[Congressional Record (Bound Edition), Volume 161 (2015), Part 6]
[House]
[Pages 7673-7679]
[From the U.S. Government Publishing Office, www.gpo.gov]




                   CONGRESSIONAL ROLE IN TRADE POLICY

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 6, 2015, the gentleman from Michigan (Mr. Levin) is recognized 
for 60 minutes as the designee of the minority leader.
  Mr. LEVIN. Mr. Speaker, it has been over 12 years since the last 
debate over trade promotion authority, the last time we considered the 
role of Congress in trade negotiations. Much has changed since then: 
the world has changed; trade negotiations have changed; and the role of 
Congress in trade negotiations has changed.
  We all recognize that trade can be beneficial. The issue is not 
whether Congress could pass an Econ 101 class, as President George W. 
Bush's chair of the Council of Economic Advisers, Gregory Mankiw, 
recently put it. The issue is whether we are going to face up to the 
fact that our trading system today is much more complex than the 
simplistic trade model presented in an Econ 101 class.
  A growing number of prominent economists today recognize those 
complexities, from Nobel Laureate economists like Joseph Stiglitz and 
Paul Krugman, to Columbia professor Jeffrey Sachs, former IMF chief 
economist Simon Johnson, and former White House adviser Jared 
Bernstein. But too many want to pretend the question of a trade 
agreement is a ``no-brainer,'' as Professor Mankiw suggests; or that 
the benefits of trade ``flows from the classic theory of trade gains 
first expounded by David Ricardo in 1817''--from a Council of Economic 
Advisers report in May 2015--because, as Charles Krauthammer recently 
wrote: ``The law of comparative advantage has held up nicely for 198 
years.''
  What do David Ricardo and Adam Smith have to say about the inclusion 
of investor-state dispute settlement in our trade agreements? Nothing, 
to my knowledge. What do they have to say about providing a 12-year 
monopoly for the sale of biologic medicines? about the need to ensure 
that our trading partners meet basic labor and environmental standards? 
How about the issue of currency manipulation? What does the theory of 
comparative advantage have to say about those issues? Absolutely 
nothing. And yet those are the issues at the crux of the TPP 
negotiations today.
  So how do the old ideas on trade fall short? Let me mention a few 
examples:
  First, as Joseph Stiglitz pointed out recently, 19th century 
economics and the theory of comparative advantage assumed a fixed level 
of technology--no technological changes--and full employment. Those 
assumptions don't fit very well in today's world.
  Second, one of the most critical economic issues facing our country 
today is growing inequality and a stagnant middle class. Many trade 
economists believe that trade contributes to that inequality. But some 
try to downplay that fact by pointing out that other factors may 
contribute more to the problem, as if that means we should not worry 
about the impact trade is having. Consider this from Dani Rodrik, a 
Harvard University economist: ``The gains from trade look rather paltry 
compared to the redistribution of income . . . In an economy like the 
U.S., where average tariffs are below 5 percent, a move to complete 
free trade would reshuffle more than $50 of income among different 
groups for each dollar of efficiency or `net' gain created . . . We are 
talking about $50 of redistribution for every $1 of aggregate gain. It 
is as if we give $51 to Adam, only to leave David $50 poorer.''
  David Rosnick of the Center for Economic and Policy Research expects 
TPP will have a very small but positive impact on U.S. economic 
growth--0.13 percent of GDP by 2025. However, he notes that economists 
today generally agree that trade contributes to growing economic 
inequality in the United States, with estimates ranging from 10 to 50 
percent of the total inequality growth. When he combines these two 
concepts, GDP growth but rising inequality from trade, he concludes: 
``under any reasonable assumptions about the effect of trade on 
inequality, the median wage earner, and therefore the majority of 
workers, suffers a net loss as a result of these trade agreements.'' In 
other words, the economic pie may grow slightly as a result of our 
trade agreements, but the average American worker gets a smaller slice 
of that pie.
  Similarly, in September The Brookings Institution published an 
economic research paper by three economists, two affiliated with the 
Federal Reserve system, that found that trade and globalization 
accounts for the vast majority of labor's declining share of income in 
the United States over the past 25 years. Specifically, they found that 
``increases in import exposure of U.S. businesses can explain about 3.3 
percentage points of the 3.9 percentage point decline in the U.S. 
payroll share over the past quarter century.''
  This underscores that the substance of the trade agreements, the 
international rules, matter. Our trade agreements must be designed to 
shape trade, to spread its benefits more broadly.
  Third, we need to stop pretending that trade only has benefits and 
few costs. We need to stop talking exclusively about exports and 
downplaying the negative impact that some imports have, as the Council 
of Economic Advisers did in a recent paper.

                              {time}  1400

  Of course, imports can help to lower prices for manufacturers and 
consumers. But lower prices don't do you much good if you have lost 
your job or seen your wage decline or stagnate. Again, as Jeff Sachs 
has said, ``It is

[[Page 7674]]

true that the benefits outweigh the costs, leading to the argument that 
winners can compensate losers. But in America, winners rarely 
compensate losers; more often than not, the winners attempt to trounce 
the losers.''
  Mr. Speaker, the old economics models are based in part on trade 
between countries with similar economic structures. This is no longer 
the case.
  The 12 parties involved in the TPP negotiations--accounting for 40 
percent of the world GDP--include economies ranging from some of the 
world's largest market-oriented economies to some of the smallest, 
least developed command economies. We have never been able to establish 
a level playing field with Japan--after decades of trying, and multiple 
``agreements'' to solve various problems--and the Japanese market 
stands virtually closed today in key areas like agriculture and 
automobiles. We have never negotiated a free trade agreement with a 
communist country like Vietnam where state-owned enterprises are a 
major concern and the Communist Party and the once so-called labor 
union are one and the same.
  The issues involved in trade negotiations have also changed 
dramatically. We are no longer simply negotiating tariff levels. As 
Professor Jeff Sachs of Columbia University said recently, ``Both TPP 
and TTIP would be better described as multinational business agreements 
involving three distinct areas: international trade, cross-border 
investment, and international business regulation.
  The TPP negotiations cover a range of subjects far beyond those 
negotiated in any previous multilateral negotiation, concerning 
everything from intellectual property and access to medicines, to 
financial regulations, food safety measures, basic labor and 
environmental standards, cross-border data flows, and state-owned 
enterprises. So the economics of trade have changed, and the trade 
negotiations themselves have changed, and so too has the congressional 
role.
  In recent years some of us have had to take it upon ourselves to 
rewrite the rules of trade negotiations. In 2006 when the Democrats 
took the majority in the U.S. House, we made it clear to the Bush 
administration that we were not going to consider the Peru, Panama, 
Colombia, and Korea Free Trade Agreements as negotiated. Each of them 
would need to be fixed.
  Charles Rangel and I worked with our House Democratic colleagues to 
coauthor what became known as the May 10th Agreement on labor and 
environmental standards in trade agreements. For the first time, fully 
enforceable labor and environmental standards would be placed in our 
trade agreements on equal footing with every other commercial 
provision. The May 10th Agreement also included important provisions on 
medicines, investment, and government procurement.
  After decades of leading the fight to include worker rights 
provisions in trade agreements, I considered at the time, and still do 
today, the May 10th Agreement to be a major breakthrough. In the case 
of our trade agreements with Peru, Panama, and Colombia, their labor 
laws were changed to come into compliance with ILO standards before the 
Congress voted.
  Then in 2011, with the Korea FTA, working on a bipartisan basis with 
then-chairman Dave Camp, with Ford Motor, and the UAW, we urged the 
Obama administration to go back and renegotiate the specific automotive 
market opening measures with Korea. And they did so, helping to garner 
broad bipartisan support in Congress.
  Mr. Speaker, we established the foundation for progressive trade 
policy. We saw the value of intense congressional involvement to 
improve trade agreements. We want to make sure it is built upon, not 
eroded.
  Mr. Speaker, now we are facing the largest multilateral trade 
negotiations since the Uruguay Round. The TPP has the potential to 
raise standards and open new markets for U.S. businesses, workers, and 
farmers--or lock in weak standards, uncompetitive practices, and a 
system that does not spread the benefits of trade, affecting the 
paychecks of American families. Once the U.S. lowers its own tariffs as 
broadly as contemplated in TPP, we will no longer have the leverage to 
bring about lasting change in other countries.
  In January, I described what I believed to be an effective way to 
resolve outstanding issues in the TPP negotiations. I believed that 
achieving these outcomes could lead to a landmark TPP agreement worthy 
of major bipartisan support and mine. Unfortunately, in 4 months, none 
of these suggestions has been taken on by our negotiators.
  Unfortunately, Mr. Speaker, the Hatch-Wyden-Ryan trade promotion 
authority fails to put TPP on the right track or to help Congress do 
so. Chairman Ryan and Senator Cruz wrote an op-ed entitled, ``Putting 
Congress in Charge on Trade.'' Senator Hatch declared TPA to include 
``strict negotiating objectives'' that give the American people a voice 
on trade priorities. But saying it is so doesn't make it so.
  On all the major issues in the negotiations, the negotiating 
objectives are obsolete or woefully inadequate. They are basically a 
wish list. And even worse, at the end of the negotiation, TPA allows 
the President to certify whether his own negotiators achieved the wish 
list. And the provisions relating to congressional withdrawal of TPA 
are meaningless. They are never going to be used because they are 
unusable.
  The Hatch-Wyden-Ryan TPA gives up congressional leverage at exactly 
the wrong time. Instead of pressing USTR to get a better agreement or 
signaling to our negotiating partners that Congress will only accept an 
agreement that ensures reciprocity and helps to spread the benefits of 
trade, the Hatch-Wyden-Ryan TPA puts Congress in the backseat and 
greases the skids for an up-or-down vote after the fact. Real 
congressional power is not at the end of the process; it is right now, 
when the critical outstanding issues are being negotiated.
  Mr. Speaker, we must meaningfully address currency manipulation--
protracted, large-scale, official, one-way intervention in the currency 
markets to weaken a currency for the purpose of boosting exports and 
limiting imports. Currency manipulation has cost the U.S. millions of 
jobs over the past decade and a half. Many people had trouble finding 
new jobs or had to accept jobs at lower wages.
  China manipulated its currency most dramatically in this time period, 
accumulating the largest stock of foreign exchange reserves the world 
has ever known. In earlier episodes, Japan, South Korea, and others 
manipulated their currencies on a protracted, grand scale. Japan's 
currency manipulation and other trade-distorting practices kept its 
auto and other markets closed while Japan had access to a very open 
U.S. market. This one-way trade decimated the U.S. tool and die 
industry and seriously injured other segments of the auto industry, 
including U.S. automakers themselves.
  The International Monetary Fund has up-to-date guidelines that define 
currency manipulation and are intended to prevent it. There is nothing 
wrong with the spirit or even the letter of those guidelines. 
Unfortunately, the IMF cannot enforce those guidelines because currency 
manipulators are able to essentially stall action in that forum.
  Arguments that prohibiting currency manipulation in TPP is 
impossible, for technical or political reasons, remind us of previous 
claims about trade agreements not being able to help defend forests or 
discourage child labor. For example, some people--prominent people--
have asserted that U.S. monetary policy would be put at risk if 
currency is included in TPP. I responded to that argument in a highly 
detailed blog months ago.
  Mr. Speaker, I would like to include that in the Record.

                  [From the Huffington Post Blog Post,
                             Feb. 6, 2015]

The Need To Address Currency Manipulation in TPP, and Why U.S. Monetary 
                         Policy Is Not at Risk

                         (By Rep. Sander Levin)

       Over the past decade, currency manipulation by foreign 
     governments has resulted in an increase in unfairly traded 
     imports into the United States and has made it more difficult 
     for U.S. exporters to compete in foreign markets. The 
     practice has cost U.S.

[[Page 7675]]

     workers between one million and five million jobs--and is 
     responsible for as much as half of excess unemployment in the 
     United States. It has contributed to stagnant wages and to 
     inequality in the United States. And it contributed to the 
     global financial crisis.*
       Bipartisan majorities in the House and the Senate have 
     urged the Administration to include strong and enforceable 
     currency obligations in the Trans-Pacific Partnership (TPP), 
     which includes a number of former currency manipulators, such 
     as Japan. Other countries interested in joining TPP in the 
     future--such as China, Korea, and Taiwan--are also current or 
     former currency manipulators.
       The IMF already prohibits currency manipulation and has 
     developed guidelines to define when it occurs. The problem is 
     that the IMF lacks an enforcement mechanism.
       I have proposed taking the existing IMF guidelines, 
     building upon them, and establishing an enforcement mechanism 
     through the TPP. Other groups and economists, such as the 
     American Automotive Policy Council (AAPC) and Fred Bergsten 
     of the Peterson Institute, have tabled similar proposals. 
     Economists on the right and left support including currency 
     disciplines in TPP. And the Commission on Inclusive 
     Prosperity recently stated: ``New trade agreements should 
     explicitly include enforceable disciplines against currency 
     manipulation that appropriately tie mutual trade preferences 
     to mutual recognition that exchange rates should not be 
     allowed to subsidize one party's exports at the expense of 
     others.'' Currency manipulation must become a subject in the 
     TPP negotiations.
       A chief concern about including strong and enforceable 
     currency disciplines in TPP is that U.S. monetary policy 
     could be successfully challenged by our trading partners, 
     given that our expansionary monetary policy (in the form of 
     `quantitative easing') may have had the secondary effect of 
     weakening the dollar. What follows is a factual response to 
     that concern.
       Again, my proposal is to take the IMF guidelines and make 
     them enforceable. Under the IMF guidelines, currency 
     manipulation is about government interventions in the foreign 
     exchange markets, not about other policies that may have a 
     secondary impact on foreign exchange rates. The IMF 
     guidelines clearly distinguish between currency 
     manipulation--government intervention in foreign exchange 
     markets--and monetary policy.
       Article IV of the IMF's Articles of Agreement states that 
     ``each member shall . . . avoid manipulating exchange rates . 
     . . to gain an unfair competitive advantage over other 
     members.'' The IMF has gone on to provide seven factors in 
     its Guidelines to determine whether a country is manipulating 
     its currency. The following review of each factor identified 
     in those guidelines demonstrates that U.S. monetary policy, 
     including quantitative easing, cannot be described as a form 
     of currency manipulation.
       Factor 1: Protracted Large-Scale Intervention, in One 
     Direction, in Currency Markets.
       The United States intervenes in the currency market less 
     than almost any other country in the world. The United States 
     has only intervened in the currency markets a total of three 
     days since the late 1990s: June 17, 1998 (during the Asian 
     exchange rate/financial crisis); September 22, 2000 (after 
     the euro was introduced and concerns grew over the euro's 
     significant depreciation against the dollar); and March 18, 
     2011 (in connection with a Japanese earthquake and tsunami). 
     These three interventions over nearly 20 years cannot be 
     described as ``protracted'' interventions. Compare this 
     record with, for example, China's interventions over the past 
     decade, which have occurred almost daily, and almost always 
     in the same direction, to weaken their currency.
       The circumstances surrounding these three interventions are 
     consistent with the Federal Reserve's Foreign Currency 
     Directive: interventions ``shall generally be directed at 
     countering disorderly market conditions.'' They are therefore 
     not consistent with the objective of ``gaining an unfair 
     competitive advantage'' over its trading partners, which is 
     what currency manipulation is about. In fact, the IMF 
     recommends and encourages members to intervene ``to counter 
     disorderly conditions.'' It is also worth noting that in 
     these three instances, the United States coordinated its 
     intervention with the other countries involved, again 
     demonstrating that the action was not taken to gain a 
     competitive advantage. Indeed, in all three cases the other 
     country requested the intervention of the United States.
       While the United States has a flexible exchange rate (i.e., 
     it lets the market determine its value), it is also important 
     to note that the IMF Guidelines do not prevent other 
     countries from establishing a fixed or managed exchange rate. 
     The Guidelines only provide that the rate cannot be set at a 
     consistently artificially low level (i.e., countries may 
     engage in ``protracted, large scale'' interventions, so long 
     as all of these interventions are not all in the same 
     ``direction'').
       Factor 2: Excessive Accumulation of Foreign Exchange 
     Reserves.
       Despite the fact that the United States has the largest or 
     second largest economy in the world, the United States holds 
     fewer foreign exchange reserves than Thailand, Algeria, and 
     Saudi Arabia, among others. Further, China has 25 times as 
     many foreign exchange reserves (nearly $4 trillion) as the 
     United States ($126 billion).
       Economists generally use four benchmarks, cited by Treasury 
     in 2006 and 2014 reports, to determine whether a country's 
     reserves are excessive. U.S. reserves are well below each 
     benchmark:
       Benchmark #1--Reserves may be excessive if they exceed 100% 
     of short-term external debt (commonly referred to as the 
     ``Guidotti-Greenspan Rule''). U.S. reserves are equal to 2% 
     of its short-term external debt ($1.2 trillion). If only 
     taking into account debt denominated in foreign currencies, 
     U.S. reserves would equal 38% of short-term debt. Note, 
     however, that this benchmark was designed with emerging 
     markets in mind, not the U.S. economy.
       By way of comparison, China's reserves are about 700% 
     (i.e., seven times greater than) its short-term external 
     debt.
       Benchmark #2--Reserves are excessive if they exceed 5-20% 
     of money supply, commonly referred to as M2. U.S. reserves 
     are 1.1% of U.S. M2 ($11.7 trillion). China's reserves are 
     43% of its M2.
       Benchmark #3--Reserves are excessive if they exceed 20% of 
     GDP. U.S. reserves are less than 1% of U.S. GDP (around $17 
     trillion). China's reserves are 42% of its GDP.
       Benchmark #4--Reserves are excessive if they exceed 3-4 
     months of imports. U.S. reserves equal less than a single 
     month of U.S. imports (about $200 billion). China's reserves 
     equal 23 months of its imports.
       Factor 3: Restrictions on/Incentives for Transactions or 
     Capital Flows for Balance of Payments Purposes.
       The United States has one of the least restrictive 
     regulatory structures in the world concerning the free flow 
     of capital. In fact, the World Economic Forum ranks the 
     United States first in the world in terms of capital account 
     liberalization and second in the world under a more general 
     `financial development' index.
       Factor 4: Encouragement of Capital Flows through Monetary 
     Policy for Balance of Payments Purposes.
       This is the only guideline that even mentions monetary 
     policy. And while the United States--and every other country 
     in the world--does have a monetary policy, the purpose of 
     U.S. monetary policy is neither to encourage capital flows 
     nor to achieve a balance in payments. The goals of U.S. 
     monetary policy are spelled out in the Federal Reserve Act, 
     which specifies that the Board of Governors and the Federal 
     Open Market Committee should seek ``to promote effectively 
     the goals of maximum employment, stable prices, and moderate 
     long-term interest rates.''
       Indeed, the IMF has explicitly supported U.S. monetary 
     policy (including each round of quantitative easing since the 
     ``Great Recession''). As the IMF said in its most recent 
     report ``[IMF] Directors agreed that the current highly 
     accommodative stance of monetary policy is appropriate, 
     consistent with the Federal Reserve's objectives of maximum 
     employment and price stability.'' The IMF has also noted that 
     U.S. monetary policy has been good for other nations 
     (`positive spillover effects') because it has helped to 
     sustain global growth. Similarly, the G-20 (which includes 
     China, Japan, Korea, the United States, and three other TPP 
     countries) has distinguished between monetary policy and 
     exchange rate policy--and has recognized ``the support that 
     has been provided to the global economy in recent years from 
     accommodative monetary policies, including unconventional 
     monetary policies.''
       Factor 5: Fundamental Exchange Rate Misalignment.
       If anything, the U.S. dollar is properly valued or even 
     overvalued, not undervalued, according to the most recent IMF 
     data and estimates. Further, given the continued weakening of 
     the yen and euro, many expect the dollar to further 
     strengthen in value in 2015.
       Factor 6: Long and Sustained Current Account Surpluses.
       The United States has had just one current account surplus 
     since 1981. In fact, the United States has been running large 
     current account and trade deficits for almost four decades. 
     Indeed, those imbalances are a major cause of concern to many 
     economists--and currency manipulation by other countries has 
     contributed substantially to the U.S. trade deficits in 
     recent years.
       Factor 7: Large External Sector Vulnerabilities from 
     Private Capital Flows.
       While the United States does have external sector 
     vulnerabilities (i.e., private and public sector debt owed to 
     foreigners), as reflected in the large current account 
     deficit, much of those vulnerabilities stem from purchases of 
     U.S. debt by foreign governments--not private capital flows. 
     And much of those purchases by foreign governments are the 
     result of foreign government intervention in the currency 
     markets that result in the accumulation of foreign reserves. 
     Thus, if anything, this factor, like Factor 6, tends to 
     suggest that the United States is a casualty of other 
     governments' currency manipulation, not that it is 
     manipulating itself.
                                  ____

       The IMF Guidelines demonstrate that the United States is 
     not manipulating its currency and would not be at risk of 
     losing a

[[Page 7676]]

     dispute. The far greater risk is that more middle class jobs 
     will be lost in the United States as a result of foreign 
     governments' currency manipulation. We need strong and 
     enforceable disciplines in TPP to help prevent that from 
     happening.


                                endnote

       *China's currency manipulation ``is arguably the most 
     important cause of the financial crisis. Starting around the 
     middle of this decade, China's cheap currency led it to run a 
     massive trade surplus. The earnings from that surplus poured 
     into the United States. The result was the mortgage bubble.'' 
     Sebastian Mallaby, ``What OPEC Teaches China,'' Washington 
     Post op-ed (Jan. 2009). The Bush Administration White House 
     also drew the connection: ``the President highlighted a 
     factor that economists agree on: that the most significant 
     factor leading to the housing crisis was cheap money flowing 
     into the U.S. from the rest of the world, so that there was 
     no natural restraint on flush lenders to push loans on 
     Americans in risky ways. This flow of funds into the U.S. was 
     unprecedented.'' Statement by White House Press Secretary 
     Dana Perino (Dec. 2008). Most of the cheap money flowing into 
     the United States came from foreign governments (not the 
     private sector) accumulating foreign exchange reserves and 
     other official assets. See Joseph E. Gagnon, ``Global 
     Imbalances and Foreign Asset Expansion by Developing-Economy 
     Central Banks,'' Peterson Institute for International 
     Economics (Mar. 2012).

  Mr. LEVIN. Mr. Speaker, I have seen no serious rebuttal of the points 
I made in that post or to similar and related points made by Simon 
Johnson, Fred Bergsten, and many other notable economists ranging from 
Art Laffer to Paul Krugman. Nevertheless, those who oppose currency 
disciplines continue to raise this false argument.
  Mr. Speaker, TPP should address instances in which countries buy 
large amounts of foreign assets over long periods of time to prevent an 
appreciation of their exchange rate despite running a large current 
account surplus. The Federal Reserve does not engage in such practices. 
That is why the U.S. already agreed to and even insisted upon what is 
in the current IMF guidelines.
  And now there is the claim that including currency disciplines in TPP 
would be a poison pill and that our trading partners would walk away 
from the table. There is no way to accurately judge this issue until it 
is properly brought to the negotiating table. To the contrary, the fact 
is that the administration says this only creates the risk of a self-
fulfilling prophecy.

                              {time}  1415

  It is irresponsible to make this claim. Indeed, our trading partners 
in TPP would greatly benefit from these disciplines. Many of them are 
the victims of manipulation in every bit as much as we are.
  A progressive trade agreement for workers and the middle class must 
address currency manipulation, which has caused millions of job losses 
and contributed to waste stagnation over the last decade. President 
Obama is right that we should write the rules and not accept the status 
quo; but, if we fail to do address currency manipulation in TPP, we are 
essentially letting China write the rules and are accepting an 
unacceptable status quo.
  It is vital that our trade agreements balance strong intellectual 
property rights and access to affordable, lifesaving medicines. Absent 
a change in course, the final TPP text is likely to provide less access 
to affordable medicines than provided under the May 10 agreement. My 
staff has just reviewed a new version of the text that raises some 
serious new questions; but even the last version of the text raised 
serious concerns.
  For example, developing countries would likely be required to 
``graduate'' to more restrictive intellectual property rights standards 
before they become developed, a clear inconsistency with May 10. There 
are also a number of concerns that the TPP agreement will restrict 
access to medicines in the U.S. and other developed countries, for 
example, by encouraging second patents on similar products, by having 
long periods of data exclusivity for biologic medicines, by allowing 
drug companies to challenge government pricing and reimbursement 
decisions.
  Oxfam, a coalition of 17 international development organizations, 
recently said:

       TPP would do more to undermine access to affordable 
     medicines than any previous U.S. trade agreement, and the 
     intellectual property provisions in TPP reverse the positive 
     step taken under the May 10 agreement in 2007 . . . and thus 
     are a step backwards for public health.

  And amFAR, the Foundation for AIDS Research, said this:

       Our gains in reducing global HIV infections would never 
     have been realized if the proposed provisions under the TPP 
     were the intellectual property standard in 2001.

  For most of the past 15 years, our trade deficit with Japan has been 
second only to our deficit with China, and over two-thirds of the 
current deficit is in automotive products.
  Japan has long had the most closed automotive market of any 
industrialized country, despite repeated efforts by U.S. negotiators 
over decades to open it. At a minimum, the U.S. should not open its 
market further to Japanese imports, through the phaseout of tariffs, 
until we have time to see whether Japan has truly opened its market.
  The administration has not stated a specific period of time for when 
the phaseout in U.S. tariffs for autos, trucks, and auto parts would 
begin or when they would end. The parties are also still working to 
address certain nontariff barriers that Japan utilizes to close their 
market.
  The Hatch-Wyden-Ryan TPA bill broadly states that the U.S. should 
``expand competitive market opportunities for export of goods.'' Such a 
broad negotiating objective provides no guidance regarding how to truly 
open the Japanese automotive market.
  On the related issue of rules of origin, there are a number of rules 
of origin being negotiated in the TPP for different products, including 
in the sensitive textile and apparel, agricultural, and automotive 
sectors. Some of the rules are largely settled while others, including 
the rules for automotive products, remain open and controversial.
  Rules of origin define the extent to which inputs from outside the 
TPP region--for example, China--can be incorporated into an end product 
for that product to still be entitled to preferential/duty-free 
treatment under the agreement.
  The rule should be restrictive enough to ensure that the benefits of 
the agreement accrue to the parties to the agreement. The automotive 
rule of origin in TPP should be at least as stringent as the rule in 
NAFTA, given that TPP involves all three of the NAFTA countries, plus 
nine others.
  The Hatch-Wyden-Ryan TPA bill provides no guidance whatsoever on any 
rule of origin on any product in the TPP negotiations. It appears that 
the U.S. and Japan will agree that Japan will reduce tariffs, but never 
eliminate them, on hundreds of agricultural products, far more carve-
outs than under any U.S. trade agreement in the past.
  Canada, on the other hand, has not put any offer on the table for 
dairy products, which is causing some concern in the dairy industry.
  The Hatch-Wyden-Ryan TPA bill has as its objective, ``reducing or 
eliminating'' tariffs on agricultural products; thus even Japan's 
opening offer, to reduce but never eliminate tariffs on nearly 600 
products, satisfied this objective, demonstrating that it is 
meaningless.
  The TPP negotiations are taking a different approach on environment 
than we did in the May 10 agreement and in our FTAs with Peru, Panama, 
Colombia, and Korea, where we stated simply that each country was 
obligated to implement seven multilateral environment agreements.
  TPP negotiators are trying to build the same obligations from 
scratch, and we still do not know if they have succeeded. Words like 
``endeavor'' and ``take steps to'' are not going to lead to the 
revolutionary changes we have been told to expect.
  The President said at Nike recently that the TPP environmental 
chapter would ``help us do things that haven't been done before.'' 
Actually, we have done these things before. In May 10, Peru included a 
special annex on deforestation. It needs more vigorous enforcement.
  The Hatch-Wyden-Ryan TPA bill is obsolete in providing instructions 
since

[[Page 7677]]

the TPP is already taking a different approach. The TPA bill also does 
not address whether or how climate change issues should be handled in 
TPP, an issue raised by other countries in the TPP negotiations.
  There are now more cases of private investors challenging 
environmental, health, and other regulations in nations, even nations 
with strong and independent judicial systems and rule of law.
  Just last month--just last month--an investor won a NAFTA ISDS case 
in which the government of Nova Scotia denied a permit to develop a 
quarry in an environmentally sensitive area.
  Other investment disputes involve ``plain packaging'' of tobacco 
products in Australia aimed at protecting public health and 
pharmaceutical patent requirements in Canada. This issue is receiving 
heightened scrutiny among negotiators and from a broad range of 
interested parties.
  Some of our TPP partners do not support ISDS or are seeking 
safeguards to ensure that nations preserve their right to regulate. The 
Economist magazine, the Cato Institute, and the Government of Germany--
the birthplace of ISDS--have also recently expressed concerns with 
ISDS.
  As far back as 2007, when the May 10 agreement was reached, we 
recognized growing concerns over investment and ISDS. We insisted that 
our trade agreements with Peru, Panama, Colombia, and Korea include new 
preambular language clarifying that the investment obligations in those 
agreements are not invented to provide foreign investors with greater 
substantive rights than investors have under U.S. law.
  Over the past few years, our concerns over the investment text and 
ISDS have become even greater. Nevertheless, our negotiators have 
refused to include the May 10 preambular language in TPP, and the text 
of the investment chapter in TPP is basically the same model as adopted 
10 years ago, even though conditions have changed dramatically in the 
past 10 years and calls for changes to or elimination of the chapter 
have intensified.
  Despite proposals to include new safeguards in the ISDS mechanism, 
the administration has not made any attempts to incorporate them.
  The Hatch-Wyden-Ryan TPA investment negotiating objective is the same 
as it was 12 years ago and, again, is obsolete.
  TPP does not ensure compliance by TPP parties that have labor laws 
and practices that fall short of international standards contained in 
the May 10 agreement, even though TPP is expected to include the May 10 
language.
  Vietnam presents the greatest challenge we have ever had in ensuring 
compliance. Workers there are prohibited from joining any union 
independent of the Communist Party. While the administration is 
discussing these issues with Vietnam, Members of Congress and 
stakeholder advisers have not yet seen any proposal to address these 
critical areas.
  On a recent trip to Vietnam, I met a woman who had been thrown in 
jail for 4 years for trying to organize workers into an independent 
union. We cannot simply have the right written obligation in the 
agreement and expect that some future dispute settlement panel is going 
to ensure meaningful change on the ground for workers.
  The administration has not committed to ensuring that all changes to 
laws and regulations are made before Congress votes, as was true with 
Peru, Panama, and Colombia.
  The administration also does not make available to Members of 
Congress any ``consistency plan'' they are discussing with Vietnam so 
that we can evaluate the changes to Vietnamese laws and practices they 
are seeking.
  From what I understand, any plan will fall far short of bringing 
Vietnam into compliance with basic ILO standards, as required under the 
May 10 agreement. For example, I am concerned Vietnam may refuse to 
allow industrywide unions to form, a clear inconsistency with ILO 
standards. Our negotiators also have refused to accept our suggestion 
that an independent panel be established from the beginning to ensure 
compliance with the labor obligations and expedite a dispute.
  Without such a structure, future cases will need to be built from 
scratch by outside groups and submitted to the U.S. Government, a 
process which has taken several years for the Department of Labor to 
act on in Honduras and Guatemala.
  The President said recently that Vietnam ``would even have to protect 
workers' freedom to form unions, for the first time,'' but the TPP that 
USTR is negotiating seems far from ensuring those words will become 
real.

                              {time}  1430

  Mexico also has a long way to go. Americans know that Mexico competes 
in manufacturing. According to Professor Harley Shaiken at UC Berkeley:
  ``Under NAFTA, the auto industry in Mexico has grown rapidly, and it 
is in the midst of an unprecedented expansion. Mexico assembled over 3 
million vehicles in 2013--more than Canada--and exported over 80 
percent of them, mostly to the U.S. Global automakers plan to invest 
$6.8 billion in Mexico between 2013 and 2015. As a result, Mexico is on 
track to become the leading source of imported vehicles for the U.S. 
market by 2015, surpassing both Canada and Mexico. Moreover, Mexico 
exported $44.8 billion in auto parts to the U.S. last year, more than 
Japan, Korea, and Germany combined.''
  The wage rate in Mexico is about 20 percent of a comparable rate in 
the U.S.
  The administration likes to say that TPP will renegotiate NAFTA. I am 
all for that, but, again, words in the agreement are not enough. Mexico 
has to change their laws and their practices. For example, they have to 
get rid of so-called ``protection contracts'' that serve to block real 
representation in the workplace, and they need to fundamentally reform 
or replace the conciliation and arbitration boards that are responsible 
for resolving disputes over workplace representation and other labor 
issues. This is vitally important because U.S. workers compete directly 
with Mexican workers in critical manufacturing and other sectors. While 
I understand the administration has started conversations with Mexico, 
I am not informed of any consistency plan that would detail the changes 
Mexico needs to make to their laws.
  TPP negotiators are also working on disciplines for state-owned 
enterprises, or SOEs. Countries that rely heavily on state-controlled 
and state-funded enterprises are able to give those champions an 
enormous and unfair advantage over private companies that compete 
against them in the marketplace.
  The TPP would include disciplines on SOEs that are expected in 
language to go beyond anything we have ever included in past 
agreements, but the extent to which an SOE provision will help to level 
the playing field will be determined by the degree to which parties 
seek very broad, country-specific carve-outs for particular SOEs. As 
concerning, the definition of ``SOEs'' is too narrow, allowing 
enterprises that are effectively controlled by foreign governments--but 
where the government owns less than 50 percent of the shares--to 
circumvent the obligations.
  There are several other TPP issues that need to be addressed. Food 
safety is one of them. There is a very broad consensus that not enough 
resources are being devoted to ensure the safety of our imports. What 
are we going to do about this issue? It is a real issue in the debate. 
Unfortunately, specific portions of the negotiations and the 
shortcomings in TPP are often difficult to discuss because the 
documents are classified.
  I have not argued that the entire negotiations should be open to the 
public. I understand that, in a wide range of contexts, from peace 
negotiations to labor negotiations, it is widely assumed that 
negotiations at times need to be held behind closed doors, and at this 
point, I am not convinced that trade negotiations are different. The 
negotiators need to communicate frequently and effectively with 
stakeholders to ensure that they are seeking the right provisions in 
negotiations. In a number of respects, our negotiators

[[Page 7678]]

were not doing that when the TPP negotiations were in the early or even 
not so early stages.
  Thanks to constant pressure from Members of Congress over the past 
several years, we have made some progress in this regard. For example, 
just a couple of years ago, USTR refused to share the bracketed text--
laying out the positions of various parties--with any Member of 
Congress. We got them to change that. Much more recently, they refused 
to let staff from personal offices assist their Members with the text 
even where the staff member had a top secret security clearance. We got 
them to change that.
  Still, there remain unreasonable and burdensome restrictions on 
access to the text. For example, Congress created a system of 
stakeholder advisers many years ago to provide advice to our 
negotiators and to Congress on the negotiations, but those advisers 
still can only see U.S. negotiating proposals. They cannot see the 
proposals of our trading partners. It is very difficult, if not 
impossible, for them to provide negotiating advice if they can't know 
what the other side is seeking. Moreover, personal office staff with 
top secret security clearances still cannot see the negotiating text 
until the Member is present.
  Let me say a few more words about this.
  I am not at all confident that our negotiators are sharing with 
Members of Congress or the stakeholder advisers all of the texts that 
are being exchanged with other TPP countries. For example, we know our 
negotiators, as I have said, have been discussing a labor consistency 
plan with Vietnam for many months now at least, but there is still no 
text for Members of Congress to review. This is one of the major 
outstanding issues in TPP, and yet there is no text to review despite 
the fact that USTR has told us for at least a year now that the 
negotiations were nearly complete. At a recent meeting to discuss 
Vietnam, it was classified so that the status of negotiations on this 
issue cannot be discussed publicly. Many of us left less confident that 
there has been any progress in the negotiations.
  Or take currency manipulation. For years, literally, we have pressed 
what the administration's position is on the issue given that 
majorities in both the House and the Senate have urged that strong and 
enforceable currency disciplines be included in TPP. For years, the 
administration said it was still deliberating on the issue and had no 
answer. Now, when pushed through the TPA debate in Congress, the 
administration claims that they could not possibly include enforceable 
disciplines in TPP because they would be a poison pill.
  Finally, I do not understand why the administration is selectively 
able to reveal to the public certain aspects that they think the public 
will like, but those of us who have concerns cannot reveal them. We 
have examples of officials revealing to the press very specific things 
from the negotiating text, like when tariffs will be eliminated on a 
particular product. In my view, as to the Environment Chapter, the 
problem with that chapter is that many of the verbs used in those 
obligations--the essence of the commitments--are very weak, but I, 
presumably, can't tell you what those verbs are.
  So one has a hard time understanding the rationale for this process. 
The way it has been handled by the administration does not make Members 
and other key parties real participants with a meaningful role, 
understanding and impacting decisions undertaken in this important 
negotiation.
  Let me say a word regarding an issue that has come up recently. In 
addition to falling short in getting TPP on the right track, the TPA 
bill also presents dangers with other agreements. This TPA will be, 
essentially, in place for 6 years. It gives the President a great deal 
of latitude in deciding which agreements to negotiate with whatever 
trading partners the President wants and covering whatever subject the 
President wants.
  Recently, Senator Elizabeth Warren drew heavy criticism for 
expressing the concern that TPA could be used by a Republican President 
to undermine Dodd-Frank. The concern was dismissed as speculative and 
desperate, but as explained below, the concern is genuine and 
legitimate.
  In ongoing trade agreement negotiations to establish a TTIP, European 
officials, U.S. and European banks, and some congressional Republicans 
have expressed an interest in harmonizing U.S. and EU financial 
services in a way that would water down U.S. laws and regulations. 
Similarly, some Republican Presidential candidates have expressed an 
interest in weakening or in repealing Dodd-Frank, although not simply 
through the TTIP negotiations. Of course, doing so through TTIP 
negotiations would give the President the excuse that agreeing to 
weaken Dodd-Frank was simply part of a quid pro quo to get something we 
wanted from Europe.
  According to an article from Politico: ``White House and pro-trade 
officials on the Hill say that the fast-track bill currently before 
Congress includes language that expressly forbids changing U.S. law 
without congressional action.'' But this language is nothing new. 
Legislation to implement trade agreements typically includes similar 
language. The purpose of the language is simply to make clear that, 
under U.S. law, our trade agreements do not have ``direct effect'' and 
are not ``self-executing,'' meaning that domestic laws and regulations 
need to be amended to give effect to any obligation in an international 
agreement.
  Implementing bills typically make changes to U.S. tariff laws to 
comply with the tariff obligations of trade agreements, but some 
implementing bills make more substantial, behind-the-border changes to 
U.S. laws to comply with the obligations in our trade agreements. That 
has been true of changes to U.S. patent laws and changes to the 
Immigration and Nationality Act.
  With all of these concerns in mind--and, above all, my determination 
to do everything I can to get TPP in shape to garner broad, bipartisan 
support in Congress--the Ways and Means Democrats offered a substitute 
amendment during the markup of the TPA bill. That amendment, the Right 
Track for TPP Act, includes negotiating instructions, not merely 
``negotiating objectives'' like the TPA bill, on each of the 12 major 
outstanding issues, some of which I have described earlier. It provides 
that the President will not get an up-or-down vote unless and until 
Congress determines that the instructions have been followed. It also 
includes real mechanisms to ensure that a poorly negotiated TPP 
agreement will not be placed on a fast track.
  Regrettably, our substitute amendment was blocked in committee based 
on a highly questionable procedural determination from the chair. In 
essence, while the Republican majority was free to mark up a bill that 
was in both the jurisdiction of our committee and the Rules Committee, 
we were denied the right to do the very same thing. Our chair was 
concerned about stepping on the jurisdiction of the Rules Committee, 
and yet the Rules Committee has waived jurisdiction over the TPA bill.
  As is often the case with trade debates, they become about something 
they are not. This debate is not about being for TPP or against. I am 
for the right TPP, and that is why I want Congress to be in a position 
to press negotiators to secure a better outcome.
  This debate is not about letting China write the rules. I wrote the 
amendments to the bill granting China PNTR to try and ensure China did 
not write the rules when they entered the WTO.

                              {time}  1445

  This debate is not about isolationism. Neither I nor any colleague of 
mine is arguing that we should pull up the drawbridge and isolate 
ourselves. Indeed, most of us who currently oppose TPA right now have 
demonstrated on a broad range of issues that we are internationalists, 
perhaps more so than those who support TPA.
  This debate is not about national security or the pivot to Asia. I 
understand the national security issues. Indeed, what happened was 
years ago

[[Page 7679]]

Wilbur Mills said let's take trade negotiations out of the State 
Department and put them in USTR in order to be sure that the economic 
advantages were not traded away for political advantages.
  In the world today, I don't see how a trade agreement can be in our 
national security interest if it isn't in our economic interest. Fifty 
years ago, when the U.S. was an economic superpower, unlike any other 
nation in the world, maybe we could grant our trading partners 
disproportionate and nonreciprocal conditions in exchange for political 
advantages. That is what Wilbur Mills said. That is not the case today. 
Our economic security is critical to our national security.
  Proponents of TPA are trying to sell TPA by selling TPP itself. 
Unfortunately, that is the problem. TPP is not yet on the right track. 
It has not earned ``the most progressive trade agreement in history'' 
moniker that the President has given it. The best course for Congress 
is to withhold fast track until we know TPP is on a better course, to 
press the administration to work with us and really respond to our 
concerns by changing the course of negotiations, to send a signal to 
our negotiating partners that the Congress has set a high bar for 
negotiations, that we are demanding the best deal; and, in a number of 
areas, I think these countries will welcome the improvements I have 
suggested.
  At the end of the day, the goal is to achieve a Trans-Pacific 
Partnership worthy of support, a TPP that spreads the benefits of trade 
to the broadest swath of the American public and addresses trade's 
negative impacts. That is really what this negotiation is all about. 
This is what really, really very much motivates my concern to get TPP 
right, not to give away our leverage until TPP is correct.
  Voting now for TPA, when there is so much yet to be done to make TPP 
right, essentially gives away our leverage, essentially is a kind of a 
blank check to the administration. I feel so deeply about the 
importance of trade, the importance of getting it right, that I really 
urge that should be our focus.
  So I urge my colleagues not to give away our leverage, not to vote 
for TPA until TPP is done correctly. That is the challenge before us. 
That is the challenge likely to be before the House of Representatives 
the week after next. That is a challenge that we must surmount. That is 
a challenge that we must meet. That is a reflection of the years of 
many of us in trying to make trade be put on the right track.
  That motivated us years ago when we put together the May 10 
agreement; that motivated us when we negotiated the agreement with 
Peru, we who negotiated it. That is our dedication. We support trade 
when expanded trade is shaped so that all benefit. That is not true 
today of this TPP, and therefore I hope my colleagues will join 
together in voting ``no'' on TPA until TPP is gotten right. That is our 
goal; that is our purpose--that is our only purpose--and I think that 
is our challenge, and I hope the week after next we are going to meet 
it.
  I yield back the balance of my time.

                          ____________________