Conversation: Rob Portman
PBS Newshour, June 23, 2005
CONVERSATION: ROB PORTMAN
Rob Portman, the new trade representative, discusses the U.S. trade deficit with China and the controversial Central America Free Trade Agreement.
"[CAFTA is] a one-way deal, in many respects, for us...it’s very much in our favor."
— Rob Portman, USTR
audio link
RAY SUAREZ: In recent months, trade issues often moved front and center for the Bush administration, and it comes at a time when the United States’ record trade deficit continues to grow. Some of the bigger issues on the table include a tough fight in Congress over the approval of the Central American Free Trade Agreement, or CAFTA, and the contentious relationship with China over currency and textiles.
Here to discuss those and other issues is the new U.S. Trade representative, Rob Portman. Ambassador, welcome.
ROB PORTMAN: Thank you, Ray. It’s great to be with you.
RAY SUAREZ: Is the Central American Free Trade Act up for a vote soon?
ROB PORTMAN: I think so. We’ve already gone through the process of a mock mark-up of the legislation, so the process has begun. The vote could occur within the next week or so. It looks as though it’s going to be a relatively close vote. As you know, trade is a contentious issue these days.
But the agreement is a very sound one. It’s one that benefits U.S. farmers, workers, U.S. small businesses, service providers. Right now, these countries of Central America and the Dominican Republic send their products to us mostly duty free. In fact, 99 percent of agriculture products and 80 percent of their products in general come to the United States with no tariffs at all.
What this agreement does is it levels the playing field. It allows us to have the same benefits. In fact, if this agreement were to pass, 80 percent of our products, which now face tariffs would go into those countries duty free. And that’s why it’s a one-way deal, in many respects, for us, and it’s a good deal for us.
RAY SUAREZ: So what about the opposition? They’re saying there are very few protections for workers, either down there or workers who will lose their jobs here. The sugar industry has its real concerns here in the United States about what CAFTA would bring.
ROB PORTMAN: Well, as I’ve said, trade is a contentious issue these days, and that may explain more of opposition than anything.
In terms of the agreement itself, again, it’s very much in our favor because it knocks down barriers to our products going to that area. We’ll have a trade surplus as a result of this. Estimates are that there could be up to a $700 million trade surplus in the first year. I don’t think it threatens any American workers because what American workers will do, they’ll have the ability to gain additional jobs by selling products down to this area. It’s, therefore, different than a lot of trade agreements, frankly, that we’ve had in the past, and one that is really beneficial to U.S. workers.
In terms to what’s in the agreement with regard to sugar that has been a contentious issue. The Central American countries were able to get a slight increase in the amount of sugar they could send to the United States. It’s very little, a couple of spoonfuls per week per consumer. It results in actually less than 1.5 percent of our sugar production in this country, which is less than the annual fluctuation in our sugar program.
In addition to that, we put in place an insurance program within the agreement, which said that if the sugar does come in at higher levels — and we think it might — or if there’s a problem with the market here, that we could actually stop them from bringing the sugar into the United States.
So it really shouldn’t affect the sugar industry at all. I feel pretty strongly about that. Importantly, so does the agriculture secretary, who would be implementing the program.
But we are reaching out to those who are concerned, who are members who represent sugar beet growers, mostly in the northern Midwest, and those who represent sugar cane growers, who are mostly in Florida and Louisiana in the south. And I think we’ll be able to make some progress on that even in the next few days.
With regard to labor rights and the agreement, there’s a very strong provision there. I think it’s the cutting edge provision, much stronger than we’ve had in past agreements, because it’s more practical and more effective. And it will resolve, in the Central American workers, having more labor rights than they have now, and having better enforcement. We’re doing things we’ve never done before.
We’re setting up a dispute resolution system that’s a modern system where we can work out any problems that arise with regard to labor rights violations. We’re providing actual funding, called capacity building that will go to these countries; $20 million is reserved for this fiscal year alone, and for next fiscal year, we hope to have considerably more resources. This week, for instance, there is a bill marked up which would double that amount, to provide funding for Central America to enforce their labor laws, which everybody has agreed is the issue.
Without CAFTA being passed, those labor rights will not be improved in that way, and we will not see that kind of enforcement. So if someone is concerned about labor rights and enforcing labor rights, this is a good agreement to support.
RAY SUAREZ: There’s a lot of downward pressure on wages because competitors all around the world are trying to get into the American market with the cheapest per-piece prices possible. How can a Central American worker in making sheets or towels or socks or underwear be protected in the face of that downward pressure, and so much of the momentum and trade moving to China?
ROB PORTMAN: That’s a great question, Ray, and that’s one of the things that I love about this agreement, is that it enables us to partner with the Central American countries, countries in our region, our neighbors, to be able to compete more successfully, including with Asian imports and imports specifically from China.
Right now, if you’re a worker in Central America, your job is in jeopardy if you’re in the textile business, not because of the United States, frankly, but because of China. And already this year, thousands of jobs have been lost in Central America, which is one reason they’re very interested in this agreement. Because under this agreement we will be able to send U.S. fabrics — yarn, elastics and so on — to Central America to be sewn, and sent back here as apparel. That product can go down duty free under the agreement, and can come back duty free, which enables us to have a strategic advantage and be able to compete with these less expensive, sometimes Chinese imports of textiles.
So it’s a way to keep jobs in central America to be sure those people have not just jobs, but jobs that have labor rights protections, including discrimination in the workplace, child labor, and so on, and it’s a way for us to keep jobs here in this country because, frankly, if we don’t have that kind of a partnerships, those kind of inputs that we’re able to send to Central America will not be being sent to Asia.
On average, a garment coming from Asia has less than 1 percent U.S. value added. On average, a garment coming from Central America has 71 percent U.S. value added.
So it’s one of those unusual situations where it’s a win-win. It enables us to keep jobs here, which is why all the major textile organizations actually endorse this agreement, which, as you know, is unusual. Normally the textile workers here in this country are very suspicious of trade agreements.
Frankly, the U.S. textile industry is under a lot of pressure, as you say, globally, now that the so-called quotas are off. But this is one where the people representing the people who are representing textiles still in this country support the agreement because they understand the need to establish this kind of partnership to keep jobs here, and it also helps Central America.
RAY SUAREZ: Let’s return to China, if we could. Right now, Chinese enterprises are selling in the United States far more than the United States sells in China, quarter after quarter. And we were told during the ’90s by advocates of opening trade with China, that eventually that $1 billion-plus market would be pried open and be awash with American-made goods. It hasn’t happened, has it?
ROB PORTMAN: Well, it’s happened, but it hasn’t happened to balance what’s coming into our country. Our exports to China, as you know, have increased dramatically since that time, in 2001 when we entered into the agreement with the Chinese so they could come into the WTO.
I think our exports have gone up 88 percent, last year 22 percent alone. It’s one of our fastest growing export markets. We have a surplus in agriculture trade. We send a lot of soybeans to China, surplus in services. So it’s been a good market for us, and it’s a fast-growing market, which is why so many, you know, American workers and farmers and small business people want to keep that market open.
But the Chinese have sent a lot more to us than we’ve sent to them. So while their market has opened, and it’s a good export market for us, it’s not good enough. And my job, as I view it, as trade representative, is not to unfairly keep Chinese products out of our market, but to be sure they play by the rules.
And playing by the rules includes opening up their market even more to our products, because they have some barriers in place — some are tariff barriers, some are non-tariff barriers — and then being sure that that aren’t stealing our intellectual property, which is a big reason, I think, that we have this trade imbalance with China, and then finally, being sure that their imports into our country are fair.
RAY SUAREZ: So let me make sure I understand you. Your general preference would be not that Chinese enterprises sell less here, but that American producers sell more there in order to close the gap.
ROB PORTMAN: Well, that’s accurate, except to say that to the extent what they’re selling here is not being sold fairly here, in other words, not by the international trading rules that were set up under the World Trade Organization, and by their accession agreement, that they should not have the right to access to our market.
So the general response to China, I think, ought to be, you know, they need to play by the rules, both ways. They need to open their market more to our products. They need to be sure that they’re abiding by the intellectual property rules that the rest of the world needs to live by as well, including Russia and other countries that have problems — protecting intellectual property, copy rights, trademarks, patents, our movies, our recordings, our intellectual property that goes along with manufacturing processes — that’s not being protected now in China, and it’s a big loss to American business.
And then second, that to the extent the imports are coming into here, we ought to be sure that they’re not unfairly subsidized, to be sure they live by the rules. You mentioned textiles earlier. As you know, we have invoked a couple of textile provisions to keep Chinese textiles from surging in our market. In some cases, some sectors have gone up as much as 1,500 percent in the last year — I’m sorry, in this year alone. That’s why we have invoked some of these so-called safeguards under the Chinese WTO accession, dating back to 2001.
And I think that’s fair, and I think that’s how we ought to be dealing with the deficit we currently have with China. We should be doing even more in terms of our exports, by them opening up their market, and we should be sure that their imports to our countries are fair.
RAY SUAREZ: If you go into an American big-box retailer, you’re often hard-pressed to find anything to buy made in the United States. Will that hundreds of billions in trade deficit per quarter narrow? Can it be shrunk? Can it be closed?
ROB PORTMAN: I think it can be narrowed, and it can be narrowed simply by changing, as I said earlier, that formula between imports and exports so we can expand our exports.
We are the most open big free country in the world. We have the largest market in the world. You’re right, when I go to the Wal-Mart back home — and I still go home on the weekends to Ohio — I see a lot of Chinese products. I don’t see a lot of American products, and what I think we ought to be telling the Chinese, which I have done already in person — I think we need to continue to do so — is that we want to see them open their markets just as we’ve opened our market to their products. The trade deficit is more complicated, though, than just imports and exports. It has to do with macro economic factors.
Every economist I talk to has a little different formulation of it, but basically it’s that the U.S. economy is doing very well. We’re the fastest growing industrial economy in the world right now. The economies of Japan and Europe are not growing as fast, so we don’t have the export markets we should have.
Finally, we aren’t saving as much as we should in this country. And believe it or not, that relates to trade, because by having a relatively low savings rate and buying more, we’re going to have, unfortunately, some trade deficits continue. So we need to do three things: One, is we need to increase our exports, and I think that’s something that, again, as trade representative, ought to be my top priority. Second, be sure imports are fair. And third, we need to adjust some of these macro economic factors by encouraging other countries to grow more and by saving more as Americans so we can reduce that trade deficit.
We have a lot to be proud of. I mean, one reason we have a trade deficit, again, is our economy is strong. We have 5.1 percent unemployment now, which is historically very low. We have growth at over 3.5 percent, which is historically high. And, you know, we are a country that is absorbing, therefore, a lot of imports, and we’re getting the benefit of having lower prices as a result of that.
RAY SUAREZ: Well, there’s a lot of things we can’t get to tonight, but I hope you come back.
ROB PORTMAN: Well, Ray, thank you.
RAY SUAREZ: Rob Portman, thanks a lot.
ROB PORTMAN: Always great to be with you.
