Senate Democrats

Reid on Consideration of the U.S.-Bahrain FTA Implementing Legislation: “Fiddling While Rome is Burning”

Washington, D.C.The Senate today debated the legislation implementing the U.S.-Bahrain Free Trade Agreement (FTA). The agreement will be voted on this evening or tomorrow morning. Senator Reid’s statement for the record notes that the Bahrain FTA demonstrates the Administration’s flawed trade priorities. The Bush Administration has no policy to address the rise of China, the record U.S. trade deficit that will top $700 billion this year, or keeping good jobs in the United States in the face of outsourcing and globalization. Instead, it’s end of the year trade priority is a free trade agreement with Bahrain, which accounts for three-one-hundredths-of-one-percent of U.S. trade. Moreover, the FTA as with all other Bush Administration FTAs, does not provide adequate provisions against child labor, forced labor and other basic international labor norms.

Statement by Senate Democratic Leader Harry Reid On Consideration of the U.S.-Bahrain FTA Implementing Legislation, H.R. 4340

“Fiddling While Rome is Burning”

I reluctantly oppose the legislation implementing the U.S.-Bahrain Free Trade Agreement. I have nothing against expanded trade with Bahrain, and I know that there is plenty in this FTA that is appealing to the U.S. business community. However, this agreement is another example of the misplaced priorities in the Bush Administration’s flawed trade policy, which can best be described as a policy of “fiddling while Rome is burning.”

If you were to ask Americans to list their top trade priorities, I think they would suggest the following: dealing with the enormous trade deficit, on pace to exceed $700 billion this year; addressing the rise of China; meeting the challenges of outsourcing and globalization; enforcing our existing agreements and rules for fair trade; and perhaps global negotiations in the World Trade Organization. A trade agreement with Bahrain would be nowhere near the top of the list; it probably would not even be on the list at all.

Yet, here we are, with the Bahrain FTA as the big trade item to close out the year. The U.S. has a trade deficit with China that is on pace to exceed $200 billion this year – more than a quarter of the entire U.S. trade deficit. Last year, China passed the U.S. as the largest exporter of high-tech information technology and communications products. There is no doubt that the rise of China presents an extraordinary challenge to the United States. Yet, the Bush Administration has essentially no policy on dealing with China’s currency manipulation and the accompanying U.S. indebtedness to the Government of China, rampant piracy of U.S. intellectual property, WTO violations, forced technology transfer requirements, and industrial policy in areas critical to the U.S. like semiconductors and automobiles.

Instead, we have the Bahrain FTA, which involves three-one-hundredths-of-one percent of total U.S. trade.

The Bush Administration has proposed no policies in the face of outsourcing and the revolution of globalization to ensure that America keeps good-paying jobs and remains the most competitive economy in the world. They basically say, “Don’t Worry, Be Happy.”

Instead, the U.S. uses the scarce resources of the U.S. Trade Representative to negotiate an FTA with Bahrain, which has an economy one-tenth-of-one percent the size of the U.S. economy.

When it comes to enforcing our current agreements, the Bush Administration has been asleep at the wheel. While the Clinton Administration brought on average 11 WTO cases per year to knock down foreign barriers to U.S. exports, the Bush Administration has filed fewer than three cases per year.

Instead, they have focused their energies on negotiating an FTA which is so small that the independent ITC has stated, “the effect of the FTA on total U.S. exports is likely to be minimal.”

Meanwhile, the WTO negotiations have delayed and floundered. Ironic may not be the right word, but it is a fitting testament to this Administration’s skewed priorities that Senators are stuck in Washington debating the Bahrain FTA this week, and so were not able to travel to Hong Kong to provide oversight on the WTO negotiations – which could have an impact thousands of times larger than a trade agreement with Bahrain.

Looking at the merits of the Bahrain FTA in isolation, let me note that I applaud the Government of Bahrain. It has been a good U.S. ally and is an important moderate Arab and Islamic country. I wish the people of Bahrain well and hope that the U.S. and Bahrain will continue to enjoy good relations, including trading relations. I also note that there are many good provisions in this agreement to ensure protection for U.S. intellectual property rights, to prevent expropriations of U.S. investments, to reduce barriers to U.S. exports, and to expand the access of U.S. service providers to Bahrain’s market.

It is regrettable, though, that the Bush Administration followed its flawed model in this FTA. In short, the interests of the business community are taken care of, but the interests of the average American are not. I certainly understand that many of the businesses that care about these FTAs make important contributions to the U.S. economy and are a critical source of employment, exports, and innovation. I value those contributions and think for the most part the chapters and provisions of the FTA important to the U.S. business community make sense. What I do have a problem with, however, is the fact that our trade agreements provide short shrift to areas of interest to human beings, including workers’ rights and environmental protection.

When it comes to transparency in government regulation, telecommunications regulation, financial services regulation, other services regulation, and e-commerce, we include provisions that force our trading partners to change their laws. When it comes to protection for intellectual property rights, our trade agreements have provisions that force our trading partners to adopt some of the highest levels of IP protection in the world. In each case, if a country violates the rules in the FTA, it is subject to trade sanctions.

Yet, when it comes to respect for the most basic, internationally-recognized worker rights and respect for the environment, our trade agreements say, “You don’t need to change your laws, just enforce whatever you have.” If our trading partners violate even this weak rule, then they pay a fine; and the fine gets turned around and given right back to them. Somehow, trade sanctions imposed to vindicate the interests of business are just “tough enforcement,” but trade sanctions for worker rights or the environment are “protectionism.”

Worse, our FTAs would allow a country to weaken its laws related to workers’ rights and the environment, and the United States would have absolutely no effective recourse. If Bahrain turns around and allows child labor, or turns around and prohibits its guest workers in export industries from joining unions, then the best the U.S. can do is seek consultations with Bahrain. This is a step back from what the Clinton Administration negotiated, which would have allowed the U.S. to pursue full dispute settlement on all of the labor provisions in the FTA. It is also a step back from existing U.S. trade preferences programs, which allow the U.S. to impose sanctions on countries that are not adequately protecting basic workers rights.

What is it about worker rights and environmental protection that warrants this disparate treatment? The same people who argue that these provisions do not belong in trade agreements bemoan U.S. labor standards and environmental rules, arguing that they hurt U.S. competitiveness and add to our trade deficit. It is absurd and dishonest to say on the one hand that these rules affect competition, and then on the other that they do not belong in an agreement that is designed to set the terms of competition.

I want to take a moment to acknowledge the good work done by Democrats in the other chamber, who pushed and pushed and got Bahrain to agree to make important reforms to its labor laws to bring them into conformity with internationally-recognized standards. And, to its credit, USTR agreed to monitor Bahrain’s implementation and enforcement of these changes as part of the FTA. I applaud the efforts of these congressmen. Their hard work on this and other FTAs should shame anyone who has tried to discredit their cause by calling it protectionist or xenophobic. I regret that I will not be joining them in support of this agreement, however. The bottom line is that this agreement does not contain binding, enforceable rules that treat respect for workers’ rights and the environment on the same footing as respect for corporate interests, so I will oppose it.

Separately, I want to address Bahrain’s boycott against Israel. For decades now, the United States has had a policy to oppose the Arab League boycott against Israel. There is an entire office in the Department of Commerce tasked with implementing this anti-boycott policy. Congress has also directed USTR to “vigorously oppose” WTO admission for countries that engage in the boycott. In my view, it is an implicit corollary of this latter rule that the U.S. should not enter into bilateral trade agreements with countries that participate in the boycott.

Bahrain continues to participate in the boycott, however. To its credit, Bahrain has terminated participation in the secondary and tertiary aspects of the boycott. And, Bahrain has stated in a letter to USTR that “the Kingdom of Bahrain recognizes the need to dismantle the primary boycott of Israel and is beginning efforts to achieve that goal.” That said, it is worth noting that even the primary boycott can hurt U.S. producers. The primary boycott prohibits imports with Israeli content. So, U.S. companies that use Israeli inputs could be barred from exporting a mostly U.S.-made product to Bahrain.

USTR and supporters of this agreement argue that the quoted statement constitutes a binding commitment by Bahrain to eliminate the primary boycott. I hope they are correct, but I am not so sure. First, the lower house of Bahrain’s parliament – the only democratically elected body in Bahrain’s national government — recently voted resoundingly to keep the boycott in place. Second, it is not as clear as I would like that the statement at issue has the character of a legal obligation rather than a statement of unilateral intent. While I hope that Bahrain has officially committed itself to eliminating the primary boycott against Israel once and for all, there is certainly no way for the U.S. to bring an enforcement action against Bahrain if it fails to do so.

I think the anti-boycott policy we have had in place for decades now is the correct one. We should not be entering into trade agreements – whether bilaterally or through the WTO – with countries that enforce the boycott against Israel — primary, secondary or tertiary. It is disturbing to me that the Bush Administration has been quietly moving away from this policy – here in the FTA today, as well as in its support for Saudi Arabia’s WTO accession this week.