Testimony of Patricia Davis--free trade, unilateral and economic trade sanctions

Testimony of Patricia Davis
President, Washington Council on International Trade
Before the U.S. International Trade Commission

May 14, 1998
MS. DAVIS: Thank you very much for holding this on the day that I happened to be in town. I know you arranged it that way.
My name is Patricia Davis. I am President of the Washington State -- of Washington -- Council on International Trade; and I would like to tell you just for a second what our Council is, just so you know it is not a government entity.
It is a private nonprofit association of interests engaged in the global marketplace. Members represent the diversified nature of our state's economy -- aerospace and manufacturing, agriculture, services, forest products, education, high tech and biotech, apparel, fisheries and food products -- to name the key ones.
Washington State is the most trade-dependent state in the country per capita. One out of every four jobs is related to international trade, up from one in five a few years ago, and headed towards one in three in the next several years. We had about $40 billion worth of exports in l997 out of our state.
Boeing is one of the nation's largest exporters, obviously. Microsoft is the leading software company. About 60 percent of their revenues come from exports. Agriculture is the third largest exporter in our State. The ports of Seattle and Tacoma comprise the second largest container load center in the United States now, after Long Beach and L.A., handling export and import goods to and from 40 states and l00 foreign countries.
Weyerhaeuser is the leading forest products company from our state. Major firms such as Nintendo and the Frank Russell Company, which is one of the four top pension fund companies in the world, are headquartered in our state. Newly-developed Intel and Taiwan Semi-conducter's wafer-tech plants have been major investments in our state recently, and they are hiring increasing numbers of people at family wage jobs.
The success of Washington State's businesses in the world marketplace hinges on thousands of long established trading and personal relationships, which have built a climate of trust and reliability over the years. Along with high quality products and an entreprenerial spirit, our companies have established important markets for airplanes, software, financial and legal services, apples, sweets, seafood, processed foods, aluminum, wood products, heavy vehicles and equipment, machine parts, high tech equipment, medical and educational services, tourism and apparel.
Over 800,000 jobs depend just on our exports. This does not include many companies which also -- and their employees -- involved in imports, whether for integration into a product, or for distribution and sale. Clearly, due to our heavy reliance on trade, economic sanctions damage our state's trading relationships more immediately and more dramatically than many others. We are pleased that this study is being done now, because I got the feeling during the warning that if this study could really quantify in ways you would like to be able to quantify the statistics, you wouldn't need to do the study. We'd all be out of business. We would not be able to access the world market.
But we are pleased also because there are increasing numbers, and there is ruinous content in some of the current 26 bills. I think it's about 26 in the House and Senate. And they are extremely worrisome to Washington State traders. A few examples may help illustrate the effects of sanctions on Washington State's companies.
As a result of the China Sanctions Act, a crane manufacturing company in Seattle, Ederer Crane, which is a medium-sized business, calculates its loss at $l0 million in sales. Since the sanctions were unilateral, other countries' firms readily filled that gap.
When U.S. firms were prohibited from taking advantage of Ex-Im Bank backup loans for the Three Gorges Project in China, companies such as PACCAR -- which makes heavy trucks -- and again, Ederer, were blocked from bidding on millions of dollars of equipment sales. Because the sanctions were not multilateral, companies from other countries benefitted.
If the purpose of these sanctions were to prevent the construction of power plants and to prevent the dam being built, they failed. Those injured were the American workers, who were either let go, or the prospective workers who might have found a job in those companies that would have benefitted, and the stability of those companies' future finances.
The apple and wheat industries in our state have been hit by several major marketplace phenomena that have sent their revenues below their costs. Among them, the Asian currency crisis, and the newly imposed Mexican tariff on apples. On top of that, sanctions that would be imposed by the Wolf-Specter Religious Persecution Act would potentially close other market options that could help them out of their trough.
There is also a competitive factor that is not well recognized, but has been mentioned today, that occurs when the U.S. threatens to impose restrictions on its own economic engines. For example, the Port of Seattle is the northwest port of entry for China's primary ocean carrier, China Ocean Shipping Company, or COSCO. And we would like to keep it that way, as the primary northwest port of entry. However, the Port of Vancouver in Canada sits just north of us; has a new l00-acre terminal, 400,000 container capacity that's empty. Vancouver has been courting our customers very hard, and they tell COSCO that Vancouver does not have such a threat, and is therefore the reliable entity with which to do business for the long term; and they can access our midwest and our eastern markets through their rail lines.
This puts the Port of Seattle's painstakingly developed relationship with an important carrier in serious jeopardy. And now they,ve become pretty aggressive with this. It's not about marketing COSCO, but they just put an ad in on our congestion in their major magazine there on the congestion we have and on the harbor maintenance tax that we have, proving that we are an unreliable and more costly area. It's not a very good copy, but I did attach it. So you can see that they are out to eat our lunch, as they state in their papers every week.
Similarly, Boeing feels the effects of MFN each year when Airbus informs the Chinese Airlines that Boeing is not reliable. The claim is made that from one year to the next it is not certain that Boeing will be able to fulfill its contracts, not just for the aircraft, but also for the supplies and parts. This makes Boeing's hard-won relationships vulnerable. Once an airlines chooses an aircraft, the effects on the manufacturer's long-term market and its workers' job security are enormous, due to years of followup with parts, supplies and training specifically geared to that type of plane.
Another less well-known effect that occurs -- at least in our state -- if unilateral sanctions are put into effect in major ways that would bring about diminished trade flows, is that fewer trains and trucks would move through our state, which thrives on two-way trade flows, not just our export capacity.
This means that agriculture would be affected enormously, because the backhaul of empty containers returning from the East Coast and the Midwest back to produce -- to the export markets of Asia -- come back empty, and therefore would come back empty if they weren't loaded with agricultural products. This provides lower transportation costs for agricultural products. And it makes Washington State apples, hay, cubes and other products price-competitive on world markets.
But it is important to note that it isn't just true for Washington State products. It's also true for midwestern state agricultural products, because the same condition prevails for them as well. The availability of empty containers and lower transportation costs related to the backhaul is important to more states than just Washington.
The State of Washington is the first beachhead when retaliation and adverse effects from trade restrictions are felt. We are now feeling the effect of the Asian currency crisis quite markedly in our statistics as they are coming through. But the specter of international sanctions on the trading partners of the most trade-dependent state in the nation is not only troubling; it is bewildering. As Mr. Lane pointed out, the U.S. Government now seems to be our own worst barrier to entry and to our success -- not getting trade barriers lowered. And in fact, the State of Washington is spending a considerable amount of money -- as is the Department of Commerce in Washington, DC -- in trying to lure small and medium-sized businesses into the export market. And so the other part of the government setting up these barriers seems to be a little counterproductive.
Unilateral sanctions have proven over and over to be an ineffective tool in achieving U.S. foreign policy goals, as we have heard today. If the goal is to achieve better conditions for the people of poor countries, it is not achieved through the isolating mechanisms of sanctions.
Time after time, unilateral U.S. sanctions are shown to have hurt U.S. companies and workers instead. Something could be said too for the human rights of working people in the United States who would like to keep on working, and for industries that would like to continue producing in America.
The international sectors in Washington State's economy have been thriving. They look forward to more open world markets, more transparency, more rules of law prevailing, and equal treatment, to enable them to continue their competitive advantage. They champion their ability to pay better than average wages as well, because they are in the global marketplace.
The traders in Washington State believe that reliability and engagement are the best ways to bring security, stability, best practices, and eventually democratic principles to trading partners' economies that are not yet as developed as our own. Federal sanctions and support for boycotts and selective purchasing ordinances at state and local levels also cause Americans to be unreliable and vulnerable. And we're facing one of those in Seattle now . The Seattle City Council is proposing for the second time -- the first time it failed -- a Burma sanction.
Members of Washington State's international trade community strongly urge that unilateral sanctions be thoroughly examined for their economic effects, as well as for their impact on American power and influence. Participants in world trade, from the leading trade state of Washington State, believe that our country's economic strength underpins the strength of U.S. leadership in the world. A strong and engaged America can promote democratic freedoms.
Thank you for your consideration of these views and for doing this very important and timely study.

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