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Preserving World Capitalism for the Next Century: A Plan of Action

Speaker: Richard A. Gephardt, U.S. House of Representatives (D-MO)
March 3, 1998
Council on Foreign Relations

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Note: Remarks as prepared for delivery

Questioner: You talked about the political, structural aspect of the economic collapse. In the past, except for Fourth of July speeches, the political leaders in this country have mostly ignored the political systems and so agreements with China and other countries go on in spite of this situation. In fact the legislation that would tie a general system of preferences to labor unions has also been largely ignored but gets to the heart of what you are talking about. What specifically would you do to change existing policy and practice to carry out the policy recommendations that you are making to us?

Congressman Gephardt: Well, as I tried to say then as I’ve said many other times, I think it is extremely important for us to lead not only to help countries financially work out of their problems but to lead other countries to the kind of policies in their own country that will recognize the need for human rights, labor rights, and environmental concerns. That was the argument in fast track. I was not against fast track, I was for fast track. I am not against free trade treaties, I am for free trade treaties. But I believe as you enter that process we must provide pressure or leverage on other countries to enforce their own laws, not international standards, not American standards, their own laws on workers’ rights, human rights, and environmental concerns.

Now, if we get a fast track, for instance, that contains that requirement that the free trade treaties that come from it contain those kind provisions, not cosmetic side agreements as we see in NAFTA, but real provisions that over time will bring about progress. I would vote for that fast track in a heart beat. That’s the kind of leadership in the area of trade that we need to assert. We had an ongoing debate about China policy, about whether to grant them most-favored-nation or not. And there again, I think we must use that opportunity to move countries in the right direction.

And, finally, the best example that I can give of using that pressure to good ends is our policy with South Africa over the last 15 years. Charles Rangel, many of our colleagues, went to the floor many times in the mid-1980s and said we should end normal a trade relationship with South Africa until it ends its horrible human rights policy. They were laughed at when they started. People said it would never happen. People said no one would ever follow. People said we would lose all these lucrative contracts in South Africa. They persisted. We overrode a veto of President Reagan. We put that policy in place. A few months after that I’m watching TV on a Sunday morning. Here’s a field in South Africa—I didn’t know what was happening—and here comes Nelson Mandela. After being there for 20 years. A hero. Not mad at anybody. Not angry at his captors. And now he is the president of the country. That is progress toward democratic capitalism. And it happened because America led through representatives in the Congress who stood for what our Declaration of Independence says, our universal rights, not just American rights. That’s leadership. And that’s what I hope for in a number of these areas of trade.

Questioner: Without some kind of compromise between yourself, the administration, and a Republican majority in Congress, there’s a real danger there will be no new trade negotiating authority in the hands of the president perhaps until 2001, if that. I take it you would not like to see that outcome. So can you describe to us a possible compromise on the worker rights and environmental issues which would make this new authority possible?

Congressman Gephardt: To answer this let me give you a little history which you may remember in the NAFTA debate and in the negotiations. In 1991 I negotiated with the then Bush administration over the fast track bill that President Bush wanted for NAFTA. We negotiated language into the legislation that said that in the negotiation we would pay attention to labor, human rights, and environmental concerns. I was happy with that and I voted for fast track in 1991. A number of Democrats joined with Republicans to vote for that bill.

I followed the negotiation very closely. I went twice to Mexico and met with President Salinas. I went to the border eight times and visited the plants and the people. I talked with our negotiators. I talked with the Mexican negotiators repeatedly. And what I asked for was either in the agreement or in side agreements enforceable language that would get all the countries and parties to the treaty to better enforce their environmental and workers law.

At the end of the day, after a five-year negotiation, our negotiators decided maybe correctly from their view point that they could not get real teeth in the side agreements. They had side agreements that they were to pay attention to these laws but frankly they were toothless and cosmetic. And I said at the time, “Please go back to the table. We’ve got to get more teeth. We’ve got to make these things enforceable. Let’s not put up with this second best solution.” And the answer I got back was, well, congressman, you and others did not make it clear in the fast track legislation that you wanted this in the treaty as a condition for your vote.

Now when we give fast track to the president—and I’m for doing it—we are giving up the constitutional right given to the Congress to review all parts of the treaty. I believe it’s the right thing to do because I don’t think we ought to be pawing over every provision in the treaty and trying to change it. I’ve got beer in Saint Louis, I’ve got airplanes in Saint Louis. I’ll worry about that. Everyone will worry about their parochial concerns. But if we are going to give this authority to the president we should at least be clear on the macro conditions or items we want in a treaty. I don’t want to mislead. Our negotiators said to me that we misled the Mexicans, we said that we could pay attention to this but it wasn’t for real. I don’t want to do that again. I want to be clear. At least for my vote. I can only speak for my vote. This is what I hope to have in these treaties. I think it’s very important.

I have no illusions about how easy it is to get countries to develop and have the rule of law and enforce their own laws. It’s a tough deal. It takes a long time. But the journey of 1,000 miles starts with the first step. We’ve got to get moving.

Go to the border and see the conditions. They are deplorable. We had a big deal in the newspaper here. There were 12 Mexican women in an apartment here working in substandard conditions and wages. That was seen to be a scandal. That’s not the scandal. The scandal is at the border. People living in cardboard boxes, children with hepatitis, children who cannot afford to go to school because they are paid subhuman wages. Now I know it’s going to be a hard lift to change that. But we can do it. It’s good for Mexico. It’s good for us. It’s good for companies in both countries. It’s good for the world. It’s good for humanity to use trade leverage which is the one thing we have to slowly but surely move people in the right direction. So I want the language. I want it to be clear.

Now, if we can’t get that I’m willing to do fast track or WTO issues alone without any language. I believe the WTO is critically important. There are treaties under the WTO we ought to be moving on and we can work out, I’m sure, a compromise to do that. I’m told the Republicans don’t want to do that alone. But I’d vote for that tomorrow afternoon. I also offered another compromise. I said, “Look, we want to do a lot of countries in Central and South America, we want a free trade treaty of the Americas, I’m for all of that. But if we can’t get any language on labor and environment that is acceptable, let’s do Chile alone.” They appear to be the one that is the most ready to move forward. They have done a lot in labor and the environment. I’m willing to trust everybody and say let’s go try again. I haven’t gotten any takers on that. I’m willing to entertain all manner of ideas but I am not willing again to mislead anybody about what we want in treaties.

Questioner: Your proposals or your calls about Japan’s failure call for a sweeping change in the way Japan does business, not just one or two things, but almost a top to bottom reform. And I can think of only two Americans who ever got that and one was General MacArthur and the other Commodore Perry. They both had a lot of help when they went to Japan. What’s your program for getting the Japanese to change? Or the Japanese might say, “You and whose army?” is going to get these answers out of Japan.

Congressman Gephardt: That’s an excellent question. First of all let me say that I have enormous respect, admiration, and affection for the people of Japan. It is a wonderful society. It is a very strong partner and friend of the United States. I believe that there are lots of people in Japan including a lot of public and private leaders in Japan who feel that Japan must change. And so I think there’s a ready audience now in Japan to begin to move some of these changes into place. And a lot of changes have already taken place. Not enough, but there has been change.

I also believe—and it’s the same argument that I made in NAFTA—that you don’t change long-standing rigid practices without putting on pressure. I have had leaders in Japan say to me privately that if you all don’t put on pressure for this change it isn’t ever going to happen. The forces for inertia are terrific. Doing it the way we’ve already done it is always something we like to do. We’re comfortable with it. It’s easier that way. Change is hard anywhere. It’s especially hard in Japan. So we must be pushing for that change. And that’s what I’ve argued in trade policy with Japan for 15 years now. In my humble opinion, even though this administration is light years ahead of past administrations in this area, we still are not pushing hard enough. We give up. We spit the bit out just about the time we’re about to get action. We get frightened when we are right at the pressure point to move forward. Now it’s always a balancing act and you’ve got to use your common sense. But I think we’re in a position now where Japan must help us with this crisis. We cannot do this alone. They must open their market. They must free up their financial system. They must reflate their economy. The numbers I’m looking at right now and that you’re looking at show perhaps less than 1 percent growth in Japan over the next year. It’s unacceptable. They’ve got to do better. They can do better. So in all these areas I hope we will push very hard.

Questioner: You made an extremely eloquent statement about American leadership and its responsibilities and burdens, the inevitability and the benefits of international capitalism, and the rule of law. I just wonder in that context how you appraise the prospects of paying our U.N. dues which are after all a treaty obligation.

Congressman Gephardt: I feel very strongly that we should have done that a long time ago and I will work as hard as I know to pass that legislation as well as supporting our policy in Iraq and our policy in Bosnia. In fact I hope that all four of these complicated questions are put into one piece of legislation. If you are going to take castor oil it’s good to get it all in one big spoon and get it over with. I think that it will be very hard to avoid this Mexico City language that some in the other party want to put on all of this legislation. I think that the only way to solve that problem is just ride into the middle of it, put all this in one bill, put the $18 billion to the IMF, the U.N. dues, Iraq, Bosnia. Put it in one bill. Let them try to put Mexico City on it if they get it on it. Then the president has to decide if he wants to sign the bill. I don’t think he will. He may try to line-item veto it if that’s still available, if the Supreme Court has decided that issue. Whatever. Let’s go. If he vetoes the bill then they have to decide if they want to sit there and not do this or have Mexico City language. Maybe they’ll put that in a separate bill as they should have from the beginning. And we can get it done.

Let me finally say this—and I don’t want to bore you with the Iraq question. I think what we are doing in Iraq is the right thing. It’s the least worst alternative. The U.N. has provided real help and real leadership in implementing this policy. And you know what they’ve done in other problems around the world. This is an enormously constructive organization for the world economic order that we’ve been talking about this morning. We need to pay our dues. It is humiliating that the United States of America, the leader of the world, cannot figure out a way when our economy is as good as it has been in 35 years ... [brief audio loss] ... and I hope we’ll do it forthwith.

Questioner: I’d like to talk a little bit about one country in Asia that has been particularly troublesome in the crisis. While many of the countries have responded indeed to the IMF’s measures, Indonesia stands out as a problem not only financially but strategically and politically for us and has become somewhat a focal for international political attention as President Suharto has snubbed the IMF and defied the IMF and is entertaining proposals for a currency board. I know that currently President Clinton has sent Walter Mondale there to negotiate with the Indonesian government. And I’d like to know what you believe the United States response should be should there be continued defiance of the IMF. Should we with hold IMF aid for Indonesia and suffer the political consequences or should we be perceived as backing down to this government.

Congressman Gephardt: It’s an excellent question. I read an article the other day. Someone in one of the papers said that we’re going to do everything that we can to get Indonesia to agree but if they don’t we really have no choice. We’ve got to keep the bail out going because if they go down then they cause contagion and other countries get in trouble. That’s the wrong approach. I must be honest with you. I think we either promote certain values and rules and discipline or we don’t. What message would it send to Thailand or South Korea if we give in at the end to President Suharto and do whatever he wants to do? Why should they keep any of the promises that they made? Why should anybody do anything?

Now I understand that may have repercussions. I think we’ve all been amazed at the speed of the contagion of this thing. Kind of like our depression in the 1930s. Roosevelt said that the only thing we have to fear is fear itself. And when one country goes down it tends to take others with them. But I think the alternative is worse. I think if we give in and say that, “Well, you really don’t have to do it, we didn’t mean it. If you go down we just can’t stand up to that.” Then we’re cooked. I think the IMF at that point has to just forget about whatever it’s doing. I think that would be a horrible result. I understand the risk. This is kind of like Iraq. You have alternatives and then you have less worse alternatives and I think that’s the less worse alternative we can take. And I hope the IMF will do that.

Questioner: So far the data suggests that countries in Asia are responding by sharply curtailing imports and the export surge is obviously down the road. You said that we should be starting to negotiate with the WTO for a flexible response to this import surge should it occur. Could you amplify what you mean by that? Are you suggesting that we should not welcome those imports or that we should provide assistance more directly and broadly to firms here that are hurt by those imports?

Congressman Gephardt: I think it’s inevitable that we’re going to take more imports. I think we already are. I think the trade figures are already ballooning and will balloon more. I guess I’d say three things. One, where we can we ought to negotiate with countries to moderate their behavior. Let me give you one specific example. We have had for years a trade regime with steel that has tried to round the rough edges. There are times when people have criticized that as managed trade and been very critical of its effects. We’re not doing it right now. All that has been called off in recent years. Our steel industry has been largely downsized and modernized. What’s left is very efficient, very productive. But even it could be knocked out if we see a long term surge of imports into the United States. So, one example would be you might want to get the steel folks together and have some arrangement to get us through this tough period at least in that area. You might want to do that in other areas.

Secondly, I think and I’ve felt this for a long time, we never get serious about worker adjustment in the United States. I’m not talking about European style worker adjustment. I am talking about training that’s real and of enough duration to really get people into a new condition. I am talking about helping people move and get into the new jobs that are out there. Low unemployment is a happy circumstance and we ought to be able to figure this out. But that policy needs to be used as well. Those are the two things I would think of to get you through the near time crisis.

Questioner: Congressman, in this week’s Business Week they said that at this speech you were going to announce a whole new kind of approach, particularly that you were going to change your opposition to funding for the IMF to support for it. And, of course, you’ve said that. But you’ve also stressed mainly continuity, that everything you’re for now you had been for in the past including the Mexican bailout. Now I must say that I’m not sure how you voted in the end. I assume you voted in favor of it. But I don’t remember you as being a strong supporter of the Mexican bailout. And, in fact, it sounds to me like you almost have a kind of double standard in the way you thought about the Mexican situation and what was wrong with Mexico and how you’re thinking about some of these Asian countries. Would you like to clarify or take issue with my impression?

Congressman Gephardt: I would be happy to.

Questioner: Nobody ever said this was an easy place.

Congressman Gephardt: No. It’s what democracy is about. I feel that position has been entirely consistent through this whole period. I’ve always voted for IMF funding. I have always voted to fund the U.N. I feel very strongly that we are in a global economy whatever anyone would think about it and we have to deal with it in the most constructive manner. And I believe the IMF, the U.N., the WTO, which I voted for, are very constructive international organizations to help further the architecture of a global capitalist economy.

I remember when the president and Bob Rubin called us down to talk about the Mexican bailout. I wrote a letter to the president a year and a half before NAFTA which said that we had better worry about a peso devaluation, that it was inevitable and it would cause problems. And we ought to negotiate that in the treaty. It was not done. But, yet, when the problem appeared, I agreed with the president and I said so at the time and secretary of the Treasury and the Federal Reserve president that we had no choice but to deal with the problem. We never voted on it in the Congress, unfortunately. As you’ll remember the president asked us as leaders—we had Bob Dole and Newt Gingrich and Tom Daschle and myself in the White House. And we all said we agree we need to do this. And we all went back to our colleagues and said, “Let’s go. Let’s vote for this.” And everybody said, “Well, we don’t think we want to.” And especially on the majority side again you had people saying that they didn’t want to do it. And the Speaker came back and said, “I can’t get any votes for this.”

And so the president using a little seen judgment from the attorney general decided he had the power to do this without a vote and he did it. I don’t know if he had the power or not. But he did it. It was a great profile in courage that he did do it because I believe if he hadn’t done it you could have seen this contagion across the world at that time.

That was when there was trouble in one country. Now you are talking about trouble in five or six countries. That’s why this crisis is so much more complicated and difficult. The president could not do this without a vote now. We have to have the vote. And I’m working and will continue to work among Democrats as hard as I can and among Republicans if any of them will listen to me to try and get this done. I think we will be able to pass it.

Now let me just finally say this. My position on IMF funding has always been the same and that’s what I’ve said here today. Some people confuse, I think wrongly, what I’ve said on the IMF, what I’m saying now on the IMF, with what I’ve said in the past on say trade with Japan, or trade through NAFTA, or fast track. I think it’s just a confusion and a misunderstanding of what I’m trying to say. I believe there is a new internationalism, if you will, that I’m trying and others in my party are trying to describe. It is not isolationist. It is not protectionist. And it never has been. But it is using trade among other things to achieve standards and values and new architecture for world trade. There are some that believe that trade among any circumstances is positive and good and should go on. I understand that view. I just don’t believe it. You’ve got to use the trading relationship to provide rules over time, international rules or regional rules that move all countries to a higher level of compatibility, and standards that are good for trade.

I’ll just end with this. Henry Ford said, “I’ve got to pay the workers enough so there is somebody to buy the cars.” It’s still right. There is not enough demand in Mexico, for instance, today because people have no money. I’m a Democrat. I believe in demand as well as supply. I believe that works should be paid for their hard work. Not more than they are owed but paid for their contribution. I think when you do that—whether it’s the minimum wage or just a fair wage—you help the entire economy.

Questioner: In a shift of gears, Mr. Leader, would you care to give us your comments on the outlook for the mid-term elections. I’m reticent but I’d be happy to do it. Right now I think our country is about as closely competitive as it has ever been. In the last election for Congress, in the raw vote for all the seats, it was a literal split, 50/50 between the major parties. It’s really an amazing circumstance. We are really at a 50/50 point. I don’t know that that is going to change in these two years. What I do think is that for a lot of individual reasons, race by race, we have a great chance to win back the 11 seats out of 435 that we need to win a majority in the House. We’ve got opportunities in the western part of the United States that we didn’t expect to have, frankly. That’s not usually our best place. We have good candidates running and they are running good campaigns. I’ve very encouraged that we could come out of the west with a net plus of six, seven, or eight seats which would poise us to either win or come very, very close to winning a majority back. You might wind up with a one vote difference between the parties. I hope it’s one vote our way and not the other way. But you can wind up with that kind of split in the Congress which would be an interesting situation.

Finally, let me say this, I really believe—and I’m not going to be partisan here—I believe what both parties have to do today—and I think our party is trying to do a good job of—is relate to what I call the “kitchen table,” everyday problems that people face. This economy is good, make no mistake about it. It’s about as good as we’ve seen in a long time. Still, millions of Americans in the middle class, people trying to get in the middle class, who are struggling, they are working two or three jobs, they are working overtime. Parents spend one-third less time with their children today than they did 15 years ago. There’s a huge heroic struggling going on out there. People are giving up their ability to spend time with their families and children to do it. And they would like a little help. They don’t want government to do everything or most things for them, but they’d like a little help on education, on health care, on child care. And I happen to believe our ideas on those are sound and I hope they’ll attract votes in the mid-term election.

Questioner: For those so inclined and would hope to see a Democrat majority, is it possible for them to express that through contributions to the Democratic Party?

Congressman Gephardt: We’ll be at the back door. Thank you very much.

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