[Congressional Record Volume 142, Number 141 (Thursday, October 3, 1996)]
[Senate]
[Pages S12258-S12261]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           THE TRADE DEFICIT

  Mr. DORGAN. Finally, while I will not characterize this Congress, 
because it would take too long, I do want to say that one of the pieces 
of unfinished business in the Congress deals with trade. I want to just 
discuss that for a moment.
  There are failures in this Congress and successes; and we can point 
to both. The 104th Congress is one of the strangest Congresses I have 
ever seen operate. It had more twists and turns than a road in hilly 
country.
  It just started out with the kind of bizarre circumstance of people 
saying, ``Well, we have no experience, and we're new here, and we don't 
intend to compromise. We got here because we bragged we have no 
experience, and we intend to prove we don't have any in the first 90 
days. We don't intend to compromise on anything. And if you

[[Page S12259]]

don't like it, we'll shut the Government down.'' And it went on and on, 
and it was a mess.
  The American people, I think, did not like it much. The first year of 
this Congress was not a very productive year. The second year of this 
Congress, I think, was a productive year, especially the last 6 months. 
Progress was made on a health care reform bill, on the minimum wage, on 
immigration reform, on welfare reform, and on a range of issues that I 
think are important to this country. I think the credit for that can be 
given to a bipartisan spirit of cooperation in the waning months of 
this Congress.
  But the one issue that was not dealt with, and has never been dealt 
with by this Congress, is an issue dealing with deficits. And, no, it 
is not the budget deficit. It is the trade deficit.
  The budget deficit is down, way down, down more than by one-half. So 
the budget deficit has been coming down and moving in the right 
direction. But the trade deficit has not. Yet, almost no one discusses 
the trade deficit.
  As I conclude my remarks today, I want to call the attention of my 
colleagues to an article written by the economist Lester Thurow. I ask 
unanimous consent to have this article printed in the Record at the 
conclusion of my statement.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. DORGAN. It is entitled, ``Awaiting the Crisis.'' This is by 
Lester Thurow, MIT economist. The subtitle is, ``It's fundamental: No 
country can run a trade deficit forever.''
  And I want to read part of it.

       When something has gone on for a long time, human beings 
     have a tendency to act as if it could go on forever--even 
     when they know that it cannot. Consider the triangular 
     trading pattern between the United States, Japan, and most of 
     the rest of East Asia. Japan runs a huge trade surplus with 
     the United States and now an even larger one with the other 
     countries of East Asia, most of which pay for their enormous 
     trade deficits with Japan by running even bigger trade 
     surpluses with the United States. The United States ends up 
     with a current account deficit (more than $150 billion in 
     1995) that is mostly attributable to its unfavorable balance 
     of trade with Japan and most of the rest of East Asia.

  He does not say it, but he should also include Mexico and Canada.

       Yet if there is one thing that we know about international 
     trade, it is that no country, not even one as big as the 
     United States, can run a trade deficit forever. Money must be 
     borrowed to pay for the deficit, but money must also be 
     borrowed to pay interest on previous borrowing.

  And he goes on. The merchandise trade deficit in this country last 
year was $170 billion. And it is growing. There was a great deal of 
activity on this floor during this Congress talking about the budget 
deficit. The Federal budget deficit is diminishing, going down, way 
down. The trade deficit is going up. There has been almost no 
discussion about this on this floor except for myself and a couple of 
others.
  What discussion does exist on this floor is generally referred to by 
others, the very people who have put us in this trade position, who 
say, ``Well, that's simply the complaining by a few certifiable stooges 
that don't have any training at all.''
  Lester Thurow is right. No country can run a trade deficit forever. 
We can see Americans who wear Chinese shirts, Mexican shorts, and 
Italian shoes, and drive Japanese cars, and watch television on 
Taiwanese television sets, and then complain about their jobs. ``What's 
happened to my job? I'm paid less. I don't have job security.''
  It simply does not add up. To the extent we have large trade 
deficits, because we import more than we export, it means that the 
manufacturing base of our country diminishes. No world economic power 
will long remain a world economic power unless it has a sustainable 
manufacturing base. You cannot move all that you produce overseas and 
still believe you will remain a strong economic power.
  I am not suggesting that our country ought to have a policy by which 
we establish walls and prevent goods from coming in. I am not saying 
that at all. What I am saying is that we must have a trade policy that 
tries to move us toward some kind of trade balance so we get rid of 
these crippling trade deficits.
  My colleague, Senator Byrd, from West Virginia, and I introduced a 
piece of legislation that we had hoped would be passed by this Congress 
in the waning days, and it was not. It would have established an 
emergency commission to end the trade deficit. Under this bill a 
commission would be impaneled to give us recommendations on how can we 
tackle this trade deficit, and what kinds of policies this country can 
employ to reduce this trade deficit.
  The trade deficit must be repaid with a lower standard of living in 
our country. There is not any economist that will argue otherwise. To 
have a trade deficit that is this large, the largest in human history, 
and growing, is very dangerous for our country.
  That does not argue, as I said, for protectionism. It does not argue 
for providing consumers with fewer choices. It simply argues that you 
must have some kind of balance in your trade policies. It suggests to 
other countries that there are reciprocal responsibilities.

  Let me give you an example.
  China sends us an enormous amount of products to be sold in our 
marketplace. And that is fine with me. But then what happens when China 
needs airplanes. And it does, because it does not manufacture airplanes 
except for small airplanes, some 50-seat airplanes. It does not 
manufacture the large planes. When China needs airplanes, because it 
has a $30-billion-plus surplus with us, or we have a deficit with them 
of over $30 billion, you would think that China would say, ``All right, 
you buy the things that we produce that you need, so now when we need 
something you produce, airplanes, we'll buy them from you.'' It is not 
the way it works.
  China says to us, ``We'd like to buy some of your Boeing airplanes. 
By the way, you must manufacturer them in China. Yes. We'll buy your 
products if you manufacture them in China.'' I do not understand that. 
It does not make any sense to me, particularly with a country that is 
running up a giant trade surplus with us or is putting us in a position 
to have an enormous deficit with them. When it intends to buy something 
that we produce, it has a responsibility to buy it from our country, 
from our workers and from our producers.
  The same is true with wheat. I will use China again, although I could 
use others. China has this enormous trade surplus with us, growing in a 
very significant way. It buys wheat, and we should be thankful that it 
buys wheat. But, it is off price shopping with other countries to try 
to figure out where it can buy discount wheat. China has a 
responsibility to buy wheat from us. When it is running up a $30-
billion-plus trade surplus or putting us in a deficit position, it has 
a responsibility to us to buy our wheat.
  I could talk at great length about Mexico and Japan and China and 
Canada. These countries have the significant portion of our trade 
deficit, and we should talk with them about the need for reciprocal 
trade policies. But I did not come to the floor to do that. I came to 
the floor to point out that Lester Thurow, the MIT economist, has 
written ``No country can run a trade deficit forever.''

  Those in this country who have a nagging feeling somewhere between 
their brain and the pit of their belly understand what it is. 
Unfortunately, economists in this town do not and most politicians do 
not. That nagging feeling of uneasiness is to see a country whose 
manufacturing is increasingly moving elsewhere. It is not simply the 
manufacturing of low-skilled circumstances. No, it is the manufacturing 
with high-skilled labor that is moving elsewhere. The result is we are 
left in this country with jobs that move from high skill to low skill, 
from higher pay to lower pay, and from more security to less security. 
That hurts this country.
  My message to the Congress and the President is that we cannot 
continue to ignore this problem. This article I asked to have printed 
in the Record is entitled ``Awaiting the Crisis.''
  I remember in the last Congress we had a significant debate about 
NAFTA, the North American Free Trade Agreement. We were promised by 
economists and others that if we would pass NAFTA with Mexico and 
Canada, we would see several hundred thousand new jobs in our country. 
It turns out we passed NAFTA. I did not support it.

[[Page S12260]]

 I actively opposed it. We not only did not get 300,000 new jobs; we 
lost more than 300,000 jobs. One recent study places the job loss 
closer to 500,000 jobs.
  It turns out the substantial new imports from Mexico are not imports 
resulting from low-wage, low-skill jobs. Instead, the imports are 
largely the result of high-skilled jobs that are still paying low wages 
in Mexico. They are the result of jobs in electronics, automobiles, and 
automobile parts. Those are jobs that used to be ours that are now 
south of the border.
  I, personally, do not see that it advances this country's interest to 
put together trade strategies that result in jobs moving overseas. I 
might say with respect to that, just parenthetically, we not only have 
a trade policy that encourages that, we also have a tax policy that 
says, ``By the way, shut your American plant, fire your American 
workers, and move your jobs overseas and we will give you a big fat tax 
break.''
  Twice I tried to get that changed on the floor of the Senate and 
twice I lost. But I will be back, because we will vote again on that in 
the next session of Congress. It might be in the interest of the 
largest international corporations to collect a tax break from moving 
jobs from Fargo or Bangor or Pittsburgh or Denver to Sri Lanka, 
Bangladesh, China, or Korea, but it is not in our interests. It might 
be in their interests, but it is not in ours. We ought to deal with 
that.
  Madam President, this is an issue that the next Congress must tackle. 
Senator Byrd, the Senator from West Virginia, and I will reintroduce 
the legislation that we introduced toward the end of this session 
dealing with an emergency commission to end the trade deficit. I will 
continue to stimulate and agitate, if necessary, on this.
  We must address this issue, but not in a way that retreats from the 
interests of expanded and open markets. We must address it in a way 
that focuses on what is in our economic interest as a country. We must 
not address it in a way that allows those who sloganeer about 
protectionism to claim anyone who does not share their view is 
protectionist.
  How do we, at the same time as we countenance largely open markets, 
insist on our trading partners opening their markets to American 
producers and the products made by American workers? How do we do that? 
The failure to do that means we load our kids with debt that they will 
have to repay with a lower standard of living. This is not the budget 
debt. This is trade debt. The merchandise trade deficit this past year 
is close to $170 billion.
  Madam President, let me again, as I conclude, pay honor and tribute 
to those who leave the U.S. Senate. It has been a privilege to me to 
serve with them.

                               Exhibit 1

                          Awaiting the Crisis

       When something has gone on for a long time, human beings 
     have a tendency to act as if it could go on forever--even 
     when they know that it cannot. Consider the triangular 
     trading pattern between the United States, Japan, and most of 
     the rest of East Asia. Japan runs a huge trade surplus with 
     the United States and now an even larger one with the other 
     countries of East Asia, most of which pay for their enormous 
     trade deficits with Japan by running even bigger trade 
     surpluses with the United States. The United States ends up 
     with a current account deficit (more than $150 billion in 
     1995) that is mostly attributable to its unfavorable balance 
     of trade with Japan and most of the rest of East Asia.
       Yet if there is one thing that we know about international 
     trade, it is that no country, not even one as big as the 
     United States, can run a trade deficit forever. Money must be 
     borrowed to pay for the deficit, but money must also be 
     borrowed to pay interest on previous borrowing. Even if the 
     annual trade deficit does not grow, interest payments do 
     until they are so large that they can no longer be financed. 
     Americans can also sell their assets (land, companies, 
     buildings) to foreigners to finance deficits, but that 
     approach is also limited since eventually there will be 
     nothing of value left to sell.
       At some point the world's capital markets will quit lending 
     to Americans (the risk of default and of being paid back in a 
     currency of much lower value are simply too great), just as 
     they have quit lending to everyone else. The question is not 
     whether the end will come. It will. The question is when and 
     how fast. Will it come as one big shock or as a series of 
     smaller shocks that do less damage?
       But no one knows, or can know, when or how fast. Economics 
     is quite good when it comes to assessing fundamental forces, 
     but it is horrible at timing and speed of adjustment. 
     Economic theory simply says nothing about either.
       When the ends comes, the biggest effects will be felt in 
     most of the up-and-coming countries of East Asia. They will 
     lose not just their United States market and trade surpluses 
     but also their ability to run a trade deficit with Japan and 
     finance the importation of Japanese products, including 
     components and spare parts. Since much of what they sell in 
     their domestic markets depends on these Japanese imports, 
     cutbacks in production will have to be far larger than what a 
     simple elimination of United States trade surpluses would 
     indicate.
       Many of the East Asian countries that think they have 
     reduced their dependence on the American market in recent 
     years will find that they have not. South Korea now sells 
     less than it once did to the United States and more to China 
     than ever before, but China could not afford to buy from 
     South Korea it if it did not have a trade surplus with the 
     United States. As China's sales fall in America, its 
     purchases from South Korea will have to fall as well.
       In addition, many of the countries in East Asia have their 
     debts denominated in yen, even though most of their sales are 
     denominated in dollars. As a result, when the yen rises in 
     value vis-a-vis the dollar, the real value of their debts 
     explodes. This effect was already apparent as the dollar slid 
     from 120 yen to 80 yen over the last couple of years. 
     Indonesia and China would have been in a lot of trouble if 
     the dollar had not recovered.
       As a consequence, when the United States loses its ability 
     to finance its trade deficit, Japan will lose not just its 
     American sales but also most of its East Asian sales. A few 
     countries in East Asia, such as Taiwan, have large foreign-
     exchange reserves and will be able to continue to import 
     Japanese components and spare parts. But most other have 
     little in the way of foreign-exchange reserves--without their 
     American sales these countries will become uncreditworthy. 
     Their Japanese purchases will have to end almost instantly. 
     Having lost their United States and Asian export surpluses, 
     Japan's big export industries will have to undergo a big 
     contraction.
       Paradoxically, the problems will be the least severe in the 
     United States. The standard of living there will certainly 
     decline as imports fall back into balance with exports, but 
     United States companies, such as auto manufacturers, will 
     quickly add third shifts and expand production to grab the 
     sales and market share that companies in Japan and the rest 
     of East Asia will be forced to give up. The problems of the 
     United States will be minor compared with those of Japan and 
     the rest of East Asia.
       Given this reality, governments should act now to rebalance 
     trading patterns in order to avoid the crisis that will 
     emerge if current trends are simply allowed to play 
     themselves out. Everyone knows that a gradual readjustment 
     that is deliberately engineered now will be a lot less 
     painful than a sudden, market-forced adjustment at some point 
     in the future.
       But it is just as clear that these governments will fail to 
     act in time. They will instead wait for the crisis to arrive.
  Mr. DORGAN. I yield the floor and I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. GORTON. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                          DEPARTING COLLEAGUES

  Mr. GORTON. Madam President, 2, or 3 days ago I had the opportunity 
to speak on the floor about those of our colleagues on this side of the 
aisle who are ending their Senate careers with the termination and 
adjournment of this Congress.
  I wanted to take this opportunity to speak briefly about my friends 
and colleagues on the other side of the aisle who are doing the same 
thing with particular reference to one who has become a special friend.
  Many people have paid well earned tribute to the Senator from New 
Jersey, Mr. Bradley, for his brilliance, dedication, and 
purposefulness; to a particular colleague, Senator Exon of Nebraska, 
with whom I have been privileged to serve on both the Budget Committee 
and the Commerce Committee whose wit, sense of humor, and ability to 
diffuse difficult situations is wonderfully welcome; to perhaps a 
favorite of many, Senator Simon of Illinois who, even when one 
disagrees frequently with him on issues, is always unfailingly 
friendly, thoughtful, forgiving, and forthcoming; to the courtly and 
courteous Senator Pell from Rhode Island.
  Madam President, all are individuals that we will miss.


                        SENATOR BENNETT JOHNSTON

  But I want to especially pay tribute to my dear friend and colleague, 
the senior Senator from Louisiana, Bennett Johnston; with common 
interests

[[Page S12261]]

in many matters relating to energy, to all sorts of natural resources, 
to our parks, and particularly to a balanced Federal budget; the 
companionship that we had in search of a bipartisan solution to those 
questions and of the balanced budget during the course of the last year 
or two. We would be closer in any event.

  But, Madam President, I want to put on the Record one unique set of 
circumstances that binds the two of us together in a way that 
illustrates in some respects how small this world is.
  When I first came to the U.S. Senate in 1981, Senator Johnston had 
been here for a considerable period of time and was a leading, highly 
respected, and very, very thoughtful Member of this body.
  About 6 months after I was here, I visited at length my mother, who 
died just a couple of months afterward, at her home in Massachusetts, 
and was talking to her with great enthusiasm about this new challenge 
of my life and this new career; describing the friendships I had made, 
at which point I said, ``One of the Democrats, mother, that I like best 
of all is Bennett Johnston. You know, he comes from Shreveport, LA, 
where your sister lived and raised her children, my cousins. I just 
think that Bennett Johnston is a really terrific Senator.'' And my 
mother smiled at me, and responded, and said, ``Well, Slade, when you 
go back to the Senate, you ask Senator Johnston whether he knows that 
his father proposed to me while we were undergraduates at Louisiana 
State University.''
  Well, Madam President, Senator Johnston obviously did not know that 
his father had proposed unsuccessfully to my mother before he met and 
married the Senator's mother. But that brought us close enough together 
that he and I have called one another cousin ever since.
  Madam President, of all of the people whom I will miss in this body 
at the end of this Congress, I want to say that I will very, very much 
miss my cousin, Bennett Johnston of Louisiana.
  Madam President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Ms. SNOWE. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Gorton). Without objection, it is so 
ordered.

                          ____________________