Press Briefing by Robert Rubin, Assistant to the President for Economic Policy, Laura Tyson, Chair of the Council of Economic Advisers, Sandy Berger, Deputy National Security Adviser, Bowman Cutter, Deputy Assistant to the President for Economic Policy, and Robert Kyle, Special Assistant to the President for Economic Policy
The Briefing Room
3:15 P.M. EST
MR. RUBIN: Hi. I'm Bob Rubin, Assistant to the President for Economic Policy. I'm going to make a few introductory remarks, and then we will get into the specifics of the GATT agreement, Uruguay Round now being negotiated.
We are, as you know, on the verge of an agreement, but we are not yet there. There are still issues that are being worked through in Europe as we speak. These need to be worked through with the EC. And then, as you know, once we finish with EC, we have to work through all the remaining issues with something like 100 other countries.
Having said that, we do believe we are on the verge -- on the verge of an agreement, but not there yet. If we do get a Uruguay Round agreement, it will be the largest trade agreement in history, and this will be the largest trade year in history, counting both the Uruguay Round and NAFTA.
Let me make a comment, if I may, on context. It's our view that whenever you look at something the President is doing in the economic arena, it is good to step back, at least for a second, and get his broad contextual framework.
From the very beginning of this administration, and even from the beginning of the transition, the President has been acting pursuant to a comprehensive economic strategy. He started by saying that he had to get our fiscal house in order, that was deficit reduction; at the same time we had the beginnings of our investment program. He is now going further with the investment program. He also felt that there was a lot of opportunity in regulatory review. Lifting export controls was the first step in that; there are other measures now pending. Health care is obviously the dominant economic initiative. It's a social initiative as well -- but economic initiative for this year. And, finally, is there opening markets, so that as we are competitive, we have the opportunity to compete.
We accomplished NAFTA, as you know; we have the Japanese framework negotiations underway; and finally we get to the issue of today's press conference, which is GATT, the largest trade agreement of all time, and the one that will now be addressed by Laura Tyson and the rest of the members of the economic team who were involved with GATT.
DR. TYSON: Thank you. Well, as Bob said, the Uruguay Round agreement that is within our grasp is the largest, most comprehensive trade agreement in the nation's history, in the world's history, for that matter. The agreement will cut tariffs and nontariff barriers by at least one-third. For the first time it will create effective multilateral rules for the protection of our intellectual property rights. For the first time it will bring agricultural trade under multilateral GATT rules. It will cut foreign subsidies that have hurt our agricultural exports. It will also provide new, more effective and more expeditious multilateral dispute settlement procedures. Those will help us address and reduce foreign trading practices that have closed our markets -- closed foreign markets to our exporters.
At the same time, the agreement will allow us to continue to use our own national trading laws, including Section 301, to address those unfair foreign trading practices that are not going to be covered by GATT rules. We worked very hard to reserve the right to use our national trading laws in those circumstances in which GATT rules will not apply.
Now, what does all this mean for the U.S. economy? First of all, let me say the U.S. economy is very well poised to take advantage of the trade opportunities that will be created by this agreement. We have the most productive workers in the world. Our unit labor costs right now are 30 percent lower than our trading partners. There have been many efforts made to quantify what might be the effects of the Uruguay Round on the U.S. economy. All of these efforts have been made without full knowledge of the what the final agreement would include. All of them are, therefore, partial in their estimates of the benefits to the U.S. economy. But I can say a couple of things about the existing estimates.
First of all, all attempts to model the effects have found positive numbers of the U.S. economy. There's unanimity among economists who have looked at this issue that this will be good for the U.S. economy. Basically the existing studies out there -- and they don't capture all the benefits, only part of the benefits -- suggest a range of $100 to $200 billion of extra output per year in the U.S. economy after the agreement is fully phased in -- that is after a decade -- will be getting an extra $100 to $200 billion a year of output.
And, again, that may be an underestimate because those estimates do not take into account such things as the benefits to our economy from improved enforcement of our intellectual property rights around the world.
This kind of increase in output means both more job opportunities in the United States and higher wages in the United States. So this is an agreement which will generate more output, higher wages, and more high wage jobs for American workers, and is therefore a critical part of our economic strategy.
Let me just conclude by emphasizing that at the beginning of this administration there were many concerns expressed that perhaps this would be an inward-looking administration on the trade front. But as Bob Rubin has already indicated, this will end up being, I think, the most important year for trade liberalization in the United States' history. This is a very important moment of looking outward, of competing, not retreating. That is what the President committed to do back in February -- we will compete, we will not retreat. And that is what this agreement confirms as our strategy.
Q: What happens next? I mean, how do you proceed with --
DR. TYSON: We'll answer questions -- we want to get through a couple of more presentations.
MR. BERGER: Hi. I'm Sandy Berger, Deputy National Security Adviser to the President. Let me just add a few words of perspective and then Bo will talk about some of the specific elements of the agreement.
If this agreement, in fact, coalesces tomorrow, it will reflect two fundamental principles that the President has both spoken about and acted upon since becoming President. One was the need --is the need to elevate international economics to the top echelon of American foreign policy; to put international economics on the front burner of American foreign policy, which the President has done through the year. And second, a point the President has made really since the campaign, and that is the interconnection between what is happening on the domestic side and what is happening on the foreign policy side. He's talked often about the disappearing walls between domestic and foreign policy.
I think if you trace the year, those two principles are quite clearly reflected. The President went to Tokyo to the G-7 summit on the heels of the House having passed the budget package. The fact the House had done that gave the President the credibility to energize the Uruguay Round and bring about a market access agreement, which really was what broke the logjam in the round that had been going on for seven years.
By the same token, the NAFTA agreement, followed by the APEC summit in Seattle, not only was important in domestic economic terms, but I also believe that it helped to give momentum to the conclusion -- toward the conclusion of the Uruguay Round. And that's not because I think the Europeans were threatened by NAFTA or threatened by APEC -- I think as they listened to the argument that the President made in the United States that trade expansion is important for economic growth, I think that's an argument that resonated in Europe, where, of course, growth is nonexistent in most places. And I think most European leaders who the President has spoken with in the last several days, I think have reached -- had reached a conclusion that this was extremely important to getting their own domestic economies revitalized.
So I think this is a culmination of a year in which the United States has led, not only in the Uruguay Round itself but in placing international economics at the core of our international relations.
Let me ask Bo Cutter to now speak more specifically to the agreement that's taking shape.
MR. CUTTER: Let me make two opening comments, and then I'm going to -- then I'll focus on some of the specifics.
The first is -- on the fact that we are on the verge of what will be the biggest trade agreement in history and on what will have been the best year in history. But I want to emphasize on the verge of, because there's still approximately 30 hours left. There is lots that is changing there now; that each time we talk with Geneva and with Mickey and with Rufus, there have been some changes so that -- I don't want to suggest -- none of us want to suggest that this is finished yet.
What I'd like to do is underline briefly for you what are the six key areas of the agreement and then say a little bit to you about the nature of the end game over the last week or so.
There are six key areas in the agreement that represent significant changes, significant improvements in the current world trading regime. Let me list them for you and come back -- go back very briefly on them, but just so that you can a rough sense of the agreement. Those are the industrial tariff cuts, the opening of agricultural markets, the development of a multilateral regime for enforcing intellectual property, the beginnings of a movement of international trading agreements toward services, the disciplining of subsidies, and the maintenance of our trade laws. I mean, when we think of it and when we brief it for the President, when we -- as we've been thinking about it, it's those six areas that we focused on.
And just to give you one -- a brief sense about each -- what the tariffs represent is essentially as Laura said on average across the board a 30 percent reduction in global tariffs. It is from that that stems the first of the principal economic advantages for our economy there.
In agriculture, what we'll see in this agreement is the movement to a broadly open market in agriculture and a disciplining of, in particular, the extensive European subsidies on agriculture.
With respect to intellectual property, which is in many ways the sort of fuel of our economy now, is what an information economy depends on, there will be in place if the deal is finalized, a global regime with respect to intellectual property that disciplines of efforts of piracy, efforts at the infringement of copyright, and that provides a set of rules.
With respect to services, which was one of the original intents of the Uruguay Round as it started, the movements I think everybody would acknowledge are beginnings. The biggest -- far and away the biggest success in the services area is the impending financial services agreement, which gives us a way to take advantage of the openness of our market and the size and strength of our financial services markets to develop around the world satisfactory reciprocal deals.
And finally, that the deal enables us, as Laura said, to maintain our own trade laws -- both with respect to anti-dumping and with respect to trade disputes and the use of our 301 legislation.
I'm sure there will be many questions, so let me move quickly from that to a comment about the end game. Approximately 10 days ago, it looked as if there were four big issues -- or it didn't look as if there were four big issues as well as literally thousands of the smaller ones. But the four that we were particularly worried about were the anti-dumping concerns, aircraft subsidies, financial services, and audiovisual. And I just want to underline with respect to each what has happened.
With respect to anti-dumping, what occurred in the last 10 days was a significant improvement in what had been a regime which we simple found unacceptable. And what it is -- as I said, and as Laura has said, what it created by virtue of the negotiations that Mickey Kantor led was an anti-dumping regime which continues our anti-dumping laws and our possibilities to -- at countervailing duties and left those capacities intact.
With respect to aircraft subsidies, what we now have in place is a regime that will discipline in particular the kinds of subsidies that have been used to subsidize the Airbus -- i.e., the focus on manufacturing subsidies in the industry.
With respect to financial services, I asked too early this morning Larry Summers, who is the Under Secretary of Treasury who has been negotiating these, for him to characterize them on a scale of one to 10, and he said it's a nine -- that it's a capacity for us to -- what it provides is a capacity for us to get rid of what's been called the free rider problem, the fact that other companies won't open their markets and basically ride on the openness of the U.S. financial markets and gives us the capacity to carry forward negotiations on a one-on-one basis.
And finally, with respect to audiovisual, what we came to a judgment very late last night -- and I should say specifically what the President, in a conversation with Mickey Kantor, came is the judgment late last night, was that, as he said for some time, that if we can't -- that he wanted a GATT, but he didn't want anything but a good GATT. And we didn't see the European offer in that as appropriate, so we pulled it out.
And basically what we've done is to remove audiovisual in terms of our negotiations with Europe from the GATT specifically so that we can maintain our -- so that we can in those capacities directly use 301 and not bind ourselves to a specific set of -- not bind ourselves to a specific set of European rules which we don't accept.
That's the general rundown -- the six areas and then the four areas of the end game. I'll just underline the two points I started with, is that we think that we are on the verge of what may be a very good deal. But we would all caution you that there are 30 hours to go and there is not a deal yet.
Q: What happens if you do get a deal? I mean, you have to go and negotiate now with the 114 countries, or what's the --
MR. CUTTER: No, here's the way the process works, because I think that we've all detected an understandable sort of uncertainty about what this process is. The negotiations have been proceeding with all 124 countries or whatever it is right along. But in general it is always believed that the -- as the two major trading areas -- the U.S. and the E.C. -- have got to come to some kind of agreement, which basically represents a marker for the rest of the world or there's chaos -- there just wouldn't be an agreement.
No, this agreement, if it's completed, has to be completed in total by midnight tomorrow night. So that while those agreements have been going on in parallel, what this -- what a European-U.S. deal does is essentially provide the basis for saying "agree or don't agree" but this, is in its broad sense, what the deal's going to be.
So there will either be a deal or there won't be a deal by midnight tomorrow night, but it'll be a full deal.
Q: When will it be effective, January or July of '95 --
MR. CUTTER: It's still -- that's still being considered -- and thank you for asking the question, because I think everyone ought to know that this is not quite like the NAFTA process; that the way this works is the President has to indicate to the Congress by midnight tomorrow night that he intends to sign the treaty. Then the Congress has four months to consider the treaty and to consider whether or not they would prefer to reject it, in essence. On the 15th of April, no earlier than the 15th of April, the President has to sign it or not sign it. That is to say, he can't sign it earlier than the 15th -- he can sign it obviously later than the 15th.
Upon signing it, if he decides to sign it, we then have to, as we did in NAFTA, submit implementing legislation. That is where the fast track actually works. It's where the requirement for 90 legislative days comes into play.
If the treaty is to go into effect, if the whole round is to go into effect by, let us say, the 1st of July '95, then obviously we have to submit the implementing legislation in such a way that it would meet that deadline. If it's by the 1st of January 1995, we have to do it considerably earlier in order to meet that deadline. And I don't know, I don't think any of us know at this point what that date is, but obviously we'll know within 30 hours.
Q: Is it 90 legislative days or 90 calendar days?
MR. CUTTER: I think it's 90 legislative -- it's 90 legislative days.
This is Bob Kyle, who's a Special Assistant to the President focusing on trade.
MR. KYLE: Once the agreement, once the legislation is formally submitted, it's 90 legislative days. Now, in the case of NAFTA, that 90 legislative days was shortened because you reach an agreement with the Congress that that they'll expedite the time.
Q: So the President will sign it by the 15th, but Congress necessarily may not vote on it until the end of the year?
MR. CUTTER: That's right. That's why we've been saying that it's not exactly like NAFTA, that eventually there will be a piece of implementing legislation on which there is a vote. But the process strings out longer, so that it's not that we go immediately into campaign mode.
Q: How is that different than NAFTA? I'm sorry.
MR. CUTTER: Well, if you remember, the process isn't different, all I'm saying is that there is now this long period -- we're not going to be submitting implementing legislation in January and immediately have the campaign.
Q: What does it cost us to leave out audiovisual for U.S. exports?
MR. CUTTER: Well, our sense is, is that given the European deal, we benefit. I mean, we have a 70 percent share in entertainment in Europe, and the last thing on Earth we wanted to do is bind ourselves within the European context of that cultural restriction.
Q: You're saying -- but that's just market the conditions -- 70 percent is, that's just how it is.
MR. CUTTER: No, that's how it is, yes. I didn't mean to say anything else.
Q: Without a deal on that, presumably the doors are there, the French or whoever are free, then, to try to keep out such entertainment products as they wish, are they not?
MR. CUTTER: Let me make two points about that. First of all, an overall point is that we've been working extremely closely with the industry on this issue. Now, the two points about your comment or question, one is that one of the reasons not to have it in terms of our relationship and our dealings with Europe on this issue in this sector not to have it within the GATT is so that, in fact, we can retaliate.
The second point is that the European consumers, acting of their own free will, seem to be not following the dictates of the French cultural managers since they buy this at the rate of 70 percent of the market.
Q: Has any progress been made on gaining access for textiles and apparel -- to the textile and apparel markets of India and Pakistan? Is that still going on -- lobbying for market access amendments? And if not, do you have any backup plans for getting access to those markets?
MR. CUTTER: Two things. I mean, generally, what this does is propose a 10-year phaseout of the multifiber agreement, and then that would mean a phaseout of the quotas and the tariffication of textiles. Then, what it is, is a reduction in the tariffs -- I think in this case by 50 percent. So that access is, in fact, provided in the agreement.
MR. KYLE: I think with regard to access to other markets there has been some progress made. I can't tell you specifically with regard to those two countries, but I know that they think they've really achieved a landmark package in terms of our access abroad. And as you know, our textile industry, in particular, has become increasingly competitive in recent years and will benefit by a lot of those market opening commitments we've got.
Q: So this is part of the specific market access amendment negotiations where progress is being made?
MR. KYLE: Yes, this would be part of the market access negotiations is to break open those markets.
MR. CUTTER: It's that first of the six points I named is the industrial tariffs and the market access agreement.
Q: Well, we heard you and your colleague stress how we don't have a done deal yet and we're only on the verge of this agreement. But isn't it fair to say that the fact that you and your colleagues have come out here and told us how great it's going to be if GATT is approved that it's all but a done deal?
MR. CUTTER: Where, as you'd expect, we're kind of in a bind, is that the agreement, the deadline's tomorrow night at midnight. The President, we believe, has to have the day to be able to look at it and to look at it in detail and see how all the parts relate. Things have, in fact, changed in the course of today. Most of us were awakened fairly early this morning to begin to talk about it and issues have changed throughout the day. So the best answer to -- let us wait and see kind of where they all wind up. But the best answer to your question is that the achievement of a European-U.S. agreement on this is very significant. We haven't reached this point before on the Round. There can't be a deal without that. But, sort of caution, prudence the fact that we've still got 30 hours of debate to go says that we've really got to be cautious in the way we're saying it.
Q: Well, what are these thorny issues that the President himself referred to this morning that still remain in this 30-hour period?
MR. CUTTER: There are still ongoing discussions with respect to the degree with market -- in each of the six areas that I mentioned -- let me step back and say what happens right now. There being an agreement on the basics between the United States and Europe, there now follows a day in which countries decide what is going to be the nature of their offer, and in which, obviously, we're negotiating to make the market opening offers as broad and as substantial as they can be, so that there are 100 mini negotiations going on in every one of these areas.
Q: And who is party to all -- all the signatories that will participate in the --
MR. CUTTER: Yes.
Q: So you've got 100 negotiations participated in by more than 100 countries?
MR. CUTTER: Right.
Q: You mentioned that --
Q: And you're going to finish it in 30 hours?
MR. KYLE: It's not as if those 100 negotiations just started yesterday, they've been going on for a while and there have been a lot of discussions. But there is still a lot of work to be done in a lot of those areas; they're going to have to finish it up.
MR. CUTTER: This is like in any negotiation, I'm sure many of you are familiar with it, you do reach a point where you know all of the options out there. And the issue now is which ones are you going to decide on. It's not invention of new alternatives.
Q: You mentioned that you thought this is the trade year and the negotiations have become very important. How would you describe the importance of this, or why do you think they've become so much more important over the last few years, compared to 10 or 15 years ago when these things were so obscure and arms negotiations were the highly visible trade talks -- negotiations?
MR. CUTTER: I think there are two reasons. One has to do with -- I don't think any of us realize the enormous degree to which the world and the world economy changes because of the end of the Cold War. And so we've all said in lots of speeches that one of the impacts of that is the sort of glue disappeared from the system, and there is a lot more potential for conflict because people don't trade economics off against security. And so it makes these more of a center stage.
But I think the much more important structural reason for us is that the international economy is far more important to our economy than it was 15 years ago. Exports and imports as a percentage of our GDP have grown enormously over the course of those 15 years. And, therefore, what this represents is the opening to our economy which, as Laura said, is now arguably the most competitive in the industrial world to a whole new area of growth.
Q: A question on agriculture. Assuming that the GATT is ratified, will we continue the high wheat subsidies we have through the export enhancement program, or is there any time in the interim period between now and when the GATT actually goes into effect, or would we actually consider reducing the subsidies we offer on wheat, and also the agriculture community, as long as they've got some other issues shaken out, do you see them as strong advocates for GATT, like they were in NAFTA, in terms of congressional debate?
MR. CUTTER: I'll answer the first question first. It's a little hard yet to know what the political lay of the land is. Multilateral agreements are different than bilateral agreements, and this one is different than NAFTA in a couple of ways. One is, you can craft a bilateral agreement so that they're likely to be much sort of a much higher level of intensity of support. But that particular agreement also had some obvious -- some real obvious points of attack, that there were people who were concerned, unhappy about the nature of the relationship with Mexico or with low-wage, what they perceived of as a low-wage economy.
This is much broader than that and, in a way, somewhat more diffuse, so that the support is going to be, I'd suspect in general, less intense, and the opposition is going to be lots less intense, just as a general rule.
And in terms of your first question about how does it affect our own domestic policies at this point, the short answer to that is, I really don't know. I know the interplay.
Bob, do you have a view?
MR. KYLE: I can give you a little sense -- I'm not sure how it -- on the specific programs you mentioned, but for example, in subsidies, in 1991 the EC spent about 12 times more on export subsidies than we did. So we're starting from a very unequal playing field. And even percentage reductions means they'll reduce -- I'm not sure what it means exactly --
Q: Would be wise to begin phasing those kinds of subsidies out, or not?
MR. KYLE: Well, for example, in our domestic supports, we've already made a number of cuts already as part of our budget packages. And the base to be ruled from is a base in the past, and therefore, in that area, for example, there's not that much of a -- there isn't any -- I don't think we're going to have to make any cuts, because we've already made a number of cuts in our programs.
MR. CUTTER: We've achieved the level of reductions.
Q: What about other kind of agriculture subsidies in our economy?
MR. KYLE: I don't know about the programs you mentioned, for example. Those are the main -- of course, these domestic support programs are the largest ones, I believe.
MR. CUTTER: That's where we have spent our money.
Q: It's been mentioned that the U.S. still maintains the capability to use the U.S. trade laws. Does that mean the U.S. in the future can't apply 301 or any kind of sector, any case, or what is the U.S. actually giving? You must have made some concessions.
MR. CUTTER: Draw a distinction -- for issues that are part of GATT that are directly included in the GATT agreements, we are required to go through the multilateral processes. For issues that are not, we are not so required. And 301 is most relevant in the second area. It remains as a sort of last resort in the first area.
MS. MYERS: Let's take one more question.
Q: What are your estimates of revenue loss at this point, and how are you going to handle the budgetary implications?
MR. CUTTER: Everyone's looking at Laura.
DR. TYSON: We will -- look, I would say right now we are not going to come up with an official estimate of revenue loss. We will work on that. And, of course, as you know, because of the pay-go rules, any revenue lost will have to be onset by something else.
It is important to say, in answer to that export -- the export enhancement question before, that we do anticipate that one way we will make some savings to offset some of the revenue losses, indeed, the fact that we will be able to, as we wanted to from this agreement, to cut back on export subsidies that were motivated simply by the need to meet and match the export subsidies offered by our trading partners. So as those come down, we will have budgetary room to bring our own down, and those will offset some of the revenue loss. But our preliminary estimates suggest that they will not offset all of the revenue loss, and indeed, we will therefore have to make --
Q: A minute ago you didn't have to do anything. Now you're going to do lots because it's going to generate revenue?
DR. TYSON: What do you mean --
Q: Well, I mean, I was asking about what we're going to do in terms of phasing out subsidies, and you said, well, we're already golden on that. And now --
DR. TYSON: No, wait. I'm giving you -- what I'm saying is that there are certain kinds of subsidies that we have, some of our export enhancement subsidies, which exist primarily to meet the subsidies of foreign countries. As those countries bring down their subsidies, we will be able to bring down ours. And that will be --
Q: Because we can, not because we're required to?
DR. TYSON: Because we can. When we went into these negotiations in 1986, if you go and look at what we wanted to do, one of the things we wanted to do was to free ourselves and the world from really excessive amounts of subsidies which were benefiting no one, but spending a lot of global resources. So the world is better off if you bring some of these subsidies down. We will have room to bring our own subsidies down; that is one way we will offset the revenue loss, but it's not a complete offset. So we will obviously have to find other ways to make up for some of the tariff revenues.
Q: You're not allowed to use increased growth projections as a source of revenue under those rules, right?
DR. TYSON: You are not allowed, in pay-go rules, to use -- if you're allowed to, you could show that any of these models that I have suggested, give you this range, would generate more than enough additional revenue from growth to offset the loss revenue from reduced tariffs. But that is not a calculation allowable in the paygo.
Q: We won't cut the EEP before '95 then, the EEP subsidies?
DR. TYSON: All I know is that what I was talking about was the room for cutting EEP subsidies that will be allowed once the agreement goes into effect, once the agreement goes into effect.
Q: So after it goes into effect, not before?
DR. TYSON: If there is any cuts before, I really don't know about them. So I'm really talking about once the agreement goes into effect.
THE PRESS: Thank you.
END 3:43 P.M. EST
William J. Clinton, Press Briefing by Robert Rubin, Assistant to the President for Economic Policy, Laura Tyson, Chair of the Council of Economic Advisers, Sandy Berger, Deputy National Security Adviser, Bowman Cutter, Deputy Assistant to the President for Economic Policy, and Robert Kyle, Special Assistant to the President for Economic Policy Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/269162