being their security is not enough and we have to give up 
jobs, I would be surprised.
    First, I want to thank the first three witnesses for not 
asserting that this agreement under consideration would lead to 
more jobs or would reduce the trade deficit, because it 
obviously won't. Ms. Overby has made the point that workers are 
discouraged and they are not entering the workforce. The reason 
for that is for low wages, and the reason for that is the trade 
policy that we have suffered.
    For every job we lose in these trade agreements there are 
ten others where people don't get raises because their employer 
is able to say I may move to China or I have to compete with 
China, or I have to compete with the free trade agreement from 
Korea, et cetera, and so wages are low and you end up with low 
participation rates.
    As to national security, national security is not just 
figuring out how to fight over rocks on the Pacific. It is also 
Iran. And there is one thing that Obama and Netanyahu agree on, 
and that is the key thing here is sanctions, they just disagree 
on how to modulate them in order to get what they hope is a 
good deal. Under these fair trade agreements, those provisions 
of our sanctions aimed at U.S. contractors could be swept away.
    Dr. Barfield, is there anything in the agreement that you 
are aware of that will say that those U.S. sanctions, 
particularly government procurement sanctions, will be fully 
enforced notwithstanding the FTA?
    Mr. Barfield. Well, the government procurement is one of 
the things being negotiated in the TPP.
    Mr. Sherman. Okay. All of our past free trade agreements 
open giant loopholes in the number one national security effort 
of this country and that is imposing sanctions on Iran until we 
get a good deal.
    Ms. Drake, what is it like to be a labor organizer in 
Vietnam? And I realize just because you work for the AFL-CIO 
doesn't mean you are in the organizing department. But you 
might know some of those folks.
    Ms. Drake. Good question. I mean the real thing that you 
are risking that you are not necessarily risking here in the 
United States is you can be arrested. And when you are arrested 
there are issues of extrajudicial killings and beatings by the 
police in Vietnam. But, really, you just don't have the 
opportunity to say we want our own union, we want an 
independent union, we want to get together and work with each 
other for better. There is one national federation, the VGCL, 
and it is really an arm of the government. And while it does 
function, it doesn't function as a union. It sort of makes sure 
that you get birthday cake at work when it is your birthday and 
things of this nature. It doesn't really function as a tool to 
say workers here need more safety, they need more money, they 
need better benefits. These are the things that workers need.
    Mr. Sherman. A number of the witnesses gave us a tremendous 
picture of how Asia is big, important, dynamic, and growing in 
every respect. Couldn't agree with you more. That is why we 
needed to use the threat of dramatically increased tariffs, and 
even with the WTO we can, whether we choose to our not, just 
impose them or threaten to impose them in order to secure free 
trade agreements. And so I look forward to us having the right 
trade policy toward this important and dynamic region.
    And finally, we have a huge trade deficit. We used to blame 
the U.S. Federal deficit. Well, we ran a surplus under Clinton, 
we had a huge trade deficit. We had deficits at the Federal 
level. We have a huge trade deficit. On rainy days we have a 
trade deficit. On sunny days we have a trade deficit.
    And so ultimately we are told it is because your workers 
aren't producing products at a good price that the world wants 
to buy. And I would say we have the best workers in the world. 
We have the best scientists in the world. We have the best 
entrepreneurs in the world. But we have the largest trade 
deficit in the world because we have the worst trade policy in 
the world.
    I yield back.
    Mr. Barfield. I would like to challenge that if I could.
    Mr. Sherman. I believe my time has expired.
    Mr. Barfield. All right, I will do it on somebody else's.
    Mr. Salmon. Mr. Emmer?
    Mr. Emmer. Why don't you go ahead, Mr. Barfield, and then 
thank you, Mr. Chair.
    Mr. Barfield. Well, the point is that nobody has said that 
the trade deficit causes jobs or that the trade, not here at 
any rate. I don't know what the AFL-CIO, what my colleague 
there would say. But to keep coming back to something that this 
trade agreement ignored was Tami's point that we have to keep 
coming back to. It's economics 101 that we will run the trade 
deficit with the rest of the world overall as long as we do not 
save, invest and save enough both privately and publicly to 
cover our investments and what we are spending. And the United 
States has for the last several decades not been able to do 
that.
    So you can change the trade deficit with China or shift it 
toward Japan or whatever way you want to do but overall, as 
Tami pointed out, it is the macroeconomic factors. You are 
still going to have a large trade deficit unless you change 
that. And we have been unwilling to do that. This is not to let 
China fall free.
    Mr. Emmer. Mr. Barfield, if you don't mind, and I 
appreciate it. Maybe you can filter it in to some of the 
others. I have just a couple minutes left, and I thank the 
chair for letting me ask a couple of questions.
    I am from the state of Minnesota, and in 2013 Minnesota 
goods exported were 20.8 billion. Nationally, and this is not 
just Minnesota, jobs supported by exports reached more than 11 
million in 2013, and every billion dollars of United States 
exports of goods supported an estimated 5,400 jobs in that same 
year. By the way, jobs supported by exports, goods that were 
exported, paid an estimated 13 to 18 percent above the national 
average. It is important to my state because 47 percent of 
Minnesota's exports, again in that year, almost $10 billion 
went to countries that are currently part of this negotiation.
    Mr. Barfield, very quickly I want to cover a couple of 
areas if I have time. First, I hear a lot of people, and I see 
some T-shirts here about Fast Track authority. Under the 
Constitution it is my understanding, Article I Section 8, that 
Congress has the sole authority to enter into agreements with 
foreign nations whether they be treaties or trade agreements, 
and that the executive has only authority to negotiate. Is my 
understanding correct?
    Mr. Barfield. Yes.
    Mr. Emmer. Now the idea that this is going to be sight 
unseen--and I am going to move to Ms. Overby. There was a 
statement made, I think by Ms. Drake, that Congress if it 
passes trade promotion authority which is nothing more than 
legislation that tells the executive branch this is what the 
expectations are; this is what we can do, what we can't do; 
this is what we will accept, what we won't; this is what 
Congress is doing to exercise its constitutional authority over 
trade; the testimony was made that this will somehow come to 
Congress sight unseen.
    In fact, the TPP legislation that would be part of this if 
this is going to go forward would require that you have full 
transparency. Isn't that right, Ms. Overby? And could you 
please explain what that would mean.
    Ms. Overby. Thank you. Yes, you are absolutely correct. I 
also find it somewhat ironic that critics of the TPP 
negotiations and specific chapters or provisions always 
criticize the lack of transparency in the negotiations, but in 
the very next breath they say it is about agreement. If it is 
not transparent, I am not sure how one knows whether it is good 
or bad.
    Also calls to make confidential negotiating text public 
are, in my view, misguided. Disclosure of negotiating text 
would risk giving foreign governments a road map to U.S. 
sensitivities and red lines that could be used to our 
disadvantage. I was actually in Korea working for the American 
Chamber of Commerce in Korea when the U.S. and Korea were 
negotiating the KORUS FTA. And an opponent of the KORUS FTA 
from the Korean National Assembly leaked some text, and I saw 
it firsthand that it provided our negotiators a clear picture 
of their strategy and frankly it helped us. We got a better 
deal, from our perspective, because of that.
    Mr. Emmer. Quickly, can you address the other claim that 
this is somehow going to affect jobs in this country? Because 
my understanding is the tariffs, in other words the barriers to 
products coming into our country are among the lowest in the 
world. And actually we want to make sure that our labor, our 
greatest workers on the face of the planet, are able to produce 
and sell their products fairly in markets outside of our 
country.
    Ms. Overby. You are exactly right. The U.S. already has one 
of the lowest tariffs in the world and most of Asia has very 
high. In fact, in Southeast Asia five times the tariff level to 
Americans. So our market is already open. If we do nothing, 
what that means is they keep selling to the U.S. and we can't 
sell to them.
    Mr. Emmer. Wouldn't that affect the trade deficit?
    Ms. Overby. In a very negative way, exactly. And your point 
about jobs, you are absolutely right. It will have an impact. 
This agreement is a job creating agreement because it is going 
to allow us to sell more, and when we sell more we have to hire 
more people to do it. Thank you.
    Mr. Emmer. Thank you very much. Thank you, Mr. Chair.
    Mr. Salmon. Thank you.
    Ms. Gabbard?
    Ms. Gabbard. Thank you very much, Mr. Chairman. Obviously 
this entire discussion is very important, and you mentioned 
looking at this. This is macroeconomics. There have been a lack 
of details that members have been able to share with people at 
home who have not a background in economics but who are very 
interested specifically in how this will affect me and my 
family, our ability to support them, and to be able to have 
opportunity to create jobs.
    I want to touch on the compliance issue because I think it 
is a valid one. When we are talking about whether it is labor 
standards or environmental standards or other things that the 
administration has put out there saying, hey, don't worry, we 
are going to ensure that these standards are included--really, 
there is not a great track record in history of such standards 
having been enforced either recently or in previous history.
    So I would like to ask you what gives you such great 
confidence that these standards if met in the agreement would 
be enforced and what is the enforcement mechanism?
    Mr. Miller. Well, I would just note that with regard to 
labor and environmental standards we have actually come a very 
long way since the NAFTA. In the NAFTA in 1994, the labor and 
environmental provisions were so-called side agreements. They 
were not in the body of the text. They were basically voluntary 
cooperation agreements.
    Since that time there have been a number of iterations in 
U.S. policy. We moved to a standard in 2001-2002 so-called the 
``enforce your own laws.'' Thanks to the leadership of at that 
time Chairman Levin and others, in the May 10th, 2007 agreement 
there was a higher standard promulgated which first tied the 
standards for labor and environment to international 
obligations; and second, allowed the same kind of dispute 
settlement mechanism as for any other violation of the free 
trade agreement.
    So the way our current law and our current negotiating 
policy operates is that the labor and environment chapter have 
equal standing with every other chapter in the trade agreement 
in terms of access to dispute settlement. There is a current 
live dispute settlement for the labor provision of the Central 
America Free Trade Agreement which is happening in real time 
right now so that would be the easiest one to follow.
    But I would note importantly on the environmental side, an 
important advance is if any two parties to, say, the TPP are 
parties to a separate environmental accord, like the CITES 
agreement or some other environmental accord, and there is an 
alleged violation of that separate accord that those parties 
can use the TPP dispute settlement chapter to settle the 
dispute of an outside agreement. So I think we made progress. 
Thank you.
    Ms. Gabbard. Thank you.
    Ms. Drake?
    Ms. Drake. Thank you very much. I think in terms of 
compliance it is a particularly important question. We have 
under CAFTA a complaint against Guatemala. There is actually 
several live complaints. The one against Guatemala has been 
going on for 6 years, and that means for 6 years employers in 
Guatemala have been freely driving down wages by failing to pay 
minimum wage, by firing workers who try to form a union, by 
specifically not following the law.
    And while they are driving down wages in Guatemala that 
means they are also driving down wages in nearby Honduras and 
El Salvador and Costa Rica because it is one labor market. And 
by the way they are also driving down wages here because 
employers here say if you don't take pay cuts, if you don't 
give back seniority rights, if you don't give up your pension 
plan we are going to move production to Central America. So it 
is a critical issue.
    On the Honduras issue, which is also an open complaint, 
that one was open for 3 years even before the administration 
responded. And they just put out a report last Friday. It is a 
great report. They may do some things to improve labor rights 
in Honduras, but meanwhile workers on the ground are being 
abused every single day. And that sends the wrong message to 
our TPP partners about how seriously the labor commitments will 
be taken.
    But also if the chapter doesn't include specific timelines, 
requirements to act on complaints that have merit, then the 
problem is, is that any government that doesn't want to act, if 
it has unlimited discretion, can just ignore it. They can do 
far worse than delay for 3 years. This is an administration 
that cares about labor rights. What if we have an 
administration, President X, in 2017 who doesn't care at all 
about labor rights?
    Ms. Gabbard. Thank you.
    Thank you, Mr. Chairman.
    Mr. Salmon. Mr. Connolly?
    Mr. Connolly. Thank you, Mr. Chairman.
    I thank you all for being here today. I must confess part 
of my problem with this topic is we now have taken theological 
positions. So largely, the AFL, almost no free trade agreement 
could ever be good. They are all bad. They all create 
dislocations. They kill jobs. They haven't worked out. And 
there is no reason to be confident that any enforcement 
mechanism would ever really work.
    Similarly, the Chamber of Commerce hasn't found one it 
doesn't like. And Ms. Overby you have heard me give this sermon 
before, but Ms. Drake's last point, what confidence does 
somebody on my side of the aisle have that the Chamber would 
ever really seriously care about labor suppression overseas 
when the Chamber is actively engaged in funneling money to 
campaigns for labor suppression here at home?
    And so is someone like me who is inclined intellectually to 
be open to free trade, I couldn't possibly trust the Chamber, 
politically or substantively, to take that issue Ms. Drake has 
just given us as seriously. You have given, not you personally, 
Ms. Overby, but the Chamber, I mean if you have a D after your 
name then the Chamber is going to go after you. It might pick 
one or two, and I mean one or two token Democrats, and other 
than that it doesn't matter what our free trade record is. 
There is no reward whatsoever coming out of your organization 
and Mr. Donohue, and so we vote for free trade at our peril.
    And I think framing this issue theologically and the 
political sort of brittleness that attends to that does not 
contribute to a rational debate or discussion about the real 
merits and real problems associated with any free trade 
agreement.
    Mr. Miller, I take your point. I mean if you listen to the 
critics of NAFTA it is a complete failure and it didn't address 
these issues, and if that critique conceded, if that is true, 
then why would anybody have confidence in the argument, well, 
this time we got it right, trust us.
    Mr. Barfield. I would like to turn that around if I could.
    Mr. Connolly. Okay, go ahead, Dr. Barfield.
    Mr. Barfield. Sorry. I would turn that around and give the 
example that I did just in terms of geostrategic, but I would 
also do it in terms of the economics. Why was it that President 
Obama turned around? Why does he think--this is a very 
progressive, a very liberal administration. And the President 
came into office saying that he would not have voted for NAFTA 
and he didn't like the free trade agreements that the Bush 
administration. The TPP is building on that tradition which 
causes the AF of L-CIO a good deal of heartburn, but the 
President has turned around because he thinks that it is 
possible.
    Mr. Connolly. Well, Dr. Barfield----
    Mr. Barfield. And it is not the Chamber we are talking 
about here. This is the leader of your party.
    Mr. Connolly. Well, he is also the leader of the country. 
He is your President as well as mine.
    Mr. Barfield. I was not implying he wasn't.
    Mr. Connolly. I understand.
    Mr. Barfield. I have defended----
    Mr. Connolly. I just thought I would say that. But I would 
also point out to you that is not unique to this President. 
Name a President, Democrat or Republican, who hasn't come 
around to the idea that free trade makes sense and hasn't 
gotten behind free trade on----
    Mr. Barfield. Why do you think that is the case? It is 
not----
    Mr. Connolly. Ms. Drake may have a point of view about 
that. Do you want to answer that?
    Ms. Drake. I would like to answer that. I think that 
candidates in general, writ large, are saying what voters want 
to hear when they are running. And they get it. They hear 
people. They say my wages have been stagnant. They say my uncle 
was laid off from a good factory job. They go to main streets 
and they see what is happening when a factory closes and a town 
dies out. And then you get into a position of power and the 
choices that you make are different, and the influences on you 
are different. So it is disappointing when candidate after 
candidate runs in a particular way and then votes differently.
    But I would like to get to your question of, the AFL-CIO is 
ideological on this and I don't think----
    Mr. Connolly. And so is the Chamber.
    Ms. Drake. Well, look, we----
    Mr. Connolly. And if you are going to answer that Ms. 
Overby has to have the opportunity too.
    Ms. Drake. We submitted 34 pages in January 2010 of this is 
what the TPP should like if we are going to support it, which 
by the way I also want to challenge Ms. Overby's comment that 
we are always saying it is a bad deal. What I said was the 
questions about the TPP are far too complex to merit a grant of 
Fast Track.
    The AFL-CIO has not taken a position for or against the 
TPP. We are certainly against using NAFTA as a model, using 
Korea as a model, using failed models as a model. And from what 
has been said publicly about the TPP, which is frankly very 
little in comparison to the voluminous number of pages, it is 
using NAFTA and Korea as a model.
    Mr. Connolly. Okay, thank you. And by the way the word was 
``theological'' not ``ideological.'' My background, I hear 
theology.
    If the chairman would just allow the Chamber rep to respond 
similarly and then I am done.
    Mr. Salmon. Yes, that is fine.
    Mr. Connolly. I thank the chair.
    Ms. Overby. It is always a pleasure to see, as a 
constituent in Mr. Connolly's district it is always a pleasure 
to see my member. So how are you?
    Mr. Connolly. Yes, every day is a holiday around here.
    Ms. Overby. Isn't it? I just want to make a couple of very 
brief comments. You know where the Chamber stands. You know how 
the Chamber determines their political donations. I am not the 
person to address that. But I do want to talk about failed 
agreements and why so little has been written about TPP.
    Again the reality is the negotiation is ongoing and frankly 
a lot of what has been written from America is not helping 
America's negotiators. And if we all want the best deal America 
can get I would think we would be standing behind the United 
States.
    To my colleague on the right, Dr. Barfield, why did 
President Obama change his view? Well, we worked very closely 
with the administration on KORUS, on the Korea FTA, and I 
believe he changed his view because he felt he got a deal he 
could sell. A deal that improved the auto piece, and he was 
able to get not only Ford Motor Company, but if I am not wrong 
the UAW actually supported KORUS.
    But I will make, and certainly admit that no trade 
agreement is perfect. We continue to try to improve upon it. I 
will say that the KORUS agreement is better than earlier 
agreements particularly in the area of enforcement. Nineteen 
committees were set up under KORUS and each one of those 
committees has a senior government-to-government working level 
meeting where we are able to raise our issues much faster. I 
believe the TPP will have even better enforcement mechanisms. I 
think our USTR representative is well aware that other 
countries are not always playing with the same level playing 
field and so they are giving us our opportunity to try to 
improve it faster.
    Mr. Connolly. I think I am going to have to cut that off, 
otherwise Ms. Drake is--I will say my point about the Chamber 
was much broader than who you contribute to. It was a pattern 
of exclusion that I think impinges on our ability up here to 
have a reward and punishment system that is a little more 
rational than it otherwise is on this subject. Thank you.
    Mr. Salmon. Thank you.
    Mr. Grayson?
    Mr. Grayson. Thank you.
    Ms. Drake, will the Trans-Pacific Partnership decrease or 
increase America's trade deficit?
    Ms. Drake. It is impossible to know because it is mostly 
secret, but it seems likely poised to increase the U.S. trade 
deficit.
    Mr. Grayson. What makes you say that?
    Ms. Drake. Well, for one thing it doesn't deal, according 
to the President, with currency. And as Mr. Barfield was 
explaining before with trade deficits, what he didn't mention 
was that basic trade 101 theory says if a country is running 
trade deficits over time, currencies will fluctuate to account 
for that and it will eventually even out. The United States is 
the only country that we know of in the history of the world 
that has had such large and sustained trade deficits over time.
    And while it is true that the United States has very low 
tariffs and very low trade barriers, the reason that we think 
we have seen floods of imports back in from certain trade 
agreements is not because the firms, the domestic firms in 
those countries are now exporting more than they could, it is 
often that production that used to happen in the U.S. has moved 
to a trading partner country and then that offshore production 
is taking advantage of the lower tariffs to get those goods 
back into the U.S.
    Mr. Grayson. Ms. Overby, will the Trans-Pacific Partnership 
decrease or increase the U.S. trade deficit?
    Ms. Overby. I believe it will decrease it because the 
studies seem to show that with our FTA trading partners we tend 
to have surpluses.
    Mr. Grayson. Well, but isn't it true, Ms. Overby, that 
since NAFTA went into effect, the first of these major trade 
agreements, the United States has run a trade deficit of at 
least $135 billion every single year, and therefore doesn't it 
follow that if we continue to expand these trade agreements we 
will have higher and higher not lower and lower trade deficits?
    Mr. Barfield. No.
    Mr. Grayson. No, no. I am still with Ms. Overby there.
    Ms. Overby. I am not an expert in the NAFTA numbers, but 
everything I have heard and been told, no, those numbers are 
inaccurate.
    Mr. Grayson. You are saying that the numbers I just gave 
you are inaccurate?
    Ms. Overby. May I----
    Mr. Grayson. The fact that since NAFTA went into effect, 
every single year we have had a trade deficit of $135 billion 
or more, you are saying that is inaccurate?
    Mr. Barfield. I don't----
    Mr. Grayson. No, sorry. Still with Ms. Overby. Sorry. Let 
us stick with the witness here.
    Ms. Overby. I am sorry, I don't have that information.
    Mr. Grayson. Okay. Now here is another little tidbit for 
you. In the last 14 years we have run the largest trade 
deficits in the history of the planet. And in the last 14 years 
we have followed these trade agreements and had an open trade 
policy. What makes you think that that would reverse itself 
under the Trans-Pacific Partnership?
    Ms. Overby. Okay, may I answer?
    Mr. Grayson. I am asking you to answer.
    Ms. Overby. I would love to. Again in macroeconomic terms, 
the trade deficit reflects the imbalance in consumption and 
savings. It is not our trade agreements. If you want America to 
have a trade surplus, may I suggest that Congress pass a budget 
that is saving more than we spend.
    Mr. Grayson. Listen, I am talking to you about the trade 
deficit not the Federal deficit, so don't change the subject. 
But let us continue it in this vein if we can.
    Since we adopted the trade policy starting with NAFTA and 
entered into these free trade agreements, our cumulative trade 
deficit is $11 trillion. That is over $35,000 for every single 
man, woman and child in this country. For me and my five 
children that is about $200,000. What makes you think that the 
Trans-Pacific Partnership, which is something like the tenth or 
eleventh in a long series of these trade giveaways, is somehow 
magically going to reverse that pattern?
    Ms. Overby. I don't think I can give you an answer that is 
going to change your mind.
    Mr. Grayson. Why don't you give me an answer that is 
accurate?
    Ms. Overby. Okay. Again I believe that the overall trade 
deficit has nothing to do with the trade agreement. I think it 
is about the imbalance in our consumption and savings.
    Mr. Grayson. Okay, so you do think it is just this 
magnificent coincidence that since we adopted these policies we 
have had these enormous, staggering trade deficits year after 
year?
    Ms. Overby. No, I think it is the way we spend more than, 
we consume more than we save. And also the U.S. dollar is the 
currency around the world. I mean we are the reserve currency.
    Mr. Grayson. We were the reserve currency for the past 100 
years, and it is only since NAFTA went into effect that this 
happened.
    What about you, Mr. Miller? What do you have to say about 
this subject?
    Mr. Miller. Well, I would observe that the United States 
trade deficit fell by 46 percent in 2009 versus 2008.
    Mr. Grayson. That has something to do with the fact that we 
had a worldwide depression in 2008.
    Mr. Miller. It certainly did. It had everything to do with 
it.
    Mr. Grayson. Okay, but you are not playing fair.
    Mr. Miller. If I could finish.
    Mr. Grayson. You are coming up with a factoid that has 
nothing to do with my question.
    Mr. Miller. My point is there was no change in trade policy 
year on year.
    Mr. Grayson. No, just a collapse of the world economy and--
--
    Mr. Miller. Yes, so that is--I am suggesting there are 
other factors involved in the overall trade deficit.
    Mr. Grayson. All right, my time is up. Thank you.
    Mr. Salmon. Now that the committee members both majority 
and minority have had an opportunity to question the witnesses, 
I ask unanimous consent to recognize Representative Marcy 
Kaptur. Hearing no objections, I recognize Representative 
Kaptur.
    Ms. Kaptur. Chairman Salmon, thank you very much for the 
opportunity to be here today. And I guess I am just sitting 
here looking at what is going on in the world and being very 
thankful that we are citizens of this republic, and whether we 
agree or disagree we are going to work this out. It is going to 
take us time because it really isn't working for America right 
now, our trade policy, but when we look at other places I am 
just thankful that we live in the system that we do.
    Let me say that for those representing the business 
community, Dr. Barfield, Ms. Overby and Mr. Miller, I respect 
what you do and you have to be part of the solution to help us 
fix what is wrong with our trade policy. We can't do it without 
you as a country. I am in the freedom business, and so it is a 
different business than those you represent are in.
    Ms. Drake, thank you for being here on behalf of many 
workers who live in the district that I represent and 
understanding the travails that they have experienced as a 
result of these trade agreements. Many times having to pack up 
boxes with the machines in the companies in which they worked 
and going to a foreign country to train their replacements. Can 
you imagine how horrible that experience is? And so I 
appreciate the moment to give a little reflection here.
    Dr. Barfield, I agree with you that our trade policy has 
been used for advancing national strategic interests. Oh, do I 
agree with that statement. And the problem with that is that it 
currently, our trade deficits now cut about a fifth, maybe a 
little bit less than that, about 16.5 percent, 16.7 percent off 
our GDP annually.
    And unfortunately trade in the aggregate is not helping us 
domestically. In places like I represent, the average worker 
has lost $7,000 a year in wages, and what families are facing 
is extraordinarily difficult. And what is dangerous for liberty 
is these people aren't voting. They are not voting for 
Republicans. They are not voting for Democrats. They are 
stopping their belief that this country can work for them.
    So in our conversation today, I wanted to place on the 
record since 1975 the country has accumulated $9.5 trillion in 
trade deficit. Congressman Grayson used an $11 trillion figure, 
so depending on which year you start with that is pretty 
significant. It has never happened in this country before. That 
translates, using 5,000 jobs per billion, into a loss of 
47,500,000 jobs. Some of the workers who haven't been able to 
find work live in the district that I represent.
    When you have something that cuts nearly a fifth of your 
GDP and loses that many jobs, we have a budget deficit because 
we have a trade deficit. And for what Ms. Overby said about 
savings, if you are an individual why would you put any money 
in a bank today? You can't even earn 1 percent interest on it. 
So there is no incentive for savings anymore because we have 
doled out almost a fifth of our ability to produce.
    So on Mexico let me just say I was here when NAFTA first 
passed. They said we would have trade balance. We have had 
trade deficits every year from Mexico. This past year 2014 
there was a $99 billion, a nearly $100 billion trade deficit 
with Mexico. That has been the same over the last 3 years 
hovering around $100 billion.
    For Korea, last year it was 26 billion. We were supposed to 
have more exports to Korea. We were supposed to get 50,000 cars 
into Korea while they sent 500,000 here. We never got to 
50,000. I don't even know if we are up to 5,000 yet. We may be 
at 500. My point is that the numbers aren't working for us. If 
we had done it right under George Bush the first and Bill 
Clinton, to be a freedom lover we should have had a major 
Trans-Atlantic free trade agreements with countries that abide 
by rule of law. We didn't do that. We didn't do that. We signed 
agreements with places that have closed markets; that don't 
believe in liberty; and I can't tell you how many companies I 
represent that have had trouble in their dealings in China. 
There is no rule of law.
    So I am just saying to you, as patriotic Americans we have 
got to fix this. We have got to first support liberty and we 
have got to create economic agreements that work for our 
people, and that isn't happening. And the tragedy in the street 
with these people who think about national strategic interests 
and so forth, they forget about what happens within our own 
borders. The people at the National Security Council, they know 
every other country in the world. They sort of forget about us 
and what happens to the people that we represent.
    So I wanted to place that statement on the record. I hope 
that this won't be the last hearing that this committee holds. 
I can't believe in TPP because I have been here long enough to 
see what happened with NAFTA, what happened with Korea. The 
Jordan accord I voted for and that one we are still in balance. 
That had labor provisions. It had environmental. That might be 
a better measure, a better type of agreement, but we basically 
failed as a country when we did not uphold the rule of law.
    Many of you are lawyers, and when we got into agreements 
with countries that don't abide by the rule of law we really 
got in a cul-de-sac and we are in it until today. So I put that 
on the record. I hope you all have ideas about how to restore 
trade balance to this country, because we can't continue to 
hemorrhage this way. It is hurting our republic deeply. It is 
hurting it, not, ma'am, only macroeconomically, but 
microeconomically. On the street. The places that each of us 
represents a piece of the puzzle.
    So I appreciate the graciousness of this committee for 
allowing me to place that statement on the record. If anybody 
wants to respond and there is still time, certainly they can. 
Thank you.
    Mr. Barfield. Well, I guess I am heartened to know that it 
sounds as if you will support the U.S.-European Free Trade 
Agreement when it comes to force over the next year.
    But I would like to go back to the point, I know we have 
been over this again and again, but I think on my side I do not 
represent the business community. I am a think tank. Sometimes 
they don't like what we say. Sometimes they do, sometimes they 
don't.
    I would like to--I know we have said it, but coming back to 
whether it was NAFTA or other agreements where Jordan was in 
balance that it somehow that had to do with the standard of 
living in the United States that is simply not true. As we have 
said, where the United States has to look in terms of our trade 
deficit is not with trade agreements but our own internal 
policies.
    And the other odd thing that I will throw in as a ringer 
here right at the end is that trade deficits are not 
necessarily evidence of noncompetitiveness nor of killing jobs. 
We were in, in the 1990s which is supposedly a golden period 
under Bill Clinton, increasing trade deficits where we had 
increasing job creation in the United States.
    Trade deficit, you have to find the circumstances. The 
reason we did, which is another reason we will probably have an 
increased trade deficit over the next couple of years if things 
go well for us, is that the United States was outgrowing, 
outperforming other nations. We were consuming more and we were 
creating more jobs. And so the trade deficit did not in that 
case translate into some lack of competitiveness. It is likely 
not to do the same thing in the next couple of years if the 
United States keeps on the same----
    Ms. Kaptur. I would love to invite you all to the district 
that I represent and we can talk trade on the street.
    Mr. Barfield. Happy to do that.
    Ms. Kaptur. And it would be very enlightening. Very, very 
enlightening. So----
    Mr. Salmon. Sounds like it might make for a good Town Hall.
    Ms. Kaptur. How about that?
    Mr. Salmon. There you go.
    Ms. Overby?
    Ms. Kaptur. Meet the street. Mr. Chairman, if I could just 
say, because you have been so generous to me, I just want to 
say that in terms of the Transatlantic Alliance, if we had 
formed it, those nations that are unfree by any measure could 
have been invited to join in and we would have raised the 
potential for liberty globally. We haven't done that.
    Look at what has happened to Mexico. Just look what has 
happened there. And we didn't address closed markets. Go to 
Japan, less than 3 percent of the cars on their street today 
are from anyplace else in the world but Japan. And we have the 
most open market in the world. You can't have free trade 
agreements when you have closed markets and when you have 
state-run capitalism like is happening in China.
    We are really living in a false world in some ways. We are 
not looking at the values of liberty and rule of law in these 
agreements and it is hurting us greatly. And it is hurting 
liberty. It is hurting liberty globally. So I thank you, Mr. 
Chairman, very much.
    Mr. Salmon. Thank you.
    Ms. Overby, it is back to my time but I am going to let you 
answer.
    Ms. Overby. Two brief comments on Japan and it being a 
closed market, and the numbers on cars. I do think that TPP 
provides us the best opportunity that we are going to see in 
our lifetime to try to crack open that market. And referring to 
job loss, I think everyone here really needs to take a look at 
the fact that--one of my colleagues loves to say, yes, jobs 
have been lost to that country called productivity. 
Technological innovations. The market, the world has changed. 
The number of people needed to make products is shrinking 
dramatically. That is not trade's fault. That is the technology 
growth that we are, we live in a technological age. Thank you.
    Mr. Salmon. So I have a couple of questions to ask. But 
before I do, the absolutism that Representative Grayson 
mentioned a few minutes ago, that all these terrible things 
with our trade deficit have coincided with the trade 
agreements, it is like saying--we created the Federal 
Department of Education in 1979. At the time in the 1970s we 
were at the top of the charts in every field and now we are 
14th in math and sciences in the world. Does that mean that the 
creation of the Department of Education actually made us do 
worse in education? I don't think that anybody is necessarily 
going to make that argument. I think that there are a whole 
host of issues that impact our trade deficit and that is what 
we are talking about. You talked about a few of the issues.
    But I want to ask another question. If we don't participate 
in TPP, if the United States does not agree to participate in 
TPP and China goes ahead with its plans with RCEP and their 
free trade agreement, is there anything that stops American 
companies from exporting jobs overseas or outsourcing then, 
even if we don't participate? Anybody care to respond to that?
    Mr. Miller. There are important consequences to not 
concluding the Trans-Pacific Partnership. We would walk away 
from potential market access gains in economies that we do not 
now have FTAs with. There are five of them. There would be an 
immediate loss in reputation. My belief is the Obama 
administration has staked a great deal of prestige on the 
completion of the Trans-Pacific Partnership, and our Asian 
allies and friends and partners would look differently at us.
    In the long run, my view is that the world economy will 
continue to grow and----
    Mr. Salmon. As it always has.
    Mr. Miller. As it always has. And the world won't wait for 
us. And that I think American firms and workers are best served 
when America leads in writing the rules. That has been true 
since the Bretton Woods Conference. The U.S. has been the 
defender of an open rules-based trading system. It is vitally 
important. And for me, that is what TPP and TTIP with Europeans 
is a real continuation of.
    Mr. Salmon. So as far as my question though, I mean if we 
didn't do TPP does that mean that jobs won't still continue to 
go overseas?
    Mr. Miller. Well, you will still have globalization.
    Mr. Salmon. That is my point.
    Mr. Miller. It will be easier. With TPP it makes it easier 
for us to compete, I think.
    Mr. Salmon. Right.
    Mr. Miller. Because as we have said several times here, we 
have lower tariffs, we have more open borders than others with 
certain exceptions we want to be clear about, in sugar and 
things like that but we are the ones who are more open. So it 
is the rest of world, not entirely but to some degree.
    I would like though come back to a point I made at the 
beginning in terms of what would happen if we don't do the TPP. 
I keep coming back to the fact that the geostrategic and the 
geoeconomic are linked. The United States in the next few 
years, whoever the new President is or whatever the new, 
whichever party has the Congress, has a good deal of heavy 
responsibilities around the world that are security 
responsibilities. There are those who argue that now we are not 
really committing enough resources to live up to the so-called 
pivot or balance. Scholars at my institute believe that.
    But wherever one stands on that question it is certainly 
true that the United States has got a lot of difficult 
questions to work through in terms of where it is going to put 
its resources both domestic and in terms of national security 
over the next few years. I think this is where the trade 
agreements does link in. I think it will be a lot easier to 
persuade the Congress and the American people to support a 
leadership role in Asia if we are a part of a regional economic 
structure that is thriving and is successful for U.S. 
businesses and U.S. workers. And that is where they are tied 
together.
    Mr. Salmon. And finally, Ms. Kaptur made some very 
impassioned points and I appreciate them. As far as liberty and 
freedom and the principles that we stand for maybe Ronald 
Reagan said it best, the shining city on a hill. If we are not 
at the table, how are they impacted by the things that we 
believe?
    I think that the most important thing that we export is not 
a commodity, it is actually an ideal. And that ideal is 
freedom. It is the thing that we stand for. And I don't know 
any relationship that I have ever had with anybody--my wife, my 
children, friends, enemies--that I have ever improved one iota 
by not being at the table, by not engaging, by not being there 
communicating and actively working with them.
    Heaven help us if what we stand for and what we believe is 
not a part of the equation and if RCEP which China is pushing 
ends up being the free trade agreement for the region instead 
of what we are pushing. I far more trust the values that we 
advocate and the things that we stand for rather than what 
China stands for.
    Anyway go ahead, Ms. Overby.
    Ms. Overby. Yes, Mr. Chairman, I just wanted to make the 
comment that what happens if TPP fails? Well, then the small 
and medium sized companies in America lose. Many opponents 
always talk about the large multinational American companies 
and they will be okay one way or another. But the SMEs----
    Mr. Salmon. They always seem to be.
    Ms. Overby. They seem to survive. But the small and medium 
sized companies they will be grossly disadvantaged. Because as 
we all know our market is open. All TPP is going to do is to 
try to knock down some of the barriers on the other side. 
Tariffs are a big part of it but it is more than tariffs. The 
problems these days are behind the border. Countries have 
gotten very creative in throwing up new non-tariff barriers, 
whether it is standards or rules it makes it so hard for 
American companies to compete.
    So all we are asking for is simply our Government to help 
us try to knock down those barriers, and if we do nothing 
America loses because the rest of the world is not going to 
stand by. I am in Asia most of the year and China is 
everywhere. They are very aggressive. They are pushing RCEP. 
They are doing all kinds of soft diplomacy. And America will 
lose if we do nothing.
    Mr. Salmon. Thank you.
    Mr. Sherman?
    Mr. Sherman. We are told that we need to be proud of these 
trade rules because they were made in America. These are trade 
rules made in America that make sure that nothing else will be 
made in America. We should be as proud of these trade rules as 
the Spaniards are of the Spanish flu, both have wrecked 
incredible destruction.
    We are told that the President's credibility and prestige 
is on the line. No, his credibility and prestige is on the line 
with Obamacare. And those who want to say that should be 
advocating every day for whatever technical fixes are necessary 
to make sure that Obamacare goes on and subsidies are provided 
regardless of how the Supreme Court interprets the current 
draft.
    We are told that the only choice is between the failure we 
currently have and the failure that is being proposed. No one 
here with the exception of Ms. Drake even acknowledges the fact 
that I proposed a different trade approach. That is to say to 
threaten to raise dramatically our tariffs with or without 
compliance in WTO as necessary to force countries to enter into 
fair trade agreements.
    We are told that there are these non-tariff barriers. And 
so our response is to eliminate the only barriers we have and 
get killed one at a time with these non-tariff barriers as if 
we can change this one, and oh, they have got that one. And we 
only see the ones they published. Most of them are on the phone 
where individual companies are told not to buy American goods.
    The way to deal with the non-tariff barriers is to have 
results or in trade agreements. Buy our stuff or don't sell in 
our markets. Don't think that you can benefit by playing with a 
procedure game and then having many of your procedures under 
the table. We are an open society. They can have commissars as 
they do in Vietnam tell their companies not to buy American 
goods. If American congressmen were to call companies and tell 
them not to buy goods we would be laughed at. Whereas, there, 
if there is any laughter businesses can be sent to re-education 
camps, business people can be sent to re-education camps.
    We are told that sometimes the trade deficit is higher--
well, the trade deficit keeps going up or is substantially and 
persistently high. That is true when we save, it is true when 
we fail to save. It is true when we have a budget deficit of 
over $1 trillion. It is true when we have a huge surplus. It is 
true when we have a huge surplus and are saving and our trading 
partners are running 3, 4, 5 percent of GDP deficits and they 
are not saving. The only thing that remains the same is we 
always have a trade deficit no matter what we do if we keep the 
same trade policies. One exception. If we are willing to have a 
calamity of the type we had in 2008, then we get to keep our 
same trade policies and see a reduction in the trade deficit.
    I suggest that we find a different way to bring down the 
trade deficit. I am amazed that there is no discussion in this 
country of moving in a new direction. All the choice is, keep 
the policies that have failed or double down on the policies 
that have failed.
    And finally, I think at least one witness suggested that 
huge trade deficits have nothing to do with jobs. The huge 
increases in imports cannot displace American workers. Ms. 
Drake, is it possible that huge increases in imports could 
adversely affect American workers?
    Ms. Drake. It is really disingenuous to say that exports 
create jobs but imports have no effect on jobs. As you said, 
you have to look at both sides of the equation, and quite 
frankly our trade deficit represents the fact that we are 
consuming more than we produce. And that means there is an 
opportunity cost for lost jobs, either real jobs that we had 
that are gone or jobs that we could have had if we produced 
things here. So we really do have to look at net exports and 
that is the number we want to increase if we want to have good 
trade policy.
    To the chairman's point about is there anything that is 
preventing companies from offshoring now? No, that is the 
status quo. But the danger of the TPP is that it provides 
additional incentives to offshore so that we actually speed it. 
And it can do that through the ISDS mechanism by saying to 
those who offshore, you now have additional influence over the 
rules this economy makes and if you would like to threaten it 
in the case that it passes a food safety law or worker 
protection law or you don't like the zoning decision that it 
made you can do that.
    And we know that that is being used and it is being used 
for exactly those kinds of things. So what we want to make sure 
is that the TPP provides the right rules that actually 
incentivize manufacturing here. And trade can be done right. 
Congressman Kaptur said she supported the U.S.-Jordan Free 
Trade Agreement. So did the AFL-CIO. I think if we look at how 
Germany does trade, if we look at how Sweden does trade, they 
do a lot of exporting in an advanced economy and they haven't 
seen the extensive job losses that we have.
    When you look at productivity, to Ms. Overby's point, when 
productivity increases workers should do better. They are 
contributing more, their firm is making more money, they should 
get a part of it. But what we have seen is a complete 
decoupling of worker productivity and wages. And that is not, 
it is in the United States but it is not just here.
    And it does have to do with globalization, because if we 
set up rules that make it much easier for firms to say, hey, 
take this pay cut or we are moving, and we do that in every 
country, firms can game countries. Who has got the weakest 
environmental regulations? Who is going to pay the lowest 
wages? And that is not good for workers or businesses. Because 
in the end what businesses want are middle classes who can be 
consumers who can buy things. And when we have such a demand 
shortage here because of wage stagnation and you have it 
elsewhere, we have a problem exporting more goods because there 
aren't folks who can buy them.
    And just to one last point on Fast Track and the full 
transparency. Again I would say be really careful, because Fast 
Track in the past has always been for a time period--4 years or 
5 years or something like this, so trade agreements can be 
negotiated that weren't even thought of when the Fast Track was 
granted. Think about how Korea was negotiated right at the very 
end of President Bush's Fast Track term. That was not something 
that Congress had contemplated when they passed the Fast Track 
deal, and I would dispute that it was well negotiated. We think 
it was rushed. We think it left jobs on the table. And we think 
the extraordinarily increase in deficits that we have seen just 
in the first couple of years of Korea are evidence that 
something is really wrong with that agreement. So I think we 
can do better, and that is really what we are here to say.
    One last thing. I don't think the question is if the TPP 
fails. I think the question is how to do the TPP. The U.S. has 
entered into trade negotiations before that have failed with 
Malaysia, with Thailand, with Europe a couple of times, and we 
still have stature. And think the question is how do we do this 
right? Not pull out, not cede space to China, but do things 
that are good for workers in China and the U.S. and that will 
be good for all of us.
    Mr. Sherman. I think my time is expired.
    Ms. Kaptur. Mr. Chairman, I can't thank you enough, and the 
ranking member, for allowing me to be here today and to listen 
to the witnesses. I appreciate your collegiality.
    Mr. Salmon. Thank you. I am going to just close by saying 
that I got this from the Korea Economic Institute of America. 
This is just my district not the entire country, but the 
Arizona Fifth District merchandise exports to Korea grew to 
18.6 million. It grew 28 percent, up 25 percent from 2013. In 
the service sector exports grew 13.2 percent to 24.3 million 
from 2012, and the jobs related to trade with Korea in my 
district are 297.
    So I understand. There is going to be other dialogue. This 
isn't the last hearing on TPP. We will have lots of other 
hearings. I really appreciate the comments. I appreciate the 
loyal opposition. That is the way it is supposed to be. And we 
appreciate the wonderful job that everybody on the panel did. 
And without objection----
    Mr. Sherman. Mr. Chairman, just make them get you import 
statistics for your district as well so you can lay them next 
to each other. And with that, thank you very much.
    Mr. Salmon. Thank you. This meeting is adjourned. Thank 
you.
    [Whereupon, at 4:51 p.m., the subcommittee was adjourned.]
                                     

                                     

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