WASHINGTON, March 10 – The 1,900-member U.S. Business and Industry Council today agreed with U.S. Trade Representative-designate Ron Kirk's modest plan to review America's pending trade agreements.  Yet USBIC said that much more sweeping changes in U.S. trade policy are urgently needed than the small-scale reforms he laid out yesterday at his confirmation hearing before the Senate Finance Committee.

Said Council President Kevin L. Kearns, "America's trade strategy has been completely broken for years.  The globalized trading system represents a failed business model and is unsustainable, as current events show.  Wholly new U.S. trade objectives are essential to generate the domestic production and jobs our battered economy needs to escape meltdown."

Continued Kearns, "Too many of Mayor Kirk's proposals seem to reflect a Clintonian,1990s mindset, when an illusory boom convinced most globalization fans that trade policy required only minor tweaks – and mainly as a political move to calm a public uneasy about losing jobs to outsourcing.   But the wreckage of the current let-everyone-export-to-America world economy could not make clearer the abject failure of that era's entire approach to trade."

According to Kearns, "Real recovery and genuine economic health will require a completely new trade strategy for a completely different era.  The United States in particular will have to stop over-consuming foreign products with over-borrowed foreign funds and start producing more of what it consumes to achieve a sustainable balance going forward."

In his prepared testimony, Kirk promised that the United States would remain "a leader in advancing the rules-based international trading system."  He declared, "The first order of business for the Administration on trade is to ensure strong enforcement of the rules."  Among his other top priorities were "advancing" the Doha Round of world trade talks, "working" on pending bilateral free trade agreements, and "a real and renewed commitment to...addressing labor and the environment."

Kearns, however, said that these objectives fall far short of America's needs.  "Mayor Kirk and his colleagues need to realize that many of our trading partners simply don't accept an American-style rules-based approach to their own governments.  Why would they adhere to a rules-based system in trade policy?  In fact, the evidence is overwhelming that they haven't."

In addition, Kearns termed the Doha Round "fatally flawed because it explicitly seeks greater benefits for developing countries than for the United States.  Its entire framework needs to be scrapped."

Kearns also noted that because most of America's major industries are capital-intensive, and because labor was in oversupply globally even before the economic crisis, the Obama administration's goal of adding labor rights provisions to trade agreements would leave U.S. trade flows, and output and employment levels, virtually unaffected.

Kearns supported the goal of integrating trade policy and environmental protection objectives more effectively.  But he argued that the main challenge on that front entails recognizing how the administration's cap-and-trade emissions scheme will send valuable production and jobs offshore to third world pollution havens.  It will also in effect encourage Chinese exports, which benefit from Beijing's energy subsidies and other pollution-encouraging policies.

In Kearns' view, a U.S. trade policy review needs to examine: (1) why so many recent trade agreements have turned into deals that encourage the offshoring of production and jobs; and (2) how Washington can boost domestic output by helping U.S.-based industries recapture home markets that have been lost to foreign competitors, often due to predatory trade practices.

He also expressed disappointment in Kirk's suggestion that the China trade challenge is best addressed by using "all of our resources within the WTO," by employing "our diplomatic resources as well," and by convincing China to move away from an export-led economic strategy.

"Chit-chat diplomacy has proven a failure time and again in moving our trading partners to take responsible actions.  In any case, the time for talking with China is long past," said Kearns.  "Candidate Obama endorsed legislation to deal unilaterally with the Chinese practice most damaging to America's domestic manufacturers and other genuine wealth creators – currency manipulation.  Step One on trade is for President Obama to urge Congress to pass the currency manipulation bill without delay, so that he can sign and enforce it.  That would be trade change we could believe in."

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