Daniel Moynihan

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, I rise to make a simple proposal, which I deeply wish the Senate will accept and see the reasons for. This amendment would simply preserve the Trade Adjustment Assistance Program, which has been in place for a third of a century now, having been one of the great social inventions, one of those that come along from time to time to help a nation, in this case ours, resolve a legitimate dispute in which there are legitimate interests on either side, in the very best tradition of a democratic society. The conflict is elemental. When our Government enters a trade agreement with another nation or group of nations, as is increasingly the case, it undertakes to lower tariffs on goods coming into our country in return for lowered tariffs in other countries--lowered restrictions, access to markets, all the different arrangements that go into a multilateral world trading system which has emerged so exceptionally in the world, and of which we are the preeminent member, the largest trading nation in the world. Getting to this point was not easy. It took courage, it took invention, and it happened here in the U.S. Congress. We have to go back to 1930 and the Smoot-Hawley tariff of that year, in which tariffs were raised to the highest levels in our history. The understanding was that this would protect American jobs. Indeed, in the course of the next 2 years from the time it was signed by President Hoover, imports dropped by one-third in our Nation. More. Alas, so did exports. And the world spun into the disaster of the 1930's. The British left free trade and went to imperial preferences. In Japan, the Greater East Asia Co-Prosperity Sphere was put in place. Manchuria was invaded--China, in fact. But we somehow called it Manchuria. Unemployment soared. In 1933, Mr. President, in Germany, Adolf Hitler came to power in a free election. Our Nation tumbled into a depression unlike anything we had known. And we had been warned. Mr. President, 1,000 economists--at a time when the Nation perhaps was more fortunate then than now and had only about 1,000 economists--wrote to President Hoover and said, ``Do not do this.'' He did it even so. Then in 1934, Cordell Hull, who was Secretary of State, began the reciprocal trade agreements program in which we would try to make our way by mutual accommodation with other countries. It was a great invention. A great man, Harry Hopkins, worked on it. It was to have been given an institution as part of the great postwar settlement--the World Bank, the United Nations, the International Monetary Fund, the International Trade Organization which was to have been located in Havana. But the ITO died in the Senate Finance Committee out of lingering fear of opening trade to the rest of the world. But I am happy to say in the last Congress it came back alive as the World Trade Organization now in place in Geneva as part of that enormous achievement, the Uruguay Round. How did we get to the point where there was this consensus that we had the Kennedy round, the Tokyo round, the Uruguay round, and then the free trade agreement with Canada, the North American Free-Trade Agreement with Canada and Mexico, and more in prospect? Well, sir, one was the manifest benefits that trade had brought this Nation and the world. But there was also a social invention. It began in 1954, when David MacDonald, then President of the United Steelworkers of America, proposed that as part of a next trade agreement, if workers were put out, if workers lost their jobs because of imports that the Federal Government had agreed to in a trade agreement, there would be some trade adjustment assistance. There would be training for them. The proposition was that, as a matter of public policy, the U.S. Government had entered into an agreement in which certain workers were displaced, certain workers lost their jobs, and other workers would gain jobs. The total would be much to the advantage of all. But there were individuals left out, and [[Page S 14856]] it had been the result of a Government policy. Well, then it ought to be the practice and policy of the Government to help with a readjustment. In 1962, as the Trade Expansion Act of that year was under consideration, Luther Hodges, then President Kennedy's Secretary of Commerce, came before the Senate Finance Committee. He said this. Both workers and firms may encounter special difficulties when they feel the adverse effects of import competition. This is import competition caused directly by the Federal Government when it lowers tariffs as part of a trade agreement undertaken for the long-term economic good of the country as a whole. . . . The Federal Government has a special responsibility in this case. When the Government has contributed to economic injuries, it should also contribute to the economic adjustment required to repair them. Sir, at that time I had the honor to be an Assistant Secretary of Labor. I was Assistant Secretary of Labor for Policy Planning and Research. We had done our work on this, sir. We knew what we were proposing. I thereupon became one of the three persons who negotiated the Long-term Cotton Textile Agreement--still in place in its successor form--that helped firms, and saw to it that firms which were losing out to international competitors because of a trade agreement--textile mills in the Carolinas, garment industries in New York, Chicago, and California--were protected, in this case by quotas. Also, there was trade adjustment assistance for workers. We put that into that legislation, sir. And the American labor movement was solidly behind the Trade Expansion Act and the Kennedy round. There was social learning going on here; how to protect certain vulnerable firms, workers whose jobs had been negotiated away in the larger general interest. And so we went from there to the Tokyo round. Labor supported the round because it had a commitment to trade adjustment. And then we had the free trade agreement with Canada and the North American Free-Trade Agreement with Canada and Mexico. And last year the Uruguay round. And before that, the commitment to trade adjustment assistance was crucial in obtaining the necessary support for fast track--in which the President brings a trade agreement back and sends it up here to the Congress for an up-or-down vote--and for NAFTA itself. The Uruguay round came to the Finance Committee in the 103d Congress when I had the honor to be chairman. And trade adjustment assistance was an essential commitment. Labor did not support the North American Free-Trade Agreement. I did not in fact support it. But we did not stop it, and we could have done so, and would have done so if there had been no trade adjustment assistance. Mr. President, in the years just since 1975, to give you a sense of the dimension we are talking about here, 2 million workers have received trade adjustment assistance benefits as their right, as the public interest demands. The assistance is part of the trade expansion activity of the Federal Government. Tariffs and trade agreements, those, sir, have always been located in the Committee on Finance. The Committee on Finance has very carefully--not always successfully but I think with an ever assiduous effort--tried to see that trade adjustment assistance is maintained. You get trade adjustment assistance when it can be shown that tariff agreements have closed down an industry at the cost of the workers and management--2 million workers since 1975. It would be such a great loss--turning our backs on generations of experience and learning the hard way--to give this up now. I do not think we want to do this to American workers. We made a commitment. Pacta sunt servanda, agreements must be kept. These are agreements at the highest level of Government. And they have been so enormously effective. But, sir, I say to the Senate, I say to anyone listening outside the Senate, strip trade adjustment assistance from the trade laws and you will never see a trade agreement again in this time. For the men and women, the working people who will have seen a pledge to them broken, a commitment negotiated by their own leaders broken, the trust will not be there again. It is sufficiently eroded as is. We know very well how difficult the last 10 years have been in this area, and we see troubles coming ahead of us. We do not need them. We worked out an arrangement which got by as--which I think is a fair statement--a social invention of very considerable measure. And so, Mr. President, it fell to the distinguished chairman of our committee, Senator Roth, and I to write to our very good friends, in whom we have the deepest respect, the chairman of the Committee on Labor and Human Resources and the ranking member, who are here today. On October 5, Senator Roth and I wrote to say that the Committee on Finance has not had an opportunity to consider this matter, the folding in and thereby elimination of trade adjustment assistance, and the NAFTA transitional adjustment assistance program. These are programs under the jurisdiction of the Committee on Finance, and we respectfully asked they be removed from the Workforce Development Act, a remarkable bipartisan achievement, with the changes we would like to make, as, for example, those suggested by Mr. Pell and Mr. Jeffords. Now I offer this amendment, and I would hope it might be accepted. It will ensure great harmony in this measure if it is accepted and disharmony if it is not. It will break with 33 years of legislation, break with three generations of learning and working together in the area of trade which has proved of such enormous benefit to the United States, and it would put in jeopardy, put a cloud over our prospects of continuing in that tradition. Mr. President, I do not speak longer than necessary if there are other Senators who wish to speak. Mr. WELLSTONE addressed the Chair.

Mr. MOYNIHAN. I see my friend from Minnesota present. Mr. President, I yield the floor.

Mr. MOYNIHAN. I would like to put a table in the Record, a cumulative program activity record from the last 20 years to show--this is a carefully administered program--of 2,011,268 workers certified for the program, 2,032,507 were denied. This is carefully administered and successful and ought to be continued. I ask unanimous consent that it be printed in the Record.

Mr. MOYNIHAN. Mr. President, I ask for the yeas and nays.

Mr. MOYNIHAN. Mr. President, I would simply like to thank the chairperson for her courtesy and clarity. I do make the point, however, that the future of trade agreements in this country would be diminished if this authority does not remain in the committee that is required to approve the trade agreements themselves.

Mr. MOYNIHAN. Mr. President, I send an amendment to the desk and ask for its immediate consideration.

Mr. MOYNIHAN. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with.

Mr. MOYNIHAN. Just 30 seconds, if I may, sir, I ask my friend from Massachusetts.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, I am pleased to join the distinguished chairman of the Committee on the Judiciary, Senator Hatch, in offering this hugely important amendment. Senator Hatch and I have worked together on matters related to the International Labor Organization for a decade now, and we believe it would be a serious error for the United States to withdraw from participation in the ILO at this time. The Senator from Utah does not raise this issue lightly, nor does the Senator from New York. Senator Hatch's concern grows in part from his experience with the ILO during his tenure as chairman of the Committee on Labor and Human Resources in the mid-1980's. In 1985, he held a hearing to consider whether there was a link between the failure of the United States to ratify ILO conventions and our influence within the ILO. The Senator from New York has also had an abiding interest in the ILO for many years. In 1975, while serving as our Ambassador to the United Nations under President Ford, it fell to me to draft the letter announcing our intention to withdraw from the ILO after a mandatory 2- year notice period. Later, on July 19, 1977, I rose on this floor to announce our intention to do just that. And again on September 25, 1980, after the ILO had met the conditions we laid down, I informed the Senate of our return to the organization. I would also note that I wrote my doctoral dissertation on the history of U.S. involvement in the ILO from 1889 to 1934. The Senator from Utah and I have taken the floor to suggest, before the Senate acts to abruptly terminate U.S. participation in the International Labor Organization, that we carefully consider how and why we came to participate in the first place. The history of the ILO goes a long way back in our national life, before it finally came to fruition at the end of the Great War. The premise of the ILO as stated in the Preamble to the ILO Constitution is that: [T]he failure of any nation to adopt humane conditions of labour is an obstacle in the way of other nations which desire to improve the conditions in their own countries. If States fail to act together to improve labor practices, an imbalance occurs and an unfair advantage is created. We ought to be taking steps to strengthen our leadership in the ILO. Instead, by prohibiting funding for the ILO, the current bill requires our withdrawal. One of the primary concerns arising from the situation of workers during World War I was that some attention be paid to the fact that labor standards often fell victim to international trade. At war's end, the opportunity arose to address this problem. The Western nations, shaken by the revolution that swept Russia in 1917, were inclined to act. Samuel Gompers of the American Federation of Labor was enthusiastically received as he traveled through Europe in the fall of 1918 to speak out against the growing Bolshevik influence in the European labor movement. Creation of an international labor organization became imperative to prevent uprisings like the one in Russia from spreading across Europe. So much so that as the terms of a new international order were being drawn up at the peace conference, a commission headed by Gompers created the ILO. It was much more a part of the campaign for the League of Nations than we might remember. In 1991, then-Secretary of Labor Lynn Martin testified before the Senate Foreign Relations Committee about the significance of the ILO. It was Abraham Lincoln of Illinois who summed up democracy when he said that ``working men and women are the basis of all government.'' . . . As such, the political structure of the ILO itself illustrates the truth of Lincoln's remarks and, hence, reinforces the linkage between democracy and a free economy, between democratic values, independent trade unions, and free enterprise. The League of Nations, which was the subject of such fierce debate on the Senate floor in the fall and winter of 1919-20, came to life somewhat furtively in the clock room of the Quai d'Orsay in Paris in January 1920. In point of fact the League system had already begun to work here in Washington in October and November of 1919 [[Page S 14674]] when the first international labor conference was held pursuant to article 424 of the ILO Constitution, which was signed as part of the Treaty of Versailles on June 28, 1919. The Washington Conference, held at the Pan American Union Building, turned out to be an almost complete success, despite all the prospects of failure. Six major labor conventions, the first human rights treaties in the history of the world, were adopted, including the 8- hour day convention, and the minimum age convention. Woodrow Wilson, on his great trip across the Nation campaigning for the United States to join the League, spoke continuously of the International Labor Organization. Indeed, almost the last words he spoke before his stroke, before he collapsed in Pueblo, CO, were about the ILO. He told the people in Colorado about the League covenant and the ILO. But he collapsed, and was prostrate when the International Labor Conference was organizing here in Washington. His Secretary of Labor, William B. Wilson, did not know what to do. The Senate was caught up in a protracted debate about whether to have anything at all to do with the League. A very distinguished British civil servant, Harold Butler--later Sir Harold Butler--arrived in New York by ship and then came down here, assigned to put in place the new international organization. He found the President prostrate and silent, and the Secretary of Labor unable to take any action without the President. By sheer chance, Butler dined one evening with the then Assistant Secretary of the Navy, a young, rising New York political figure, Franklin Delano Roosevelt, and his wife Eleanor. Butler recounted his difficulties. ``Well, we have to do something about this,'' said Roosevelt. ``I think I can find you some offices at any rate. Look in at the Navy Building tomorrow morning and I will see about it in the meanwhile.'' Roosevelt was devoted to Wilson. By the next day Roosevelt had 40 rooms cleared of its admirals and captains to make room for the conference. Harold Butler later became the second director-general of the ILO, serving from 1932 to 1938. Subsequently, he returned to Washington during the second World War and his continued friendship with President Roosevelt made him a hugely influential figure in the wartime alliance. Just as Roosevelt helped get the ILO off the ground, when he came to the Oval Office, his administration soon laid the groundwork for the United States to join. In June of 1934, the House and Senate both passed a resolution clearing the way for our participation. The ILO is the part of the League system the United States was least likely to join. The League system consisted of the League itself, the Permanent Court of International Justice, and the ILO. In fact, the ILO was the only one we did join and it was the only one to survive the next war. A tribute to its enduring importance. Last year, Congress approved U.S. participation in the World Trade Organization. This was the culmination of a half century of negotiations to break down trade restrictions. Yet continued progress toward free trade brings with it a danger that labor standards will be threatened. This was the primary motivation for forming the ILO three quarters of a century ago. As trade barriers continue to be broken, labor standards in our country will increasingly be linked to standards in other countries. Maintaining humane, minimum labor standards was the primary motivation for forming the ILO three quarters of a century ago. The first priority of the ILO--which is closely related to encouraging the democratic process--remains the defense of worker rights and the application of international labor standards. In a recent letter to all Senators, Abraham Katz, President of the U.S. Council for International Business--which includes among its members the U.S. Chamber of Commerce--lists as one of the three critical reasons the United States should continue to participate in the ILO: To ensure that American companies continue to have a voice in setting international labor standards that have an impact on their operations and profitability. He adds that participation is vital to promote the rights of workers and oversee adherence to good labor practices, which we believe is an acceptable alternative to using trade sanctions to promote these rights. As the Business Roundtable said in a recent statement to Congress: ''. . . the United States should upgrade its participation in the ILO . . .,'' rather than seek to address international labor issues in the World Trade Organization. The ILO is the place to address human rights as they relate to employment. The ILO was the forum for the first human rights conventions the world has known. Perhaps none is more important than the right of workers to organize and bargain collectively. I recall then Secretary of Labor Elizabeth Dole's testimony before the Committee on Foreign Relations on November 1, 1989: [T]he International Labor Organization is the United Nations' most effective advocate of human rights. We are all aware, for example, of the ILO's courageous support of Solidarity during the darkest days, and the critical role it has played in Poland's historic journey to democracy. The efforts of the ILO on behalf of Solidarity were extraordinary. Poland had ratified ILO Convention 87 on Freedom of Association and Protection of the Right to Organize, and Convention 98 on the Right to Organize and Bargain Collectively. Ratification of these Conventions was a fact Poland could not deny. In 1978, the International Federation of Free Trade Unions charged Poland with violating Convention 87. After repeated requests from the ILO to Poland to comply with Convention 87, Poland's Minister of Labor wrote to the ILO Director General in 1980, stating that Poland officially recognized Solidarity, the first independent trade union to gain national recognition in a Communist country--the first ever. Lech Walesa was allowed to attend the 67th session of the International Labor Conference. A year later, Poland tried to suspend trade unions, but the ILO would not relent. Poland could not deny the basic fact that they were obliged by treaty to recognize Solidarity, and domestic law, even martial law, could not undo those treaty obligations. Repeated criticism from the ILO kept pressure on the Polish government to allow the return of Solidarity. Finally, in April 1989, the legal status of Solidarity was restored by the Polish government and followed quickly by democratic elections. Now President Walesa has written Senator Dole stating: The ILO, thanks to the activism of its officials, played a significant role in reminding the world of our existence and our goals. It supported us in the most difficult times of our underground existence. The Committee on Inquiry created by the ILO after the imposition of martial law in my country made significant contributions to the changes which brought democracy to Poland. Our relations with the ILO have at times been stormy. In the 1970s the ILO came to apply a double standard to the conduct of nations in the West as opposed to the totalitarian block and was being abused as a forum to carry out political agendas unrelated to its legitimate purposes, and thus we withdrew from the ILO in 1977. Our withdrawal had the desired effect: the ILO responded to our concerns and in 1980 we rejoined. Since then we have increased our engagement with the ILO. For instance, up until 1988, the United States had only ratified 7--6 maritime and 1 technical--of the 176 ILO conventions. However, in 1988 a new era commenced. The United States ratified its first convention in 35 years. At this point I must acknowledge the role in this turnabout played by the sponsor of this amendment, the distinguished Senator from Utah, Senator Obrin G. Hatch. In 1985, during his tenure as chairman of the Committee on Labor and Human Resources, Senator Hatch recognized that the ILO had put into place a comprehensive set of conventions which protected the human rights of workers around the world. He clearly saw the failure of the United States to ratify these very same conventions weakened our influence within the ILO and limited our ability to use those conventions in pursuing reforms in other nations. Senator Hatch proposed that we again begin ratifying ILO treaties, and we have done. In all, the Senate has now ratified five conventions since 1988. Most notably in 1991 when the United States for the first time ratified an ILO human rights convention: Convention 105 on the Abolition of Forced Labor, an area [[Page S 14675]] where the ILO has made vital contributions. ILO Convention 105, ratified by the Senate on May 14, 1991 by a vote of 97 to 0 abolishes the use of forced labor in five specific circumstances: First, as a means of political coercion, second, as a method of mobilizing and using labor for purposes of economic development, third, as a means of labor discipline, fourth, as a punishment for having participated in strikes, and fifth, as a means of racial, social, national or religious discrimination. This convention addresses one of the great crimes against humanity that the 20th century has known, the forced labor camps of the totalitarian states. It builds on an earlier ILO Convention, 29 which calls on ratifying nations to suppress forced labor in all its forms. Convention 29 defines forced labor as ``all work or service which is exacted from any person under the menace of any penalty and for which that person has not offered himself voluntarily.'' It goes to the very essence of what civilized conduct is in our age. The committee hearing on Convention 105 was hugely informative. In particular, I believe that we helped expose some of the atrocious conditions in the prisons of China and the goods for export that prisoners are forced to produce. To this day I have a pair of socks, the product of the Chinese gulag, which Representative Wolf brought back for our hearing. I am proud that we were able to ratify Convention 105. It would not have been possible without the chairman of the Foreign Relations Committee, Senator Helms. I would also point out that a current provision of this bill relies on the standards set by the ILO. I speak of Section 611 which requires the Secretary of the Treasury to certify that goods originating in China were not made with forced labor. The definition of forced labor is not random. Section 611(e)(1) defines forced labor as ``all work or service which is exacted from any person under the menace of any penalty and for which that person has not offered himself voluntarily.'' The definition of forced labor in this bill is word-for- word that of ILO Convention 29. As it should be. A primary function of the ILO is to set such labor standards for the world. That is the record. The ILO has accomplished much in its three- quarters of a century. I urge my colleagues to carefully consider these facts and to not prevent us from participating in this hugely important institution. A final point I would like to raise is the simple fact that when the United States joined the ILO in 1934 we made a commitment to give an advance notice of two years before we withdrew from the organization. If we are to prohibit funding for the ILO as the current version of this bill does, we are essentially withdrawing from the ILO unannounced, and thus in violation of international law. Such rampant disregard for our legal commitments does not become this body, nor does it serve the interests of this country. amendment no. 2864 At the appropriate place, insert:

Mr. MOYNIHAN. Mr. President, I rise to join the Senator from Vermont in his effort to restore funding for the program providing Trade Adjustment Assistance for companies affected by imports. This has been an enormously effective program for more than 30 years. Under the firm TAA program, we have established a national network of centers that provide technical assistance to trade-impacted companies. These centers, several located in universities, have a remarkable record in improving companies' manufacturing, marketing, and other capabilities in the face of stiffened competition from foreign imports. This program is a complement to the Trade Adjustment Assistance program for workers, which provides direct benefits to individuals who lose their jobs because of imports. Both are part of an effort to fulfill a commitment we have made to American workers as we pursue our national trade policy. The notion of Trade Adjustment Assistance was first articulated in 1954 by David MacDonald, President of the United Steel Workers, and the program was later enacted in the Trade Expiration Act of 1962. In 1993, when I last spoke on this floor in support of this program, I cited Luther Hodges' statement to the Senate Finance Committee in 1962 during consideration of that landmark legislation. I find it fitting to bring that statement here again: Both workers and firms may encounter special difficulties when they feel the adverse effects of import competition. This is import competition caused directly by the Federal Government when it lowers tariffs as part of a trade agreement undertaken for the long-term economic good of the country as a whole. The Federal Government has a special responsibility in this case. When the Government has contributed to economic injuries, it should also contribute to economic adjustments required to repair them. Our trade policy, which began with Cordell Hull's Reciprocal Trade Agreements Program in 1934 and culminated with the passage last December of the Uruguay Round Trade Agreements Act, results in some winners and some losers. Losers, simply because some American industries have difficulty competing against companies with the advantages afforded to them in other countries. However our winners are plentiful, and expectations are that implementation of the Uruguay Round agreements alone will pump an additional $100 million to $200 million into the American economy. We dare not abandon the policy. We simply must assume responsibility for those whom it may harm. The Trade Agreement Assistance for Firms program has been enormously effective in assuming that responsibility. In just the past five years, the twelve regional TAA centers have collectively helped 488 companies. Most of those firms were in danger of going out of business prior to the TAA center's assistance, and all were experiencing serious difficulty meeting payroll obligations. In the two years prior to receiving assistance, these 488 manufacturing companies had laid off 10,447 employees. In the two years after TAA help arrived, however, those same companies had hired an additional 5,475 workers. Their sales rose 24.5%, productivity increased 13%, and, as a result, tax revenues are up. Program organizers estimate that more than $7 in federal and state income tax revenue is generated for every $1 spent on the program. The TAA center at the State University of New York in Binghamton has played no small role in that success, assisting 49 manufacturing companies in my State over those same five years. While those firms experienced a combined drop in sales of $27 million in the two years preceding TAA assistance, they now can boast increases of over $51 million in sales in the subsequent years. These accomplishments preserved employment for many New Yorkers plus generating jobs for 167 more. I have received numerous letters from these companies, each detailing for me how timely and critical was the TAA center's assistance, and I would like to share with my colleagues some of their compelling stories: Beldoch Industries Corporation, located in Manhattan, has manufactured ladies' knitwear for over 50 years under three generations of family management. When the company had trouble competing with inexpensive textile imports, Gene Hochfelder, Beldoch's Chairman, sought the help of New York's TAA center. The center's consultants identified strategies under which Beldoch could consolidate operations, provide more prompt service to customers, and successfully compete with foreign imports. Beldoch, with its 260 employees, has kept its manufacturing in the U.S. and is experiencing great success. The Beach-Russ Company, located in Brooklyn, New York, manufactures vacuum pumps, air compressors, and gas boosters. Charles Beach, President of Beach-Russ, writes ``The New York Trade Adjustment Assistance Center facilitated the obtaining of assistance in the development of a New Vacuum Pump to make our company more competitive with low-cost foreign manufacturers.'' Michael Hrycelak, Vice President of AJL Manufacturing Inc. in Rochester, writes of how the New York TAA center helped them devise a new marketing plan. He adds, ``We strongly support this program, a true example of a government agency adding long term value, with minimal short term cost.'' And there are many works in progress as well. Helmel Engineering Products, Inc. is a small machine tool manufacturing company in Niagara Falls with only 26 employees. In the face of stiff competition from overseas, the company has recently completed a two-year diagnostic survey and adjustment project directed by the New York TAA Center. The Center's assistance allowed them to update and improve the marketing of their software, a task which otherwise would have taken closer to five years and may have been altogether unmanageable for the small company. But now, believing that they manufacture the best software their industry can offer, Helmel is optimistic about their new future. Judging by the success of their fellow graduates of the New York TAA program, I think their optimism is well-founded indeed. Mr. President, this is clearly government money well spent. These are quality companies with capable managers and dedicated workers. The TAA program's modest investment has been sufficient for them to recover from damage done by imports and remain active contributors to our national economy. Seventy-six of my colleagues in this body, many of whom are still here today, supported our effort to liberalize trade last December. It was good policy. The country is better for it, and we should not regret our decision. But we must also assume responsibility for its consequences. I urge the Senate restore funding for this important and very worthy program.

Mr. MOYNIHAN. I rise to stress the importance of continued active participation in the American Institute of Indian Studies (AIIS). AIIS is the preeminent organization funding U.S. scholarship in India. This program operates in conjunction with the Council of American Overseas Research Centers, and is affiliated with Universities across the country. Is the distinguished Senator from South Carolina aware of the participation of researchers from the University of South Carolina in AIIS?

Mr. MOYNIHAN. I say to my two colleagues that in 1974 President Nixon asked me to go to New Delhi as Ambassador in his second. At that time relations between our two nations were somewhat strained. The two largest democracies in the world should not have strained relations, but we have experienced such periods in the half-century since independence. One thing that I have noticed as a longtime follower of U.S.-India relations has been that when official contacts between our countries cool, citizen to citizen contacts have successfully carried the weight of the relationship. I would say to my two friends that AIIS is an organization which has played such a role in our relations with India.

Mr. MOYNIHAN. I am concerned that the level of funding in the bill for international educational exchanges will seriously impinge on the ability of AIIS to adequately fill the research demands of U.S. scholars in India. I would therefore seek assurance from the Chairman and Ranking Member of the Subcommittee that the statement of managers for the Conference Report of this Bill contain mention of the merits of AIIS and the importance of continued funding for the organization.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, I rise to speak on the importance of international exchange programs at this particular point in history. I would particularly like to highlight the Fulbright program and its enormous contribution to the enrichment of our society. The Fulbright program was created in 1946 largely with the efforts of the Senator from Arkansas from whom the program derived its name. Since that time the program has sent 75,026 United States students to study in foreign countries and has brought 127,093 foreigners to study in our country. Forty-five years ago they sent me off to the London School of Economics where, for the first time, I learned a dictum of Seymour Martin Lipsit, who has put it so nicely. He said, ``He who knows only one country knows no country.'' If you use the simple analogy of eyesight, it is two eyes that provide perspective. My experience in London was certainly eye-opening. As a New Deal Democrat I was surprised to find how extraordinarily suspicious of the United States they were in London. I wrote back to a friend, in a letter that Douglas Schoen had preserved in his book: I get the impression Americans are not generally aware of just how fundamentally we are being opposed by a small but enormously vital element in British society, or just how much we are being disagreed with by British society in general. I respectfully submit that we had damned sure better get off our intellectual asses but quick. A point that was perhaps never fully appreciated. I only wish that there were more Fulbright opportunities so that more students might have the enlightening experience that I enjoyed. [[Page S 14699]] Perhaps at no time in our history have we needed an increase in international exchange programs. We find ourselves in a world that in many ways is more complex than when it was dominated by two ideologies. International exchange programs are necessary to give our students an appreciation of our country and its place in the world. The Fulbright program has been administered by an even older institution, the Institute for International Education [IIE]. Last year I had the honor to address the Seventy-Fifth Anniversary Forum of the IIE. I ask unanimous consent that my remarks from this event be printed in the Record at this point.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, I rise today to mourn the death of a great friend and great American, S. Douglass Cater, Jr. A native of Montgomery, AL, Douglass Cater traveled north to school at Exeter and Harvard, interrupting his education to serve as a Russian specialist in the Office of Strategic Services in World War II. After the war ended, he remained in Washington, writing eminent prose on Washington and national affairs for The Reporter. His articles, along with his first-rate books ``The Fourth Branch of Government'' and ``Power in Washington'' brought him to the attention of Lyndon Johnson. In 1964, he joined the Johnson [[Page S 14130]] White House as the President's education specialist, assisting in the development of programs that established Federal aid to education as the national policy. He also oversaw much of the work that went in to the creation of the Public Broadcasting System. Always a dedicated educator, Douglass Cater became the President of Washington College after stints at the Aspen Institute and The Observer, the great English newspaper. As president of Washington College, Douglass moved to a new plateau above that of Chester Dana, the title character of his masterful 1970 fiction book, ``Dana: The Irrelevant Man.'' I reviewed that book back when it was first published and wrote the foreword to an upcoming edition. That brilliant novel remains as true today as ever, even though the climate and culture of this city and government have drastically changed. Douglass Cater gave new meaning to the terms ``gentleman'' and ``scholar.'' He brought a thoughtfulness and intelligence to all his work, and continually preached the value of civilized discourse over political bickering. His faith in reason was much appreciated by all those who came to know him. Douglass Cater was, in the words of Edwin Yoder, ``one of the best of a fine generation.'' And so we will remember him, even as we offer our condolences to his beloved wife Libby, and all his children and grandchildren. Mr. President, I ask unanimous consent that the full text of the articles from the New York Times and the Washington Post be printed in the Record.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, I rise today to express my great dismay at a proposal passed this week by the House Ways and Means Committee to repeal the low-income housing tax credit. The housing credit is the Federal Government's principal and most successful affordable housing program. The Enterprise Foundation estimates that the housing credit is responsible for almost all of the new private construction of housing units for lower income renters, and that almost 800,000 units of rental housing for lower income working families and the elderly have been constructed or rehabilitated as a result of the housing credit. They also report that the 106,000 affordable housing units generated with the housing credit in 1993 resulted in the creation of approximately 90,000 jobs, $2.8 billion in wages, and $1.3 billion in additional tax revenues. I have visited many of the projects in New York that have been made possible by the housing credit, and I can assure you the credit is having a dramatic effect on the availability of good, affordable housing. Yet now some of our colleagues in the House would repeal it. I do not understand what their reasoning is. The House Ways and Means Committee proposal would sunset the credit at the end of 1997. The committee acted without holding any hearings to review the housing credit. And while the committee calls on the Government Accounting Office to review the management and operation of the housing credit, it acts nonetheless. The housing credit was devised by the Senate Finance Committee during consideration of the Tax Reform Act of 1986, and was signed into law by President Reagan. It has enjoyed solid bipartisan support for nearly a decade. I was pleased in 1993, as Chairman of the Senate Finance Committee, to bring legislation before the Senate which permanently extended the housing credit. That legislation was enacted as the Omnibus Budget Reconciliation Act of 1993. We were able to permanently extend the housing credit in a bill which produced the largest amount of deficit reduction in this country's history. The Office of Management and Budget estimates that the direct and indirect effects of the bill were to reduce the baseline deficit by a cumulative amount of one trillion dollars. In sum, while making a very significant attack on the deficit, we were still able to find the resources for this important national priority. And yet just 2 years later we see an effort to repeal it. This is an odd development, indeed, and I urge my colleagues to join me in opposing it.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, I yield myself the remaining 3 minutes in opposition.

Mr. MOYNIHAN. Mr. President, the word reform means to restore to an earlier good state. Sir, there was no earlier good state of our present welfare system. It began as a widow's pension, a societal transformation program. In 1988, with the Family Support Act we began to say that welfare cannot be a permanent way of life; it has to be a transition. It has to be an exchange of effort between the society, and the individual caring for children. A year and a quarter ago on this floor, I introduced S. 2224, the Work and Responsibility Act of 1994. This was the administration's welfare reform measure. I introduced it on behalf of myself and Mr. Mitchell, the majority leader at that time, Mr. Breaux, Mr. Daschle, Mr. Dodd, Mr. Kennedy, and Mr. Rockefeller. It had taken a year and a half to get to it, but it was welcomed, and it was in the tradition that we have upheld for a good 20 years now. The table of contents sets the tone. Title I, JOBS--job opportunities and basic skills; title II, work; title III, child care; title IV, provisions with multi-program applicability; title V, prevention of dependency; title VI, child support enforcement; title VII, improving Government assistance and preventing fraud; and title VIII, self- employment and microenterprise demonstrations. That was the track we were on. The Family Support Act of 1988, to which this was to be a successor, came out of this Senate floor 96 to 1. I fear we have lost that tradition. We are ripping out a portion of the Social Security Act today. I fear we may be now commencing the end of the Social Security system. The one thing not wrong with welfare was the commitment of the Federal Government to help with the provision of aid to dependent children. We are abandoning that commitment today. Mr. President, I thank the Chair. I thank all concerned. I yield the floor. Mr. DASCHLE addressed the Chair.

Mr. MOYNIHAN. Mr. President, I yield 3 minutes to my friend from Massachusetts, Senator Kennedy.

Mr. MOYNIHAN. Mr. President, I yield 3 minutes to the indomitable Senator from Illinois, [Ms. Moseley-Braun].

Mr. MOYNIHAN. Mr. President, might I just say that this is an extremely important issue, and requires the attention of the conference committee.

Mr. MOYNIHAN. I move to lay that motion on the table. The motion to lay on the table was agreed to.

Mr. MOYNIHAN. Mr. President, I ask unanimous consent that Senators vote from their desks and that their vote be announced.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, I rise today to introduce legislation designed to stem the use of foreign trusts for the avoidance of U.S. taxes. The administration's fiscal year 1996 budget, which contained a series of proposals for change in the taxation of income from foreign trusts, called attention to this problem earlier this year. Since then, I have been committed to developing practical rules to dramatically improve tax compliance when foreign trusts are used, without unduly burdening legitimate financial transactions. The bill I introduce today represents a serious attempt to achieve that balance. It is difficult to estimate precisely the magnitude of tax avoidance occurring through the use of foreign trusts. But we have some disturbing evidence. Under current law, U.S. taxpayers are required to report the assets held in foreign trusts that they have established. But the IRS reports that only $1.5 billion of foreign trust assets were reported in 1993. The estimates of total U.S. source funds held abroad in tax haven jurisdictions are staggering by comparison, in the hundreds of billions. In 1989, the New York Times reported that financial institutions in the Cayman Islands, Luxembourg, and the Bahamas had $240 billion, $200 billion, and $180 billion, respectively, on deposit from the United States. (New York Times, October 29, 1989, pg. 10.) More recently, Barron's estimated that a total of $440 billion was on deposit in the Cayman Islands in 1993, with 60 percent of that amount--$264 billion-- coming from the United States. (Barron's, January 4, 1993, pg. 14.) To put this in some perspective, Barron's calculated that there was more American money on deposit in the Cayman Islands than in all of the commercial banks in California. Although only a portion of U.S. funds abroad are held in foreign trusts, the Treasury Department estimates that tens of billions of dollars are held in offshore asset protection trusts established by U.S. persons. Undoubtedly motivations behind establishing offshore accounts vary, and tax advantages may pale in comparison to the ability to protect assets from U.S. tort or other liabilities. Whatever the initial motivation for moving assets offshore, however, it seems clear that a very large portion of the assets soon disappear insofar as U.S. tax reporting is concerned. The result is rampant tax avoidance. Because tax haven jurisdictions typically have bank secrecy laws, the IRS is effectively precluded from uncovering the information necessary to enforce our tax laws. Tax enforcement is almost entirely dependent upon voluntary reporting by taxpayers, and the evidence is clear that voluntary compliance in this area is lacking. Something must be done, and the intent behind this bill is to end the ease with which taxpayers can reduce their tax bills by legally or illegally taking advantage of existing foreign trust rules. Over the past several months I have received extensive comments from practitioners and academics concerning the administration's original foreign trust proposals and possible alternatives. These comments have been very useful. I would like to thank in particular the tax section of the New York State Bar Association for their detailed analysis. A tremendous amount of work went into their submission, prepared on request and within a very short period of time. The bill I introduce today is substantially revised from the original administration bill--S. 453--to reflect many of the comments received. It has been developed over the last few months in cooperation with my counterpart on the Ways and Means Committee, Congressman Gibbons, who has been unwavering in his efforts to improve tax compliance in the foreign area. I have also worked with the Treasury Department to develop rules that adequately address the needs for effective tax administration. There are a number of aspects to this legislation. The provisions designed to enable the IRS to obtain better information on foreign trusts are perhaps the most significant. The bill would substantially strengthen the current information reporting rules on transfers to, and annual operations of, foreign trusts. Among other changes, the bill includes new rules designed to lead most foreign trusts established by U.S. persons to appoint a U.S. agent that can provide trust information to the IRS. In addition, the recipients of monies from foreign trusts would be required to report amounts received. Penalties for failure to comply with reporting requirements would be raised so that they have genuine deterrent effect--as contrasted to the nominal penalties of current law. The bill would also close a number of loopholes in the existing grantor trust tax rules, a series of rules that specify when the existence of a trust will be ignored for tax purposes because the creator of the trust retains sufficient control over the assets transferred to be appropriately treated as continuing to own the assets. For example, a foreign person--generally not taxable in the United States--transferring assets to a trust for the benefit of U.S. persons generally would not be treated as the tax owner of the assets in the trust unless the trust was fully revocable. Instead, the U.S. beneficiary receiving income from the trust would be taxed on receipt of that income. The ability to manipulate other foreign trust rules also would be curbed. A U.S. beneficiary's use of property of a foreign trust would be treated as the receipt of a distribution from the trust, taxable to the beneficiary. In addition, a U.S. beneficiary receiving a distribution from a foreign trust's accumulated income would be charged a market rate of interest on taxes due--on a prospective basis--rather than the currently prescribed 6 percent simple interest. Finally, the bill includes rules to provide greater certainty as to the classification of a trust as foreign or domestic. Under current law, there is considerable uncertainty on this issue because the determination is based on all relevant facts. A more comprehensive description of the bill, and of the major differences between the legislation that I introduce today and the original administration proposal, has been prepared. I ask unanimous consent that this summary, together with the bill, be placed in the Record at the conclusion of my remarks. Mr. President, I believe this legislation represents a balanced approach to the problem of tax avoidance through the use of foreign trusts, and a significant improvement over the administration's initial legislative proposal. There should be an opportunity to act this year to end the use of foreign trusts to avoid U.S. taxes. I look forward to continuing this effort. Mr. President, I ask unanimous consent that the text of the bill and additional material be printed in the Record.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, I rise today to introduce legislation designed to stem the use of foreign trusts for the avoidance of U.S. taxes. The administration's fiscal year 1996 budget, which contained a series of proposals for change in the taxation of income from foreign trusts, called attention to this problem earlier this year. Since then, I have been committed to developing practical rules to dramatically improve tax compliance when foreign trusts are used, without unduly burdening legitimate financial transactions. The bill I introduce today represents a serious attempt to achieve that balance. It is difficult to estimate precisely the magnitude of tax avoidance occurring through the use of foreign trusts. But we have some disturbing evidence. Under current law, U.S. taxpayers are required to report the assets held in foreign trusts that they have established. But the IRS reports that only $1.5 billion of foreign trust assets were reported in 1993. The estimates of total U.S. source funds held abroad in tax haven jurisdictions are staggering by comparison, in the hundreds of billions. In 1989, the New York Times reported that financial institutions in the Cayman Islands, Luxembourg, and the Bahamas had $240 billion, $200 billion, and $180 billion, respectively, on deposit from the United States. (New York Times, October 29, 1989, pg. 10.) More recently, Barron's estimated that a total of $440 billion was on deposit in the Cayman Islands in 1993, with 60 percent of that amount--$264 billion-- coming from the United States. (Barron's, January 4, 1993, pg. 14.) To put this in some perspective, Barron's calculated that there was more American money on deposit in the Cayman Islands than in all of the commercial banks in California. Although only a portion of U.S. funds abroad are held in foreign trusts, the Treasury Department estimates that tens of billions of dollars are held in offshore asset protection trusts established by U.S. persons. Undoubtedly motivations behind establishing offshore accounts vary, and tax advantages may pale in comparison to the ability to protect assets from U.S. tort or other liabilities. Whatever the initial motivation for moving assets offshore, however, it seems clear that a very large portion of the assets soon disappear insofar as U.S. tax reporting is concerned. The result is rampant tax avoidance. Because tax haven jurisdictions typically have bank secrecy laws, the IRS is effectively precluded from uncovering the information necessary to enforce our tax laws. Tax enforcement is almost entirely dependent upon voluntary reporting by taxpayers, and the evidence is clear that voluntary compliance in this area is lacking. Something must be done, and the intent behind this bill is to end the ease with which taxpayers can reduce their tax bills by legally or illegally taking advantage of existing foreign trust rules. Over the past several months I have received extensive comments from practitioners and academics concerning the administration's original foreign trust proposals and possible alternatives. These comments have been very useful. I would like to thank in particular the tax section of the New York State Bar Association for their detailed analysis. A tremendous amount of work went into their submission, prepared on request and within a very short period of time. The bill I introduce today is substantially revised from the original administration bill--S. 453--to reflect many of the comments received. It has been developed over the last few months in cooperation with my counterpart on the Ways and Means Committee, Congressman Gibbons, who has been unwavering in his efforts to improve tax compliance in the foreign area. I have also worked with the Treasury Department to develop rules that adequately address the needs for effective tax administration. There are a number of aspects to this legislation. The provisions designed to enable the IRS to obtain better information on foreign trusts are perhaps the most significant. The bill would substantially strengthen the current information reporting rules on transfers to, and annual operations of, foreign trusts. Among other changes, the bill includes new rules designed to lead most foreign trusts established by U.S. persons to appoint a U.S. agent that can provide trust information to the IRS. In addition, the recipients of monies from foreign trusts would be required to report amounts received. Penalties for failure to comply with reporting requirements would be raised so that they have genuine deterrent effect--as contrasted to the nominal penalties of current law. The bill would also close a number of loopholes in the existing grantor trust tax rules, a series of rules that specify when the existence of a trust will be ignored for tax purposes because the creator of the trust retains sufficient control over the assets transferred to be appropriately treated as continuing to own the assets. For example, a foreign person--generally not taxable in the United States--transferring assets to a trust for the benefit of U.S. persons generally would not be treated as the tax owner of the assets in the trust unless the trust was fully revocable. Instead, the U.S. beneficiary receiving income from the trust would be taxed on receipt of that income. The ability to manipulate other foreign trust rules also would be curbed. A U.S. beneficiary's use of property of a foreign trust would be treated as the receipt of a distribution from the trust, taxable to the beneficiary. In addition, a U.S. beneficiary receiving a distribution from a foreign trust's accumulated income would be charged a market rate of interest on taxes due--on a prospective basis--rather than the currently prescribed 6 percent simple interest. Finally, the bill includes rules to provide greater certainty as to the classification of a trust as foreign or domestic. Under current law, there is considerable uncertainty on this issue because the determination is based on all relevant facts. A more comprehensive description of the bill, and of the major differences between the legislation that I introduce today and the original administration proposal, has been prepared. I ask unanimous consent that this summary, together with the bill, be placed in the Record at the conclusion of my remarks. Mr. President, I believe this legislation represents a balanced approach to the problem of tax avoidance through the use of foreign trusts, and a significant improvement over the administration's initial legislative proposal. There should be an opportunity to act this year to end the use of foreign trusts to avoid U.S. taxes. I look forward to continuing this effort. Mr. President, I ask unanimous consent that the text of the bill and additional material be printed in the Record.