Trade and Transportation: Michigan's Road to Prosperity, Remarks

Remarks by
Thomas J. Donohue
President and CEO, U.S. Chamber of Commerce

Lansing, Michigan
March 20, 2008

As Prepared for Delivery

Introduction

Thank you very much, and good afternoon ladies and gentlemen.

Let me begin by recognizing our partners today: the Lansing Regional Chamber of Commerce, the International Business Center, and the Michigan Chamber of Commerce.

I'd especially like to recognize our host, Bill Sepic, president and CEO of the Lansing Regional Chamber. Bill has been a strong partner of the U.S. Chamber for many years. He also serves on our Transportation and Logistics Committee. We appreciate his leadership on some of the issues I'll be discussing today.

And finally, I'd like to thank our local sponsors, Chase Bank and the law firm of Foster, Swift, Collins & Smith.

I was in Michigan last fall to visit GM's headquarters. Some of its executives were kind enough to pick me up at the airport. They came in a hybrid SUV, which gets about 50% better gas mileage in the city than GM's nonhybrid models.

Once at headquarters, I was briefed on a dazzling array of new GM technologies to increase fuel efficiency, improve the environment, and create better, safer, and smarter cars and trucks. We talked about fuel cell technologies that use hydrogen to generate electricity, with the only byproduct being water. GM told me about electric vehicles that can make a 40-mile commute without using a single drop of gasoline.

I learned how GM was using flexfuels like Ethanol-85 that can be made from switchgrass; about clean diesel technologies; how innovative engine designs were saving energy; and about other alternatives to the internal combustion engine.

Although these are difficult times for the Big Three, GM was confident, forward looking, and excited about the future. It was clear that the company was making smart investments; hiring the best engineers, scientists, and designers; and planning for success. GM is responding to the realities of today's market and is seeking to use those realities to its advantage.

It was during that briefing that I got a glimpse of the what the future of Michigan's economy could be-high tech, science-based, innovative, growing, and globally engaged. And although times have been tough for Michigan's economy, there is an achievable vision for a brighter economic future for this state.

Today, I'd like to discuss two of the building blocks in that road to prosperity.

Trade

The first may surprise you-trade. Yes, trade!

I'd like to mention a few interesting facts about trade … facts we all need to hear and repeat over and over. In 2006, Michigan was the sixth-largest exporter of U.S. goods, with exports accounting for more than 10% of the gross state product. Michigan exported more than $40 billion in manufactured goods that same year.

How does that translate into jobs? In 2005, exports supported 220,000 manufacturing jobs in Michigan. That same year, more than 200,000 Michigan workers were employed by foreign companies.

Who is exporting these products? Of course, large companies like GM are selling a lot of cars and trucks overseas. But, in fact, the vast majority of Michigan's exporting companies-88%-have fewer than 500 employees.

Gov. Granholm has acknowledged the beneficial impact of trade in Michigan, noting that international companies have invested $1.7 billion in the state in the last three years.

Trade plays an equally important role nationally. Let's not forget that 95% of the world's population lives outside the United States. Trade is equivalent to about one-third of our entire economy and supports at least 12 million good-paying American jobs.

Trade and the worldwide economy have helped bolster the balance sheets of American households by delivering higher incomes, lowering interest rates, and increasing investment opportunities. They have delivered lower prices, more choices, and higher worker compensation.

With such overwhelming evidence in favor of trade, how could so many Americans' beliefs about trade be so disconnected from reality?

Some presidential candidates are calling for a time-out on trade. Some are even talking about reopening agreements already on the books, such as the North American Free Trade Agreement. In a recent Fortune magazine poll, a majority of Americans said that free trade was a bad deal for our workers and our country. TV talking heads like Lou Dobbs are fanning the flames of isolationism every single day.

They couldn't be more wrong.

The U.S. Chamber is setting the record straight. Our TradeRoots initiative-the nation's only sustained trade education program-is working in conjunction with our International Division, our communicators, our lobbyists, and our policy folks to build an understanding of the benefits of trade.

How are we doing that? First, we're making the case for fair trade. That's right, fair trade. You see, the status quo is often very unfair to American workers and farmers. We have one of the most open markets in the world, yet when we ship our products and services overseas, they are subject to high taxes known as tariffs.

But in a world where the terms of trade are unfair, trade agreements aren't the problem-they're the solution. FTAs are the crowbar we can use to pry open those markets and eliminate those tariffs. That will allow us to export even more products and create more good-paying jobs.

Let me give you an example. There is a debate raging in Washington about approval of a trade agreement with Colombia. It's hard to understand what the fuss is about when you look at what the agreement would accomplish.

Nearly everything we import from Colombia enters our market duty free, but U.S. exports to Colombia face tariffs that average 14% for manufactured goods and far higher for agricultural products. That's not fair!

The agreement would help eliminate these disparities. It would sweep away Colombia's tariffs, most of them immediately. That would mean a level playing field for American workers, farmers, consumers, and companies by opening the growing Colombian market to our exports.

Second, we're getting the facts out about trade. The Chamber's TradeRoots program has held hundreds of meetings across the country, bringing together stakeholders to discuss the importance of trade to local communities. We're making the case on Capitol Hill for free and fair trade agreements that benefit workers, consumers, and American companies.
And in many cases our companies are starting the education process with their own employees. Heavy equipment manufacturer Caterpillar is a good example. Much of its booming business depends on exports. In fact, the company has hired more than 13,000 workers since 2006, due in large part to growing sales in China.

However, Caterpillar discovered that even its own workers didn't understand how exports benefited them. So they started painting messages on equipment parts-"This tractor is bound for X country"-as they moved through the production process. Workers quickly grasped that the assembly line might grind to a halt if the company wasn't selling a lot of its products overseas.

Third, we're acknowledging that while most workers and consumers benefit from trade, we need to recognize another fact: Some workers are dislocated. They deserve our support. They deserve new opportunities. They deserve better education and retraining programs so that they can succeed in a 21st century economy.

That's why the Chamber strongly supports reauthorization of the Trade Adjustment Assistance program. It will help ensure that America's workers have access to the education and job training tools they need to return to work quickly.

It's also why we've launched a major education initiative to ensure that our students are equipped from day one with the skills they need to succeed in our high-tech, rapidly changing economy.

Finally, we're asking everyone to consider the alternative to trade. Suppose we shut off our markets and built a wall around our country. Suppose we say that we won't trade with the rest of the world. Then what would happen? Prices would go up for American families. They'd be denied more choices in the marketplace. Other nations would retaliate, closing off their markets, which would destroy American jobs. The millions of Americans employed by either U.S. exporters or by foreign companies operating in the United States would be headed for the unemployment line.

If you want a major recession, shutting down trade would be the fastest route.

Free trade is fair trade.

Infrastructure

There's something else that would be a godsend to Michigan-a modern, refurbished infrastructure system. And not just roads and bridges, but everything from power plants to broadband to dams.

The state relies on well-maintained infrastructure to conduct cross-border trade, power its homes and businesses, educate its children, and conduct physical and electronic commerce.

But by nearly every measure, Michigan's infrastructure is deteriorating, as is the entire country's. Thirty-eight percent of Michigan's major urban roads are in poor or mediocre condition. Twenty-nine percent of its bridges are structurally deficient or functionally obsolete. Travel on Michigan's highways has gone way up, while capacity has barely increased. Meanwhile, funding is falling.

There are 25 state-determined deficient dams in Michigan.

Demand for energy is predicted to increase significantly in coming years. Yet no new power plants have been built here in two decades, and the current generating facilities average 48 years old.

As of 2006, Michigan's broadband penetration was below the national average. The state's drinking water and waste water infrastructure need tens of billions of dollars in funding over the next 20 years. The Detroit metropolitan area loses 96 million gallons of drinking water per day due to leaking pipes.

The list goes on.

What are the real-world consequences of this failing infrastructure for Michigan? For one, it could tremendously hamper your ability to conduct cross-border trade-a tremendous economic bright spot for the state-especially with Canada and Mexico.

Michigan led all states in surface trade with Canada in 2007 and was third with Mexico. Michigan is home to more than 40 commercial ports, but the facilities are showing severe signs of age.

Poorly maintained roads and bridges are sapping productivity, polluting the environment, and costing lives. Driving on crumbling roads and bridges costs the average Michigan motorist almost $300 a year in vehicle repairs. Those stuck in congestion are needlessly spewing pollutants into the air.

Across the nation, poorly maintained roads contribute to a third of all highway fatalities. For Michigan, that means unsafe roads lead to almost 450 deaths a year. That's a tragedy.

Lack of investment and modernization of power facilities threaten Michigan's future, as does the relatively low rate of broadband penetration. These infrastructure failings are not limited to Michigan-the entire nation faces similar challenges, and they must be addressed.

What must the nation do to meet the enormous and urgent challenges I have outlined?

We need to start by fostering an honest national dialogue on how and where we are going to find the public money to meet critical infrastructure needs. And, how we spend it. Let's address the latter point first.

To regain the trust of the American people and build the case for increased funding, we need to make certain that public dollars are spent wisely. Taxpayers are rightfully outraged at how much of the money they pay in user fees for roads, the aviation system, and other transportation systems are diverted to noninfrastructure projects-projects like childhood obesity programs, "bridges to nowhere," or a rain forest museum in Iowa.

Politicians should be penalized when they skim money from dedicated transportation funds to pay for projects of their own choosing. It breaks trust with the taxpayers. Both the federal and state governments are guilty of this practice.

If Congress insists on earmarking infrastructure funds, it should at least require that the earmarks go to core infrastructure needs, not unrelated pet projects.

Congress must also work with the states to ensure that infrastructure funding goes to the highest priority projects yielding the greatest economic and safety benefits to the entire nation. There is no mechanism in place to do this now.

Deciding which projects to fund should be based on actual needs and not on politics or ideologies-for example, more road construction in some communities, more investment in public transportation in others.

Yet even if we spent every single dime of infrastructure funding for its intended purposes, we still wouldn't have enough to bring our current system up to par, much less expand it. So where will the money come from?

First, we should start by unleashing and unlocking the potentially hundreds of billions of dollars in private investment just waiting to be spent on critically needed projects like power plants, transmission lines, port facilities, railroads, public transportation systems, airports, and privately constructed roadways.

The money is there-ready, willing, and able-if government and regulators would just get out of the way. No one objects to timely environmental reviews, and we all support strong health and safety protections. But the red tape, lawsuits, and mind-numbing regulations we have imposed on our infrastructure systems and transportation modes defy common sense.

Second, we can stretch public dollars by tapping the growing interest in public-private partnerships and other innovative financing arrangements. Some critics have attacked such projects when they involve foreign companies. My question to the critics is this: What are those companies going to do-roll up the turnpike and take it home?

Yet even with these approaches, there is no question that as a nation, we are going to have to find and invest more public dollars in our infrastructure. Therefore, along with other options, we are going to have to consider an increase in the federal gasoline user fee.

This could take the form of a straightforward increase in a fee that hasn't been raised in 14 years, or it may be in the form of a carbon tax designed to address global warming-as long as the proceeds are dedicated to transportation.

I know you may think it's a crazy time to even suggest this with gasoline approaching-and in some communities passing-$4 per gallon. But I'm not running for office, so I actually get to tell you the truth. And the truth is that sooner or later, we're going to have to face up to the resources question-if we want a superior and safe infrastructure and a competitive American economy.

Rallying the American people behind a commonsense, affordable, and practical program for infrastructure improvement starts with us, the business community. The Chamber recently launched an effort called Let's Rebuild America. We are putting money, people, research, programs, and strong political action around a sustained, long-term campaign to rebuild the economic platform of our nation.

We are appealing to every American who is sick of pollution, tired of congestion, fed up with rising costs, and concerned about his or her safety. We are documenting in a factual and comprehensive way the totality of America's infrastructure needs-not just what is required to patch things up, but what we must do to move our country and economy forward in a competitive world.

We are educating the public, the business community, policymakers, and government at all levels about the benefits of investing in infrastructure and the cost of failure.

We are helping lead the fight to remove impediments to private sector investment, to increase public investment in infrastructure, and to ensure that the money is spent wisely and efficiently.

This meeting marks the first in a series of meetings nationwide in which we'll engage local business leaders and begin boosting our grassroots support. And while we're working to generate noise in the states, we'll also be lobbying inside the Beltway to urge Congress to make this issue a priority.
The bottom line is this: The people of our country must know, and be reminded again and again, that we can create good American jobs right here at home, clean the air, succeed in a global economy, preserve a good quality of life, and save innocent lives by investing in our infrastructure.

Conclusion

No one will argue that these are tough economic times for Michigan-indeed, for the entire nation.

I have spent the last year traveling the country speaking about the major competitive challenges facing our country … a changing worldwide economy, infrastructure, health care, education, energy, capital markets …

We know the issues that we must confront as a nation. The question is: Do Americans still have the strength, the will, the desire, and imagination to tackle these tough issues?

Will we choose to listen to the defeatists and the doom-and-gloom crowd and seek to protect what we already have and fear the future?

Or will we embrace tomorrow with the same sense of determination, hard work, optimism, and creativity that helped build the greatest country on Earth?

Trade and infrastructure can be twin engines that help fuel a tremendous recovery in this state and the nation and position them for great success in the 21st century economy.

I'm bullish on Michigan and America. I believe that if we work hard to educate Americans about the facts on trade and infrastructure, we will make the right decisions … we will make the right investments … and we will create a better nation for our children and grandchildren.

And that hard work begins today … right here, right now. I hope you'll join us in this important cause.

Thank you very much.