[Congressional Record (Bound Edition), Volume 152 (2006), Part 17]
[Senate]
[Pages 22406-22408]
[From the U.S. Government Publishing Office, www.gpo.gov]




                     BALANCED TRADE RESTORATION ACT

  Mr. FEINGOLD. Mr. President, I am delighted that the Senator from 
North Dakota and I have introduced this bill to address one of the most 
serious economic problems facing our Nation; namely, the trade deficit. 
There is no greater advocate for sensible trade policies than Senator 
Dorgan, and I am proud to join him in this effort.
  The measure we have introduced is based on a proposal advocated by 
one of the foremost free market advocates in the world, Warren Buffett. 
It is a straightforward and market-based approach to our massive trade 
deficit, and I commend Mr. Buffett for his willingness to step forward 
with this idea.
  In a seminal article in Fortune magazine, Mr. Buffett made the case 
for taking action on this problem and laid out the basics of the 
approach that Senator Dorgan and I take in this bill. In that article, 
Mr. Buffett argued that our trade deficit is, in effect, a transfer of 
our Nation's net worth. He describes our situation by using the 
imaginary example of two islands, Squanderville and Thriftville. Here 
is some of what he wrote:

       A perpetuation of this transfer will lead to major trouble. 
     To understand why, take a wildly fanciful trip with me to two 
     isolated, side-by-side islands of equal size, Squanderville 
     and Thriftville. Land is the only capital asset on these 
     islands, and their communities are primitive, needing only 
     food and producing only food. Working eight hours a day, in 
     fact, each inhabitant can produce enough food to sustain 
     himself or herself. And for a long time that's how things go 
     along. On each island everybody works the prescribed eight 
     hours a day, which means that each society is self-
     sufficient.
       Eventually, though, the industrious citizens of Thriftville 
     decide to do some serious saving and investing, and they 
     start to work 16 hours a day. In this mode they continue to 
     live off the food they produce in eight hours of work but 
     begin exporting an equal amount to their one and only trading 
     outlet, Squanderville.
       The citizens of Squanderville are ecstatic about this turn 
     of events, since they can now live their lives free from toil 
     but eat as well as ever. Oh, yes, there's a quid pro quo--but 
     to the Squanders, it seems harmless: All that the Thrifts 
     want in exchange for their food is Squanderbonds (which are 
     denominated, naturally, in Squanderbucks).
       Over time Thriftville accumulates an enormous amount of 
     these bonds, which at their core represent claim checks on 
     the future output of Squanderville. A few pundits in 
     Squanderville smell trouble coming. They foresee that for the 
     Squanders both to eat and to pay off--or simply service--the 
     debt they're piling up will eventually require them to work 
     more than eight hours a day. But the residents of 
     Squanderville are in no mood to listen to such doomsaying.
       Meanwhile, the citizens of Thriftville begin to get 
     nervous. Just how good, they ask, are the IOUs of a shiftless 
     island? So the Thrifts change strategy: Though they continue 
     to hold some bonds, they sell most of them to Squanderville 
     residents for Squanderbucks and use the proceeds to buy 
     Squanderville land. And eventually the Thrifts own all of 
     Squanderville.
       At that point, the Squanders are forced to deal with an 
     ugly equation: They must now not only return to working eight 
     hours a day in order to eat--they have nothing left to 
     trade--but must also work additional hours to service their 
     debt and pay Thriftville rent on the land so imprudently 
     sold. In effect, Squanderville has been colonized by purchase 
     rather than conquest.

  Mr. Buffett paints a grim picture for the future of our economy in 
his article. At the time he wrote those words, our trade deficit was 
about $500 billion. Last year, the trade deficit was about 60 percent 
higher.
  There are many factors contributing to our trade deficit, but there 
can be no doubt that the deeply flawed trade policies of the past 
decade and more have contributed greatly to the mess in which we find 
ourselves.
  The trade agreements into which we have entered, based on the model 
established by the North American Free Trade Agreement, known as NAFTA, 
have helped ship much of our wealth overseas, often in the form of 
factories that provided entire communities with good-paying, family-
supporting jobs.
  I hold listening sessions in each of Wisconsin's 72 counties every 
year. This is my 14th year holding those listening sessions, listening 
to tens of thousands of people from all over Wisconsin. I completed my 
1000th of those sessions just a few weeks ago, and I can tell you that 
there is nearly universal frustration and anger with the trade policies 
we have pursued since the late 1980s. Even among those who would have 
called themselves traditional free-traders, it is increasingly obvious 
that the so-called NAFTA model of trade has been a tragic failure.
  I voted against NAFTA, GATT, and permanent most favored nation status 
for China, in great part because I felt

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they were bad deals for Wisconsin businesses and Wisconsin workers. At 
the time I voted against those agreements, I thought they would result 
in lost jobs for my State.
  But, Mr. President, even as an opponent of those trade agreements, I 
had no idea just how bad things would be.
  And things could hardly be worse. You can see the results of those 
policies in hundreds of communities around my State.
  And I note that these trade policies are not the result of partisan 
politics. I wish they were. I wish I could lay the blame at the feet of 
our colleagues in the other party. But Members of both parties have 
aided and abetted these flawed policies. Presidents of both parties 
have advanced them, and Members of Congress from both sides of the 
aisle have approved them.
  This legislation is not a substitute for a sound trade policy. It is 
not intended to be. Even if we enact this measure, we will still need 
to straighten out the flawed trade policies of the past several 
administrations. But there is a clear relationship between the flawed 
trade agreements into which we have entered and the mushrooming trade 
deficit.
  In 1993, before NAFTA was implemented, our trade deficit with Canada 
and Mexico was $9 billion. In 2004, 10 years after NAFTA was 
implemented, our trade deficit with those two countries has ballooned 
1,200 percent--1,200 percent--to $111 billion. By one estimate, the 
massive growth of imports into this country from Canada and Mexico 
relative to exports to those two countries has displaced almost 1 
million jobs.
  Giving China permanent most favored nation trading status and 
ratifying the creation of the World Trade Organization have only made 
matters worse.
  Far from improving our trade balance, NAFTA and these other trade 
agreements have only made matters worse.
  When questions were raised about the actual provisions of these 
flawed agreements, supporters were quick to play the free trade card 
and label those who questioned these policies as ``protectionist.'' It 
is somewhat encouraging that some who blindly accepted these agreements 
are now beginning to read the fine print.
  One might think it obvious, but apparently it needs to be 
reiterated--these aren't your father's trade agreements, and the 
elegant theories of Adam Smith and others do not apply to the 
agreements we are asked to approve. As Thea Lee wrote in a column in 
the Wall Street Journal:

       We should all understand by now that modern (post-NAFTA) 
     free-trade agreements are not just about lowering tariffs. 
     They are about changing the conditions attached to trade 
     liberalization, in ways that benefit some players and hurt 
     others. These are not your textbook free-trade deals. These 
     are finely orchestrated special-interest deals that boost the 
     profits and power of multinational corporations, leaving 
     workers, family farmers, many small businesses, and the 
     environment more vulnerable than ever.

  Millions of working families across Wisconsin know this. If instead 
of exporting manufacturing goods, China exported editorial writers, the 
opinion pages of our newspapers might reflect an understanding of this 
as well.
  The argument we hear is that trade deals like NAFTA and CAFTA may 
cause some short-term pain, but they are ultimately good for all 
countries concerned. Maybe we lose a few jobs to Mexico or China, the 
argument goes, but we would also gain jobs. Each country would engage 
in the economic activity for which it has a so-called comparative 
advantage and everyone wins.
  But as I noted during the CAFTA debate, this nice, neat academic 
theory bears little relation to what is actually happening in the real 
world. And one of the reasons for this disconnect is that in an arena 
that has been fundamentally changed by technical advances, such as the 
Internet and the rapid flow of capital, we are not playing by the same 
rules as our trading partners.
  The trade agreements into which our country has entered in recent 
years too often lack even the most reasonable standards to ensure that 
our businesses and workers can compete on a level playing field. This 
was certainly the case with CAFTA, which failed to include meaningful 
labor standards. The weak standards it did include were effectively 
unenforceable. Similarly, the environmental provisions it included were 
largely cosmetic. And the promised positive impact claimed for U.S. 
agriculture is far more likely to benefit middlemen and large 
agribusiness, while putting smaller family farms at a long-term 
competitive disadvantage as they continue to keep both the water and 
air clean while paying their employees a living wage.
  As I said, we have to stop entering into trade agreements that are so 
fundamentally skewed and that result in a race to the bottom. I was 
pleased to introduce a resolution laying out standards for the kind of 
trade policies we should pursue. The principles set forth in my 
resolution are not complex. They are straightforward and achievable. 
They require enforceable worker protections in our trade agreements, 
including the core International Labor Organization standards. They 
insist that trade agreements preserve the ability of the United States 
to enact and enforce its own trade laws. They provide that trade 
agreements may protect foreign investors but state that foreign 
investors should not be provided with greater rights than those 
provided under U.S. law.
  The standards in my resolution also require that trade agreements 
protect public interest laws from challenge by foreign investors in 
secret tribunals. They require that the agreements into which we enter 
ensure that food entering into our country meets domestic food safety 
standards. They mandate that trade agreements preserve the ability of 
Federal, State, and local governments to maintain essential public 
services and to regulate private sector services in the public 
interest. They require that trade agreements contain environmental 
provisions that are subject to the same enforcement as commercial 
provisions.
  My resolution requires trade agreements to preserve the right of 
Federal, State, and local governments to use procurement as a policy 
tool, including through Buy American laws, environmental laws such as 
recycled content, and purchasing preferences for small, minority, or 
women-owned businesses. And it requires that trade negotiations and the 
implementation of trade agreements be conducted openly.
  These are sensible policies. They are entirely consistent with the 
goal of increased international commerce, and in fact they advance that 
goal.
  We should pursue trade agreements that are built around these 
principles, but I fully understand that such a change in our trade 
policies is unlikely to occur overnight.
  The bill Senator Dorgan and I are introducing today focuses on 
reducing the trade deficit, and while it is not a substitute for 
soundly crafted trade agreements, it can stem some of the damage done 
by the trade policies of the past several years.
  This proposal is straightforward. It requires that the total value of 
what we import not exceed the total value of what we export, and rather 
than trying to pick winners and losers, as some of our trade agreements 
do, it lets the market decide which product areas will thrive in global 
competition and which will not.
  This is done through the use of Balanced Trade Certificates, BTCs. 
BTCs would be issued to U.S. exporters in an amount equal to the dollar 
value of their exports. Those BTCs would be sold, directly or 
indirectly, to foreign exporters who wanted to bring goods into the 
United States. Foreign exporters would have to have BTCs in an amount 
equal to the dollar value of the goods they want to bring into the 
United States. To import $1 million worth of products, a foreign 
exporter would have to have $1 million worth of BTCs, representing $1 
million worth of U.S. exports.
  By limiting the total value of all BTCs to the total value of all 
products we export, the bill would result in a balance of trade.
  Unlike an industry-specific tariff or quota, the BTCs proposed in 
this bill will not shield any particular industry or penalize any 
specific country. While

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there would clearly be a net benefit to American industries competing 
in the global market, that marketplace ultimately would determine which 
industries and businesses succeed and which do not.
  This new balanced trade system is phased in over 5 years to minimize 
any economic shocks, with a longer phase-in period of 10 years for oil 
and gas. While our addiction to oil is not the focus of this bill, that 
addiction continues to have an impact on our balance of trade. The 
additional time provided in the bill for oil and gas imports will give 
Congress an opportunity to advance a serious energy policy, one that 
moves us away from our addiction to oil, an addiction that only 
aggravates our dangerous trade imbalance.
  As Mr. Buffet warns in making this proposal, ``there is no free lunch 
here.'' These balanced trade certificates will increase the price of 
imported goods. Some domestically produced goods might also increase in 
price. But the alternative, continuing down the path we are now on, 
will mean that we will increasingly transfer our net worth overseas, 
and with it our economic future.
  Nor are we the only ones put at risk by our trade deficit. A recent 
story in the New York Times headlined ``U.S. Trade Deficit Is Called a 
Threat to Global Growth'' reported the concerns of the Managing 
Director of the International Monetary Fund, Rodrigo de Rato, and 
others, over our trade deficit with China and other countries. The 
story reports on the threat our trade deficit poses to global economic 
growth and notes that the warnings about our trade deficit by Mr. de 
Rato and other financial experts will be addressed later this month 
``at the annual meeting of the directors of the I.M.F. and the World 
Bank this month in Singapore.''
  Some of the foremost experts in the world of international finance 
are concerned about our mushrooming trade deficit. It is time that we 
did something about it.
  In the article describing the proposal on which this legislation is 
based, Mr. Buffett compares our country to a very rich family that owns 
an immense farm. He writes: ``In order to consume 4 percent more than 
we produce, we have, day by day, been both selling pieces of the farm 
and increasing the mortgage on what we still own.''
  Mr. President, if we don't do something to straighten out our trade 
policies and turn our trade deficit around, before we know it, we won't 
have any more of the farm to sell off. We will have sold off all of it.
  I urge my colleagues to join Senator Dorgan and me in sponsoring this 
legislation.

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