U.S. Rep. Adam Smith at The G20 Summit and Beyond

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Full Transcript of Rep. Smith's Speech (PDF here):

I appreciate the economic analysis there, I think it’s all accurate, if a little bit depressing, the challenges that we face. But I guess the good news is that we kind of knew that going into November. We knew and I think American people knew that we had stepped over a cliff, and it was going to take a lot of work to fix it. It was going to take a lot of work, a lot of effort and a lot of time to get there. And hopefully with the Obama Administration, what we will continue to do is do a good job of being honest in explaining that and working our way out of it, while letting people know that it’s going to take a little while. And I think Rob outlined very, very well what those challenges are.

I want to mention just one more and then talk a little about the international peace issues that I work on, and that is the challenge of protectionism. As you are going into an economy like this, there are several very basic lessons; you don’t raise taxes, you don’t cut spending and you don’t enact protectionist policies, because that in essence is a tax cut. It drives up the cost of doing business. A tariff is a very straightforward tax, but quotas and other non-tariff barriers also fundamentally drive up the cost of doing business at precisely the moment when, as Rob described, you can ill-afford any more driving down of people’s economic activity; and that is precisely what this causes.

I don’t want to continue on doom-and-gloom side here but we’re in a lot of trouble on this issue and we need folks to start speaking up on this more aggressively. And it’s creeping up in a lot of different directions and I do believe that the Obama Administration needs to be more forceful in talking about the dangers of protectionism and explaining it. And explaining why it would be so bad for the economy in this moment.

We’ve got a lot of trade agreements that are hanging out there not being acted on. That’s unfortunate, particularly in the case of Korea, because Korea is a huge economic trading partner. We have been fighting tooth and nail in Congress for the last five or six years over things like Oman and Peru, and as important as it is to keep a trade agenda moving forward, these are not large trading partners. They are not going to have a dramatic impact on our economic bottom-line in this country.

Those agreements were important because they represent the fundamental issue: Should we do trade agreements or not? Are we going move forward with the trade agenda? But in terms of economic impact, they weren’t that important. Korea is, and it sits out there not being acted on.

But worse than that is some of the creep in other directions. We have a trade war going on in the US, all over Mexican trucking. You can get into sort of the discrete issues as to whether or not Mexican trucks are safe, should they come across the boarders and how do we negotiate that. But the bottom-line is, it was in the NAFTA Agreement that we would allow this to happen. We didn’t, the clock ran out, and now Mexico has begun slapping tariffs on all manner of different goods that are out there. And by and large, you are not hearing much about this. There is no sense of urgency that I can see to fix this problem, but it’s the first step down the road, I believe, of having the type of elevated trade war that we can ill-afford.

So, we need to get back on track and have a trade agenda. Now, it does help that Ron Kirk was confirmed as US Trade Representative. It also helps that it’s Ron Kirk. He is a good guy. He has the rights policies on these issues and I believe he is committed to moving a trade agenda forward. But one of the biggest messages I have is we need to urge all pieces of the Obama Administration, Commerce, Treasury, whoever we are talking to, that this is something they need to get on their agenda to show that we can take positive steps. Because to the extent that we don’t (whether it’s not fixing the Mexican trucking problem, not passing the Panama Free Trade Agreement or for Columbia or Korea, not going forward to try to get the Doha Round started again, not continuing to negotiate a variety of different trade agreements out there), reactions come from the rest of the world. And that’s how a trade war gets started. They too retreat. They too look for ways to protect their own products.

Also, you can add into the mix the Buy America provisions that were in the stimulus bill. Now, the exceptions outweigh the rule on that, and if you really sort of dive into it, it is unlikely that the Buy America provisions that are contained in the stimulus bill are going to have much of a negative impact on our economy. But that’s not the story in the rest of the world. If you read what they are saying about it, and I am sure it’s coming up with the G-20 Summit, they view those Buy American provisions as a dramatic problem and also to some extent license for them to react in a similar fashion. And then, you elevate the trade war and you elevate protectionist policies and you drive up the cost to consumers and the cost of business in a moment when we can least afford to do that. So, we need voices out there, and right now within Congress, they are hard to find.

There is a very, very powerful group of folks who continued to see trade as a threat to the economy instead of an opportunity. And this despite the fact that we have stepped up and addressed many issues, many legitimate issues that have been out there for a while. It never made sense - and this is one of the things that came out of the WTO - that you would not negotiate labor and environmental protections as an essential part of trade. If you are setting up the rules for a global economy and talking about intellectual property and talking about investor rights and those types of things, then certainly, the rights of workers and efforts to protect the environment should be part of that discussion. But they are now. All of those agreements that I just mentioned have enforceable provisions in them on labour and the environment on an equal basis with every other objective on the trade. So, we made that step.

Another common complaint was that American workers are falling behind and the government has not changed policies to help them. And I think that’s an incredibly valid point. It’s at the core of some of Rob’s research about, long term how do we get out of this, how do we build an economy where the middle class and the working poor are not seeing their wages go down? And it’s about health care and a better education system and also about getting a new energy policy.

Well, we just spent almost $800 billion on that sort of stimulative effect to help American workers. We still have to work on health care, but we’re taking steps in those areas to address those concerns. So, we have listened and tried to meet those concerns. Which reminds me of my message on education; the key to education and workforce training is giving our people, young, old, middle age, whatever, applicable skills. That is the weakness in our system. I think there is a little bit of an obsessive focus in some corners on having a college degree because that’s the level of education that’s now demanded out there. It may be necessary, but it depends on what the college degree is, and if it's applicable to an actual job. That’s what we need.

In K-12 education, in the community and technical colleges (who by the way are the one group out there that I think are doing a really fabulous job. Simon’s got a great proposal about how to take advantage of the computer services that they have available, and there are a lot of other good ideas) that’s where we’ve got to place our emphasis if we are going to have an educated public who can go to work.

I made it all the way through college with a degree in Political Science, but I really didn’t actually know how to do anything at that point. I sort of fought my way through that and found a job but it was a different economy then. Our young people today cannot afford to be taking high school physics and high school calculus, that isn’t applicable to something. That doesn’t show them here is a job path for you to follow. That doesn’t get them very integrated immediately with the businesses in the world who are actually going to employ people and show them the skills that they need to do that. That is the type of useful education and job training that we need and we really need to make changes. I think there are opportunities but we need step up to that.

Last thing I want to say is on the international peace, the importance of global poverty and the importance of global development. One of things we’re really going to need to get out of this crisis is partners. We are seeing that at the G-20. The rest of the world is sort of looking at us and going, “Okay, you were the guys who screwed this whole thing up, and now you’re going to show up and tell us what to do? Not going to happen.”

There is a lot of hostility out there, some of it is probably misplaced. But nevertheless, we don’t have the best reputation in the world at precisely the moment when we need it the most, to work together in a cooperative way to find a way out of the economic box that is so snugly erected around us. And to do that, I think one of the things we need to do is show the world that we care about the fact that 2.7 billion people live on less than in $2 a day; that there is such a dramatic difference in the wealth, distribution in wealth that accrues to our benefit and against the rest of the world.

We lecture China, we lecture India about human rights, their labor conditions or anything else, but these are two countries that have brought 400 million people out of poverty in the last 20 years. So, we need to get an understanding of the fact that the fundamental unfair distribution of wealth and opportunity in this world is a major challenge to stability, and that’s how I came to this issue.

I actually was chairing the Terrorism Subcommittee, working with the Special Operations Command in Iraq, in Afghanistan and elsewhere where Al-Qaeda-inspired insurgencies were cropping up, and trying to deal with them. There are a lot of different ways to deal with them. But at the end of the day, even the Special Operations guys who are trained to target terrorists and take them out came to understand very quickly that development was a big key to this.

If you are going to stop an insurgency in a given country or a given community, and the people there feel like they have opportunity and feel like their government is providing for them, the insurgency finds far, far fewer recruits. Insurgents can’t get that level of support even if people still cling to their crazy ideology. It simply becomes something that the people talk about with each other, not something that they support enough to go out and blow themselves up for. This is a key piece of that.

And what the US can do right now is actually have a global development strategy, which we don’t. There is a lot of focus on the foreign aid budget and it usually focuses in one or two directions: Either why are we spending any money on people outside of the US when we have all our problems? I think just explain why we do. But second are those who actually support it would simply say we need to spend more.

There is a battle is going on in our budget right now over increasing the foreign aid budget. Now, that’s fine. But what I am more concerned about is what do we spend it on? What’s the strategy? We have somewhere between 35 and 40 different agencies in the Federal Government that have some responsibility for development. They do not coordinate. USAID, which is supposed to be in charge of it, has shrunk to the point where, the best way I’ve ever heard it described was in an article which said that right now USAID basically manages contractors. They don’t actually do anything. They are simply saying, “Okay, we have this pot of money. Who are we going to pay to do what it was that we used to do?” They are not actively involved. They are a piece of the state department that is focused on many, many other issues.

We need a coordinated development strategy. That was the motivation behind the Global Poverty Act, the idea that we should have a global strategy. Great Britain does this. I could go on a great length about what that strategy is but it suffices to say we can do it better and we need to have it coordinated. And I am growing concerned that despite the fact that President Obama is very committed to this, despite the fact that Secretary of State Hillary Clinton is very committed to this, as is Jack Lou who is one of her under secretaries, it's not happening

We don’t have a USAID director at the moment. It's April 1st and I haven’t even heard a name recently, nor have we started to pull together a strategy on this. It's understandable, Secretary of State Clinton has certainly been busy and is working very hard. She’s been in Mexico, been in China, been in the Middle East and I think she is in the Netherlands right now doing very, very important work. But that is why we need a strategy, why we need a USAID director.

In my opinion, it ought to be cabinet level at a minimum and ought to be separate from the State Department. It should consolidate all, or at least most of those development agencies that we have right now into one place. That way we can have a cohesive policy that shows that this is important to us because we have learned a lot, I believe, in the last 5 or 10 years about what works in development. That’s what’s so exciting.

When you see the work that the Gates Foundation and Bono and endless other NGOs and governments have been doing, we have really learned how to make a difference in poor communities on global health, on microfinance, on trade and capacity-building issues. Now, we just need to take that knowledge and put it into a coordinated strategy so we can actually start to make a difference on this issue, and that too I believe impacts the global economic picture.

It's hard to sustain an economy when you have roughly three billion people who aren’t participating in it. It goes back to the old Henry Ford maxim about, “it doesn’t make sense to have people making my cars who can’t afford to buy them.” Henry Ford was not a philanthropist. He wasn’t looking at his workers saying gosh, now, that’s unfair. He was looking at his inventory going, “Who is going to buy this?”, and the same applies on a global scale.

So, those are a couple of areas that I really think we need to be focused on as we look both short term and long term to get ourselves out of our current economic crisis. And I simply want to close by once again thanking Simon and the works that NDN does. Nobody comprehensively looks at these issues better than the NDN under Simon’s leadership. It's been great to be able to work with him and Rob and others. I look forward to continuing to do so. Thank you.