Statement of the Hon. James P. Moran, M.C., Virginia

Testimony Before the Subcommittee on Trade
of the House Committee on Ways and Means

Hearing on Summit of the Americas and Prospects for Free Trade in the Hemisphere

May 8, 2001

As an unwavering supporter of free trade, I would first like to cite my firm support for granting trade promotion authority (TPA) to the President, but it should appropriately address labor and environment concerns. TPA is crucial to the President's ability to negotiate an FTAA and its approval by Congress would demonstrate the United States' commitment to expanding hemispheric trade. I encourage Members of this Committee to act in a bipartisan manner to advance legislation implementing TPA.

The expansion of trade in the Western Hemisphere represents one of our greatest opportunities in the coming decade. The creation of a FTAA will create a $10 trillion trading bloc of 34 countries and 800 million people stretching from the Bering Strait to Tierra del Fuego. If the sheer magnitude of this hemispheric agreement is not compelling enough to prompt Congressional approval of trade promotion authority, a Free Trade of the Americas Agreement is critical in another sense. We have an historic opportunity to lead in this endeavor to ensure that it reflects U.S. interests and values that can sustain the path of democracy and economic reform by our Latin American partners. Expanding trade relations with our neighbors in this hemisphere not only makes sense from a trade perspective, but also from a foreign policy and economic security standpoint.

Mr. Chairman, as you know, I have been one of my party's strongest proponents of free trade. As co-chair of the New Democrat Coalition, I have worked with other members who believe our future economic growth and prosperity depend on trade, but that we should be able to balance our economic interests with democratic values. Trade is and should be a non-partisan issue, the result of collective efforts by bipartisan Members to advance our overall economic interests. In order for this to be a successful bipartisan effort, we must address labor and environmental concerns in a meaningful way.

I commend the Administration's emphasis on expanding our trade relations in the Western hemisphere. U.S. Trade Representative Robert Zoellick has already shown outstanding leadership in this endeavor, providing the guidance and expertise that is essential to crafting an agreement that represents U.S. interests in the region, but also secures the backing of our Latin American partners.

Despite this bright start, I would like to sound the caution expressed by Peter Hakim, President of the Inter-American Dialogue, in his article entitled "The Uneasy Americas," that appeared in a recent issue of Foreign Affairs. He cites that "If Latin America loses confidence in Washington....the opportunities for American leadership in the hemisphere will diminish, along with hopes for an effective U.S.-Latin American partnership." For these reasons, this Administration and Congress cannot neglect the regional importance of renewing trade promotion authority in securing the support of our Latin American neighbors for wider economic and political cooperation.

We must also recognize the difficult economic and political situations faced by many of these countries, which are increasingly skeptical of the U.S. commitment to the region. The United States leadership in negotiating an FTAA, along with Congressional approval of TPA, will send the right signals to our Latin American allies. Such steps as renewing the Andean Trade Preference Act and expanding consultation with our Latin American neighbors on trade and development matters will go a long way toward repairing dormant ties with many countries in the hemisphere.

Reauthorization of the ATPA, though of little consequence to the United States, is critical to the Andean region's economy. It should also be expanded to offer greater economic incentives to our Andean partners, including a reduction in tariffs on apparel goods. The formula that worked for the Caribbean Basin Initiative (CBI) countries, which last year were extended duty-free and quota-free treatment for U.S. imports of apparel assembled in these countries, fit the economic realities in the Caribbean's apparel industry. We need to find a similar approach for addressing the economic realities of the apparel industry in the Andean region.

The apparel industry in Colombia, for example, has suffered as a result of the improved trade preferences extended to the CBI countries, with many manufacturers closing their operations and setting up facilities in the Caribbean. This has dealt a tremendous blow to Colombia and the other Andean countries which have lost any competitive advantage in apparel goods. For Colombia, trade in apparel represents a significant industry for a country suffering from economic instability and few employment opportunities. The United States has invested more than $1.3 billion in military aid in Colombia under Plan Colombia to fight the drug war. This aid, while important, does not go far enough in offering alternative economic development that can deter the cultivation and exportation of cocaine in Colombia. Expansion of ATPA benefits that includes apparel items is one critical way for the United States to fight the drug war while also improving economic opportunity and stability in the region. The relatively small investment of providing greater trade incentives to Colombia and the other nations under ATPA renewal would reap tremendous long-term gains for these countries and for U.S. consumers.

While ATPA has offered the Andean countries tariff preferences on certain goods in an effort to enable them to pursue alternatives to cocaine production and trafficking, it has not gone far enough to stimulate long-term economic incentives that will sufficiently counter the narcotics industry in the region, most notably Colombia. For Colombia to be truly successful in stemming the drug trade, it will need more economic opportunities that will provide jobs and wages that can sustain Colombian workers and farmers.

Renewal of ATPA should expand upon the existing program and allow similar preferences for apparel items that the Congress offered to the Caribbean countries last year. This is absolutely essential in the case of Colombia, whose apparel industry employs roughly 300,000 workers and comprises $408 million in U.S. imports. At a minimum, the Caribbean Basin Trade Partnership Act (CBTPA) will weaken the Andean countries' apparel industries and lead to revenue and job losses as apparel producers begin moving their operations to Caribbean locations.

According to the U.S. International Trade Commission's March 2001 report on U.S. Andean Apparel Trade, "Among the most immediate potential impacts that could occur from Colombia's loss of competitiveness with the CBERA countries are (1) a decline in foreign investment and a diminished alternative to drug production in Colombia and (2) a further decline in production-sharing trade with the United States that has occurred since 1997." I would also add that the Andean countries will face additional competition from Asian suppliers of apparel goods, who will gain access to the U.S. market free of quota restrictions in 2005.

Our Andean trading partners are also poised to be strong allies in our mutual efforts to secure a larger hemispheric trading bloc. We should start our efforts to expand trade in the Americas by first approving an expanded Andean Trade Preference Act that includes apparel and other goods from the region. I urge my colleagues on the Committee to expedite consideration of an expanded ATPA before the expiration of this agreement later this year.

Mr. Chairman, I would simply close by reiterating the importance of Congressional approval of trade promotion authority legislation. I am confident we can successfully tackle the difficult issues of labor and the environment in this process. TPA is integral to demonstrating the United States' resolve in the region, and will offer the opportunity to negotiate other trade agreements that benefit American consumers and businesses.

As expressed in the Declaration of Quebec City approved by President Bush and the 33 other heads of state from the Americas, "we do not fear globalization, nor are we blinded by its allure. We are united in our determination to leave to future generations a Hemisphere that is democratic and prosperous, more just and generous, a Hemisphere where no one is left behind." I think this splendidly captures the importance of an FTAA to our future.

Mr. Chairman, I thank you for this opportunity to appear before the Committee and would be happy to respond to any questions you and other Members may wish to ask.