Council on Foreign Relations
JULIA SWEIG: Good afternoon. Hello, and good afternoon. I welcome all of you to the Council on Foreign Relations. I’m Julia Sweig. I’m a senior fellow here in the Latin America Program. I would like to thank Congressman Kolbe and Congressman Levin for coming over today. It’s a pleasure to have both of you here, and I know that our members, and our members of the diplomatic community, as well as the press corps, have many questions not only about Central America, the trade agreement with the United States that’s now under discussion, but also more broadly, about U.S.-Latin American relations from your perspective.
We will speak for about 25 minutes between the three of us, and then open it up to questions from all of you. I remind you now that also when you speak in the question-and-answer section, to please identify yourself and stand up when you begin speaking. Identify yourself. And also, if you would all please turn off your cell phones if you have any of them, and pagers and any other technical things that might make noise.
The biographies of these two members of Congress are here in your folders, so I will let you read those. They’re extensive, and both of these gentlemen have played important and active roles in formulating our national debate on our relations broadly with Latin America, and specifically on trade. So, I’d like to open up the conversation—I don’t know which of the two of you to ask the questions first to.
JIM KOLBE: Well, he’s the more senior.
SANDER LEVIN: K before L, so—
SWEIG: That is the protocol.
LEVIN: Either way. It doesn’t matter.
SWEIG: OK, then I’ll ask Congressman Levin, and then follow with the same question to you. If you could lay out for us what you see as the major stakes on the table with ] CAFTA-DR [Central American Free Trade Agreement-Dominican Republic from the perspective of the United States, Central America, and the Dominican Republic, then broadly from the perspective of Latin America and U.S.-Latin relations, and finally in the context of the Doha Round [of World Trade Organization (WTO)] negotiations. And I’ll remind you again—you can take a couple of minutes. We have 25 minutes.
LEVIN: Well, when we chatted earlier, you thought that Jim and I might say something briefly more generally. And I’d like to try to frame if I might the issue somewhat more broadly, and then come directly to CAFTA and Latin America. Because I do believe that there is often a misunderstanding as to what these trade issues and arguments are all about. And I’m glad to be here with Jim. You and I have a chance to talk about these issues, and enjoy doing so. And I think both of us try to go beyond some of the rhetoric, and sometimes the overdrawn rhetoric, to describe what’s really beneath the surface of these discussions and these debates. And coming off of the hearing yesterday on CAFTA before [the Committee on] Ways and Means, it reinforces for me the need to talk about as well as I can, or as poorly, what I think the dynamic of all this is about.
So let me just do that in a few minutes, and then Jim, you take over. And then we can come back to more details. There’s a tendency to talk about trade and trade issues, free trade versus protectionism, for example, or fair trade. And I don’t think that’s the basic argument. I think it misrepresents what the debates are mainly all about. The basic disagreements today increasingly are among those who support expanded trade and have often worked for expanded trade. I think there’s a more basic feeling or difference.
If it isn’t protectionism versus free trade, what is it? It’s whether and how you need to shape trade as it expands. I think there are basic differences as to the extent you have to do that, the extent to which trade is an end, in and of itself, the extent to which it’s a means to an end, the extent to which, essentially as expanded trade works out, it works out any problems. And what really needs to be done is expand it, and it’s a win-win proposition, and if there are losers, catch them with some kind of a safety net.
So on these issues, I think we need to get away from the argument, it’s free-traders versus protectionist, but to see what’s driving the differences, and the differences, for example, between Jim and myself. We’ve seen these differences, for example, manifested way back when I first came as there wasn’t an inflow, influx, of products from Japan. I come from Michigan. We especially felt it in the auto industry. And while we had these open markets, Japan had very closed markets. And the question became, what do we do about it? And there was a basic difference of opinion, not whether we needed trade from Japan, not whether trade from Japan was good for America, but more whether we needed to take steps to make sure there was a two-way flow, and if not, what the consequences would be.
I think we see it today for example in relation to China, and how we react to this disparity in trade flows between China and the United States. And I don’t want to spend a lot of time on it, because we’re going to talk about Latin America. But there are differences of opinion as to the degree of activism. And that’s true, for example, as we discuss the currency issue, whether we really need to shape the terms of trade, or whether it kind of works itself out.
And so now just briefly about CAFTA, and then we’ll get to more specifics. The issue is not really whether there should be a Central America Free Trade Agreement. Because I think the majority of us, and I think a clear-cut majority, as we did with China, feel that there is no alternative but to further engage with Central America, and to increase the flows of trade. The basic issues, I think, relate more, and then we’ll talk about the core labor standards issue, is the degree to which you focus on the expansion of trade, or whether you also need to build into the equation the context, the texture, and the terms of those trading relationships. And maybe I’ll leave it at that, and let Jim take over, and then we’ll come back to it.
SWEIG: Thank you. I think that’s a wonderful way to open the discussion. Do you agree, and then please elaborate, that the debate is really not about free trade versus protectionism, but really this matter of, do you need to manage trade or does it unfold on its own once an agreement is in place?
KOLBE: Well, first of all, Julia, thank you very much, and thanks to CFR for doing this event. I think it’s great for us to have this chance to do this. And I enjoy these events where Sandy and I get to kind of spar a little bit and talk about and have a serious discussion, and I think we respect each other a lot. I’m going to kind of stick to the question that you initially asked here, and that is, what is the impact of this on—
SWEIG: What’s at stake.
KOLBE: What’s at stake in three areas: What’s at stake for the trade agenda here in the United States? What’s the stake for Central America? And what is at stake for the Doha Round, which is, I guess, a subset of the first one here.
But first let me speak for the trade agenda. And my view is pretty clear. This is the tip of the issue this year on trade. If we are not able to pass CAFTA, I think it’s very hard to see how we can move on to all the other things that we’ve got, whether we’re talking about bilateral trade agreements, the regional trade agreements—well, we’ve got the president’s extension of his authority for negotiation for two more years, but I think after that, it would look pretty bleak. So I think it’s absolutely critical in that regard. I don’t think you go much further in trade if you don’t get this agreement passed.
Secondly, what’s the importance for the Central American region? I think it’s of vital importance to the Central American region, particularly in two areas. One has to do with access to the U.S. markets of giving these people an opportunity to compete in an increasingly global world, one in which China, all you have to do is go to Mexico and talk to the Mexicans, and all they talk about is China and its role there. The same thing is true, I was just down in Central America last weekend, the same thing is true in Central America as well. If we’re going to give them a chance to compete, particularly in textiles, we’ve got to be able to give them this kind of advantage in tariffs.
And the second area which is so vital to many is the immigration. What we’re basically saying if we turn down a CAFTA agreement, we’re saying we don’t [inaudible] have jobs there at home. We want you to come to the United States to get your jobs, and that’s exactly what they will do, they’ll vote with their feet. They’ll march to the United States.
The third issue is its impact on Doha, which I think I kind of answered. It brings us back full circle to the trade agenda. I think Doha, which is in enough difficulty as it is, just kind of grinds to a halt at that point. I think it’s very hard to see how we move forward with the Doha agenda. I think my colleague, who will be Ambassador [Robert] Portman, Mr. Portman will, as USTR [U.S. Trade Representative], have a lot of time on his hands if we don’t get CAFTA passed. So we need to get it passed.
SWEIG: Congressman Levin, what about this issue of immigration and whether the trade agreement would be a driver out of people? Would they come with their feet without? With an agreement, there will be displacement in the agricultural sector. You would have perhaps people migrating into cities in Central America, or simply opting out and trying to come north from those displacements perhaps. Or is overall on balance the effect of the trade agreement to really provide jobs and keep Central America through Central America?
LEVIN: Good question. I do urge we be careful that we not oversell as well as undersell any particular aspect of trade. And I think Jim and I agree, the oversimplification of the trade issue is one of the greatest dangers to wise decisions. And there is so much polarization on trade issues. And that leads to oversimplification. I think it’s also a part of the tradition how economists view trade in a very kind of straight line, I think narrow, way, kind of it’s always better. I think the legacy if I might add of Smoot-Hawley [Tariff], it seems like there was a terrible mistake, and we can rather simply not do the same thing, just kind of change the tariffs, not follow that course. And I mention that because of immigration.
It’s complicated. It’s not simple in my judgment. NAFTA [North America Free Trade Agreement] was sold in part on the immigration issue. And it turned out it’s not at all clear how it affected immigration. Because immigration from Mexico has continued to increase. My judgment is that there will be two effects. I do think that it’s vital to strengthen Central America, to have those economies strengthened. In that respect, the more we can help the strengthening of Central American countries, the less there will be immigration here. I think that’s true.
But also, and this gets to my view about the texture, the context, of trade agreements. If one talks—we met with some bishops in Central America, as we did with the Andean countries. And they came here to tell us, do look at the potential impact of CAFTA on poor farmers within our countries. Do look at that.
There is going to be serious displacement. As you mentioned, some increased inflow from rural areas to the urban areas of the countries involved. And what will be the impact? The answer is, I don’t know. And I don’t know how much the impact of NAFTA on Mexico agriculturally has led to increased immigration into the United States. And you probably know more about this than I do.
My plea is not to simplify or oversimplify the dynamics of trade. They aren’t—trade agreements are not win-win agreements. And I once told President Clinton don’t use that term. I said it rather bluntly to the president. I was working—and I’ll finish on this—on China PNTR [permanent normal trade relations]. And Jim and had spent some time together on this. And we put some amendments, because I was in favor of trying to work it out, some amendments to put into the China PNTR agreement that were later adopted. And when the president would make the appeal, “You have to go for China PNTR because it’s win-win,” I would say to the president, “Look, we’ve worked it out. I favor it. But don’t say to my colleagues it’s win-win. Don’t say it’s a no-brainer.” Because it isn’t a no-brainer. It’s a tough issue. And it isn’t win-win. And we have found out in terms of our relationship with China, it’s not a win-win proposition. It’s much more complicated than that. So when it comes to immigration, the answer is, I don’t know.
KOLBE: Could I just offer a quick response?
SWEIG: Please do. Yes, I’d like you to.
KOLBE: And then we can run some other things. Just very quickly a response to that. I think on the immigration, I think this will have more of an impact, this agreement, than most of them would, where they may be more general. This is much more specific. And the reason I say that is because of January 1st and the disappearance of the [trade] quota on textiles, which is having a tremendous impact, and that’s a huge part of the market, the manufacturing base in these countries that we’re talking about in Central America. When I was in Nicaragua last week, we were told just this January, 25 percent of the apparel exports to the United States have been lost. That’s going to quickly translate into a lot of jobs that are going to be lost. We have to give them some way in which they can compete with the capital as well as low labor costs that exist in China, the capital investment that exists, and tariffs are a way to do that.
On agriculture, I think that—I happen to be very much opposed to our farm subsidies program. And that’s a larger issue and one for the Doha Round. But as it relates here to the Central America agreement, I think that these countries are going to be less affected by the crops that we grow. We will clearly beat them in, as you have seen in Mexico, wheat, corn, soybean. These are not—they do have some production in those areas, but it’s not as major. And a lot of them are shifting to specialty crops. We visited a lot of the areas where we have programs that are shifting them over to these specialty crops that have a market in Central America as well as the region, including Mexico and some of the countries of Latin America and the Caribbean, and into the United States. So I think there is going to be a bit less of an impact than perhaps we saw in Mexico.
SWEIG: Thank you. You mentioned referring to other trade agreements. And I want to raise with both of you, and then we’ll open it up to questions, what makes the Central America CAFTA debate different, harder, tougher, than Chile, than Singapore, than Australia? Maybe even than China? Is it Central America’s proximity to the United States? What are the domestic politics that are underlying that? I guess I just would like you, and you gentlemen are both speaking so honestly, and that’s so refreshing. So I guess if you could elaborate on what makes Central America so different and tougher, [that] would really add value to this discussion.
KOLBE: Want me to go first this time? All right. My answer to that would be, and Sandy can speak from a Ways and Means standpoint, but I would cite two things that I think are important. First of all, the administration has chosen a very deliberate strategy to take on the easy ones first. It’s not a huge problem with a trade agreement with Australia, you don’t have labor, you don’t have environmental problems. You were basically trading with a country that was much smaller, but which is on a par with the United States from an economic development standpoint.
It’s always when you’re dealing with underdeveloped countries that you have these kinds of problems. So that was true of Singapore, that was true of Chile, for the most part it was true of Chile. There were problems around specific issues that are going to be a problem. So these are the easy things. But now we’re getting to the one where you have both the labor issues, the environmental issues, and the whole issues of access to the market that are of much more importance.
The second thing, when you get into these contentious trade issues like this one clearly is, whether it be PNTR or the [WTO] Uruguay Round, when you get into those kind of issues, we lost some ground in the Congress, largely through retirement of members, and largely on what I would call the pro-trade side of Sandy’s party, the Democratic Party. And so we have some special interests on the Republican side around sugar and other agriculture and textile that make it hard for a lot of members, some of our members, to vote for, and we don ’t have the support that we’d normally have on the Democratic side. It’s going to be a very tough slog to pass this thing. By no means should any of us think that it’s going to be sure.
SWEIG: Congressman Levin.
LEVIN: I opened up by talking about the general picture, because if we don’t discuss that, I don’t think you’ll understand the position of myself and many of us in terms of CAFTA. I mentioned about the labels, et cetera, because if you talk about pro-trade, how do you explain [Representative] Mr. [Charles] Rangel [D-N.Y.], myself, [inaudible] all involved in trade issues, [inaudible], and I can go down the line, who have voted for every trade agreement, and helped to shape and since NAFTA, except for the fight on TPA [trade promotion authority]?
So how do you explain that? Not by whether it’s pro-trade or not, since we voted for these agreements and helped to shape them as I said. So what is it? Jim mentioned some. There are a couple of issues that have come up in this agreement that have a very specific impact—sugar and textiles. Sugar was left out of the Australia agreement; otherwise it would have been controversial. That doesn’t mean I would have voted against it. I voted for it. But it would have been more controversial, I think you would agree. Apparel and textiles wasn’t a major issue with Chile, with Singapore. It was that they fix the textile apparels division in Singapore, the three islands—I even forget their names—that were in Indonesia.
So what is it? It relates to this issue of what expanded trade is all about. You mentioned the apparel and textile industry in Central America. By the way, most of the people who work there are women, mostly between 18 and 25 or 30. Most of them are single. And large numbers have children of whom they’re the only support. The question becomes, and this relates to core labor standards, what is the fighting all about? It isn’t because, or should not be because, of how interest groups are lined up in the United States. It’s because of the issue of whether trade agreements are going to be shaped so that, as President Clinton put it, there’s a leveling up instead of a leveling down. Whether they’re going to fit into a development pattern that is effective for the countries we trade with and for us. There is immense income inequality, more than any other region in the world. There are weak middle classes in most of the Central American countries.
The question is whether trade agreements are going to help in terms of the sharing of the benefits of trade, or do you assume that more trade will automatically work out for the best for them and for us? If workers don’t gain the benefit of trade, you assume automatically it will happen, it affects their incomes. And so many of the workers in the maquilas [factories] are living below the poverty line. It means that they will not be able to climb into the middle classes of their country. It means our workers will have to compete with workers who don’t have basic rights. And it means that we will not have a growing middle class to which we can sell goods and services produced by us.
That’s really the basic issue that affects how many of us are approaching this. The realities on the ground in Central America today by and large—a little less in Costa Rica—is that workers do not have the basic ability that they’re supposedly assured of under ILO [International Labor Organization] core labor standards of being able to associate and to be represented in the work place.
And we had this argument yesterday, and I’ll finish with this so we can go on, and we heard all kinds of explanations. We heard the chairman of the committee say, “Trade agreements should not dictate changes in domestic law.” Nonsense. That’s what trade agreements do. Intellectual property, tariff levels, subsidies—you favor international trade agreements requiring the U.S. to change its agricultural policies. I do, too, to some extent. We heard the arguments, “Well, they signed conventions, and under civil law [in] Central American countries, conventions are the same as laws.” That isn’t true, really. We heard arguments that the ILO report says that there are these basic rights within these countries. When the report and our own State Department report of 2004 says that that isn’t true.
So the people like myself who are internationalists, who believe in international trade, the issue of core labor standards for Central America—[in] Chile, they exist in reality. Singapore, they exist in their laws and in reality. Australia, they do. We voted for them. The standard used in Central American CAFTA is, “Enforce your own laws.” It’s a double standard only for labor and the environment.
And I close with this: [Representative] Xavier Becerra [D-Calif.] asked of someone who came from the movie industry a very good question in our hearing yesterday. He said to [inaudible], “If you had the exact same agreement as negotiated by this administration, but as to intellectual property we changed it from the civil and criminal sanctions and provisions that were required to be enacted into Central American laws, if you changed it from those requirements to a simple, ’Enforce your own laws of intellectual property,’ would you favor CAFTA?” He did not want to answer it. The answer is, there’s no way he could support a standard, “Enforce your own laws” as to the industry he was representing. And I’m not representing the American labor movement. I’m representing what I think is an essential part at this juncture of what trade should be all about in terms of making sure, at least over a reasonable period of time, that there is a spreading out, a sharing of the benefits.
And recent developments in Latin America, I think, tell us that it is addressing this issue of a broader sharing of benefits, of addressing the income inequalities, that is critical to the development of democracies in those countries and our ability to have meaningful trade relations.
KOLBE: Sandy, I’d just make one quick response to the comments you made there about the enforcement of the labor standards there, something that I believe we need to do. In my five years as chairman of the Foreign Operations Subcommittee, I’ve never had a letter from a Democrat in the House of Representatives asking me to provide money to these countries, like the Central American countries, to help them in the capacity-building to enforce their environmental and trade laws. Last year, as Republican chairman of the committee, I put in $20 million into the bill specifically to help them build the capacity and enforce these kinds of laws. If we’re really serious about this, we ought to try to help these countries build up the capacity to do that.
LEVIN: I agree. But let me just say that the administration’s proposal has been consistently to reduce the funding for [inaudible] within the Labor Department.
SWEIG: We don’t know what that acronym is.
LEVIN: International Labor—whatever it is. [Laughter] And to your credit, there was a specific appropriation put in for capacity-building. It is inconsistent with the proposals of the administration over the last four or five years to reduce the funding for this bureau. And we oppose the reduction in that funding.
SWEIG: Please turn that off. Thank you. [Inaudible] I think that brings us to a nice moment to open this discussion up. And if you would please again turn off your cell phones, and when the microphone comes to you, identify yourself and stand up. And please ask a question. So, I will open it up to the floor right now. Yes, the gentleman right there.
QUESTIONER: My name is [inaudible]. I’m an independent consultant on international security, and very much a layman on these issues. What is so difficult for me to understand is the justification for our protection of sugar in this country, which both of you mentioned. As I understand it, it’s a very small proportion of our agricultural industry, and it keeps the price of sugar in this country two to three times the world market price. Why do we tolerate that?
SWEIG: Would you like take a crack?
KOLBE: Sure, I’ll take a crack at it. It’s outrageous. We shouldn’t be doing it. It’s more than three times the world market price that we pay for sugar. It’s driving users of sugar, that is, candy manufacturers, out of business. We’ve had candy manufacturers go bankrupt here in the United States specifically because of the sugar.
It’s an outrage that we do this. We should get rid of it. There is absolutely no excuse. It’s political. They are a very hard, tough, political group here in this country, and they fight very, very hard for their interests. And they’re fairly broadly based. You could find not only cane sugar, but sugar beet, in an awful lot of states. Just go around the map of the country, and just paint the states that have it, including Sandy’s state. We’ve got a couple of members from Sandy’s state on our side that are having a real problem with it because of sugar beets.
In my view, the time has come for us to beat them back, and do something about it, rather than just constantly kowtowing by taking a lot of the Australian, and here in the CAFTA agreement, giving them a 1.1 percent increase in the total quota. Outrageous.
LEVIN: Quickly, I don’t think a single sugar beet is growing in my suburban district. My brother is in a tougher situation in the state of Michigan. I wish we could address this effectively, so I tried to study a bit. I did not know enough about it to prepare for the hearing yesterday. And just briefly, I was struck by the need for us—as Jim has tried to do—face this issue directly. Also to try to think beyond the rhetoric of this issue, because otherwise we’ll never resolve it. And the more you dig into this issue, it’s not quite that simple. It’s not quite that simple in this sense. There is at least the question whether we should address this through bilateral and multilateral agreements or to do it through the WTO.
Because the concern of the sugar industry—that’s both beets and cane—is that the added 100,000 will reach a level where our sugar program will be affected, and that the spillover will be a huge dumping of sugar into the market, and a reduction of the price that they get.
Now one last point about that. The sugar industry of this country, and I don’t know if they’re correct or not, claims that if all the subsidies in the world were eliminated that the American sugar industry could compete. That’s what they said. So all I’m saying is, I do think that we need to address it, and I think one of the problems that we’ve had with the way the administration approached CAFTA, failing to try to build a bipartisan coalition of people like many of us, who believe in expanded trade, has been that tough issues like sugar have not been tackled very effectively, or the apparel and textile issues, because I think we could have done differently and probably done better in our ability to compete with China.
So where are we left with sugar? You have a lot of votes, as Jim has said. And now Rob Portman is going to try to convince people who are coming from areas with sugar beets that, darn it all, we’ll make effective the provision in CAFTA that says that the U.S. can provide funding to the CAFTA countries if we don’t allow their added sugar to come in. But then he’s going to face the question, and Jim, you’ll be perhaps more critical than I will be, “All right, Mr. Trade Ambassador, you say the U.S. will provide that. How are we going to be sure that those monies, those compensation, will come to us that’s a loss for Central America?”
And I have no idea whether my colleagues who are [inaudible]. And we made a mistake in my judgment, and it’s been one of the issues that has kept people like Jim and myself apart. We don’t agree on lots of things. But when it comes to specific agreements, this, I think, unwise division of opinion, has kept us from the bipartisan coalition that not only would have led to the negotiation of a CAFTA that could pass, but I think also tackling some of the tough issues that we did not, including apparel and textile. I’m not convinced that the apparel and textile provisions in this agreement are going to allow us to effectively compete with China. I think we could have done better.
QUESTIONER: Stephen Donehoo from Kissinger McLarty Associates. One of the concerns I have is that the impact of not passing CAFTA could be felt throughout the rest of the hemisphere, where we’ve been seeing a—really, a step back, a step away from the United States of late, starting at the bottom and working your way up. Even more recently in Ecuador and Venezuela. Is that a concern? Both of you all care about the hemisphere, but how about for your colleagues? Do they actually care whether the rest of the hemisphere splits off in another direction?
KOLBE: I guess it’s my turn to go first. Very quickly. I think it’s a concern to many people, and I certainly share that concern. I think—and partly, I think it’s understandable since 9/11—our focus has been elsewhere. We’ve been, not distracted, but we’ve been very much focused on what is happening in the war on terror and that leads us necessarily to Central Asia and the Middle East. But I think we need to pay a lot more attention to Latin America, and I think you’re absolutely right, whether you look at Ecuador or you look at Venezuela and a number of other countries one can point to. Things have not gone precisely in the direction that we would like. It does seem like it’s a step backward.
I’m not sure too many of our colleagues make too much of a connection between CAFTA. And now I think there is some of a connection, because I’ve already visited there with ambassadors from Latin American countries that are not CAFTA countries. They’re vitally interested in this. They know this is a question about our commitment to that region. So, I think it is a legitimate question and a legitimate issue.
LEVIN: I have your concern. I have a slightly different approach to the connection. I think what’s happening in Latin America, and I was reading the UNDP [United Nations Development Program] report, which talked about the spread of democracy. It said the problem is that the spread of democracy has not meant the improvement in the lives across the populations, that one of the critical problems is the pervasiveness of income inequalities, one of the reasons. And so my deep feeling is—and my beloved father had deep connections with Latin America and imbued that in me if I might say so. I think we have to work together so that the Latin American countries address these basic inequality issues. If not, democracy is going to recede and that would be terrible. And we’re going to get—I’ll say this carefully—more leadership that I don’t think we want to see.
QUESTIONER: Yes, Maria Pena with EFE News Services in Washington. It’s actually a two-part question. I’ve covered the CAFTA issue from the very beginning, so I’m very aware with the concerns. And, of course, again, immigration keeps coming up as a big concern. People who are opposed to it say that it’s actually going to increase illegal immigration, because it will devastate the agricultural sectors in those countries. NAFTA has already done that, to some extent, in Mexico.
So, if you could address again the immigration impact. And No. 2, another way they’re saying is that this is not going to promote economic development, so why, instead of promoting a free-trade agreement that will mainly benefit the U.S., why not push forward, for instance, a Marshall Plan for Latin America or for Central America for that matter?
SWEIG: It’s your turn to go first.
KOLBE: Your turn to go first. [Laughter]
LEVIN: I think we addressed the immigration issue. I did as well as I can. I think there needs to be concern about the impact of CAFTA on the rural populations within Central America. And, as I said, we talked to the bishops about this. They had some strong feelings about this. So, let me just leave it at that, because I’m not sure we were sensitive enough to that issue. I think—I believe in expanded trade. I just think you have to shape the thing so that you maximize the benefits and minimize the detriments to it.
And, in terms of a Marshall Plan. Look, I don’t think our country is doing anything close to well enough to provide the kinds of assistance that is necessary to strike at poverty. I was reading about the lack of water that is pervasive in villages within Latin America. But, I was once in a foreign aid agency, in AID [U.S. Agency for International Development]. I believe in the effectiveness of partnership efforts between the U.S. and developing countries and I think—and here Jim has been one of the towers of strength within his party. Jim has shown a sensitivity to this issue and I wish there were more who had that sensitivity in this Congress and in the White House.
KOLBE: Quickly, on immigration, I did address that earlier. I think the impacts of immigration would be more negative if we cannot have CAFTA then vice versa. Yes, there will be some displacement, as we’ve seen in NAFTA and in Mexico, but I think there will be even more displacement if we have the manufacturing, the apparels or the textile sector lose out if—and I think that it’s less so in the agricultural sector than you’ve suggested, because of the nature of the agricultural sector in Central America, which is less in basic crops and more in kind of specialty crops, bananas, and melons, and peppers, and a lot of other things that they are now producing.
Marshall Plan? It’s interesting that you mentioned the Marshall Plan. I think the Millennium Challenge Corporation [MCC] is the most dramatic new paradigm for foreign assistance that we’ve had since the Marshall Plan. Two of the five countries are in the queue and, in fact, are in active negotiations now for completion of a compact with the Millennium Challenge Corporation. Costa Rica doesn’t qualify on the income levels. The others would be, at some point, perhaps in the next tier of countries that might participate.
We have two of those countries, Honduras and Nicaragua, that are in that queue and very much would need this. And I think it’s one of the more dramatic things that we’re talking about doing to actually change the whole concept of development assistance to go to countries that are fighting corruption, that have transparency, that are committed to the rule of law, committed to investment in their own citizens through education and healthcare. Where the development assistance will be provided through the MCC and it will be [a] very large, very large amount that we provide, goes directly to actually improving the lives of the people in those countries, because it can be sustained.
It’s the kind of economic assistance that can be sustained. Not just pouring it down a rat hole. And the second thing is, it’s bottoms up. Instead of coming from the U.S. Agency for International Development, it’s the countries that develop this program and submit it to the—so, I think we have a, in a sense, a new Marshall Plan for these countries.
SWEIG: Yes, in the back. Please stand up. Thank you.
QUESTIONER: Kathleen MacIntyre from the Ford Motor Company. There’s a lot of consternation, understandably, and a lot of dismay expressed in the legislature about China and the currency situation. And, recently, legislation proposed it would put a 27 and 1/2 percent tariff on all goods from China. It would seem to me that if we defeat CAFTA, all we’re doing is handing China a victory in really allowing them to keep doing what they’ve been doing and further incentivized, if you will, by us. Do you have any comments on that?
SWEIG: I think you’re first.
KOLBE: Well, I think that’s precisely correct. And we’ve talked about it very specifically in the area of textiles, where these countries, I think, really need to be able to compete against the kind of capital investment and low-wage costs that exist in China. Although, and I was in China, I was told what I thought was an interesting statistic, that China’s lost 6 million manufacturing jobs in the last couple of years because of high wage rates, and moving to other countries like Vietnam and Cambodia, and Sri Lanka there. [Laughter] Very interesting paradigm that’s existing there. But I think that’s absolutely correct and particularly as it relates to textiles, of course. You’d think it is a win-win situation, but it’s certainly better than not having it, because if we don’t [do] it, this apparel is going to come from China and the cloth and fabric will come from China in that region too.
But, if we do it from Central America, we at least have a chance with the way the agreement is worded, and also with the transportation costs and selling more of that fabric from here down to Central America. So, I do think it’s very much an issue of—I think we’ve got to be very cognizant of the role that China and ways in which we can help countries compete. I’ve introduced legislation to allow the 13 poorest countries of the world have no tariffs and not for trade agreement, but different trade preferences, so similar with what we did in the African agreement, AGOA [Africa Growth and Opportunity Act], and, so that they can compete as well.
I met with those ambassadors yesterday. I think they see this as a great hope for them to be able to compete in the world. So, I think we’ve got to be thinking about those kinds of things.
SWEIG: One very brief comment, and then I will see if there are any very, very short questions in the audience and, hopefully, there won’t be, actually. I take it back, it’s 1:30 on the dot, so if you would reply and then we’re going to close.
LEVIN: Then we’ll quit. OK. As someone who just took his Ford Focus out to get a new tire, let me—let me comment. [Laughter] It’s going fine. It just needs a new tire. It’s the potholes here, you know that. [Laughter] I think it’s a mistake to try to link them very much. We have some major problems with China and Japan in terms of currency. And, if we don’t face up to them, we’re making a mistake. I say this as someone who very much has—favors, and still does, to expanded trade with China, but we’re lax in terms of fighting for what we enacted.
And, so I think to link them diverts attention from the need to have a clearer China policy, and there’s a temptation to use China as an effort to get votes for CAFTA. That won’t be an effective China economic policy. Believe me, it will be a short run, and you’ll see it vanish if CAFTA passes. And, in terms of competing, the Caribbean Basin competing with China—in my judgment, we should have done more, and there isn’t time to go into it. Because, the way CAFTA is now programmed, I don’t think it’s going to be an effective enough tool. And it’s going to have to be. Talking about China, we’re going to have to look at the flow of good things from China, especially in apparel, as it relates to the Caribbean. If we do nothing in that regard, I think the Caribbean, including the U.S. textile sector, eventually will lose out.
SWEIG: The United States has wrestled for many centuries now with how did it play a positive role in Latin America, in Latin American development and democracy. And this is one tool, trade, but maybe not the only tool, as you raise. I think I’ll just remind everybody before I close that I’m an historian and my historian’s mind, listening to this, remembers that one of the key issues in Central America in the 1980’s and really, until this trade debate, the last time we were all really dealing with Central America was over the Central American wars. Labor-management relations were extremely polarized and were often at the center of some of the most vicious and violent conflict on the ground.
So, when I asked at the beginning—and I don’t think I actually had the answer until listening to all of this. What’s underlying some of the polarization around Central America in this issue, and including labor, and that? It does have to do with the United States not really having yet come up with an answer, a clear answer, and a bipartisan answer, on how best to play a positive role in helping Central Americans form the democracy and grow the economies that we know would be good for Central Americans and for the United States. And, so I want to thank both of you for helping me and helping us think very seriously about those issues. It’s been a fantastic conversation, and I hope you come back.
KOLBE: Thank you for inviting us.
LEVIN: Thank you, Julia. Thank you.
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