Peter DeFazio

Mr. DeFAZIO

Mr. DeFAZIO. On that point, if the gentlewoman, I know she remembers, during our discussions leading up to NAFTA, we were told one reason so many U.S. corporations were avid for the NAFTA agreement was because there were no labor limitations on it. In fact, they were assured by the ruling party they would not allow free labor unions. They would not allow collective bargaining for wages. In fact, they guaranteed that they would cap wages or depress wages, as they have done over the last decade. Now, this is the biggest drop in wages they have managed so far, a 40-percent drop in wages. Yet somehow, as I recall, I believe his last name is Salin, the largest billionaire in Mexico, somehow he knew the day before the devaluation to change his pesos to dollars. A few of the other billionaires in Mexico somehow, they had really good advice. Of course, they were not getting it under the table from the authorization party which they financed with $500 million in contributions last year. No, of course not. This was the free market at work.

Mr. DeFAZIO. If the gentlewoman will yield, I was in the elevator, kind of in the back, there was a big crowd a little while ago. A number of conservative Members, Republicans, got on the front, and they were talking with some concern saying, you know, what this is about is, you know, we are putting the U.S. taxpayers on the line and really we are going to stick it to the peasants in Mexico because their standard of living is going to go down under their amendment. It is all to bail out the big banks. But the good thing is it is being identified as a Democrat program because it is the President and the Secretary of the Treasury who are so visible on this. I piped up from the back and said, ``You can't pass it with Democratic votes in the House.'' So it is not something for our Republican colleagues to be listening and saying they are going to be able to pass blame to the White House and to the Secretary of the Treasury because they are out to lunch on this issue. It can only pass in the House and the Senate if the Republicans support it, because they are in So if there is a bailout of Mexico, it is the Republican congressional bailout of Mexico, hand in complicit with the Secretary of the Treasury and the President of the United States who happen to be Democrats on some days.

Mr. DeFAZIO. I think it is extraordinary; we did have a lot of press in the room when we made the announcement. Certainly, I guess, they did not filming us and photographing us. But it did not run in any of the national media when we were talking about the problems with the bailout, the problems with the NAFTA Agreement that came to pass. But what did run, the lead--and I happened to watch some of the networks--was President Clinton handing the Prime Minister of Japan a basket of apples to say everything is now going to be OK in trade because the Japanese finally are buying United States apples. I am happy for my fiends in Washington State that their apples are going to Japan. That is great. But at 50 cents an apple, with a $60 billion trade deficit with Japan, all we have to do is sell the Japanese 120 billion apples this year and we will be in trade balance. That is a great deal. Now, that is going to be a lot of apple-eating for the Japanese.

Mr. DeFAZIO. And they are saying we could not have possibly anticipated this. Well, it is strange. It is strange that we stood on this floor 14 months ago, backed by credible economists who said, ``Today, as you vote on the NAFTA agreement the Mexican peso is overvalued by 20 to 25 percent to make them look more attractive as a partner for the United States, to make them look as though their currency is stable. But it's inevitable after the passage of NAFTA they will have to devalue the peso by 20 to 25 percent.'' And now we are told by the Secretary of the Treasury, a former partner in one of the major investment firms in this country, that no one could have anticipated this. Well, the economists we talked to, who gave us a very critical analysis of NAFTA, could certainly anticipate it, did, and we are right on the money. In fact, they were a little bit overly optimistic about Mexico because we are talking the free market says the Mexican peso should actually go down 40 to 50 percent, and whatever happened to free-market forces? Where is the free market when we need it? If the market says the Mexican peso should be worth half as much, should the United States Government intervene to artificially prop it up?

Mr. DeFAZIO. If the gentlewoman will yield, I think the interesting thing for our colleagues to realize for those listening is that what Alan Greenspan, head of the Federal Reserve Board, and Robert Rubin, an ex-managing partner of Goldman, Sachs, now Secretary of the Treasury said to us, representing the people in Congress: ``What are you concerned about? This is only a loan guarantee. There is no risk to the United States. In effect we are only a cosigner.'' Well, wait a minute. When I go to the bank to buy a car, they do not ask me to get a cosigner. When somebody with bad credit goes to the bank asking to buy a car, they want a cosigner. We are cosigners because we know Mexico does not have good credit. There is nothing underlying these massive loan guarantees except the full faith and credit of the U.S. Treasury, which is part and parcel the taxpayers of the United States of America, $40 billion at risk for the taxpayers of America. For what? So we can continue to encourage United States corporations to move manufacturing jobs to Mexico, so we can run a trade deficit with Mexico. If we assume that Mexico can meet these obligations, we have to assume there will be a massive turnaround in their current accounts deficit. They had a $28 billion current account deficit this year. They say next year they will cut it in half. There is only one place they can get that. They are assuming by saying that they will be running a trade surplus with the United States of America of tens of billions of dollars in coming years, and we all know when you run a trade surplus with someone, you are profiting and your people are working. When you are running a deficit, you are exporting jobs. We are about to enter into the same category, in fact we did in October, with Mexico as we have with every other one of our trading partners. That is, we are going into deficit, and we cannot keep on piling deficit upon deficit in our balance of international trade any more than we can the Federal Treasury. It looks like with the balanced-budget amendment we are finally waking up to fiscal reality here in Washington, DC, with the domestic economy. But what about the foreign economy? How can we run a trade deficit and expect to have jobs and accumulate wealth and an increased standard of living? How can we run a trade deficit with Mexico and export our manufacturing jobs and expect to increase wages and better working conditions and have jobs for people here, and we are going to pay $40 billion for this privilege? It is outrageous.

Mr. DeFAZIO. The big winner was tobacco. Our tobacco exports went up dramatically. They had the largest percentage increase. Art, collectibles, antiques, and precious jewelry and so forth were No. 3. Now, that may put a few people, you know, who have got expensive boutiques and stores in Manhattan and a few places to work and make them happy, but I do not think it is putting very many Americans to work. I do not think it is helping very many average artists or craftsmen. Could I just get parochial for a moment? Last year the Pacific Northwest's entire delegation, Republicans and Democrats alike, had a lengthy series of discussions with this administration about refinancing the debt of our regional power authority, the Bonneville Power Administration, because we have had and seen political calls by the Reagan administration, the Bush administration, and now this year the Clinton administration to do a punitive refinancing of our debt. So we said, ``OK, fine, we will go to the private sector and finance, refinance, this debt,'' and we got the entire delegation, Democrats and Republicans, to agree. The Office of Management and Budget would not let us do it. They said they could not count it as a plus under the budget rules, so we could not do this. But somehow Mexico wants $40 billion of loan guarantees, and that is OK; we are not worried about the budget rules here anymore, because this is national security, folks. Those little people up in the Northwest, well, gee, sorry, we could not help you out with your refinancing of EPA, but Mexico, $40 billion, no problem.

Mr. DeFAZIO

Mr. DeFAZIO. Mr. Speaker, I move that the House do now adjourn.

Mr. DeFAZIO

Mr. DeFAZIO. Now we are going to lend them taxpayer dollars under this line of credit to repay the loans made by private interests in this country.

Mr. DeFAZIO. I do not want to get too far afoot on the Federal Reserve, but I think it would be interesting for people watching to know that now this Congress has subjected itself to all laws. Yet the one entity now left in this country that is exempt from virtually every law, of conflict of interest, public disclosure, freedom of information, is the Federal Reserve Board. They have these extraordinary powers. I can call and say, ``Excuse me, I'm elected, I represent the Fourth District of Oregon, and I understand you are taking United States dollars and shipping them to Mexico to prop up the peso. I would just like to know what kind of collateral you got, what the terms of these loans are, and what you think the prospects are of repayment and how much money we're shipping to Mexico,'' and the Federal Reserve says to me, ``That's none of your business, and we don't have to tell you. This is national security.'' National security? National security when we are now paying to ship our jobs to Mexico? That is the bottom line here. We can document that there has been a net job loss through the first year of this agreement. That was not predicted by the proponents but was predicted by us. The gentlewoman has demonstrated it very graphically with the automobile sector. In fact, autos were the No. 3 loser. The No. 1 loser was machinery and electric parts, which was going to build things in Mexico that will be shipped back here. They are a loser. Optical and photo was a big loser, and autos were No. 3. We had a few winners. Tobacco. We exported more tobacco products to Mexico, we exported more articles of cork, and the Mexicans bought a lot more antiques and art from the United States during the last year. How many jobs does that produce in America versus the deficit we are running in autos and other critical manufacturing sectors and a growing deficit and one that is going to grow astronomically with the devaluation of the peso? These are questions that need to be asked and I really appreciate the fact that the gentlewoman has the guts to stand up here on the floor, because there is a lot of pressure, and you know it, for us not to talk out about this.

Mr. DeFAZIO. I think I recall that during the debate over NAFTA, the gentlewoman from Ohio, myself and others raised the point that we thought the Mexican peso had been artificially propped up and overvalued in order to try and sell the NAFTA agreement. In fact as I recall, we said we thought it was about 20 to 25 percent overvalued. Of course we were wrong. Apparently it was 40 to 50 percent overvalued. This was clearly on the part of the financiers on both sides of the border and some of the highest political officers in both countries an attempt to distort the ultimate impact of this agreement. In fact, the Mexican opposition party has filed criminal charges manipulating the value of the peso, which has now crashed. What this means, of course, is that the average Mexican worker, who has seen their wages decline rather dramatically over the last 20 years, will see another 40 or 50 percent decline relative to United States goods. Instead of having an average of $1,600 a year in buying power, that is, if they used all of their disposable income they could buy $1,600 worth of our goods, which was always the fallacy of NAFTA, it was never designed to sell goods to Mexicans, it was always designed to get cheap labor in Mexico to ship the goods here, now those Mexican workers will have total incomes in United States dollars of $800 or $900 a year. So if they save really hard, they might be able to buy a pair of running shoes at the end of the year from United States manufacturer based in Mexico, but not likely. I think this is really key for us to explain to the American people. Not only has this happened, and not only are we now being asked to put up U.S. taxpayer dollars to prop up the peso. This is the free market? It seems to me the free market is saying, ``The peso is worthless, let it drop.'' No, we are going to prop it up with $9 billion out of our Federal treasury with no review by the U.S. Congress. Apparently Mexico can just draw on that $9 billion whenever they want. Beyond that what is even more outrageous is the Federal Reserve Board which controls the deposits and the currency in this country has extended a secret line of credit to Mexico under secret conditions for a secret amount. When my staff contacted the Federal Reserve, we were just told, ``That's none of your business. We don't tell Members of Congress what we're doing.'' But if a bill comes due, if the Mexican Government declares bankruptcy or defaults, we will get the bill, the same way we did in the savings and loan crisis. The American people are being played for suckers here again and this is what we need to communicate today. We are not going to let this keep happening without bringing the light of day to these secret deals.

Mr. DeFAZIO. If the gentlewoman will yield on that point.

Mr. DeFAZIO. If the gentlewoman would yield on that, because this is a point that occasionally a constituent brings up with me. And they say look, if we didn't have this free-trade agreement with Mexico, consumers would suffer. I said wait a minute, do you think that Chrysler, which is building a new large Dodge Ram truck plant, a truck that sells for a minimum, I think, of $15,000, some of them sell for as much as $30,000, I said do you think Mexicans with their former average earnings of $1,700 a year, this week reduced to about $800 or $900, are going to be buying many of the Dodge Rams which they build? And they say, well, no. I said, have you noticed that since Chrysler or other United States firms started building these trucks in Mexico, that the price has come down? Oh, no. Have you noticed that the profits have gone up, but the price has not come down? Well, now that you say that, yeah, I guess I did notice they had their most profitable quarter ever. I say that is the point. Even if you can argue that we should produce goods overseas because we can exploit cheap labor and it will be beneficial to the American consumer, the bottom line is that does not happen. The prices do not go down. The profits go up. Nike Corp., based in Portland, OR, they don't make anything in America anymore. They used to manufacture shoes here.

Mr. DeFAZIO. And, if we use the other interesting statistic, maybe getting less esoteric here, Treasury has two sets of numbers, and that is for goods exported to Mexico that were made in the United States, and in the second is for goods that were transshipped. We have become a point of entry for European goods that have shipped a container to New Orleans, and then will ship from New Orleans to Mexico in order to avoid the customs and tariff on European goods, and they add that into our balance of trade. Maybe one dock worker checks that container for 1 or 2 minutes of his or her day, but that was the total American contribution to that effort. But that counts as part of our exports to Mexico. It is, as my colleagues know, it is a transshipment. I mean it is amazing, the lengths to which our Government has gone to try--and even when they get all done with that, they still have to show a deficit in October, and that was before we got to the devaluation, and does any American believe, or do any of those muckamucks really believe, that we can go on, year in, year out, running a trade deficit with the rest of the world of $120, $140, $160 billion, and someday the piper will not come due. We are not only exporting those jobs this year by running those trade deficits. Someday someone is going to ask us to cough up those dollars that we are shipping overseas. We have more than $1 trillion of Federal debt now. From 1917 until 1984 the U.S. Government was the largest creditor in the world, and now we are the largest debtor in the world. We owe more money to the rest of the world than all of those problem nations combined. Add them up, Brazil, Mexico, everybody else. Our trade debt is greater than every other nation in the world----

Mr. DeFAZIO. Mr. Speaker, if the gentlewoman would yield for just a moment, I would just like to go back to a point that came up during the press conference, and I noticed that the gentlewoman was a bit beleaguered by a reporter from her district who did not seem to understand the difference between a net trade balance and shipping a few cars to Mexico, and he would point to the representation of 2\1/2\ cars going to Mexico and say, ``Well, look, that's an increase from one and a half cars symbolized there going to Mexico. That means we send another 10,000 cars to Mexico.'' Unfortunately he was totally ignoring the other side of the ledger which showed another--I believe it is 200,000 cars coming from Mexico to the United States. So, what this means is the United States actually entered into a deficit, a trade deficit, with Mexico for the first time in recent history of $81 million in October, and that is just the beginning. We are going to run trade deficits with Mexico. Now I come from Oregon, and everybody says Oregon is a free-trade State, and, by gosh, we benefit from trade. Well I met with Dr. Charles McMillan, Ph.D., contributor to the Harvard Business Review and scholar, a member of the Clinton transition team, to talk about trade issues yesterday. He said, ``Isn't it interesting?'' He said, ``In the GATT debate and the NAFTA debate we heard how every State is running a surplus and benefits from trade, but somehow the United States of America is running a $160 billion trade deficit,'' and in fact he recalculated those numbers and found out that my home State of Oregon is a net loser in trade, as is virtually every other State in the Union, and for Mr. Clinton's State, big-time losses. Thousands of jobs from his State have been shipped overseas in the last year. Now these are points we have to make because my colleagues will read the headline. It said, ``Detroit Thrilled.'' They shipped 10,000 more cars to Mexico. It does not say Detroit really thrilled, they built 250,000 more cars in Mexico and shipped them here with dollar-an-hour labor. That is what the headline should be, but the press will not run that headline. They only run the one that comes out of the boardroom.

Mr. DeFAZIO. Awful hard from here. I can hardly see it. are sending 20,000 cars. We are doing real well. We didn't send any before.'' Of course they are sending them to rental car companies in Cancun and in Mexico City where Americans can vacation. They never talk about this number, the 277,000 cars and trucks coming the other way. It completely obliterates this, and that is why America's trade advantage with Mexico has been cut in half and, in October, went into the red. I say to my colleagues, you have to read the fine print so carefully. It is just like articles in my own local newspaper back home when they talk about wages and they talk about the economy in our area. The last paragraph at the bottom of the page on the insert says, ``But wages didn't go up. There is job creation, but there is no wage growth, and the reason is because we are cashing out our good jobs with good benefits to the low-wage nations of the world that are largely undemocratic in nature whether it's China, whether it's Mexico, whether it's many of the nations that repress their work forces and do not in their laws provide for the dignity of work.'' It does not surprise me why our wages are going down.

Mr. DeFAZIO. If the gentleman would yield, I have five daily newspapers in my district and an untold number of weeklies. Every one of those five newspapers endorsed NAFTA. Now just a little, tiny bit of history. I am from Oregon. We are famous for Willis Hawley. Everyone who has studied economics 101 hears about the disaster of the Great Depression having been caused by the Hawley-Smoot Tariff Act was passed 9 months after the crash of the stock market. So it is hard to say that somehow those tariffs triggered the stock market crash or the Great Depression. But they become a convenient whipping boy. Now, if anyone raises reasonable concerns about our trade agreements, the fact that we do not have reciprocity with Japan, the fact that we are giving away sovereignty with GATT, or the fact of the case of the North American Free-Trade Agreement that we are now obligated to prop up the Government of Mexico with billions of United States taxpayer dollars, you are called a protectionist. I do not call that a protectionist. We are told that this is a national security issue. Yes, it is a national security issue. We are talking about American jobs and American taxpayer dollars, and we want to protect our national security by revising and rewriting wholesale this agreement because it is a loser for the people of this country and for the people of Mexico.

Mr. DeFAZIO. Further on that point is, those 30,000 who have applied, many are lost in the Federal redtape. They have to prove beyond a shadow of a doubt that they can identify where their jobs moved to in Mexico. I believe the figure is 12,000 have been approved. That means that 18,000 are in need of special assistance. As the gentlewoman points out, out of a few hundred dollars a week for people whose jobs moved or were shifted back to Mexico, changed by United States policy, and yet at the snap of a finger, the Federal Reserve can spend billions of dollars with no Federal disclosure and the Treasury can pony up a $9 billion line of credit somehow, but the workers who are out of jobs are still waiting in line at the unemployment office, hoping, begging for a bit of help so they can get retrained.

Mr. DeFAZIO. Mr. Speaker, I would just like for the people who are watching to know this is not an ``I told you so.'' And we are going to go through the list of things we predicted would happen with NAFTA that have come to pass, including the peso devaluation. But there are a lot of short memories in Washington, DC, and a short attention span in the media when it comes to these very critical issues. But ``I told you so'' is not going to be enough in this case because thousands more American jobs such as the ones the gentlewoman talked about are at risk, and now tens of billions of U.S. taxpayer dollars are at risk and ``I told you so'' is not an adequate response. And that is why we are speaking here today and that is also why we will be introducing, this week, legislation to trigger the repeal provisions of NAFTA. There was a 6-month option out of NAFTA and we are introducing legislation to say this has worked as poorly and as badly and even worse than we ever anticipated. It is a loser for the American taxpayers, it is a loser for the American workers, it is a loser for the Mexican worker, and a loser for the environment along the Mexican border and the United States border, and it is time to repeal it and put in place an agreement that will benefit people on both sides of the border and help raise standards of living rather than depress them and bankrupt the Treasury. I will have to step off the floor but I will be back because I want to continue the discussion. And I believe the gentleman from Vermont [Mr. Sanders] will step up and take my place.

Mr. DeFAZIO. And it comes from other taxpayers.