Mr. Chairman and distinguished members of the Subcommittee, I am John E. Pepper, Chairman of the Board and Chief Executive of The Procter & Gamble Company. I am appearing today on behalf of the National Foreign Trade Council, a broad-based organization of over 500 U.S. companies having substantial international operations or interests. I also serve on NFTC's board.

I appreciate the opportunity to testify today on U.S. trade policy. I would like to focus my remarks on fast track trade negotiating authority and make three points: 1) the world isn't waiting for the U.S. to take advantage of the benefits from trade agreements; 2) the U.S. economy is dependent on expanding trade and investment globally; and 3) without fast track authority to negotiate new trade agreements, the U.S. will jeopardize domestic job growth and be disadvantaged to other countries and regions throughout the world.

1. The World Isn't Waiting for the U.S. To Take Advantage of the Benefits from Trade Agreements.

The United States has an impressive record of achievement in leading the rest of the world in the direction of a trading system that is rules-based, transparent and open. Through multilateral, regional and bilateral efforts, we have negotiated clear rules of the game for international trade, and have progressively reduced tariff and non-tariff trade barriers. The result has been an enormous economic stimulus under which world trade has consistently outpaced world economic growth. It also has led to a trading system that is largely built around U.S. concepts of market-based economic growth and a sense of fair play.

NAFTA and the WTO, two examples of agreements negotiated under fast track authority, are resounding successes and we should be proud of them. Expansion of these agreements is critically important as is the pursuit of other initiatives that promote basic U.S. trade interests. This means moving forward on Chile's accession to NAFTA, expanding free trade throughout the Western Hemisphere, encouraging the APEC process, and strengthening the WTO through accession of major emerging economies, such as China, Russia and Vietnam, on viable commercial terms.

NFTC members are seriously concerned that we are falling behind. It is now approaching three years since Chile was invited to join NAFTA. Other trade negotiating efforts initiated in late 1994 are losing momentum, such as the creation of a Free Trade Area of the Americas (FTAA) and the move toward eventual free trade among APEC countries. Our negotiating ability and credibility is limited without fast-track authority.

Meanwhile, our trading partners are aggressively reaching agreements among themselves, while the United States is forced to sit on the sidelines. Chile and Canada have negotiated their own free trade pact, the European Union is moving to establish special trade relationships with Mexico and elsewhere in Latin America. The Andean Pact is getting stronger. Japan, as well, is wisely seeking to enhance its trade position in the region. Chile, moreover, has a free trade agreement with MERCOSUR, which is led by Brazil. While there is nothing wrong with these agreements in and of themselves, we must recognize the benefits created by them exclude the U.S.

These developments are putting American firms and workers at a competitive disadvantage. For example, Chile's uniform 11% tariff is being phased out for both Mexico and Canada, but not for us. Among the MERCOSUR countries, tariffs as high or higher than 40% have been eliminated. Consequently, intraregional trade among MERCOSUR partners is exploding, growing over 40% in the past two years. Meanwhile, the best trade growth the U.S. can report with any MERCOSUR country is 20% over the same period. Latin America is the second fastest growing region in the world and if we don't move forward on achieving the FTAA, we may be the only country without preferential trade status.

2. The U.S. Economy is Dependent on Expanding Trade and Investment Globally.

The U.S. is the world's largest, most competitive and innovative economy. However, it's important to remember that 95% of the world's population lives outside the United States. This means that the vast majority of growth potential for American industry -- growth that provides American jobs -- comes not from the U.S., but from the rest of the world.

Our experience at Procter & Gamble is a good example. We are a $35 billion company. More than half of our total business comes from outside the U.S. -- and 73% of our growth in the past decade has come from international markets. Had we not been able to expand our business globally over that period, we'd be a much smaller company today. In fact, we would be a far less competitive company today. We'd employ fewer American workers and those jobs we did provide here would be far less secure.

Instead, we have 44 U.S. manufacturing plants and more than 40,000 U.S. employees. Many of our U.S. plants have substantial export business, and key non-manufacturing functions here in the U.S., such as Research & Development, Engineering, and Logistics support our international operations.

Our Jackson, Tennessee facility is an excellent illustration of this point. The Jackson Plant was built in 1971 to produce Pringles and Duncan Hines baking mixes for domestic sales. It wasn't until around 1990/91 that we began to develop an export business for Pringles. Today, exports of Pringles to Canada, Europe, Latin America and Asia are over $200 million in sales, and represent a third of the plant's production volume. We now employ 1300 people at Jackson and we're launching a $185 million expansion to the facility. This expansion will result in 200 additional new jobs to our work force there. The future for P&G is in expanding our international business opportunities. Obviously, Jackson has and will continue to be a major beneficiary of this trend.

I'd like to comment on NAFTA in light of the Administration's pending review and questions about its success. The record is clear -- NAFTA has brought major benefits to the United States and is very much in the mutual interest of the NAFTA partners -- the United States, Canada, and Mexico. NAFTA is doing exactly what it was intended to do -- breaking down Mexico's very high trade barriers to us and leveling the playing field. It has expanded U.S. jobs, trade and market share.

The facts speak for themselves. Today, 2.3 million high-wage U.S. jobs depend on trade with Canada and Mexico -- 311,000 of these jobs have been created under NAFTA. Exports to Mexico are setting new records, despite the peso crisis. In 1996, we exported $57 billion to Mexico -- an increase of 23% over the previous year and 37% over 1993, the year before NAFTA went into effect. Likewise, exports to Canada in 1996 were 33% above 1993 exports. U.S. share of Mexico's imports has grown from 69% before NAFTA to 76% today. At the same time, our non-NAFTA European and Japanese trading partners have seen their market shares decline.

NAFTA, moreover, has kept Mexico on the path towards open economic reform and trade liberalization with the United States during its worst recession in recent history. This is in sharp contrast to what happened during the financial crisis of 1982 when Mexico imposed 100% duties and other trade restrictions on American products. It took seven years for our exports to recover then. This time it took only eighteen months.

NAFTA has created business opportunities for Procter & Gamble. Procter & Gamble's exports of finished products from the U.S. to Canada and Mexico have nearly tripled since NAFTA was implemented. We believe we have only scratched the surface of market opportunities available as a result of NAFTA.

Other NFTC member companies have also benefited from NAFTA and remain fully committed to this agreement. It's a win-win for all three countries and should be expanded.

The NFTC also applauds the recent conclusion of the WTO Information Technology Agreement which was concluded under a residual grant of negotiating authority. It is a demonstration of our ongoing ability to lead in the trade arena when our negotiators have the necessary tools. While Procter & Gamble had no specific stake in the outcome of this agreement, we know that the expansion of rules-based regimes will ultimately help our business.

While these trade agreements benefit American firms and workers, it's imperative that all of us do a better job of explaining how trade makes us strong. We can't afford not to. Trade now accounts for 30 percent of U.S. GDP. Exports have been responsible for one-third of U.S. economic growth over the past decade. These exports support 11 million American jobs. Export related jobs pay better, and are more stable and productive. Clearly, trade fuels our economy.

3. Fast Track Authority Must Be Renewed Now.

Without fast track negotiating authority, our ability to access foreign markets is seriously compromised and places us at a competitive disadvantage. Renewal of fast track must be a top priority for our government. It should be broad in its coverage and long term.

The issue of linking labor and environment to fast track is highly controversial. These non-trade objectives are worthy of pursuit in and of themselves, but should not impede the progress of trade expansion. Trade expansion by itself brings about economic development for our trading partners, which supports improved environment and labor conditions.

At Procter & Gamble, we seek to attract and retain the best people wherever we do business. Additionally, we design and engineer our manufacturing equipment to a single high global standard whether it's being installed in Mehoopany, Pennsylvania or Guangzhou, China.

In conclusion, let me say that important events on the horizon beg for strong U.S. trade leadership, credibility and strategic vision. If we are to secure a prosperous future for our children, we must work together. It is critical that Congress and President Clinton join together to enact new fast-track trade negotiating authority that builds on our impressive and positive trade legacy. We have no time to lose. The rest of the world is moving. The time to act is now. Thank you.

  Return to Top

Home |  About Us |  Resources |  Press Releases |  Federal Activity & Legislation
State & Local Activity |  NFTC Lawsuit |  Contact Us |  Site Index