In case you hadn't noticed, the world is a changing place. Perhaps my perspective is a bit different than yours.Let's start with the rules of foreign trade. For the past six years, we have been the ox that has been gored by the rulings of the World Trade Organization. The most recent and notable ruling affected our ability to shelter our steel industry from what we felt was the unfair pricing of imported steel.
More recently, the House of Representatives revised corporate tax laws in order to meet another ruling that required the elimination of tax breaks on profits earned abroad by U.S. companies. This was accomplished via legislation that introduced incentives to keep production jobs here in the United States. We are becoming more aware of what tools to use to stay on the right side of the trade regulations. One might think we are learning from major European trading partners — but some of them are facing their own setbacks in the way they conduct business as well. It appears that the increase in the size of the European Union has brought some fundamental strength to the free traders in that community.
In order for the European Union to grow significantly, its less prosperous members need to see a sharp increase in their net trade balance in the coming years. Assuming that for the most part trade will be facilitated within the European community, it will be necessary to shift some of the existing positive net trade balance away from the more prosperous nations. But the amount of change that's needed cannot be fully accommodated within the confines of the European community. Foreign trade with distant partners, such as China, the Middle East, and eastern Asia, will become more urgent as the fundamental change gains momentum.
Once again, a rising tide could forestall what would have been a very uncomfortable reallocation of trade. As world trade grows, there will be ample opportunity for well-established economies to benefit from joint trade agreements with the faster growing regions. To assure continuing stability in trade, as well as market growth, it is important that everyone has the chance to take advantage of these opportunities. Strong bi-lateral trade agreements that either exclude or inhibit other free trade will result in economic and political dislocations for both trading partners.
On January 1, 2005, the Agreement on Textiles and Clothing (ATC) will require that all remaining quota arrangements in the sector be removed. This will create a very difficult time for an important sector of the U.S. economy. Jobs will continue to be lost in this industry as a result of this agreement. Having been raised in New England during the mill town crisis of the 1950s, I know first-hand of the impact this type of dislocation can create.
This time around, there will also be many who won't be able to make the transition. Fortunately, however, most of the states affected by ATC have already begun to put in place economic development strategies to help create a new industrial and crop base. These measures help spur the kind of change that will be needed. And hopefully it will take less time for a successful transition than it did in my hometown in the 1950s.
Needless to say, we'll see more of this in our future. We must be vigilant and make sure we get a fair shake in trade issues. At the same time, however, we must also be prepared to put the steps in place that will enable us to transition to other industries when it becomes necessary. No other economy has shown that it can transition as well as ours does. That alone will keep our national competitive edge in place for generations to come. We need to understand that foreign trade disruption is not just a local issue. It ultimately affects us all.