[Congressional Record Volume 141, Number 100 (Monday, June 19, 1995)]
[House]
[Pages H6086-H6088]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                            TRADE WITH JAPAN

  The SPEAKER pro tempore. Under the Speaker's announced policy of May 
12, 1995, the gentleman from California [Mr. Dreier] is recognized for 
60 minutes as the designee of the majority leader.
  Mr. DREIER. Mr. Speaker, I have taken this time out today to relate 
to our colleagues some remarks that I made late last week; actually it 
was Thursday morning, the speech that I gave downtown. It has to do 
with an issue which quite frankly is rather sensitive and delicate and 
controversial. It is the proposed imposition of 100 percent tariff on 
the importation of automobiles from Japan to the United States.
  Mr. Speaker, I was careful in making these remarks last Thursday 
morning. I made them before the President left for his meeting in 
Halifax with Prime Minister Murayama, and I also have been very careful 
to make these remarks today only after the President returns. So I have 
not said these things while the President was out of the country, 
recognizing Senator Van Den Berg's great recognition that partisanship 
ends at the water's edge.
  I have been very proud to have been one of the President's strongest 
supporters when it has come to trade policy. I am a Republican, and I 
have been criticized by some of my Republican colleagues here and 
throughout the country for having strongly supported passage of the 
North American Free-Trade Agreement, completion of the Uruguay round of 
the General Agreement on Tariffs and Trade, and having pursued a very 
strong prohuman rights policy in China.
  I have been proud to have worked not only with President Clinton but 
with my fellow Californian, the U.S. Trade Representative, Mr. Kantor, 
and with a bipartisan group of Members of both the House and the 
Senate; here in the House I have been privileged to work with Chairman 
Archer of the Committee on Ways and Means, Chairman Crane, who chairs 
the Trade Subcommittee; my friend Mr. Kolbe on this side. On the other 
side my colleague, the gentleman from New Mexico, Mr. Richardson, who 
was here a few minutes ago; my fellow Californian, Mr. Matsui; the 
gentleman from Florida, Mr. Gibbons, of course, the former chairman of 
the Trade Subcommittee of the Committee on Ways and Means. And we have 
pursued very, very strongly a bipartisan approach to trade. I am proud 
to have worked closely in rallying support for NAFTA.
  The gentleman from Arizona [Mr. Kolbe] and I and a couple of others 
introduced legislation calling for the limitation of the tariff 
barriers for the North American Free-Trade Agreement 8 years ago. I 
spent the last 7 days with Mr. Gibbons and Mr. Matsui and members of 
the Committee on Ways and Means before completion of the Uruguay round 
of the General Agreement on Tariffs and Trade, an agreement which 
creates an opportunity among 124 nations in the world to create the 
free flow of goods and services.
  Of course, on China policy, I strongly supported Mr. Hamilton's 
language in the past because exposure to Western values is what will 
enhance the human rights situation that exists in China. I believe very 
strongly in that.
  My past support for the President's trade policies has been based 
clearly on our goal of increasing jobs and living standards both in the 
United States and throughout the world, improving the qualify of life 
by reducing trade barriers and increasing commerce, the free flow of 
goods and services.
  Mr. Speaker, while I part company with the President on the policy 
that he has stated calling on June 28 for the imposition of this 100-
percent tariff, the President has actually parted company with the free 
trade principles which we have pursued vigorously for his entire 
Presidency up to this point. I share the President's broad goal of 
breaking down tariff barriers in Japan so that we can gain greater 
access to that market. However, the specified U.S. demands on auto 
parts purchases and dealership access are clearly repugnant to those of 
us who stand for free trade.
  The administration has made tactical blunders regarding the timing 
and direction of this effort. The short-term economic impact of 
implementing trade sanctions, especially from my State of California, 
and I will get into that for a moment in just a moment, will be very 
negative. And I have to say, Mr. Speaker, it saddens me to conclude 
that the President is threatening to significantly set back the 
prospects for additional multilateral trade initiatives and a forward-
looking Asia policy that ties the United States into that 
extraordinarily growing market in the Pacific rim.
  Let me take a couple moments and talk about my State of California. 
California, whether you like it or not, it is the seventh largest 
economic power on the face of the earth; 32 million people in 
California. California is the Nation's largest exporter. Its $81\1/4\ 
billion in exports is 20 percent of our Nation's total. Exports support 
1.5 million jobs in the State of California. Foreign investment 
supports another half million jobs. While California has suffered 
greatly due to the defense and aerospace cutbacks, which have taken 
place for the past several years, the one bright spot has been 
California's access to other markets so that we could, in fact, be the 
gateway to the Pacific rim and Latin America.
  California's No. 1 trading partner is Japan, with exports of $22.5 
billion last year. Japanese-owned companies employ 150,000 Californians 
in electronics, entertainment, and computers, among other industries. 
If you add in the suppliers, there are a quarter of a million 
California jobs which are tied directly to Japanese investment.
  Sixty-two percent--62 percent, Mr. Speaker--of California's exports 
go directly to the Pacific rim; 692,000 jobs in California are 
supported by Pacific rim trade, and it is very important to note that 
every single country, every single country in the Pacific
 rim has stated its very strong opposition to President Clinton's plan 
to impose this 100 percent tariff.

  The State of California has a great deal to lose and very little to 
gain from the policies which President Clinton has proposed. The auto 
industry in California is more closely tied to Tokyo than it is to 
Detroit. The Japanese companies targeted by the President's sanctions 
have invested over $2 billion in California, directly creating over 
13,000 private sector jobs; each company targeted, each company that 
has been targeted by the President's proposed imposition of this 100 
percent tariff is headquartered in California. Another 28,640 are 
employed by dealers that sell cars imported from Japan.
  Mr. Speaker, I believe that it is criminal to discriminate against 
California workers simply because the companies they work for are based 
in Tokyo rather than Detroit. The administration's sanctions threaten 
12,000 middle income workers in dealerships and many more in 
California's ports and within advertising firms.
  Mr. Speaker, these Americans have done nothing, they have done 
absolutely nothing to deserve unemployment. Of course, the greatest 
fear of all [[Page H 6087]] is recognition that the President is 
playing with fire with his proposed plan. An escalating trade war with 
Japan, which virtually everyone has said is a possibility, with the 
discussion of this possibility, an escalating trade war with Japan 
would devastate California and clearly threaten the economic future of 
the largest State in the Union.
  Mr. Speaker, balancing trade by sector is playing bad policy. The 
trade imbalance between the United States and Japan is primarily a 
reflection of Japanese weakness, not strength. We should support 
openness in the Japanese economy, and we all share that same goal, but 
we should not support balanced trade. The administration has gone 
beyond the mistaken policy of trying to balance trade between our two 
countries, and they are now making the case that we should have 
balanced trade in one sector, the auto sector. That is the only place 
we should have balanced trade.
  This route is a bad one. Heading down this path is clearly a very 
poor policy. And the best way to look at that is the President proposes 
to move only in the auto sector is, let us see what would happen if the 
Japanese made the decision to do the same thing to us. What would we as 
a country say if Japan extended this policy to some of the large 
exporters in our Nation's greatest State of California.
  Well, the motion picture industry, Mr. Speaker, the motion picture 
industry enjoys a $1 billion, a $1 billion bilateral trade surplus with 
Japan. What would we say if the Japanese made the same mistake, same 
statement of us that we are of them on auto policy? Obviously, we would 
not stand for it. The agriculture industry in this country has a $9.2 
billion bilateral trade surplus with Japan, and the aerospace industry 
has a $3.1 billion trade surplus with Japan.
  Service industries are on the cutting edge of California's export 
industries. Requiring a bilateral trade balance in each service sector 
would stifle our service exports to Japan, and it would be wrong. And 
that is exactly what we are trying to do in the area of autos with this 
policy.
  The thing that really saddens me greatly, Mr. Speaker, is that we 
have observed a transition, a transition that has taken place within 
this administration's policy from what I know you, Mr. Speaker, and I 
agree has been very good trade policy. It is has garnered bipartisan 
support. The transition has been good trade policy to good trade 
politics. The Clinton administration earned the strong support of those 
of us who are free traders in both parties over the past couple of 
years because of the fact that we were able to work together in a 
bipartisan way on the North American Free Trade Agreement, on 
completion of the Uruguay round on the General Agreement on Tariffs and 
Trade and for a sound China policy.
  I regularly congratulated the President, in fact one of the most 
passionate speeches I ever heard him deliver was just before passage of 
the North American Free Trade Agreement when former Presidents and 
other officials stood in the East Room of the White House. The 
President's speech was superb and very, very heart felt.
  The administration in pursuing those policies took on the traditional 
projectionist factions within their own political party. However, the 
thing that concerned me greatly was that they pursued these things when 
it came to dealing with the issue of trade; but with the election on 
the horizon, they seem to be shifting back to what admittedly is a 
popular policy. It appears that they are now moving in a direction that 
many feared when neo-projectionists within the administration, like 
Robert Reich and Laura Tyson and others were named to senior positions 
from the beginning.
  Rather than pursuing further broad, free trade initiatives, they 
appear to have adopted a polticial trade strategy intended to appeal to 
that labor base within the Democratic Party and to make the President 
look tough on dealing with Japan.
  The first inclination of most Americans is to be critical of Japan. I 
admit that as I stand here right now, I am taking what is perceived as 
being the politically unpopular position. But I clearly believe that 
the goal of penalizing American consumers and workers with the planned 
imposition of this 100 percent tariff is wrong. We learn throughout 
history that tariffs have, in fact, diminished the standard of living, 
going all the way back to when me political party supported the Smoot-
Hawley Tariff Act at the beginning of the Depression in hopes that it 
would somehow shorten the Depression. Virtually every economist has 
agreed that the Smoot-Hawley Tariff Act exacerbated the Great 
Depression, in the same way this politically popular policy that the 
President is pursuing creates the potential for a very serious trade 
war.
  The result, Mr. Speaker, is bad foreign policy that threatens our 
long-term interests in Asia and bad economic policy that threatens the 
trade policy gains over the past 2 years.
  Those gains that we have made over the past 2 years have been modeled 
after the fact that the United States of America has recognized that we 
live in a global economy, and breaking down these barriers is obviously 
the wave of the future. This policy as announced by the President is 
clearly a retrograde step on the whole issue of free trade.
  It is often said that only Richard Nixon could open up ties with 
China. It takes strong leadership to undertake bold and dramatic 
initiatives. Up to this point, that is exactly what President Clinton 
has done in the area of trade. Statements by people in the 
administration like Laura Tyson who indicate that they believe the 
Japanese political weakness makes success more likely, the opposite is 
the case. The argument that she has made is that political division 
within Japan will somehow lead them to break down on this issue is 
wrong; again, the opposite is the case.
  The economic reality in Japan reveals the fraud of those who claim 
the Japanese economic and trade policies have enriched Japan at our 
expense.
  There are many people out there who regularly argue that Japan has 
been greatly enriched at our expense, but let us look at what has 
happened in Japan over the past several years. Japan has had 4 years of 
flat economic growth, unlike the kind of growth that we are now 
experiencing here in the United States. Japan has undergone 4 years of 
flat economic growth. This year alone the stock market in Japan has 
dropped by nearly a third to its lowest point since 1983. The 
appreciation in the yen has made it very unprofitable for Japan's 
businesses to export. Japanese banks hold $476 billion in bad loans.
  Mr. Speaker, $476 billion, let us compare that to the cost of the 
savings and loan debacle here in the United States, the cost of which 
was $150 billion. So obviously Japanese financial institutions are 
faced with very serious problems.
  And it is important for us to note the present amounts of money that 
have been made by United States businesses when so much of the real 
estate market during the 1980's was sold to Japan. Remember, Mr. 
Speaker, how people were outraged at the fact that Japan would own so 
much of what is here in the United States. They purchased Rockefeller 
Center, a wide range of other real estate investments during the 
1980's, and I think everyone has recognized that real estate values 
have dropped dramatically over the past several years, a tremendous 
loss to those Japanese investors.
  So this argument that Japan is greatly taking advantage of the United 
States is unfounded. Economic weakness in Japan, however, Mr. Speaker, 
hurts this country by placing a overall drag on the international 
economy. Remember, we are living with a global economy today. Of all 
industries to pick a fight with, it is incredibly ironic that U.S. 
automakers would be the target. Why? Because they are very healthy. We 
all know that United States automobile manufacturers in large part, 
despite competition from the Japanese auto manufacturers, have had 
tremendous profits, record profits just this past year.
  But, Mr. Speaker, not everyone knows that two of the three largest 
auto manufacturers in Japan have lost money in the last year.
  Ambassador Walter Mondale, former Vice President, our Ambassador to 
Japan, is now reported to believe that the new generation of Japanese 
Government bureaucrats desires to see Japan lean more toward Asia than 
toward the United States. And they are [[Page H 6088]] bolstered by 
this conflict, those within Japan who would choose to lean toward the 
other very successful nations within the Pacific rim. Those people are 
bolstered by this proposed imposition of a 100-percent tariff.
  Mr. Speaker, this would be extraordinarily detrimental to U.S. 
interests in Asia.
  One of the things that I think is a rather remarkable twist in the 
whole managed trade plan, the Clinton administration does not want the 
Japanese Government to manage auto makers. And yet this administration 
wants our Government, our Government to manage the Japanese automakers.
  The primary sticking points that are driving us toward the job 
killing sanctions involve auto parts and auto dealerships. In auto 
parts, the administration wants the Japanese automakers to purchase 
certain amounts of United States parts.

                              {time}  1230

  On auto dealerships, the administration wants the Japanese auto 
companies to require 1,200 of their dealers in Japan to sell United 
States cars.
  Mr. Speaker, these demands do not involve Japanese Government action. 
They require action from Japanese businesses. It should not be 
surprising that the administration's proposed sanctions target the 
companies they want to coerce into an agreement. In fact, the 
administration is targeting Toyota and not Tokyo.
  This proposed plan is, all the way around, a lose-lose-lose trade 
policy. If the administration wins in this showdown, it bolsters the 
popularity of trade policies that threaten our Nation's long-term trade 
and foreign policy interests. Imposing sanctions that clearly violate 
the World Trade Organization rules puts us in a position to lose the 
first major case before the World Trade Organization.
  What does this do? Well, it plays into the hands of the Ross Perots 
and Pat Buchanans and Ralph Naders of the world, clearly undermining 
the potential for future multilateral trade agreements.
  Mr. Speaker, our allies and trading partners around the world are 
unified in opposition to the unilateral sanctions policy because every 
government invested significant political capital in implementing a 
stronger multilateral trade regime which is designed to break down 
tariff barriers, improve the quality of life for working and consuming 
Americans and for peoples throughout the world in developing nations. 
Now the United States of America is proposing to ignore that newly 
established policy.
  Don't overlook the possibility, Mr. Speaker, and it saddens me again 
to say this, but don't overlook the possibility that the 
administration's policy could, as I was saying a few minutes ago, spin 
out of control and set off a very destabilizing economic and political 
confrontation between the United States and Japan and potential other 
nations.
  In the words of my colleague, David Obey, and I quote:

       I think most of us learned some time ago that if you don't 
     like the President's position on a particular issue, you 
     simply need to wait a few weeks.

  Well, I have been holding out hope that that Obey quote was right on 
target. But as June 28 rapidly approaches, it appears that we are not 
taking the kind
 of positive shift that in this case I believe would help us greatly.

  There is always hope, though, that the administration will come to 
its senses, focus on negotiating objectives that the Japanese 
Government can accomplish, and move away from these sector-by-sector 
specific negotiations to broad deregulation and antitrust enforcement 
in Japan, which we strongly support. We strongly support those kinds of 
things, so that we will have an opportunity to gain further access to 
that market.
  That is why several years ago I followed the trade subcommittee 
chairman, the gentleman from Illinois [Mr. Crane] by introducing 
legislation calling for a United States-Japan free trade agreement. We 
know that they have access to our market. We want to gain access to 
theirs, but increasing these tariffs is clearly wrong.
  We cannot lose sight of the fact that the United States economy is 
healthier and better prepared to move into the 21st century than the 
Japanese economy is. We should not move away from the openness that has 
made us as a nation strong, even in an effort to move Japan toward a 
policy that will make it strong.
  The President has just completed his meeting with Prime Minister 
Murayama, and we know that coming up our Trade Representative, Mr. 
Kantor, will be meeting with Mr. Hosokawa and we hope very much that 
this will be resolved.
  But the threat of imposition of these sanctions is a wrong policy. It 
is a wrong way to do business. I know it is politically popular here in 
the United States, but we have to look at the fact that we are playing 
with fire, Mr. Speaker, and this policy creates the potential for very 
serious problems not only here in the United States and Japan but 
throughout the world.
  My request, Mr. Speaker, is that this administration go back to the 
great free trade policies which have played a role in enhancing the 
economy of the United States, those policies being the breaking down of 
barriers within Latin America with implementation of the North American 
Free Trade Agreement, establishment of the WTO, and completion of the 
Uruguay round of the General Agreement on Tariffs and Trade, which 
among 124 countries is continuing to pursue the goals that were 
established in 1947 when the GATT went into place. That goal is very 
simply breaking down barriers.
  My party and I believe this Nation strongly stands for freedom, the 
free flow of goods, services, ideas. That is what this agreement among 
124 nations is doing. And in China, exposure to Western values, getting 
our ideas into China, that is what will help the very serious human 
rights situation that exists there, and this President has wisely 
acknowledged that.
  Mr. Speaker, let us not as a nation move backward to the days of 
Smoot-Hawley when we look at the issue of a global economy. We are 5 
years away from the millennium. Clearly the United States of America is 
the world's only complete superpower. We face very serious problems 
throughout the world.
  We have stood in a bipartisan way for free trade. This proposed 
policy is 180 degrees from that. I hope very much, Mr. Speaker, that 
this administration will change the policy and continue to work on 
other methods to break down barriers and create an opportunity for us 
to gain access to the consumer market in Japan.

                          ____________________