Chuck Grassley

United States Senator from Iowa





Hearing on the Consequences of the Asian Financial Crisis

Feb 04, 1998

Hearing on the Consequences of the Asian Financial Crisis

Thank you, Mr. Chairman. I expect this to be one of the most important hearings the Committee holds this year. We should all be concerned about the situation in Asia because of its ramifications on the U.S. economy and impact on our constituents. Each one of our states will be affected.

Just 10 days ago a local Iowa newspaper, the Cedar Rapids Gazette, ran a major story analyzing the impact of the Asian crisis on Iowa. Iowa's factory exports to Asia have nearly tripled since 1987. And Asia now accounts for about 30% of Iowa's manufactured exports. On the agriculture side, 70% of Iowa's pork exports go to the Pacific Rim and over 40% of our total agriculture exports are to Asia. We cannot afford to ignore this problem.

Although at this particular time, what is happening in Asia can accurately be described as a "crisis," I also view it as an opportunity. Think of the ways our financial institutions have changed since the stock market crashed in 1929. And how the U.S. had led the world in trade liberalization since the failure of the Smoot-Hawley tariffs.

Sometimes a crisis leads to fundamental, long-term reform. That strengthens a country's economy to a level much higher than could be attained before the crisis.

We have such an opportunity in Asia. But reform will be achieved only if the United States demands change. Apart from the financial reforms required by the IMF, the East Asian nations must open their markets to U.S. exports.

I joined a letter last week led by Senators Baucus and Roberts to Secretary Rubin that highlights the pervasive trade barriers erected against our agriculture exports. Put in place by the same countries that we are now helping through the IMF. These must be removed if real reform is to take place in Asia.

Often in times of financial difficulty, countries choose to close their borders. History has shown that higher trade barriers usually lead to bigger problems. I have a graph here that shows the volume of world trade from 1929 to 1933. As the depression began, countries imposed high tariffs and world trade was reduced from about $3 billion in January, 1929 to a low of $992 million in January, 1933. In other words, the anti-trade policies accelerated the downward spiral of the world economies. We must avoid this situation in Asia.

Also, it's conceivable that the Asian countries will dramatically increase their exports to the United States in order to help their economies. If that's the case, these countries have a moral obligation to open their markets to our exports. Trade must always be a two-way street.

I support assisting the Asian nations through this difficult time. But many of our constituents will be wondering why we're spending taxpayer dollars to rescue foreign economies. The least we should get for our money is to give our farmers and workers a fair chance to compete in these markets.

Thank you, Mr. Chairman.