Jack Reed

Mr. REED

Mr. REED. I will be happy to yield.

Mr. REED

Mr. REED. Mr. President, I rise today to use my time to discuss the fast-track bill. First, let me commend the excellent statement by the Senator from West Virginia. His staunch defense of the Senate and the Congress is based not only on his unsurpassed knowledge of the Constitution, but also his common sense and appreciation that the wisdom of the American people expressly represent the best way to make a treaty. I rise to discuss a number of issues with respect to our trade policy, most particularly, the fast-track legislation that is before us today. Like all of my colleagues, I understand the importance of international trade. Today, the value of trade equals 30 percent of our gross domestic product, which is up from about 13 percent in 1970. Indeed, trade is of great importance to my State of Rhode Island, which exported goods totaling $1 billion in 1996. There is nobody on this floor today that is arguing that trade is not important and that the United States shouldn't be actively involved in international trade. The question today is not whether the United States should engage in trade. The question today is whether we will establish a framework that will open markets without undermining our standard of living. This debate is more than about simply increasing our access to cheap goods; it is about our continuing efforts to promote employment at decent wages here at home, continuing our efforts to protect the environment around the world, and strengthening our efforts to promote stable trade and fair trade throughout the world. The critical aspects of this fast-track legislation are the goals which we set as Members of the Senate. These goals are known as principal negotiating objectives. This is the mission we give to the President--to go out and negotiate, based on these goals, to reach settlements that will advance these multiple objectives: freer trade, fairer trade, a rising standard of living here in America and, we hope, around the world. The rationale for fast track was aptly summarized back in 1974 when the Senate Finance Committee wrote its report with respect to the first fast-track legislation. This report language bears repeating: The committee recognizes that such agreements negotiated by the executive should be given an up-or-down vote by the Congress. Our negotiators cannot be expected to accomplish the negotiating goals if there are no reasonable assurances that the negotiated agreement would not be voted up or down on their merits. Our trading partners have expressed an unwillingness to negotiate without some assurances that Congress will consider the agreement within a definite timeframe. The key operative phrase in this passage is the phrase which we have highlighted behind me. The negotiated goals. That essentially is what we are about today. Charting negotiating goals that will give the President of the United States the direction and the incentive to conduct appropriate negotiations, to yield a treaty which will benefit ourselves, and also to signal to our trading partners what is critical and crucial to this Congress and the American people in terms of trade agreements. This rationale for fast track makes sense, and only makes sense, if we get it right here, if we get the negotiating goals correct. Unfortunately, the bill before us does not provide the President with the full range of goals necessary to increase U.S. trade and enhance our standard of living. Indeed, this bill is contrary to some of the provisions of the 1988 fast-track legislation which specifically recognized workers' rights and monetary coordination as fundamental negotiating goals. In addition, the 1988 fast-track bill gave the President greater authority to negotiate on environmental issues in the context of these trade agreements. The Roth bill limits this authority. Fast track is a great slogan. Free trade is a great slogan. But here today we are not about sloganizing, we are about legislating. And, as such, we must look to this bill, to all of its details and specifically to the goal which it lays out for the President of the United States. In failing to adequately address issues such as labor and monetary conditions, the Roth bill neglects the serious assumptions that underlie the whole theory of free trade. The theory of free trade evolved over many, many years, based upon the economic notions of comparative advantage and specialization, notions that were advanced hundreds of years ago by David Ricardo, the English economist. At the core of these notions of comparative advantage and specialization is that certain nations can produce or prepare goods and services better than others, and that if we trade we can maximize values throughout the world. These assumptions, though, rest on other critical assumptions. As Professor Samuelson, the famous economist, pointed out in his 10th edition work on economic theory: The important law of comparative advantage must be qualified to take into account certain interferences with it. Thus, if exchange rate parities and money wage rates are rigid in both countries, or fiscal or monetary policies are poorly run in both countries, then the blessings of cheap imports that international specialization might give would be turned into the curse of unemployment. We will hear a lot about free trade, but this bill does not give the President the direction to establish the underlying environment which is necessary for free trade--respect for and recognition of the rights of workers to freely associate, to seek higher wages, respect for and acknowledgment of the critical role of currencies in the world of trade. Because of these reasons and many others, this bill, I think, falls far short of what we should in fact pass as a means to achieve the goal we all fervently seek, which is free, open trade and fair trade throughout the world. Now, the debate on trade in the United States is not new. From the beginning of our country we have fiercely debated the role of trade in our economy. Beginning with Alexander Hamilton's ``Report On Manufacturers,'' there has been a constant ebb and flow between those that would advise protective tariffs and those that would suggest free, open trade is the only route. This battle back and forth between opposing views took on, in many respects, the characterization of protectionism versus free traders. It reached its culmination, perhaps, before World War II when, in 1930, this Congress passed the Smoot-Hawley Tariff Act which has become infamous because of its effect upon, at that time, the beginning of the world depression. And then, in 1934 the protective tariffs embedded in Smoot- Hawley were reversed. In 1934, the Tariff Act gave the President the right to reciprocally negotiate trade and tariff adjustment. So, this phase, running from the beginning of the country to the advent of World War II, saw a fierce battle between protectionists and open-marketeers. The second phase of our debate on trade began in the aftermath of World War II where a dominant American economy sought to establish rules for freer trade. But from World War II through 1974, particularly with respect to the Kennedy and Tokyo Rounds of GATT, our view was more or less using trade as a foreign policy device, using trade as a way to establish bulwarks against the threats of communism, the threats of instability. And in so many respects it was this unintended but accumulation of concessions to trading partners around the world that has left us where we are today, which in many respects our market is virtually open in terms of tariffs and in terms of nontariff barriers, but there are many other countries who still maintain barriers to our trade. Beginning in 1974, we recognized that an important part of access to markets was not just the tariff level but those nontariff barriers. As a result, we started the fast-track process. In this context that I described, fast track makes sense if we get the goals right. Today's legislation, I suggest, does not get the goals right. Indeed, since 1974 international trade has taken on a much more central position in our economy in terms of its size and, now, in a variation on some of the foreign policy themes we heard during the 1950's and 1960's, as a way of some to create the democracies, the markets which we think are essential to progress around the world. In any respect, we are here today not to stop the progress of free trade but, in fact, to ensure that free trade results in benefits for all of our citizens and, indeed, benefits for those citizens of the world economy which we hope to trade with. Some have labeled anyone who opposes this fast-track mechanism as a protectionist. I think quite the contrary, those of us--let me speak for myself. I certainly think that we represent interventionists, because we feel that to get trade right, you can't simply leave the country we trade with as we found it. We have to insist that they begin to adapt to and accept international standards with respect to workers' rights, environmental quality, currency coordination, a host of issues. In fact, when we look at the agreement, we see instances within this legislation, it is quite clearly acknowledged, where we are pushing or trying to push countries to adapt to our way of doing business. But they seem to be exclusively with respect to commercial practices-- commercial laws or agricultural policies. So we have in some respects the will to try to develop a world system based upon our model, but when it comes to critical issues like workers' protections and environmental quality, this legislation does not express that necessary role. The administration has expressed their deep desire for this legislation. Indeed, I hope we could pass a fast-track legislative bill this session to open up markets to American firms, to compete in a global economy. With under 5 percent of the world's population living in the United States, we certainly have to find ways to sell to the remaining 95 percent of the world's population. It is no secret that economies in many parts of the world are growing faster than we are and offer tremendous opportunities for our investment and our exports. It is indeed predicted that economies in Asia and economies in Latin America will continue to grow at significant rates and we have to be part of this. But we have to be part of this growth in trade in a way that will ensure that American firms and American workers are in the best position to compete and win in this global economy, this battle for success in the global economy. But I don't think, as I mentioned before, that this bill will set the goals necessary to win that competition. Now, as Senator Byrd indicated so eloquently, this legislation also represents a significant expansion in the authority of the President to conduct the foreign policy of the United States and the commercial policy of the United States. In fact, since the adoption in 1974, the President's ability to negotiate and enter into trade agreements to reduce or eliminate tariff and nontariff barriers has increased significantly. But because it is such a significant delegation of authority, we have to, as I indicated before, make sure that we get the general goals correct, because we won't have the opportunity, as we do in other ways, to second-guess or correct the President's decision as we go forward. So, again, as the Senator from West Virginia indicated, this is the opportunity for us, and maybe the only opportunity, to set the appropriate agenda for discussions going forward on international trade. I think, as I said, the current bill before us does not establish the appropriate negotiating goals so that we do ensure the President not only has the authority but the appropriate direction to serve the interests of the American people in establishing a regime of free and open trade throughout the world. Now, as I indicated before, the Roth bill that is before us today is deficient in many specifics. First, let me take one specific and that is the notion of providing a very active negotiating goal to seek ways to improve and enforce labor relations in other countries around the world. In 1988, fast-track legislation stated that one of the administration's principal negotiating objectives in trade agreements was: To promote respect for worker rights; to secure a review of the relationship between worker rights to GATT articles, objectives, and related instruments with a view to ensuring that the benefits of the trading system are available to all workers; to adopt as a principle of the GATT, that the denial of worker rights should not be a means for a country or its industries to gain competitive advantage in international trade. This legislation before us eliminates this workers' rights provision as a principal negotiating objective in trade agreements. I dare say if we read that to any Member of this Senate, they would say of course that has to be a goal of our trade negotiators. Yet in this legislation it is not such a goal. As a result, it will limit the President's ability to try to negotiate improvements of labor standards and, as such, it will cast aside the interests of millions of American workers as well as the interests of workers worldwide. It is no secret that income inequality has risen substantially in the United States in recent years. For nearly 2 decades the real wages and compensation of American blue-collar workers have been declining. Hourly compensation for nonsupervisory production workers fell by approximately 9.5 percent between 1979 and 1995. There are many reasons for this. Some would cite declining rates of unionization, some the erosion of the real value of the minimum wage. But others would cite the increasing globalization of trade. Although it is difficult to determine exactly the composition, the factors that are influencing this phenomena, there is an emerging consensus by economists that approximately 30 percent of the relative decline in the wages of noncollege-educated workers, and even a larger share in the decline with respect to production-wage workers, is a result of international trade and its effects. And I should say even though the President has suggested Executive initiatives in the last 2 days to try to correct some of these incongruities, it is not likely to do so. In fact, if we want to ensure that our wages remain comparable with our increases in productivity, we have to ensure that when our negotiators go to the table and negotiate arrangements, they are conscious of the rights of American workers and conscious of the rights of those workers in the countries with which we are attempt to go negotiate these trade agreements. Indeed, in light of these trends it is imperative that this provision be part of our fast-track legislation. It is not such a part of the legislation. We have the recent experience of NAFTA to further inform the debate on these issues. It has been estimated that since enactment of NAFTA in 1993, trade with Canada and Mexico has cost the United States approximately 420,000 jobs, including 2,200 in my home State of Rhode Island. As a minimal estimate of job loss, the Labor Department has certified approximately 143,000 workers as being eligible for assistance because of trade dislocation. The list of companies that have made NAFTA-related layoffs is a veritable ``Who's Who'' of American industry. It includes General Electric, Allied Signal, Sara Lee, Black and Decker, TRW, Georgia Pacific, Johnson & Johnson--and the layoffs continue. Indeed, I don't think one can point the finger merely at these companies because they are certainly just taking advantage of something which we created, the opportunity legally--in fact some would argue the incentive legally--to move production out of the United States to other areas, in this case Mexico. But the effect is not simply in the jobs lost. The effect perhaps is more decisive in the suppression of wages. There are reports that companies will either explicitly or implicitly threaten to relocate to places like Mexico if wage concessions are not made. In fact, during the debate last year on NAFTA, a Wall Street Journal poll of executives found a majority of executives from large companies intended to use NAFTA, as they indicated, as ``a bargaining chip to keep down wages in the United States.'' And this is borne out by numerous anecdotes. For example, workers at a plant in my home State in Warwick, RI, agreed to freeze wages and work 12-hour shifts without overtime pay because the company threatened to move production to Mexico. Similarly, 4,000 workers in a plant in Webster, NY, accepted 33-percent cuts in base pay to avoid a threatened plant relocation. A company in Georgia threatened to move 300 jobs at a lighting plant to Mexico unless workers took a 20-percent cut in pay and 36-percent cut in benefits. Mr. President, 220 workers at a plant in Baltimore agreed to take a $1-an-hour pay cut to keep the plant open. And the list goes on and on and on. The negative implications of NAFTA has been felt by U.S. workers and it should give us renewed energy and commitment to ensure that in the next round of fast-track legislation we at least replicate the 1988 goal of actively trying to ensure that worker protection, workers' rights are a central part of our negotiating strategy. Once again, this legislation does not do that. It is important also to note that in the context of NAFTA, the benefits for Mexican workers have not been what they were advertised as. Since the passage of NAFTA, real manufacturing wages of Mexican workers have declined 25 percent. Part of this decline is attributable, of course, to the peso crisis. However it is important to recognize that real wages were stagnating prior to the peso crisis, while worker productivity in Mexico continued to grow. So, despite increased productivity, wages in Mexico continue to stagnate or decline. In fact, the percentage of Mexicans considered extremely poor rose from 31 percent in 1993 to 50 percent in 1996, after NAFTA. And two out of three Mexicans report that their personal economic situation is worse now than before NAFTA. Following NAFTA, we have the benefit of these experiences which we did not have when we were considering the legislation back in 1988. Again, it seems inconceivable that seeing what has taken place in NAFTA, seeing how important--not only to our workers but to the workers of the country we hope to trade with--how important it is to negotiate and to reach principled agreements on worker protections and worker rights, that we are neglecting to do that in this legislation. And, as such, we have left a huge hole in our responsibility to give the President the responsibility and the direction to do what is best for the working men and women of this country, do what is best for the overall welfare of this country. Now, with respect to the environment, that is another area where this legislation is deficient. It restricts the ability of the President to negotiate environmental issues and trade agreements by requiring that they be ``directly related'' to trade. And this differs from the 1988 fast-track bill which provided greater latitude for the President to negotiate on environmental issues. I would assume that ``directly related to trade'' means that if we have a problem getting a good into a country because they object to an environmental rule, that we might say, for example, labeling of a can, of a product, that that might be actionable. But it is not actionable if the country has absolutely no environmental enforcement; that it allows pollution to run rampant, that it actually encourages the relocation of factories and production facilities because of lax environmental rulings, because one I assume would argue that's not directly related to trade, it's not directly related to a good we are trying to get into the economy. But in fact, and again the NAFTA experience is instructive, this is precisely one of the ways in which countries undermine our environmental laws at home on the standard of living of our workers here in the United States. Indeed, after NAFTA we should be much more interested in including strong environmental protections. For the examples that the NAFTA experience has given us. Subsequent to the passage of NAFTA the Canadian province of Alberta, which was only one of two Canadian provinces to sign the NAFTA environmental side agreement, adopted legislation in May 1996 prohibiting citizens from suing environmental officials to enforce environmental laws. And, in fact, since that time, to attract corporate investment, Alberta has advertised its lax regulatory climate as part of ``the Alberta advantage.'' Now, it might be an advantage to Alberta. Certainly I don't think it is to many residents of Alberta. And it is not an advantage to U.S. companies or U.S. workers who are faced with laws that we passed, and rightfully so, that demand high-quality environmental controls in the workplace. In October 1995 Mexico announced that it would no longer require environmental impact assessments for investments in highly polluting sectors such as petrochemicals, refining, fertilizers and steel. (Mr. BROWNBACK assumed the chair.)

Mr. REED. Mr. President, Mexican officials said they were eliminating these environmental impact assessments to increase investment, which may well be an apparent violation of NAFTA because it prohibits, apparently, the weakening of environmental laws to attract investment. So our experience with NAFTA should tell us that we must redouble our efforts to have the principal negotiating objective of environmental concerns. Yet, again we have constrained and circumscribed the ability of the President by simply saying they have to be directly related to trade, and many environmental problems are not directly related to trade. For example, near the United States-Mexican border, there is an area known as Ciudad Industrial, where a number of sophisticated, highly automated manufacturing plants have been established since NAFTA. These manufacturing plants discharge hazardous waste through a nearby sewer outfall which adjoins a river that is used for washing and bathing. The Mexican Government has enacted a number of institutional barriers to environmental progress to prevent pollution abatement. For example, Mexican law prohibits the local government from taxing these state-of- the-art factories to pay for sewers, to pay for cleaning up. In these ways, unrelated directly to trade, there are advantages to relocating production in countries. These are the type of actions which we should be concerned about, that we should, in fact, direct the President to be concerned about, that we should, in fact, insist the President bring to the table as a significant negotiating goal. There is a final point I would like to make with respect to the specific deficiency of these goals, and that is the issue of monetary coordination. The 1988 fast-track bill included monetary coordination as a principal negotiating objective. Specifically the bill stated: The principal negotiating objective of the United States regarding trade in monetary coordination is to develop mechanisms to ensure greater coordination, consistency and cooperation between international trade and monetary systems and institutions. The bill before us today eliminates monetary coordination as a principal negotiating objective, thereby limiting the President's ability to address issues of currency valuation, fluctuating currency, all of the issues that have become tangible and palpable in the last few days, as we witnessed the gyrations of currency and the stock market throughout the Orient. Currency valuation is a key component of trade policy because it affects the price of imports and exports. For example, as the U.S. dollar gets stronger relative to other currencies, U.S. exports to a foreign country will likely become more expensive in that country and the country's imports will become cheap in the United States. Inversely, as the U.S. dollar gets weaker relative to other currencies, U.S. exports to a foreign country will become cheaper in that country, and that country's imports will become more expensive in the United States. As a result, and quite clearly, currency valuation affects trade flow between countries and, consequently, the trade deficit. We have to be terribly conscious of these currency valuations. It is evident in recent statistics on the valuation of the dollar in trade that there is a high correlation between the two. Since mid-1995, the dollar has risen against a number of foreign currencies, and during this period, the United States trade deficit rose also. It is estimated the trade deficit will increase to $206 billion by the end of 1997. Also, currency valuation affects direct investment into our country by foreign investors, and that is something that we also have to be sensitive to. Again, the NAFTA experience gives us further evidence--if we didn't know about it before--it gives us further evidence. As you know, NAFTA was enacted and shortly thereafter, the peso collapsed. What we thought were significant reductions in Mexican tariffs were wiped out by a 40- percent reduction in the value of the peso. This reduction was part of inevitably the continuing strategy of Mexico, and the strategy of many countries, to have export-led growth to reduce the cost of their goods to United States consumers, and one way they did this was through the devaluation of the peso. If we continue to be indifferent to the notion of currency and its role in our international trade, we are going to continue to see these problems and others like them. It turned out that before the negotiation of NAFTA, Mexico was running a trade deficit of $29 billion with the United States, a very large trade deficit, 8 percent of its gross domestic product. By 1994, after the onset of NAFTA and towards 1996, their deficit had turned into a surplus, again, in many respects because of the currency changes that took place because of the peso prices. So we do have to be very, very conscious of these currency effects. Once again, this is not a part of the major negotiating goals for this legislation. Reduced currency values in Mexico has prompted increased investment there. In the past year, investment in maquiladora plants in the Mexican State of Baja California, have increased by more than 35 percent. In effect, because of their policies, because of our adoption of NAFTA, we have created monetary incentives to move and invest in Mexico and not just for the United States but for other countries around the world who are using Mexico as a platform for low-cost production which, in turn, is imported into the United States without duties. Over the horizon, there is another major trading partner whose currency manipulations, if you will, can cause us significant problems, and that is China. As part of its strategy to encourage exports and discourage imports, China has engaged in an effort to reduce the value of its currency relative to the dollar. These currency valuations wipe out many of the concessions that we think we have sometimes with the Chinese with respect to their trade and our trade. It puts, of course, downward pressure on the wages of U.S. workers as we cannot produce here the items that can be produced overseas more cheaply, not because of differences in productivity, but, in many cases, in part at least in the very calculated manipulation of currencies by foreign countries. Again, the absence of such a major negotiating provision within the bill, I think, is a fatal flaw. Overall, the bill before us continues a policy of protecting capital without, I think, sufficient protection for workers, protecting the ability of capital to relocate throughout the world, without recognizing that there must be commensurate protections for workers, workers both here in the United States and workers worldwide. Because of the incentives now to deploy capital almost everywhere, we are beginning to recognize the phenomena of excess capacity in production facilities around the world, and many economists fear that this will lead to a massive deflation, and this massive deflation could be the major economic challenge that we face in the year's ahead. The lack of work protections, the fact that countries can manipulate currencies, the lack of sensitivity to environmental policies has been an incentive, a very powerful incentive, to move production from the United States into these developing countries. For example, Malaysia's booming electronics industry is based on the explicit promise to American semiconductor companies that workers will effectively prohibited from unionizing. In fact, when Malaysia considered lifting this ban on unionizing, American companies threatened to move to China or Vietnam, more receptive countries. This competition for cheap labor continues to put downward pressure on wages in developed countries as companies use the threat of relocation to leverage or reduce the pay of their workers. These trends, related to labor and technology, are creating a situation, as I indicated, of overcapacity in many respects which may outstrip the ability of the workers to afford the very goods they are producing. The economic journalist, William Grieder, characterized the situation as follows: The central economic problem of our present industrial revolution, not so different in nature from our previous one, is an excess of supply, the growing permanent surpluses of goods, labor and productive capacity. The supply problem is the core of what drives destruction and instability. Accumulation of factories, redundant factories as new ones are simultaneously built in emerging markets, mass unemployment and declining wages, irregular mercantilist struggles for market entry and shares in the industrial base, market gluts that depress prices and profits, fierce contests that lead to cooperative cartels among competitors and other consequences. That is an outline of a world which faces increasing prices. The oil companies are a good example potentially of that world. By the year 2000, the global auto industry will be able to produce nearly 80 million vehicles. However, there will only be a market for approximately 60 million buyers. These imbalances, created by excessive supply, will put downward pressure on prices, and reduced profits and begin a deflationary trend. Another commentator, William Gross, is managing director of Pacific Mutual Investment Co., which manages more than $90 billion worldwide, now pegs the risk of a general deflation at 1 in 5 in the next several years. He states: My deflationary fears are supported by two arguments: exceptional productivity growth and global glut. He cites twin causes. Real wages both in the United States and abroad cannot keep up with the rapid growth of new production. That is, there will not be enough demand to buy all excess goods and emerging economies create aggressive new players eager to outproduce and underprice everyone else. Overcapacity may be at the heart of the crisis that we have seen in Asia, the crisis which is manifested through currency turbulence and also through the stock market gyrations. We have seen in Thailand, for example, where, fueled by massive capital infusions, the economy in Thailand took off at a staggering rate. Between 1985 and 1994, the Thais had the world's highest growth rate, an average of 8.2 percent. It was prompted by developers who were building office towers and industrial parks that were built regardless of demand. They continued to build even as the completed buildings were half empty. Petrochemical, steel, and cement plants were operating at half capacity because of oversupply. To address the oversupply issue, currency speculators thought it inevitable that the Thai currency, which was pegged to the dollar, would be devalued to boost Thailand's exports. Based on those assumptions, currency speculators began selling Thai currency and it decreased. The Government was forced to step in. They could not sustain their support and the bottom, if you will, dropped out of the local Thai currency, the baht. We feel similar pressures with the Philippines, Malaysia, and Indonesia. All of this is prompted, in part, by the fact that capital can move everywhere, capital is moving everywhere, and we are not, I think, recognizing it in terms of our overall trade policy and certainly not recognizing in terms of this legislation. We have to be conscious, very conscious, that the conditions of untrammeled deployment of capital around the world has beneficial effects but can have very detrimental effects. It has to be balanced. It has to be balanced by similar regimes in terms of workers' rights, in terms of environmental quality, in terms of coordinating currency, in terms of those factors which will allow free trade to be truly free and not allow situations to develop where capital is attracted not because of quality of workers, not because of natural resources, not because of factories that go to the heart of the production function, but because countries consciously try to depress their wages, try to suppress enforcement of environmental quality, try to manipulate currency, try to lure for short-term growth capital which will end up eventually bringing their house of cards down but, in the meantime, affecting the livelihood, the welfare and the state of living of millions and millions of American workers. This bill does not adequately address those capital movements. It doesn't adequately understand or recognize that modern technology is assisting these capital movements. It does not recognize that we have to have policies that comprehend what is going on in the world today. This migration of capital, this technological expansion, all of these things have an impact on the wages of American workers. All of these have an impact on what we should be doing here today in terms of developing our response to world trade as it exists today. There is another aspect of this capital deployment and this technology deployment and that is the notion of forced technology transfer which many of our trading allies engage in, specifically China. Their trade policies have demanded that companies investing in or exporting to China must also transfer product manufacturing technology to China. A recent article in the Washington Post chronicled this issue. For example, to win the right to form a joint venture with China's leading automaker, General Motors promised to build a factory in China featuring the latest in automotive manufacturing technology, including flexible tooling and lean manufacturing process. GM also pledged to establish five training institutes for Chinese automotive engineers and to buy most of its parts for the Chinese venture locally after 5 years. Similarly, an unidentified United States manufacturer is planning to build a major facility in China instead of the United States in response to Chinese pressure. An executive with the company indicated that production will be more expensive in China and the quality will be worse, but in order to do business in China, they had to conform to these demands. According to many United States business executives, China's demands for technology are simply a cost of doing business with China. However, the effect is that our companies are transferring their facilities to China, making China not trading partners but ultimately competitors to our own world. An interesting experience of DuPont. In the late 1980's, DuPont negotiated with China's Chemical Industry Ministry to form a joint venture to make a rice herbicide called Londax. By the time the venture started production in 1992, several factories in China were already producing Londax using DuPont technology that it was providing to the joint venture. Soon thereafter, approximately 30 Chinese factories were making several DuPont proprietary herbicides, all without the explicit permission of DuPont. So what we are seeing again is not only the deployment of capital because of natural market forces, but because of the will and because of the negotiating stance of foreign countries that are required as a part of free trade, we are seeing the free transfer of our expertise, our proprietary information, our technology, and ultimately in many cases our jobs. The other aspect of this legislation which should be noted, I think with some significance, is the fact that this legislation really does not recognize the fact that we have been running trade deficits of staggering proportions year in and year out. It is interesting to hear the proponents of fast track talking about this as the great salvation for our trading partners. And we have had fast track now since 1974. I would daresay, we were probably running trade deficits in 1974. So clearly, fast track is a mechanism--in fact, some would argue the way we conduct some of these bilateral Free Trade Agreements is not the answer to the most consistent foreign problem we face in America today; that is, continued trade deficits. We have to address these problems. The major trade deficit we run of course is with the Japanese. But we are also running significant deficits with the Chinese. In some respects, one wonders why we are here today talking about fast track when one would argue our major problem is adjusting our trade relationship not with emerging countries like Chile, but with countries like Japan and China. Once again, I do not know what this legislation will do to effect those major problems. Let me just suggest that we have entered into a fast-track procedure which is flawed because the goals we have established do not reach the most important issues that we face in the world today. They do not address our trade deficit directly. They certainly do not address the issues of work protections, environmental policy, currency issues. In fact, also they are sending wrong signals to our allies, our potential trading partners. By not adopting these as central, important key negotiating goals, we are essentially telling our potential trading partners we do not care. Oh, yes, we will have side agreements. We will have executive initiatives. We will talk a good game about these issues. But they are not at the heart of this legislation which is the defining legislation for our whole procedure. I do not think it takes much for a trade minister in a foreign country to figure out pretty quickly it is not important--not important--to the American people, not important to Congress, not important to our trade effort when, in fact, I would argue it is the most important thing that we can and should do. We have seen the side agreements mentioned, but the side agreements have not, I think, produced anything near the type of mechanism, type of framework which is essential to good trade policy throughout the country and throughout the world. Let me just conclude by saying that the fast-track procedure will work if we get the goals right. We have neglected to get negotiating goals right. We have neglected key issues with respect to worker protections, key issues with respect to environment, key issues with respect to the coordination of currency. And the suggestion that we can, by side agreements or by legislative initiatives, make up the difference I think is mistaken. The experience of NAFTA has been very instructive in that regard. Today, we are here as Members of this Senate to do what we must do in the trade process. And that is, to write legislation which will clearly define all the relevant goals that are necessary to not only open up markets but to maintain the standard of living of the United States. This is a central issue that we face today and will face in the days ahead. This bill, sadly, will not give us the kind of direction, give the President the kind of direction that he needs and that the American people demand. I yield back the balance of my time. Mr. President, could I reserve the balance of my time?

Mr. REED

Mr. REED. Mr. President, I rise in support of S. 1292, the Military Construction Appropriations Line Item Veto Disapproval bill. I have long questioned the line-item veto in general terms. I am not convinced of its merit and I am particularly concerned with the manner in which it was applied to the Military Construction Appropriations bill for fiscal year 1998. Like my colleagues I believe that wasteful spending must be cut. However, since the line item veto was exercised for the first time on the Military Construction Appropriations bill for fiscal year 1998, we have learned that even the White House now recognizes that its own data and process for identifying ``wasteful'' items to be subjected to the line item veto were seriously flawed. Indeed, OMB Director Franklin Raines wrote in the official Statement of Administration Policy, ``. . .we are committed to working with Congress to restore funding for those projects that were canceled as a result of the data provided by the Department of Defense that was out of date.'' Indeed, it is my understanding that the Administration is seeking ways to right these wrongs through other avenues. Moreover, I am perplexed by the theory that only the Administration knows what deserves to be in the budget. Instead, I believe there is plenty of wisdom here in Congress as well as the White House to establish budget priorities based on rational compromise and debate. Lastly, I would suggest to supporters of the line item veto that the real task of balancing the budget requires votes like the one I cast in 1993 for deficit reduction, not line item vetoes. There are also some who believe the line item veto is an innocuous device that could never be used for purely political purposes. However, the people of Rhode Island know full well what giving the President the authority to pick and choose specific budget items means. Rhode Island has already experienced a Presidential effort to eliminate an essential program. In 1992, President Bush tried to rescind funding for the Seawolf submarine program which is vital to our nation's defense and the livelihood of thousands of working Rhode Islanders. Fortunately, Democrats were able to beat back the attempt to rescind funding for the Seawolf, but this experience led me to believe that a line item veto would make future battles even more of a lopsided battle than a fair fight. In addition, a President, of any political party, could use the line item veto to eliminate other programs that are important to Rhode Island without fear because a small state like mine only has four votes in Congress. Mr. President, The line item veto is of untested constitutionality. Without a Constitutional amendment, the line item veto act transferred significant power from the Legislative Branch to the Executive. I would hope that the Supreme Court rules on the constitutionality of the line item veto in the near future so the Congress can act accordingly. In the interim, I believe the two principle tests on the use of the line item veto should be: One, is a particular line item veto politically motivated? Two, is a particular line item veto the outcome of a rational and coherent analysis based on sound policy?

Mr. REED

Mr. REED. Mr. President, I rise today to recognize the achievement of Western Coventry School of Coventry, Rhode Island, which was honored earlier this year as a U.S. Department of Education Blue Ribbon School. It is a highly regarded distinction to be named a Blue Ribbon School. Through an intensive selection process beginning at the state level and continuing through a federal Review Panel of 100 top educators, many of the very best public and private schools in the nation are identified as deserving of this honor. These schools are particularly effective in meeting local, state, and national goals. However, this honor signifies not just who is best, but what works in educating today's children. Now, more than ever, it is important that we make every effort to reach out to students, that we truly engage and challenge them, and that we make their education come alive. At the Western Coventry School, a kindergarten through sixth grade school, parent-teacher cooperation, through an award winning Parent Teacher Association (PTA), has helped to improve the quality of education. The school has instituted a mentoring program for at-risk youth and has made concerted efforts to ensure that students with special needs receive the assistance they require. In addition, teachers have taken an aggressive role in developing new approaches to teaching reading and math. Mr. President, Western Coventry School is dedicated to the highest standards. It is a school committed to a process of continuous improvement with a focus on high student achievement. Most importantly, Western Coventry recognizes the value of the larger community and seeks its support and involvement. This school and community are making a huge difference in the lives of its students. Mr. President, the Blue Ribbon School initiative shows us the very best we can do for students and the techniques that can be replicated in every school to help all students succeed. I am proud to say that in Rhode Island we can look to a school like the Western Coventry School. Under the leadership of its principal, Barry Ricci, its capable faculty, and its involved parents, Western Coventry School will continue to be a shining example for years to come.

Mr. REED

Mr. REED. Mr. President, I rise to express my support for the VA-HUD Conference Report and to commend the conferees for their work in resolving a number of contentious issues with the House. First, I would like to commend the conferees for providing adequate funding to renew all expiring section 8 contracts. In my State of Rhode Island, it is expected that section 8 contracts on 4000 units will expire in fiscal year 1998, and I am pleased that this bill will ensure that all of these contracts are renewed. I would also like to commend the conferees on their successful effort to include the section 8 mark-to-market reforms in the conference report. The Senate Banking Committee passed a mark-to-market bill in June that was initially attached to the balanced budget legislation, but was subsequently dropped in conference. The significance of inclusion of the mark-to-market reforms in the conference report cannot be overstated because these reforms address an increasingly serious problem, which, if left uncorrected, will threaten the future viability of the section 8 program. The problem I am referring to is the projected increase in section 8 costs as the number of expiring section 8 contracts increases in coming years. In fiscal year 1997, approximately $3.6 was provided to renew expiring contracts. However, absent mark-to-market reforms, the costs of renewing expiring section 8 contracts is expected to increase to $9 billion in fiscal year 1998, and to $18 billion in fiscal year 2002. The reforms included in this bill address this issue by enabling landlords of section 8 properties to restructure their mortgage contracts, which will reduce the escalating costs of the section 8 program. The reforms will also reduce the subsidy levels that HUD pays to landlords for section 8 assistance. Because of the high costs to build many of these section 8 properties, HUD has been forced in many cases to pay subsidies that are in excess of 120 percent of fair market rent. In fact, a recent study found that 75 percent of HUD's newer assisted housing projects had rents above fair market rent, and that 50 percent of this housing had rents greater that 120 percent of fair market rent. I am pleased that this bill will address this problem by reducing rents to below fair market rents, or fair market rents for most section 8 housing. These changes will produce $500 million in savings for taxpayers. Also, the mark-to-market provisions will improve the quality of section 8 housing by requiring landlords to evaluate the rehabilitation needs of their property and undertake necessary repairs. For too long, many of our section 8 properties have been in an embarrassing state of disrepair. In a recent study, it was found that 24 percent of the section 8 properties were distressed. Sadly, some of these section 8 properties have become havens for crime and drug activities. I am pleased that the mark-to-market reforms will begin to attack this problem by requiring landlords to make repairs to their properties and become more responsible owners. The bill also includes provisions that will enable HUD to screen out rogue owners and managers, as well as provide more effective enforcement tools that will minimize fraud and abuse of HUD insurance and assisted housing programs. Most importantly, the reforms in this bill will require landlords who are restructuring their mortgages to maintain their property as section 8 housing throughout the life of the mortgage. This provision is particularly important in ensuring the preservation of the existing stock of section 8 housing. The mark-to-market reforms included in this bill could affect five Rhode Island housing developments in the near term, and could affect countless other developments in the future, as these provisions are fully implemented by HUD. Overall, I believe these reforms will improve the quality of life for tenants of section 8 housing, half of whom are seniors, and most of whom are very low income. However, it should be noted that these reforms are not a panacea, and we should be mindful that there is much more to be done. For example, we must take steps to address the ever-worsening affordable housing crisis facing this Nation. Unfortunately, this bill follows HUD appropriations bills in recent years and fails to provide funds for new section 8 vouchers. Indeed, such funds have not been appropriated since 1993. Also, there is the issue of the term of section 8 contracts. In years past, section 8 contracts have had terms that ranged from 5 to 40 years, with budget authority being allocated in accordance with the terms of the contract. However, because of the adverse budgetary implications of providing long-term contracts, expiring contracts are now being renewed for 1-year terms which require annual appropriations. These 1-year renewals have created a great degree of uncertainty among tenants of section 8 housing who are being notified annually by HUD that they may not have housing if Congress fails to provide section 8 funding. In a meeting with constituents, I was informed that some seniors who are residents of section 8 housing have suffered strokes and other ailments after being notified that their housing was in jeopardy if Congress failed to appropriate funding for section 8 renewals. Mr. President, this is a very serious issue which must be addressed. While HUD is required to notify tenants about contract renewals, something must be done to ensure that this notification does not unnecessarily alarm seniors and other residents of section 8 housing. I understand that HUD is currently working with a number of tenant groups to craft a notification letter that is less alarming than letters in years past. I intend to work with HUD to see that future notices provide adequate information, without unnecessarily alarming section 8 residents. Mr. President, I am pleased that this bill increases funding relative to fiscal year 1997 for a number of important programs to Rhode Island. For example, funding for the Community Development Block Grant Program, which provides flexible funding to States and localities for community development initiatives, is increased by $75 million. In fiscal year 1997, Rhode Island cities used over $20 million in CDBG money to fund initiatives ranging from job training to neighborhood revitalization. In addition, funding for the HOME Program, which is aimed at expanding the supply of affordable housing, is increased by $100 million over fiscal year 1997. Last year, Rhode Island received $3 million in HOME funding which was used to provide 283 units of affordable housing. Finally, the VA-HUD appropriations bill maintains level funding for a number of important programs such as the section 202 and section 811 programs that provide housing for the Nation's elderly and disabled. A number of Rhode Island groups have successfully used section 202 and section 811 grants to build housing for the elderly and disabled, ameliorating the shortage of affordable housing for these groups in Rhode Island. In conclusion, I would again like to commend the work of the conferees. Their efforts will help preserve and maintain the section 8 program, in addition to a number of other important housing and community development programs.

Mr. REED

Mr. REED. Mr. President, I am pleased to join my colleague Senator Hagel in introducing the Small Business Banking Act of 1997, legislation that eliminates a Depression-era Federal law prohibiting banks from paying interest on commercial checking accounts. This legislation represents an important victory for small business and the banking industry because it eliminates a costly and burdensome Federal prohibition that has outlived its usefulness. The prohibition against the payment of interest on commercial accounts was originally part of a broad prohibition on the payment of interest on any deposit account. At the time of enactment, it was the popular view that payment of interest on deposits created an incentive for rural banks to shift deposits of excess funds to urban money center banks that made loans that fueled speculation. Moreover, it was believed that such transfers created liquidity crises in rural communities. However, a number of changes in the banking system since enactment of the prohibition have called into question its usefulness. First, with the passage of the Depository Institutions Deregulatory and Monetary Control Act of 1980, Congress allowed financial institutions to offer interest-bearing accounts to individuals--a change which has not adversely affected safety and soundness. Second, a number of banks have developed complex mechanisms called sweep accounts to circumvent the interest rate prohibition. Because of the costs associated with developing sweep accounts, however, large banks have become the primary offerors of these accounts. As a result, many smaller banks are at a competitive disadvantage with larger banks that can offer their commercial depositors interest-bearing accounts. Most important, the vast majority of small businesses cannot afford to utilize sweep accounts because the cost of opening these accounts is relatively high and most small businesses do not have a large enough deposit base to justify these costs. In light of these developments, it has become clear that the prohibition on interest-bearing commercial accounts is nothing more than a relic of the Depression era that has effectively disadvantaged small businesses and small banks, and led large banks to dedicate significant resources to circumventing the prohibition. I am, therefore, pleased to cosponsor this legislation that will eliminate this prohibition and level the playing field for small banks and small business.

Mr. REED

Mr. REED. Mr. President, I am pleased to join my colleague Senator Hagel in introducing the Small Business Banking Act of 1997, legislation that eliminates a Depression-era Federal law prohibiting banks from paying interest on commercial checking accounts. This legislation represents an important victory for small business and the banking industry because it eliminates a costly and burdensome Federal prohibition that has outlived its usefulness. The prohibition against the payment of interest on commercial accounts was originally part of a broad prohibition on the payment of interest on any deposit account. At the time of enactment, it was the popular view that payment of interest on deposits created an incentive for rural banks to shift deposits of excess funds to urban money center banks that made loans that fueled speculation. Moreover, it was believed that such transfers created liquidity crises in rural communities. However, a number of changes in the banking system since enactment of the prohibition have called into question its usefulness. First, with the passage of the Depository Institutions Deregulatory and Monetary Control Act of 1980, Congress allowed financial institutions to offer interest-bearing accounts to individuals--a change which has not adversely affected safety and soundness. Second, a number of banks have developed complex mechanisms called sweep accounts to circumvent the interest rate prohibition. Because of the costs associated with developing sweep accounts, however, large banks have become the primary offerors of these accounts. As a result, many smaller banks are at a competitive disadvantage with larger banks that can offer their commercial depositors interest-bearing accounts. Most important, the vast majority of small businesses cannot afford to utilize sweep accounts because the cost of opening these accounts is relatively high and most small businesses do not have a large enough deposit base to justify these costs. In light of these developments, it has become clear that the prohibition on interest-bearing commercial accounts is nothing more than a relic of the Depression era that has effectively disadvantaged small businesses and small banks, and led large banks to dedicate significant resources to circumventing the prohibition. I am, therefore, pleased to cosponsor this legislation that will eliminate this prohibition and level the playing field for small banks and small business.

Mr. REED

Mr. REED. I thank the Chair. I rise to express my support for the defense appropriations conference agreement, and I commend my colleagues, particularly Senator Stevens and Senator Inouye, for their great work on this measure. I am particularly pleased that an important provision in the conference report is language which will allow Newport News and Electric Boat, this country's only two manufacturers of submarines, to team together to design and build the next generation of attack submarines. Without this language, these shipyards and our submarine program could be endangered. With this language, however, we will continue to build the Navy's most valuable weapon, a silent and very effective submarine. Work will commence on the new attack submarines, which will boast great stealth and great strength with advanced war- fighting capabilities, yet will be smaller, more flexible and more cost effective. This teaming agreement will preserve America's vital submarine industry base, which encompasses over 3,000 high-technology companies in 44 States. This conference report brings us one step closer to ensuring that the United States continues to maintain the finest submarine force in the world. Since the first day I arrived in Congress, there has been a strong debate over the future of the U.S. naval submarine program. There are those who believe that the era of the submarine ended with the end of the cold war. But a majority of my colleagues and I believe that our submarine fleet needs to be maintained and modernized and that it will serve us as well in the future as it has in the past. In a time when the mission of our armed services is constantly changing and a threat could emerge anywhere in the world, we need such flexibility. I think it is fitting to note the comments of our respected Chairman of the Joint Chiefs of Staff, Gen. John Shalikashvili, on the eve of his retirement. General Shalikashvili said, ``Submarines are an integral part of U.S. global influence and presence. Their stealth and endurance provide the unified commander enormous capabilities across the full spectrum of conflict.'' I believe that the provisions in this defense appropriations agreement indicate that the submarine has proven itself. This legislation allocates scarce defense dollars to build up the submarine industrial base, to procure new torpedoes, to procure new submarine periscopes, and to assure excellent training programs for our submarine crews. This agreement will provide funding for the completion of the Seawolf program and for the first new attack submarine. This report shows support for the submarine procurement program as well as a logical and cost-effective way to harness the expertise and skill of our Nation's submarine builders. I would like particularly to again thank Chairman Stevens and Senator Inouye for their continued support, Senator Warner for his efforts on the committee, and all of those who have played a critical role in ensuring that our submarine fleet will continue to be the finest in the world, that our sailors will go forth with the best ships in the world and that with their service and these ships we will continue to protect America and defend our principles. I thank the Senator for the time. I yield back the remainder of my time.

Mr. REED

Mr. REED. I yield myself such time, under the control of Senator Kennedy, as I may consume. I rise this afternoon in opposition to the Coats-Lieberman amendment. I have sensed from the comments of the Senator from Indiana and the Senator from Connecticut that they, too, share our mutual frustration with the status of public schools in the United States and particularly in the District of Columbia. That frustration is forcing us to look at ways in which we can improve education because we believe it is so vitally important to the future of the young people of America and indeed to the very success of America in the future. I don't think this frustration should cloud our vision as to what we are doing if we would adopt an amendment such as is proposed today. I believe it would represent an abandonment of public education, not a reform of public education. I feel very strongly that our first commitment should be to a strong system of public education throughout this Nation, that we should be seeking to make school reform and excellent schools the right of every child and not just those who may be fortunate enough to receive some type of voucher to leave the system. Indeed, we can ask ourselves, even if this measure should pass and 2,000 children would leave the public education system in the District of Columbia, what about the thousands of children remaining? What have we done to make their lives better and their education better? I don't think we can save a few and sacrifice the many. I think what we have to do is sit down, conscientiously and cooperatively, and reform public education, not abandon it. Now, the District of Columbia, as we all know, has stark educational needs. Their class year was delayed for days and days and days, not because of anything more complicated than the fact that the buildings were in disrepair. Yet, rather than investing in roofs or boilers or those items that would actually put children literally into the classroom, we are now debating a voucher bill that would take some of those resources that could be available for these activities and disburse them to private education. Indeed, I believe we have a special obligation here in the Nation's Capital to ensure that the schools are the best in the country. However, we are not talking about that today. Instead, we are talking about allowing 2,000 students to leave that system, rather than talking about how we can make every school in the District of Columbia the best in this country and in the world, and how we can give every child in the District of Columbia the chance to succeed educationally so that they can succeed in life. The amendment offered by Senators Coats and Lieberman brings the issue of the quality of education, particularly education in many of our urban areas, clearly into focus. For that, we thank them. It is a crisis we must address, but a crisis that I believe is not solved by vouchers. Vouchers would take the limited resources necessary to improve, reform, and reinvigorate public education and, instead, allow some students to leave the system. Indeed, as part of this amendment which is being debated today there is absolutely no requirement that schools accepting the vouchers would also have to accept the great task of public education, which is to educate all students regardless of their abilities, regardless of their proficiency in the English language, regardless of discipline problems or troubles they may have. This is the task we set for public education. That is not the task that is frequently embraced or supported by private education. In Cleveland, which has a voucher program, no students with disabilities are served. 1,460 students, nearly half of those that were given the vouchers, could not even find a private school that would accept them. The essence of a private school very clearly is they get to reject students, and they get to reject them on very subjective grounds. That is the nature of private education. That does not apply, obviously, to public education. Public education not only must accept every child but has a moral and legal requirement to serve those children as best they can. And that is a significant difference. Private education works very, very well. It has provided good education to many Americans. I was a student in parochial schools in Rhode Island. But one thing that was true then and is true now when I talk to parents is that, if your child has a particular difficulty or disability, if your child needs enhanced care, specialized attention, the first choice is specifically the public schools because the public school not only has the obligation but will make available those resources as best they can. And, once again, in the arena of private schools it is not because of any ill-will but simply because of the fact that they just do not have to do that. So we are talking about a system in which there is not equality, not equality admission, and in many cases not equality of resources either. We have to support the mission of public education in the United States, and it is not just about training workers for the world economy. It is not just preparing young people to engage in the technologically challenging world of the next century. It is also about Americans, because one of the hallmarks of our country has always been that we have a system of public education that is a common ground for the American people--that children of all races, children of different national heritage, children of different religious convictions can come and be educated in a place that emphasizes not their differences but their common status as citizens of this great Republic. We are in danger perhaps of losing that. We are in danger because there is a great deal of skepticism about the effectiveness of public education in the United States. And, looking at the record, one should be skeptical. But we should not respond to that skepticism and that frustration today by turning our back on public education. Rather, we should look at the way we can make public education better for all students. What we should be thinking about and talking about and enacting is tough academic standards in public education. How do we involve parents and the community more deeply and more intimately in the lives and schools in the neighborhood? How do we make schools safe and drug free? How do we bring technology into every classroom? And how do we ensure that every classroom is a place that is structurally sound, clean, and creates an environment where young people want to learn and want to strive to get ahead? The notion of school choice in the public education system is a good one. Parents should have some flexibility within the public system to pick out charter schools, magnet schools, or special schools. Those types of schools help stimulate innovation and improvement in the public system. In my home State of Rhode Island we are fortunate to have several different schools, particularly at the secondary level which draw on the special talents and special skills of the students and which give parents and students a choice. But when we start moving away from that system of public education into funded private education, funded now by these vouchers, we are stepping across a boundary which I think we will regret because inevitably we will be pulling resources away from the needed improvements and reforms in public education, and we will see our schools deteriorate even further. There is a better way to reform education. If you look at schools which have the same basic demographic characteristics, one of the most persuasive comments that I have seen is that the difference in performance between a good school and a bad school is most accounted for by the qualifications of their teachers. We are not talking about dealing with that issue of teacher preparation here today. We are skirting it, where, in fact, I think if we have scarce Federal dollars, and, indeed, we do have scarce Federal dollars in every category of expenditures, we have to look at where we can get our best value. And it is not balanced. It would be better spent, I feel, in improving the quality of teaching in our public schools. I introduced legislation--the Teacher Excellence in America Challenge Act, the TEACH Act--which would turn around the model of professional development and training in the United States to provide for better teachers. This legislation is based upon an extensive study by the National Commission on Teaching and America's Future, which contains some disheartening statistics about the quality and preparation of teachers in America. Over 12 percent of newly hired teachers have no training; 23 percent of all secondary teachers do not have even a minor in their main teaching field; and in schools with the highest minority enrollment, students have less than a 50 percent chance of getting a science or mathematics teacher who holds a license and degree in his or her field of teaching. These are the real problems of public education. These problems have to be addressed. And we can address them, and we must address them. If we do that we will be on much firmer ground in improving public education. What is the price tag, as estimated by the National Commission on Teaching and America's Future, for improving the quality of teachers throughout this country? It is over $4 billion. It may seem inconsequential today. We are debating a very small program with respect to the District of Columbia. But we need all the resources we can to meet the greater challenge of preparing our teachers and the greater challenge of simply ensuring that school buildings are suitable and safe for children. To turn away from these challenges and to adopt this amendment is, I believe, the wrong approach. I believe we have a lot to do to improve public education. We have the necessary task ahead of us to improve teaching, to improve the school environment, and to challenge schools with demanding standards. I also hope that this body will adopt a national evaluation system so that schools know where they stand, and so that when we talk about how well a school is doing it is not just anecdotal, but we will actually know how well they are doing. In fact, I hope that the national evaluations would be participated in by both public and private schools so we can make a judgment about how well the public schools are doing versus private schools. I think we would be a bit surprised. I think we would find despite the disparagement, despite the criticism, despite the constant bombardment against public education, that it would stand up very well. But we all can do better, and we all must do better. The dollars that we are talking about today are important. They should be applied to provide every student in the District of Columbia with a chance--not 2,000 lucky students--but every student in the District of Columbia. They should be focused not on retreating from our commitment to public education but to reaffirming it by assuring every child in this District, and we hope in this country, will have a good, safe school building; they will have well-prepared and motivated teachers; they will have textbooks that are current; and, they will have the chance to use all their talents not only for their own success but ultimately for the great success of this Nation. I yield my time. Mr. COATS addressed the Chair.

Mr. REED

Mr. REED. Madam President, I rise today to address S. 830, the Food and Drug Administration Modernization and Accountability Act of 1997. This is an important bill with serious implications for the health of the American people. The FDA is responsible for assuring that the Nation's food supply is pure and healthy as well as providing a guarantee that drugs and medical devices are safe and effective. The FDA has an immense impact on the lives of all Americans. Few government agencies provide this kind of important protection for the American people. Indeed, the FDA's mandate requires it to regulate over one-third of our Nation's products. Daily, the FDA faces the delicate balance between ensuring that patients have swift access to new drugs and devices, while guaranteeing that those new products are safe and effective. S. 830 contains many positive elements. It reauthorizes the important Prescription Drug User Fee Act, one of the most effective regulatory reforms ever enacted. S. 830 also includes a number of provisions that will improve and sensibly streamline the regulation of prescription drugs, biologic products, and medical devices. I believe that these important reforms to the operation of the Food and Drug Administration will increase its efficiency and speed the delivery of important new medical treatments to patients. One of the most important elements of this legislation is the reauthorization of the Prescription Drug User Fee Act, often referred to as PDUFA. PDUFA established an important partnership between the agency and the industry, and has successfully streamlined the drug approval process. I am pleased that S. 830 will provide expedited access to investigational therapies. This provision builds on current FDA programs related to AIDS and cancer drugs. Another important element will allow designation of some drugs as fast track drugs, thus facilitating development and expediting approval of new drugs for the treatment of serious or life-threatening conditions. The bill will also require the Secretary of the Department of Health and Human Services to establish a database on the status of clinical trials relating to the treatment, detection, and prevention of serious or life-threatening diseases and conditions. Patients have long deserved access to such information, and I am pleased that this bill provides it. S. 830 is the result of ongoing negotiations both prior to and subsequent to the markup of the legislation. Through this process, a number of provisions that seriously threatened public health and safety were dropped or otherwise resolved. I am particularly pleased that improvements made since the markup include important protections to the third party review process. Important changes have also been made to provisions regarding health claims for food products, health care economic claims and a number of other provisions in the original legislation. Yet, there was one important change that was not made to S. 830. Yesterday, along with Senators Kennedy, Bingaman, and Durbin, I offered an amendment that would make a change on device labeling claims--an issue that has been identified by the Secretary of HHS as worthy of a recommendation to the President to veto this bill. Although our amendment did not prevail, I am still hopeful that this issue can be resolved as the bill continues through the legislative process. In effect, the bill limits the FDA's current authority to ask device manufacturers for safety data. It prohibits the FDA from considering how a new device could be used if the manufacturer has not included that use in the proposed labeling application. As a general matter, the FDA does not consider uses that the manufacturer has not included in its proposed labeling materials. However, there are instances when the label does not tell the whole story. It is these instances--when the label is false or misleading--that our amendment addressed. I am disappointed that we were not able to resolve this one issue, because the rest of the bill is worthy of support. However, I am unable to support this bill today because the device labeling issue remains unresolved. This matter is too important to the health and safety of Americans to vote for S. 830 at this time. I look forward to working with my colleagues to resolve the issue of the FDA's authority in the device approval process. And when this issue is resolved, I am prepared to vote in favor of this bill.

Mr. REED

Mr. REED. Mr. President, today we are debating very important legislation, important for the country in the reformation and reauthorization programs at the Food and Drug Administration. Particularly important in this legislation is the prescription drug user fee program, which has proven to be a remarkable achievement that has speeded the approval of drugs, getting these necessary medicines to the American public. S. 830 includes a number of provisions that will include and streamline the regulation of prescription drugs, biological products and medical devices, and we have made great progress over the last several weeks and months in reaching this position today. This bill is a result of ongoing renegotiations, both prior to and subsequent to the markup of the legislation. Through this process, a number of provisions that could have threatened the public health and safety have been dropped or otherwise reformed in such a way that we have made, as I said, remarkable and very effective progress. However, this legislation still contains provisions which could jeopardize the public health. I rise today to address one of these areas and that is the elimination of an important consumer protection against unsafe or ineffective medical devices. The bill, as it is proposed today, as we deal with it today, would limit the FDA's authority to ask device manufacturers for safety data. It prohibits the FDA from considering how a new device could be used, if the manufacturer has not included that use in the proposed labeling. As a general matter, the FDA does not typically consider uses that the manufacturer has not included in its proposed labeling. However, there are instances where the label does not tell the whole story. In these instances, when the label may be false or misleading--it is in these instances that my amendment would give the FDA the authority to look behind the label. In fact, this is such a critical issue that the administration has made it clear that this provision could put the whole bill at risk, including, I might add, the reauthorization of the PDUFA, the prescription drug user fee amendment, because they have threatened, if this provision does survive, to veto the legislation. And that would, I think, derail a great deal of very positive work that we have done today. A great deal of discussion has taken place on the medical device provisions of this bill. I certainly want to compliment Senator Jeffords and Senator Kennedy and all my other colleagues on the committee for resolving most of these issues and doing so in a very reasonable, very thoughtful, and very responsible manner. However, the provision regarding device labeling still raises substantial concerns, as I have alluded to, and it could be corrected very simply by my amendment without, I believe, undermining the attempt of this bill which is to provide for a streamlined, effective process so that new medical devices, new pharmaceuticals can reach the market and be used by the American public for their health and well-being. Let me preface discussion of my amendment by briefly describing the process of how the FDA regulates and clears medical devices for market. Under current law, manufacturers of new class I and class II devices can get their products onto the market quickly by showing that they are substantially equivalent to devices already on the market. For example, the manufacturer of a new laser can get that laser onto the market if it can show the FDA that the laser is, again, ``substantially equivalent'' to a laser that is already on the market. Similarly, the manufacturer of a new biopsy needle can get the biopsy needle onto the market by showing it is substantially equivalent to a biopsy needle already on the market. And the manufacturer of new patient examination gloves can get the same expedited market clearance by claiming substantial equivalency. Under current law, manufacturers are required to demonstrate this substantial equivalency to the FDA by showing that the new product has the same intended use as the already-marketed product; and that the new product has the same technological characteristics of that already- existing product in the marketplace. If the new product has certain different technological characteristics, these characteristics must not raise new types of safety and effectiveness questions in order for the product to still be substantially equivalent to the older product. The logic of this process for moving medical devices onto the market is quite simple. If a product is very much like an existing product, it can go to market quicker. But if it raises new safety or effectiveness questions, those questions should be thoroughly answered before the product is made available to the public. The process for getting new medical devices on the market is commonly known as the section 510(k) process or the 510(k) process. It's considered to be the easiest route for FDA approval. In fact, 95 percent of all medical devices that come onto the market come through this 510(k) process. In a sense, because of this, because of this ease, this is the process that is most used by manufacturers. There is, in many cases, an incentive to bring your new product through this 510(k) procedure. It has the lowest thresholds for approval, if you will, and this incentive requires, essentially, the manufacturers at times to look about in the marketplace and say this is going to do just what this item does currently, even though the new technology or the new innovation or new design might be adaptable to other purposes. But there is, I believe, a regulatory incentive to try to speed things through the FDA by saying: No, no, this is substantially equivalent, that's all we are going to do, this is it. As a result, I think the FDA has to seriously look at, not just the labeled use, but in certain circumstances--not common circumstances but in certain circumstances-- look behind the label. The bill as it is currently proposed would compromise the FDA's existing ability to do that and this change could raise substantial risks to the public health. My amendment addresses this bill that would prohibit the FDA from considering how a device would be used if the manufacturer has not included the use in its proposed label. My amendment would add 9 simple words to the bill. Let me first show you the existing language that is under discussion, and that is: The determination of the Secretary under this subsection and section 513(F)(1) with respect to the intended use of a device shall be based on the intended use included in the proposed labeling of the device submitted in a report under section 510(k). Essentially, what this says is if a manufacturer says, ``This is what we are going to do,'' on a label, this is all we can consider in our application process, even if the FDA considers the possibility of other uses or even, some would argue--even if the FDA felt that the label was misleading or, indeed, false. My language would be added at the very end, and it would simply say, ``if the proposed labeling is neither false nor misleading.'' In a sense, it would give the FDA the opportunity to look at a proposed use on a proposed label and say, ``This is consistent with the device, consistent with use, let's get this onto the market through the 510(k) process expeditiously.'' But if they thought there was another possible use, another likely use, or that the intended use was really perhaps a subterfuge for other uses, they could challenge the application at that juncture. I believe this is something that the FDA should have the authority to do. In fact, I would assume the American public believes that the FDA has this authority, that they can look very closely, very carefully; that they don't have to take as the final authority the characterization of the device by the manufacturer. And they can, by simply examining the device, using their experience, conclude that there might be other uses which should be evaluated before this device gets on the market. As I indicated, my amendment would allow them to effectively look behind the label, look behind the characterization that was proposed by the company. It is also important to note that this is not a particularly novel or startling approach to legislation. Because if you turn to the other major approval process, that is for a class II product, a new product that has to do extensive premarket review, in this case they do have the explicit authority, under present law, to look beyond the label. Because even if the manufacturer indicates one use on the label, they do not have to accept that use if they determine that it is false or misleading. So this is not a novel concept. In fact, I think it represents what should be the normal practice for the FDA, to be able to look behind the label. My amendment would give the Food and Drug Administration this authority. It would give them the authority, and does so for new information, additional information, additional data. This is not an attempt to frustrate progress, to slow up the process, to impede the rapid deployment of new technologies into the marketplace. This is, I hope, an attempt to protect the public health and safety, protect the consumers of these devices; and, hopefully, to delineate the authority of the FDA which typically they would use only in rare circumstances so we don't have a battle at the FDA about whether this device is technologically different. So I hope, by using this approach, this language, we could conform the 510(k) process in this respect to the existing process and we could move forward with good, sound public policy regarding the Food and Drug Administration and medical devices. Let me give just a few examples, because this is not just a legal, academic issue. This is a very real issue. There has been one example that has been discussed on the floor by my colleagues and that is the use of biopsy needles. Biopsy needles are approved for one use, principally. That is, as the name implies, to take a biopsy to remove tissue from a breast lesion, for example. Typically, these needles will remove a very small bit of tissue, about the size of the tip of a pencil. But a manufacturer could present a device that could remove 50 times that--not a typical pencil, but the width of a hot dog. And that would obviously raise questions about how this new device is going to be used. But under the language in the legislation, there is a very strong argument that the FDA could not look to possible other uses because the manufacturer said simply, ``We're going to use this for the traditional biopsy of tissue, a small biopsy of tissue. That's all. We're not going to use it or suggest it be used for the removal of tumors, the removal of tissue, just the biopsy.'' Then they would be essentially prevented from looking at this other use which may in fact be the actual use of the device in the marketplace. So we have to be very careful about that. The FDA should be able in this case to say, ``Well, this could be used for something beyond a simple biopsy. If that's the case, show us some data about its success rate, show us some data about the effects if it's used in this way and not the precise label use.'' This is something that I believe we should have. There are proponents of the existing language which say that the FDA can get at that simply by saying this is a new technology, it is not equivalent to the old one. But the manufacturer could argue that there are no questions of safety or effectiveness even if it was a new technology. Essentially this new language designed to streamline the process could lead us right back to the contentious issues about whether or not this new technology endangers health and safety. It could lead us back, I think, in a way in which the FDA has the weaker hand in the argument. I believe that the American public would like to see the FDA with the authority and the ability to ensure that these devices are thoroughly reviewed before they get to the marketplace. As we go forth, there are other examples. In fact, my colleague from Massachusetts, I think, will talk specifically about one example of a biopsy needle which went on the market. Before this device went on the market, it was tested only on two cows and, I am told, 13 roast beef. Now we hear that the device marketed as a biopsy needle has in practice been used for other surgical procedures. Now, this is an example of how something, even if it was not deliberately designed by the manufacturer, can be changed in its use in practice. And, again, I think the FDA should be able to anticipate those rare circumstances where it might happen and take effective action to protect the public health. There are other examples. Another good example is a surgical laser. Lasers have been used for decades for the removal of tissue. Several years ago a manufacturer added a side-firing mechanism to their laser to improve its use for prostate cancer. While the manufacturer did put that specific use in the proposed label, it was very, very clear that this new side-firing design was intended solely for this purpose of treating prostate patients. As a result the FDA, using its current authority, its ability to look beyond the actual labeling use, was able to require the manufacturer to submit data demonstrating the laser's safety and effectiveness in treating prostate patients. This is precisely how the approval process should work. In rare circumstances, when the device obviously looks different than the label use, the FDA should be able to say, this could be used in ways that you are not labeling. We have to look at all the likely, obvious ways beyond the label. Let us do that. Let us get beyond the label. Under the present language, without the Reed-Kennedy-Bingaman amendment, the FDA would have a difficult time looking behind the label, looking at actual uses and requiring the data and the analysis which should be done beforehand, before the goods get on the market. I do not think you have to do this simply because there are people out there who would have a maligned motive. This is a situation where, if we create through our legal structures opportunities to get products quicker to the marketplace, then companies, with their expert legal counsel, will exploit those ways. It is our responsibility to ensure that we have a process that protects the public health. Whatever process we develop here today will be used by the companies in a way which, if we were executives of companies, we would use in the same way. But we have to take into consideration not the benefits or the position of the manufacturer, but the position, I think, of the general public that would use the devices. So, I believe we have to have standards that are sufficient to give the Food and Drug Administration the authority they need to do the job. I believe that my amendment does this. I believe we have to have these procedures in place before a device gets into the marketplace. There are those who would argue that the FDA has the power to recall an item, has the power to intervene, but then of course it is too late because obviously the public has already suffered in some way. Indeed, it is not as easy as it may appear for the FDA to step into the marketplace and get goods off or an item off the market that has already been approved. So I think the idea that this can be corrected after the fact is not sufficient weight to preclude us from taking effective steps before a device gets in the marketplace. What I would like to do in my amendment is simply give the FDA the authority to look at a proposed use, a labeled use, make a determination that this device and this label is consistent and get it through the 510(k) process quicker. But in those rare circumstances where the device itself and the label do not appear to be consistent, coherent, where there is the possibility of a false label or a misleading label, or the possibility that the company may indeed in most cases in very good faith be insisting this is how they want to market it, this is how they propose it be used, but the medical profession itself would adapt this very quickly for other uses, in those circumstances I believe the FDA should have the authority. I hope that my colleagues will recognize this, will support this amendment, support giving what the FDA has today: the authority to look behind the label and to require that companies provide data for the likely uses of the product they intend to market. Before concluding, I ask, Mr. President, unanimous consent that Senator Durbin be added as a cosponsor to this amendment.

Mr. REED. I thank the Chair.

Mr. REED. Mr. President, I have an amendment at the desk, amendment No. 1177. I would like to call up my amendment at this time.

Mr. REED. I ask unanimous consent Senators Kennedy and Bingaman be added as cosponsors of this amendment.

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

Mr. REED

Mr. REED. I concur with the Senator's notion that the FDA could look at safety and effectiveness but the critical question is safety and effectiveness to do what? To do what the labeled use is or to do something else. And the language of the bill restricts the answer to that question, to do what, statutorily to simply say whatever the company puts into the label. And that seems to be the crux of this debate. Yes, they can look at safety and effectiveness; yes, they can look at technological change, but only in the context of what the company purports in the label to say is the intended use. They can't look beyond it. I yield back to the Senator from Massachusetts.

Mr. REED. I thank the Senator. Thank you, Mr. President. Mr. President, we debated this morning the Reed amendment, which would give the Food and Drug Administration the authority to look behind the labeled use in evaluating a class 1 or class 2 medical device before that device would be sold on the marketplace. My amendment is very simple. It would allow the FDA, if they felt the label was misleading or false, to ask for additional information with respect to possible uses other than the labeled use. This is consistent with their current practice. And it would protect the public health dramatically. I urge all of my colleagues to support this amendment. I heard opposition on the floor this morning to the amendment--first, not so much opposition but an attempt to diminish the importance of this amendment by saying, ``Well, class 1 and 2 devices are just simple little medical devices. They are low-risk medical devices.'' I don't know about you. But, like many Americans, I think the definition of a low-risk medical device is a device that is being put into someone else's body, not my own. Because, if there is any type of device that is coming into a person's body, they expect and anticipate that the FDA would thoroughly review it, ask all the questions, and look at all the possible uses that are reasonably discernible from the device itself. The other objection which has been made to the amendment is that it is unnecessary because the FDA can step in and ask for this type of information. But, in fact, that is not the case. As some have explained here today, there is a two-prong test to get 501(k) approval under current. First, the device must be substantially equivalent to another device already on the market, and this device performs essentially the same task that the other device does. If there are technological differences in the device, then the FDA can make an evaluation of this technology to determine its effectiveness. But all of these different tests collapse into one point. The question is, what is the device being used for? That is where the current language in the bill is so restrictive of FDA responsibility and the obligation we expect them to discharge. Because, according to the language in the bill, the FDA and the Secretary of HHS reviewing any of these proposals could only do so with respect to the intended use of the device based on the intended use included in the proposed labeling of the device. You have to evaluate these devices for safety and health, and efficacy based upon some use. And if the FDA is restricted solely to the use indicated on the label, then they will not be able to look behind the label to other possible uses--look beyond the label to other possible ways--in which the device could be used and ask for supporting data to justify those uses. We have seen and heard examples today on the floor with respect to biopsy needles, with respect to lasers, with respect to a host of very important medical devices. The American public I hope would demand that these devices be evaluated thoroughly for all reasonable uses--not only the use that a manufacturer would suggest as a way to take advantage of this expedited procedure for review and entry into the marketplace. One does not have to repute ill will or bad motives to the manufacturers of these devices. Simply stated, they have a tremendous incentive to get these items into the marketplace. Once they are in the marketplace, there are different uses that could be promoted. Also, in terms of marketing, there are scores of salesmen and women who are zealous in trying to promote these goods. They might not be as scrupulous with respect to these uses as intended by the manufacturer. All of these factored together suggest strongly that if we do not initially have a good approval process which allows the Food and Drug Administration to look behind the label, to look at likely uses other than the ones presented by the company, we could run the risk of introducing medical devices into the marketplace that would be harmful to the American public. We have made great progress on this legislation. We have done so because we all feel sincerely that our chief responsibility is to protect the public health. My amendment would do so. My amendment would give the FDA the authority to request additional safety information in the rare circumstances in which they have suspicions that the labeled use is either false or misleading. The FDA could look behind that label and require additional data before they would release a device onto the marketplace. I hope that we all support this concept. I hope we can all rally around the principle that when in doubt, and when confused about the different interpretations of various sections, that we will ultimately allow the FDA to use its judgment and its discretion to protect the public health of the American people. I yield our time.

Mr. REED. Will the Senator yield?

Mr. REED. Will the Senator yield?

Mr. REED. Will the Senator yield?

Mr. REED

Mr. REED. We have made great progress with respect to the Food and Drug Administration [FDA] bill. That is a tribute to Chairman Jeffords and the ranking member, Senator Kennedy from Massachusetts, and all the members of the committee and the Members of the Senate participating in this debate. However, there remains at least one issue of concern, one issue that was a subject of extensive debate today. That issue is a provision regarding the 510(k) approval process for class I and class II devices. As I mentioned previously, these class I and class II devices are serious medical devices. This is not a Band-Aid or gauze. These are lasers or biopsy needles or many other complicated, necessary medical devices. As a result, we cannot, I think, assume that this is a small or inconsequential issue we are debating. It is a very important issue. Essentially, the legislation that is before the Senate today limits the FDA from looking behind the stated use on the label presented by the manufacturer when they request approval to put a new product on the market. It is important, in certain cases, to make such a searching review beyond the proposed use by the manufacturer. It is particularly important in the case where there is strong suspicion that the label is either misleading or fraudulent or false. Although my amendment was not favorably considered earlier today, it would have given the authority to the FDA to look beyond the label in cases where they could show--and this is a very high standard of proof--that the label was false or misleading. There is no other provision in this new legislation that would give the FDA such authority. Indeed, one could ask why the proponents of this legislation deliberately chose to remove the FDA's authority and to effectively prevent the FDA from conducting a thorough review of medical devices as they come on the market. I have outlined, as many of my colleagues have, the detailed reaction of several sections of the FDA law. It is complicated, arcane legislative language. I have tried to think of a more homely and mundane example which might illustrate the dilemma the FDA would be facing as it contemplates this new legislation. If the FDA were in the position of not approving medical devices but approving, for example, land transportation vehicles, they might be confronted with an existing model, perhaps a Ford Mustang. And say, for example, a new product such as an F-16 fighter plane is presented for review. Both can move over the ground, both of them are fairly fast, and both of them have certain similar aerodynamic capacities. Both of them can carry passengers. So one could make the argument that the F-16 could be substantially equivalent in use as a ground transportation vehicle. But I think anyone would have to say, upon looking at both of these devices, that there is a strong suggestion the F-16 can be used for something else. If the FDA, or in this example, the hypothetical agency, did not have the authority to ask the simple question: Will it be used to fly and can it fly? The hypothetical agency may not be doing the job. That is a homely example to illustrate that the FDA is frequently confronted with devices that are presented as being substantially equivalent to existing devices. These new devices may be similarly labeled to that existing device, but they have the potential for other uses. If it is obvious that the device is for uses not listed on the label, the FDA should have the authority to make an inquiry into those other uses. In fact, my suspicion is that in the development of new medical devices there is a long history of starts and stops. A history of contact with other individuals, many researchers working together, exploring different uses and alternatives, different materials. In that process, it is very likely that other issues are contemplated, evaluated and perhaps designed into the device. Today we have a system where there is more incentive for approaching the FDA with a petition of a 510(k) approval because that is the fastest way to the marketplace. Even if there were uses that were discussed and contemplated, even if there are obvious uses that might become part of common practice, those may be dismissed in order to get this through the system quickly. What we have done today by not adopting my amendment is effectively prohibit the FDA from making that searching inquiry into possible uses. The consequences can be severe to the public health. Despite all of these issues we have discussed, this bill represents significant progress on many fronts. We are very, very close. I hope in the ensuing conference--or before we go to conference--that we could address this particular issue. It is an issue that has been highlighted by Secretary Shalala. It has been highlighted with respect to the potential for a Presidential veto. I hope we don't reach that point. The hard work that has been done over many months by my colleagues, the hard work of many representatives of the industry, and the hard work of public health advocates I think will lead us, if we can get over this hurdle, to a bill that we will all be proud of. In conclusion, today we have spent some time discussing the industry. We have spent some time discussing the FDA. There have been criticisms by Members with respect to both the industry and the FDA. Our job at this point is not to demonize or deify anyone. It is to get good laws passed. I believe this legislation can be approved and can succeed. I note the majority leader is standing by, and I yield back my time.

Mr. REED

Mr. REED. I would say you have trotted out some impressive statistics about income as a measure of the wealth of these artistic enterprises like the Metropolitan, but the other side of the equation is their cost. Many of these institutions, even the famous ones, find it very difficult to make ends meet.

Mr. REED. Mr. President, the National Endowment for the Arts has served this Nation well for many, many years. There are things that we can do to improve its performance, but the wholesale scuttling of the National Endowment would, I think, be a mistake. I believe that we can make improvements but we cannot give up the vision of a national agency which reaches into every corner of this country to encourage and inspire the artistic excellence of the American people. By supporting the NEA, we can accomplish that. I believe these amendments would disrupt that support, and, therefore, I oppose them and request that my colleagues oppose them. I yield back my time.

Mr. REED. I thank the Chair. I rise in strong support of the arts. Earlier this afternoon, we were able to fend off a frontal asault on the National Endowment by the Ashcroft amendment. Today we are debating two amendments that would also do great damage to the National Endowment for the Arts. I come to this position with I think a very special standing because I have succeeded Senator Claiborne Pell, who was one of the architects of the National Endowment for the Arts. Senator Pell recognized that centuries from now this Nation would be recognized far more for its contribution to the human spirit than perhaps anything else. And through his efforts, the National Endowment was created and through the efforts of the National Endowment theater, ballet, and opera has spread throughout this country. One of the fallacies I think that is found in the argument of my colleagues is that the States are quite capable of doing this, they are ready to do this. But the reality is that before the National Endowment for the Arts there was not much art throughout many parts of this country, that there were not as there is today opera companies throughout America and theater companies. In fact, if the National Endowment for the Arts is eliminated, if this is put into a block grant, I fear, and I think I fear with very, very good evidence, that what will happen is a shriveling of the arts in America. Many of us have been in State government. We know that there is no monopoly on great wisdom or aesthetic sensibility at the State level, no more so than at the Federal level. We know that this money might be ill used. But we also know that it will be subject to a much more narrower and parochial focus. We have within the National Endowment a national vision, a national vision, though, that acts through local individuals, and that is what is critical also. The National Endowment is not running a great national theater here in Washington exclusively. But what it is doing is reaching into every corner of America and giving people an opportunity to appreciate and participate in the arts. In my home State of Rhode Island, we have theater companies that are supported by the NEA. We have educational programs that allow young children to witness the arts. Indeed, the first time I ever saw a play was as a grammar school student in Cranston, RI, when I went to see the Trinity Repertory Company, supported by the National Endowment, by Federal support, put on ``Saint Joan'' by George Bernard Shaw. That was a moving experience. And that experience is replicated every day throughout this country because of the National Endowment. In addition to contributing to the artistic quality of America, this agency has generated tremendous economic development and progress throughout the country. In my own State, its contribution to the arts has been multiplied in terms of the economic effect. Providence, particularly, has become a city that is proud of our arts, that has thriving companies that need the National Endowment, not just for aesthetic reasons but for good, solid economic reasons. And by eliminating the National Endowment, or by block granting its funds, we will, I think, dissipate that energy, that enthusiasm, and that achievement we have seen today. The arts are not only a source of pleasure, but in many cases a source of great economic progress, particularly in my home State of Rhode Island. So, for many, many reasons, I believe that these amendments, while well intentioned, will undercut what is a strong national policy to support the arts.