Testimony by E. Leon Trammell on Implementation of U.S. Bilateral Free Trade Agreements with Chile and Singapore
Statement of E. Leon Trammell Chief Executive Officer, Tramco, Inc. Testimony before the Subcommittee on Trade of the House Committee on Ways and Means, on Implementation of U.S. Bilateral Free Trade Agreements with Chile and Singapore on behalf of the
U.S. Chamber of Commerce.
June 10, 2003
Mr. Chairman, thank you for inviting me to appear before this panel today. I am Leon Trammell, Chief Executive Officer of Tramco, Inc. in Wichita, Kansas. I am also a member of the Board of Directors of the United States Chamber of Commerce, as well as acting Chairman of the Board's International Policy Committee.
In addition to Tramco, I am pleased to testify on the recently signed U.S. free trade agreements with Chile and Singapore on behalf of the U.S. Chamber of Commerce, which is the largest business federation in the world. Representing nearly three million companies of every size, sector, and region, the Chamber has supported the business community in the United States for nearly a century.
Tramco manufactures and sells high-production conveyer product lines. Our annual sales are roughly $20 million. In fact, exports make up about 60% of our sales. Tramco exports to 45 countries around the world, including Chile and Singapore. In Chile, we are active in the copper mining industry, and about 10% of our annual sales are in Chile. In Singapore, Tramco is active in the oilseed industry. The Singaporean market accounts for between 2-3% of our annual sales.
I personally support these two landmark agreements, and the U.S. Chamber of Commerce offers a strong endorsement as well. These accords will slash trade barriers for U.S. exports, enhance protections for U.S. investment in these two countries, and enhance the competitiveness of American companies in the global economy.
The Bracing Tonic of TPA
America's international trade in goods and services accounts for nearly a quarter of our country's GDP. As such, it is difficult to exaggerate the importance of the victory obtained last summer when the Congress renewed Presidential Trade Promotion Authority (TPA). When President George W. Bush signed the Trade Act of 2002 into law on August 6, it was a watershed for international commerce. As we predicted, this action by the Congress has helped reinvigorate the international trade agenda and has given a much-needed shot in the arm to American businesses, workers, and consumers struggling in a worldwide economic slowdown.
When TPA lapsed in 1994, the U.S. was compelled to sit on the sidelines while other countries negotiated numerous preferential trade agreements that put American companies at a competitive disadvantage. Last year, during our aggressive advocacy campaign for approval of TPA, I believe many members of Congress grew tired of hearing that the U.S. is party to just three of the roughly 150 free trade agreements in force today.
The passage of TPA allowed the United States finally to complete negotiations for bilateral free trade agreements with Chile and Singapore, in December and January, respectively. These are the first significant free trade agreements negotiated by the United States since the NAFTA.
They are excellent agreements. Giving the lie to foreign critics of alleged U.S. protectionism, no products were excluded from the market access commitments included in the two agreements.
These agreements raise the bar for rules and disciplines covering a host of economic sectors from services and government procurement to e-commerce and intellectual property. They also raise the bar for future trade agreements, including the Free Trade Area of the Americas (FTAA) and discussions for trade liberalization in the context of the Asia-Pacific Economic Cooperation (APEC) forum.
Maintaining Competitiveness
The two agreements have much in common, but each has its particular advantages. One factor adding urgency to our request for quick Congressional action on the agreement with Chile is the heightened competition U.S. companies face in the Chilean marketplace. In this sense, Chile is an example of how the world refuses to stand still — and how American business will lose its competitiveness without an ambitious program of trade expansion.
Let me illustrate. Many of you know that Chile's free trade agreement with the European Union came into force on February 1. On that day, tariffs on nearly 92% of Chilean imports from the EU were eliminated. Consequently, it is not surprising to note that Chilean imports from the EU expanded by 30% in the year ending in February 2003, whereas Chilean imports from the United States grew by less than 6%. Chilean imports from Germany grew by 47% and those from France grew by 41% in the same period.
The reason is simple: While U.S. exporters wait for a free trade agreement, our exports to Chile continue to face tariffs that begin at 6% and, for some products, range much higher. The upshot is that European companies are seeing their sales in Chile rise five times as quickly as those of U.S. firms.
In a similar fashion, the free trade agreement with Singapore will further anchor U.S. competitiveness in the Asia-Pacific region, where Singapore is already actively engaged in negotiating trade agreements. Singapore has implemented free trade agreements with Australia, Japan, New Zealand, and the European Free Trade Area and is negotiating with Canada, Chile, and Mexico. It is also a participant in the framework agreement between ASEAN and China aimed at reducing tariffs and non-tariff trade barriers.
The comprehensive nature of the free trade agreement with Singapore is a testament that Singapore shares many of our country's views on global trade liberalization. As such, the agreement will contribute to our global and regional trade liberalization objectives and will serve as a barometer for other countries in Asia that are interested in completing a free trade agreement with the United States.
Gauging the Benefits
How might these two agreements benefit the United States? There is a strong economic argument to be made for free trade agreements. As U.S. Trade Representative Robert Zoellick has pointed out, the combined effects of the North American Free Trade Agreement (NAFTA) and the Uruguay Round trade agreement that created the World Trade Organization (WTO) have increased U.S. national income by $40 billion to $60 billion a year. Thanks to the lower prices that these agreements have generated for such imported items as clothing, the average American family of four has gained between $1,000 to $1,300 from these two pacts — an impressive tax cut, indeed.
From a business perspective, the following are a few examples of specific market-opening measures in the two free trade agreements, provided here to give some insight on how U.S. companies stand to benefit:
Tariff Elimination. In the case of Singapore, the free trade agreement will immediately eliminate all Singaporean customs duties on all U.S. products upon entry-into-force, unequivocally meeting one of the principal negotiating objectives set forth in the Trade Act of 2002. The agreement will also remove a number of significant non-tariff barriers, such as Singapore's excise taxes on imported automotive vehicles. The agreement with Chile will eliminate tariffs on more than 90% of all U.S. goods immediately, with the remainder to be phased out in a fairly rapid fashion. Today, most U.S. exports to Chile face a tariff of 6%, which can constitute a significant barrier indeed, but tariffs are substantially higher on some sectors. For instance, Chile continues to impose a luxury tax of 85% on vehicles imported from the United States valued at more than $15,000 — a significant barrier to U.S. exports that the free trade agreement will eliminate.
Services. Services accounts for over 80% of GDP and employment in the United States. The services chapters of both agreements provide enhanced market access for U.S. firms across different service sectors using a "negative list" approach (full market access for all service providers except those in sectors specifically named). U.S. service suppliers will also be assured fair and non-discriminatory treatment in both countries. Banks, insurers, and express delivery providers are among the sectors that will benefit from new opportunities in both markets if the two agreements are approved and implemented.
Electronic Commerce. The landmark E-Commerce chapters of the U.S.-Chile and U.S.-Singapore agreements will help ensure the free flow of electronic commerce, champion the applicability of WTO rules to electronic commerce, and promote the development of trade in goods and services by electronic means. Provisions in this chapter guarantee non-discrimination against products delivered electronically and preclude customs duties from being applied on digital products delivered electronically (video and software downloads). For hard media products (DVD and CD), custom duties will be based on the value of the carrier medium (e.g., the disc) rather than on the projected revenues from the sale of content-based products.
Intellectual Property Rights. The agreements with Chile and Singapore provide important new protections for copyrights, patents, trademarks and trade secrets, going well beyond protections offered in earlier free trade agreements. Once again, the two agreements serve as a useful benchmark for future agreements with other countries. Both agreements have important new enforcement provisions. In the case of Chile, the agreement criminalizes end-user piracy and provides strong deterrence against piracy and counterfeiting. The agreement also mandates both statutory and actual damages under Chilean law for violations of established norms for the protection of intellectual property.
Movement of Personnel. Under the two agreements, U.S. professionals will be granted special temporary entry visas into Singapore and Chile for a period of 90 days. The special visa would be based on proof of nationality, purpose of the entry and evidence of professional credentials. The visas would provide for multiple entries and would be renewable. The Chamber welcomes this provision in the free trade agreements, as it will make it easier for U.S. companies to deploy personnel for short assignments or transfers to company facilities in Chile and Singapore.
Provisions on Labor and the Environment. The longstanding policy of the U.S. Chamber is that trade agreements should not hold out trade sanctions as a remedy in response to labor and environmental disputes. Our interpretation of the enforcement mechanism of the labor and environmental provisions of the Chile and Singapore free trade agreements is that monetary compensation is the remedy of first choice and that trade sanctions would be employed only as a last resort.
What the Chamber is Doing
The U.S. Chamber is helping to lead the charge in the effort to win approval of these two agreements. In concert with our partners in the U.S.-Chile and U.S.-Singapore Free Trade Coalitions, the Chamber has met face-to-face with over 120 members of Congress since January to make the case for approval of the two agreements. We have also met with members of Congress in their districts throughout the country as part of our ongoing "TradeRoots" program to educate business people and workers about the benefits of open trade. We have found extremely broad support for the agreements both in the Congress and in the business community.
As part of this "TradeRoots" effort, the Chamber has published two "Faces of Trade" books to highlight small businesses in the United States that are already benefiting from trade with Chile and Singapore — and that stand to benefit even more from free trade with these two markets. I invite you to review these success stories and see the face of American trade today. It isn't just about multinationals, which can usually find a way to access foreign markets, even where tariffs are high. It's about hundreds of thousands of small companies that are accessing international markets — and that are meeting their payroll, generating jobs, and growing the American economy.
We've generated a wealth of information about the potential benefits of these agreements and our efforts to make them a reality. In the interest of brevity, I would simply urge you to contact the Chamber if you need more information. A good place to start is our website: www.uschamber.com .
Conclusion
Trade expansion is an essential ingredient in any recipe for economic success in the 21st century. If U.S. companies, workers, and consumers are to thrive amidst rising competition, new trade agreements such as these two will be critical. In the end, U.S. business is quite capable of competing and winning against anyone in the world when markets are open and the playing field is level. All we are asking for is the chance to get in the game.
Mr. Chairman, we appreciate your leadership in reviving the U.S. international trade agenda, and we ask you to move expeditiously to bring these agreements to a vote in the Congress.
Thank you.