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WASHINGTON (CNN) -- Lou Dobbs testified today before the House Foreign Affairs Subcommittee on Terrorism, Nonproliferation, and Trade. The hearing was entitled "Trade, Foreign Policy, and the American Worker." Below is the transcript of Lou's testimony.
There's Nothing Free About Free Trade
"The United States has sustained 31 consecutive years of trade deficits, and those deficits have reached successively higher records in each of the past five years. The trade deficit has more than doubled since President George W. Bush took office. The U.S. trade deficit has been a drag on our economic growth in 18 of the 24 quarters of George W. Bush's presidency.
The current account deficit in 2006 reached almost $857 billion, also a new record, and now represents 6.5 percent of our total GDP. Since 1994, the first full year in which the North American Free Trade Agreement was in effect, the United States has accumulated more than $5 trillion in external or trade debt.
The United States has been a debtor nation for almost three decades now, and with our trade debt now rising at a faster rate than the national debt, the United States could be consigned to international debtor status in perpetuity. That is, unless the U.S. government adopts a pragmatic and responsible new direction in its fiscal and trade policies.
Congress is being called upon this year to renew fast-track authority, and the Bush administration, as it did five years ago, is insisting that Congress continue to cede its Constitutional power and responsibility of trade policymaking and to renew so-called "fast-track" trade promotional authority, which diminishes Congressional prerogative and reduces representation of domestic interest in the name of so-called "free trade."
As I've already pointed out, free trade has been the most expensive trade policy this nation has ever pursued. There is nothing free about ever-larger trade deficits, mounting trade debts and the loss of millions of good-paying American jobs.
Since the beginning of this new century, the United States has lost more than three million manufacturing jobs. Three million more jobs have been lost to cheap overseas labor markets as corporate America campaigns relentlessly for "higher productivity, "efficiency," and "competitiveness," all of which have been revealed to be nothing more than code words for the cheapest possible labor in the world.
Corporate America and our country's political elites have combined to put this country's middle-class working men and women into direct competition with the world's cheapest labor. Salaries and wages now represent the lowest share of our national income than any time since 1929. Corporate profits have the largest share of our national income than at any time since 1950.
The pursuit of so-called free trade has resulted in the opening of the world's richest consumer market to foreign competitors without negotiating a reciprocal opening of world markets for U.S. goods and services. That isn't free trade by any definition, whether that of classical economists like Adam Smith and David Ricardo or that of current propaganda ministers who use the almost Orwellian term to promote continuation of the trade policies followed for the last three decades.
How important is it that we reverse the course of these short-sighted and destructive policies? More than six years ago, the Board of Governors of the Federal Reserve System had this to say about what happens when trade deficits exceed 5 percent of GDP: "We find that a typical current account reversal begins when the current account deficit is about 5 percent of GDP." Again, our current account deficit now represents 6.5 percent of GDP. The authors of the study go on to say: "In general, these episodes involve a declining net international investment position that levels off, but does not reverse, a few years after the current account begins its recovery."
It is important to note that no recovery is underway, and that most importantly, the United States last year suffered negative investment flows. The cumulative effect of more than three decades of trade deficits and mounting external debt has produced our first investment income deficit on record. This is the first time that Americans have earned less on investments abroad than foreigners earned on their investments in the United States since 1946, when the Commerce Department began keeping records.
Amazingly, even our own top trade officials admit that U.S. free trade policies aren't working, unless they consider trade surpluses for our trading partners to be the objective of U.S. trade policy.
U.S. Trade Representative Susan Schwab appears to understand the consequences of the past few administrations' free trade policies, but she's shown little willingness to shift that policy. Schwab said, "...Our trade deficits are too high. We can't...pretend that the trade imbalance can just keep getting bigger with no cost."
And Ambassador Schwab's Deputy Trade Representative, Karan Bhatia, said outright, "From Chile to Singapore to Mexico, the history of our [Free Trade Agreements] is that bilateral trade surpluses of our trading partners go up."
Because I seek balance and reciprocity in our trade policies, I've been called a "table-thumping protectionist," and the Bush administration has hurled at me its favorite public epithet, "economic isolationist." Nothing could be farther from the truth. I believe, as I hope you and the majority of all members of this Congress believe, irrespective of your political party, in the importance of an international system of trade and finance that is orderly, predictive, well-regulated, mutual and fair.
Reciprocity does not in any way connote protectionism. Mutuality does not in way connote economic isolationism. But both terms when applied to our trade policy require a pragmatism and a commitment to the domestic and national interests of this country in all international agreements. And I believe, as I hope you do, that no international agreement of any kind should ever again be signed by this government without clear, honest understanding of the potentially awesome impact that such agreements have on the lives of our working men and women, our environment, and our quality of life.
I salute and commend you, Mr. Chairman, and this committee for beginning the process of achieving that understanding, and for the first time in a very long time, I am encouraged that this branch of our government is looking upon the United States first as a nation and secondarily as an economy, and is choosing to represent Americans first as citizens, rather than consumers or units of labor.
You have my thanks, and I appreciate the opportunity to speak before you. I wish you all the best in what I hope becomes a turning point in our great country's history."
Lou Dobbs testifies on free trade in front of Congress on Wednesday.
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