World Trade Day Dinner - remarks by U.S. Chamber of Commerce President and CEO Thomas J. Donhue, Denver, Colorado

On: World Trade
To: World Trade Day Dinner
From: Thomas J. Donhue
Date: May 18, 2004

Denver, CO
May 18, 2004

INTRODUCTION/NAFTA

Thank you, Jim (Reis). It's a pleasure to be in Colorado, my home away from home.

Between Qwest board meetings, visits to see one of my three sons and his family in Boulder, and quick getaways to another son's vacation home in Beaver Creek, I'd say I spend more time here than anywhere but Washington, D.C.

The heat and humidity in Washington is rising, and the billions of cicadas [SA-KAY-DUHS] that come up from the earth on the east coast every 17 years have emerged, so I can tell you that I'm especially thankful to be here at this particular time.

I was pleased to learn that the 24th annual World Trade Day conference would focus on the ten-year impact of NAFTA on Colorado and the Rocky Mountain Region.

NAFTA was a bellwether free trade agreement for the U.S.—unlike any that we've successfully negotiated before or since. Its success speaks for itself.

In the ten years since NAFTA was implemented, three-way trade among the U.S., Canada, and Mexico has doubled to more than $600 billion annually, creating significant new opportunities for businesses, workers, and consumers in all three countries.

Canada, Colorado's top export destination, has put distance between itself and the rest of the world as the largest U.S. trading partner, surpassing even the European Union, which has a population and GDP roughly ten times that of Canada!

And since NAFTA, Mexico has become the second largest foreign market for U.S. goods and services, surpassing Japan.

Critics of NAFTA argue that it has caused the loss of tens of thousands of U.S. manufacturing jobs, which have migrated south for cheaper labor.

I tell you with confidence that those jobs didn't go to Mexico, or to China, or any other place you've ever heard of. Instead they've gone to a country you've never heard of—a country called "productivity."

U.S. productivity over the past three years has grown at a pace at least double that of the 1970s, 1980s, and 1990s.

Did you know that in 1980, it took 454,000 General Motors workers to build 5 million cars? Today, it takes 118,000.

We produce more using fewer workers. That kind of productivity and efficiency should be celebrated, not criticized.

Those who have written manufacturing's obituary fail to recognize that this sector is fundamentally strong and growing stronger.

In an eight-year period ending in 2001, manufacturing output increased by a third, and its annual average growth rate during the first eight years of NAFTA was 50% greater than in the eight years before the agreement took effect.

It's all about jobs, some people say? Well, manufacturing has added new jobs in each of the past three months, including 21,000 in April. So anyway you look at it, manufacturing continues to be a vibrant and vital sector of our economy—even more since NAFTA was implemented.

NAFTA has been good for trade, growth, and jobs, but perhaps just as important, it offers valuable lessons and a clear roadmap for how the U.S. should engage the global economy now and into the future.

Its most basic lesson is simple: U.S. businesses and workers can compete and win in the global economy if they're given the opportunity as well as a level playing field on which to compete.

With that in mind, I'd like to talk about some of the key issues facing U.S. global competitiveness and how the Chamber is affecting the debate on those issues.

One debate that is taking place in Colorado and just about in every state, on the campaign trail, and in Washington is the issue of global sourcing, and whether or not U.S. companies should be punished for sending some jobs overseas.

Nobody knows for sure how many U.S. service jobs have gone overseas. The government doesn't keep those statistics, and private sector estimates are all over the map.

But a fair estimate might be about 250,000 jobs moved overseas in the past two years. That's a drop in the bucket when compared to the 138 million Americans on U.S. company payrolls—the most in history, by the way.

And it's a small percentage of the 2 million U.S. telemarketing jobs that were lost when the Federal Communications Commission implemented its Do Not Call List! So before the government reacts to U.S. jobs going overseas, it ought to take a look at its own actions.

It's not easy for workers who have been displaced by global sourcing and trade, but leading economists from both Democratic and Republican administrations agree that sourcing some work overseas allows companies to strengthen their bottom lines, reduce consumer prices, focus on more profitable operations, and create new and better jobs here at home.

I recently returned from a trip to India, where some U.S. service jobs are going. I saw firsthand highly-educated, well-trained young Indian workers manning call centers and performing office tasks for clients all over the world, including some U.S. clients.

I noticed that virtually all the equipment they use is American-made. In fact, everywhere you look, you can see a major U.S. presence in India in terms of our products, services, expertise and technologies.

For U.S. companies to gain that kind of foothold in a country with the world's largest middle class means plentiful opportunities for our workers and our economy.

Placing restrictions on the ability of U.S. companies to source in India or anywhere else around the globe would trigger retaliation from our trading partners and shut us off from valuable export markets, costing Americans far more jobs than such protective measures would ever save.

Let me give you a sense of what's at stake:

Foreigners ship more office work to our country than we send abroad. In 2003, the U.S. enjoyed a nearly $60 billion surplus in services trade, which means foreign-owned companies hire far more accountants, financial services people, lawyers, sales and marketing folks, and other white collar workers right here in the U.S. than we hire in other countries.

Foreign companies have invested $487 billion in the U.S., directly creating 6.4 million jobs and indirectly creating tens of millions of additional jobs.

Take, for example, Toyota. It has about 30,000 employees on its U.S. payroll, but if you count all of the dealers, suppliers, and distributors who get business from Toyota, it actually supports hundreds of thousands more.

Isolationism is not an option in today's global economy. 95% of the people we want to sell a product or service to live somewhere else, so we have to go to where they are.

The Chamber is leading the fight against those who want to erect walls around the U.S. instead of tearing them down.

We've distributed a booklet that makes the case for global sourcing to every member of Congress, the media, top administration officials, governors, the entire Chamber federation, and global business leaders. It's been well received and widely quoted around the country, and even the world.

There's no doubt we're having an impact on this debate. At last count, there were more than 160 anti-sourcing proposals introduced in 38 state legislatures and we've defeated virtually all serious proposals, although several relatively minor legislative measures or governor's executive orders have passed.

There's a movement afoot right here in Colorado to put on the November ballot an initiative that would prevent companies that use foreign workers from doing business with the state.

I urge all of you to work to prevent this initiative from succeeding because it would put Colorado on the road to isolationism when in fact this state has such great potential to grow as a thriving center of international commerce.

Meanwhile, back in Washington, we're engaging in a similar battle. Last week in Congress, the Chamber helped defeat several anti-sourcing amendments to the Senate corporate tax bill, which is designed to replace U.S. export subsidies that were found to be in violation of World Trade Organization rules.

But playing defense on this issue is not good enough. We must communicate a strong plan of action to the American people who are concerned about jobs, trade, and worldwide sourcing.

First, we must remove domestic impediments to job creation. We have to bring under control frivolous class action lawsuits that drain more than $233 billion from our economy every year.

The Senate can take a major step forward by passing class action reform when it comes up on the floor during the first week in June.

We must ensure that our businesses have access to reliable and affordable energy supplies, particularly natural gas, whose rising prices have already forced some chemical manufacturing plants and others out of the country.

And we must upgrade our energy infrastructure, especially our electricity grid, so that energy delivered to our homes, businesses and factories is not disrupted.

Reforming an antiquated tax system that puts American companies at a global disadvantage, upgrading a transportation system that is overburdened and in disrepair, getting a handle on health care costs, and cutting down on the number of unnecessary regulations are all priorities that would better enable U.S. businesses to grow and create jobs in the U.S.

They won't keep every single job from going overseas, but they sure would help keep and create a lot.

Second, we need to improve the skills and education of our workers so that they are equipped to perform the jobs of the future.

We have to especially make math and science more attractive to our young people because these subjects are the foundation of the technology jobs that will drive our economy in the decades to come.

The lack of interest in math and science is clearly reflected in our nation's performance in those subjects.

U.S. eighth graders rank 19th in the world in math, behind top competitors such as Singapore, South Korea, Taiwan, Hong Kong, and Japan.

Meanwhile, our competitors are moving fast to improve the skill levels of their workers. In 2002, 60,000 engineers graduated from U.S. colleges, but China and India graduated five times that many. More than a quarter of Ph.D. graduates in science and engineering in the U.S. are foreign born.

So we've got to make headway in education and training.

Third, we need to push our trading partners to live up to their trade commitments and to further open their economies to U.S. goods and services.

One country that we need to continually encourage and stroke is China, which has 1.3 billion consumers.

No organization has been more persistent than the Chamber in addressing Chinese policies and business practices that are unfair to American manufacturing and services companies.

We're making significant progress, I might add.

China recently agreed to beef up protections of intellectual property rights, postponed indefinitely technical standards on wireless computers, and took steps to further open their insurance and express delivery sectors.

These developments are evidence that dialogue and engagement works—and that sanctions or protectionist remedies designed to punish labor or human rights violations create rifts that damage job growth.

We're also seeing greater cooperation from India. Aside from its attractive workforce, India has tremendous export market potential for U.S. companies.

During my trip there last month, we agreed to work with the Confederation of Indian Industries on a 12-month project to bring together U.S. and Indian small and medium sized companies to expand trade and commerce.

We also announced with the Federation of Indian Chambers of Commerce and Industry a joint effort to fight counterfeiting and intellectual property theft, which by some accounts is robbing the global economy of half a trillion dollars a year.

So we must continue to lean on those countries that, despite their pledges to engage in free and fair trade, are not moving along as quickly as they should be.

Finally, to create more opportunity and wealth in the U.S., we must push forward with bilateral, regional, and multilateral free trade agreements.

The Administration has shown tremendous leadership in this area.

Last year, we sealed deals with Singapore and Chile, and Congress this year will likely approve a free trade agreement with Australia, which U.S Trade Representative Bob Zoellick signed today.

Currently, the Chamber is making a big push for the Central America Free Trade Agreement. The countries covered by this agreement—if you include the Dominican Republic, which is joining the negotiations—would become our second largest export market in Latin America, trailing only Mexico.

Politics will likely prevent a vote on CAFTA before the elections, but we're confident that Congress will pass it right afterwards.

CAFTA can help pave the way to other important western hemisphere trade deals. U.S. negotiations with Panama and the Andean countries are expected to conclude by early next year.

And, of course, we continue to pursue a Free Trade Area of the Americas agreement, which would include all 32 democratic nations in our hemisphere.

Ladies and gentlemen, it's no secret that the global economy is growing more competitive by the day. You know, because you're a part of it.

This shouldn't surprise us. For decades, the U.S. encouraged countries to open their economies, invest in infrastructure and their workforce, and participate in the global economy.

Well guess what? They listened. And now countries that we barely even knew existed are competing with us.

Our choice is clear. We can either listen to the defeatists and erect isolationist walls, or we can engage the world, roll up our sleeves, and compete.

We've been here before. In the '70s and '80s, so-called economic experts warned that the U.S. was being overtaken by Japan and Germany. It never happened.

Today, some say India and China will overtake us. They haven't, and they won't.

Throughout our history, American business has responded to global competition by inventing, innovating, or developing the next great thing.

And I know we will do it again and again.

Thank you very much.