An Agenda to Help Americans Compete and Win In the Worldwide Economy Remarks

Zions Bank International Trade & Business Conference

Remarks for
THOMAS J. DONOHUE
President and CEO, U.S. Chamber of Commerce

Salt Lake City, Utah
May 20, 2009

As Prepared for Delivery

Introduction

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

Scott, thank you for the opportunity to address one of the nation's most prestigious platforms on world trade and global engagement.

I'd also like to recognize my friend Lew Cramer of the World Trade Center Utah and Lane Beattie and his staff from the Salt Lake City Chamber of Commerce.

Seventy-six years ago, President Franklin D. Roosevelt proclaimed the first World Trade Week. A public statement underscoring the importance of trade could not have come at a better time. A wave of protectionism and isolationism had swept the country. Four years earlier, elected officials had passed the Smoot-Hawley Act, dramatically raising tariffs on imported goods.

This proved to be precisely the wrong medicine in the face of a severe recession. In fact, historians tell us that protectionist measures helped turn that recession into the Great Depression.

Today we face a similar situation-an economy on the ropes, protectionist sentiment rising, and a choice before us … to renew our commitment to global engagement and trade or to retreat into isolationism and economic decline.

To us, the choice is obvious. To many Americans, it's a tougher call. Just as they did 76 years ago, some are quick to blame trade for our economic woes. They are quick to point at others as scapegoats for our problems. They believe protectionism does what its name implies-it protects. History has proven them wrong.

As we celebrate World Trade Week 2009, we have no greater calling than to spread the gospel of the benefits of trade and engagement.

I can't think of a better story to tell than what's happening here in Utah. You have made world trade a lynchpin of your economy. Utah is the sixth-biggest exporter in the region. In fact, the state exported goods and services valued at $10.2 billion in 2008, a 38% increase from the previous year-and a remarkable accomplishment in this economy.

By the way, let me pause to congratulate Governor Huntsman's appointment as ambassador to China. The U.S.-China relationship might be the single most important relationship in the 21st century. It will be in good hands.

The story of trade and engagement at the national level is equally compelling. Trade sustains millions of American jobs. Approximately 57 million American workers are employed by firms that benefit from exports. We don't always notice the fact that millions of jobs depend on exports, but we certainly would if those jobs disappeared.

Last year, the United States was once again the world's largest exporter, with nearly $2 trillion in exports. For most of the past decade, trade has been a significant economic stimulus, at times generating nearly all U.S. economic growth. Recently, our economy would have deteriorated more quickly and more deeply had it not been for trade.

The bottom line is that our future prosperity depends on our efforts to sell products and services to the 95% of the world's population that lives outside the United States.

And what about our future? What steps must we take to ensure that America remains committed to engagement in the global marketplace, which creates goods jobs and lifts up American families?

That's what I'd like to discuss today. But first, I have been asked to briefly describe the Chamber's views on where the economy is headed and how we are engaging the new administration.

The Economy and the New Environment in Washington

In terms of the economy, we think it may have hit bottom. We are guardedly optimistic that after bouncing along the bottom for a while, we'll see a return to growth by the end of this year.

In terms of banks, we are still struggling to get our arms around the value of toxic assets. We still don't know the total amount of losses that banks and financial institutions will have to write down after all is said and done. If the stress test results are accurate and the major banks need to raise less than $100 billion in additional capital, we're in pretty decent shape.

The test of health for banks isn't how much money they can sit on- it's when will they start lending again. So far, the credit markets are still largely frozen, although we see some signs of thawing on the margin.

In addition, consumers seem to be opening up their wallets a bit more. Retail sales have been up and down in recent months. Discount stores have been doing very well. But the toll taken on consumer confidence from declining 401(k)s and home values has prompted a "shift to thrift." Don't forget consumer spending is three-fourths of the economy.

We think the housing market has also reached bottom, but faces a long, hard slog. We anticipate a very slow, but steady, recovery during the next two years.

In terms of the political environment, we have an ambitious, popular president and a new Congress. The Chamber is looking for ways to work with the president. We want him to succeed.

We share his goal of revitalizing the economy. We supported the flawed but necessary stimulus bill. We supported TARP and aid to key industries.
We like many of his education policies, including more charter schools, merit pay for teachers, and higher standards and accountability. We hope he delivers.

There are, and will be, many areas where we don't support his policies. And our opposition will be principled, polite, and firm. Our chief concern with the administration is the degree to which it would expand and involve government in the private sector.

We supported extraordinary measures by the president, Congress, and the Federal Reserve to prevent a systemic collapse of the financial system. Once our system is stabilized, the government should get out just as quickly as it got in. We need to be planning an exit strategy now, or we run the risk of our markets and key industries becoming permanently reliant on government. That would not be good for the economy.

The administration's proposal to create a government-run health care option to compete with private insurers is deeply disturbing. The government option would drive private providers out of business, making health care almost completely government run. That would not be good for the economy or for health care.

The administration's cap-and-trade program would essentially give government control of the nation's vital energy sector. That would not be good for the economy—and it won't solve the global challenge of climate change.

And the massive tax increases and huge deficits proposed by this administration in its budget—well, those would not be good for the economy either.

I could give a separate speech on each of these topics. But today the focus is on trade and engagement. However, I would be happy to discuss any of these issues during the question and answer session.

One area where we have been encouraged is trade. It's interesting that our new president has quickly become a defender of the value of trade. It wasn't so long ago that he was singing a different tune. On the campaign trail a year ago, he treated NAFTA as a punching bag.

With the campaign behind him and the economy worsening, the president has seen the light about how trade can grow the economy and create jobs. So instead of renegotiating NAFTA, the president is standing by it. Instead of consigning three previously negotiated free trade agreements with Panama, Colombia, and South Korea to oblivion, he is looking for ways to advance them in Congress. Instead of appointing a U.S. Trade Representative beholden to the unions and other anti-trade interests, he appointed a free trader, Ron Kirk.

In fact, the president's new-found support for trade-combined with his personal popularity-appears to have led more Americans to support trade. These are all welcome developments.

Advancing World Trade and Global Engagement

So, what do we need to do to advance trade and global engagement? There are many things we can do—from global regulatory cooperation to any number of trade facilitation measures. Today, I'd like to focus on just four.

First, we must counter the rising tide of protectionism and isolationism. In these tough economic times, protectionism comes in many forms—from domestic stimulus packages to in-country barriers to plain old tariffs.

I should add that the United States is not always blameless. For example, Buy American provisions are not helpful. Recently, the Chamber was able to soften such mandates to ensure that they did not violate our international trade agreements. Unfortunately, the Buy American language that remained in the bill is still causing trade friction—particularly with our largest trading partner, Canada.

One of the best defenses to rising protectionism is education. For many years, the U.S. Chamber has had the only sustained national trade education program in the country. It is called TradeRoots, and it is dedicated to raising grassroots support and public awareness about the importance of international trade to local communities.

When making an argument, it's always helpful to have the facts on your side—and we do. One of the best arguments we can make is that free trade agreements help level the playing field for American companies. Many Americans think they do just the opposite—they favor our competitors.

The fact is that the U.S. market is largely open to imports from around the world, but other countries continue to levy steep tariffs on U.S. exports while erecting other kinds of barriers to U.S. goods and services. No one wants to go into a basketball game down by a dozen points from the tip-off—but that's exactly what American exporters do every day.

What eliminates those barriers? Free trade agreements. That's why we need more of them, not less.

Americans would be more supportive of trade if they knew that those adversely impacted by it wouldn't be left out in the cold. Trade benefits the vast majority of American workers, but workers who lose their jobs through no fault of their own deserve the chance to be retrained for a new economic environment.

That's why we were pleased to see that the economic stimulus package included legislation to expand and modernize Trade Adjustment Assistance, known as TAA. Yet more can be done.

Congress and the administration should consider integrating TAA's training programs into the one-stop career centers operated under the Workforce Investment Act. Also, TAA administrators must do a better job making known its benefits.

As a guiding principle, business should be involved from the outset to make TAA's training programs more effective and to ensure that workers' skills are matched to the needs of industry.

Educating the public about the benefits of trade—and reassuring them that workers displaced by it will be given the tools they need to succeed—can go a long way toward building a broad consensus on trade.

Programs that tell the good story of trade and engagement—such as TradeRoots, the World Trade Center Utah, state and local chambers, and conferences such as these—are absolutely invaluable to getting our messages out.

Second, we need to get busy passing pending free trade agreements and revitalizing the Doha Round. The deals with Panama, Colombia, and South Korea are no-brainers. They will bolster important allies, create good American jobs, and confirm that America is not ready to cede its global leadership role in trade.

The Panama agreement will come up for a vote first—and very shortly. Approving it will have the virtue of allowing the new administration to demonstrate its pro-trade credentials. And it will be positive for everyone when the administration sees that it can pass trade agreements and live to tell about it.

Next week I will be traveling to Brazil and Colombia as part of the Chamber's effort to increase global engagement with emerging countries. I will tell Colombian President Uribe that we are doing everything we possibly can to win support for the U.S.-Colombian free trade agreement.

We know that these bilateral deals are great for American businesses and workers. The United States is now running trade surpluses with 9 of the 10 countries with which it has entered into FTAs since 2004. The United States had trade deficits with 6 of these 9 countries just a few years ago.

If we don't negotiate new bilateral deals, we'll be putting America and its workers at a competitive disadvantage. More than 100 bilateral trade negotiations are currently under way among our trading partners—without us. Asia is awash in new trade deals, and the European Union is seeking agreements with South Korea, India, and others. America must do the same or be left on the sidelines.

It would help if the president asked for, and Congress granted, trade promotion authority. Without this authority, no foreign government will engage in serious trade negotiations with the United States, bilaterally or under the umbrella of the World Trade Organization.

As for global deals, the successful conclusion of the Doha Round would represent the single largest stimulus program in the world. But more than any other trade negotiation I can recall, the Doha Round seems a bit cursed. It was launched in a spirit of global goodwill just weeks after 9/11. But every July, the trade ministers seem to gather in Geneva. And every July, the talks break down.

We need to get off the dime. We're losing sight of the big picture. It's time to lift our eyes, raise our ambitions, and strike a deal.

Third, we need to welcome investment from abroad while protecting our investments overseas. Investments by foreign companies in our country have created more than 5.3 million American jobs—including 35,000 right here in Utah. This number does not include the millions of people who work for companies that supply parts and materials to foreign-owned firms.

In 2007, Congress took an important step to ensure that America remains open to foreign investment by passing the Foreign Investment and National Security Act, or FINSA. FINSA reaffirms the U.S. open door policy toward international investment—ensuring the president's authority to block a foreign acquisition of a U.S. company when tangible national security issues are at stake.

While we work to keep America open to foreign investment and the tremendous benefits it brings, we must also protect U.S. investments made overseas. U.S. affiliates generate substantial earnings for American companies. Their sales totaled $4.7 trillion in 2006—a sum more than triple the export earnings of U.S. companies. These earnings provide American companies with a growing pool of capital to help their companies grow, innovate, and create better jobs at home.

To ensure strong protection of U.S. investments overseas, we must promote the rule of law, sanctity of contracts, and respect for property rights. One of the best ways to do this is through the U.S. bilateral investment treaty program. Bilateral investment treaties provide a level playing field for investors by advancing the principle of "national treatment."

The United States has already successfully negotiated treaties with dozens of countries, and we should negotiate more, especially with emerging nations.

Fourth, we must work aggressively to protect intellectual property at home and abroad. Despite its fundamental importance to economic prosperity and human progress, IP is under attack across the world. Criminals have built a $600 billion global criminal enterprise of counterfeiting and piracy. A growing movement of anti-IP activists are promoting the idea that IP rights should not be recognized and that protecting IP impedes progress and hurts the poor.

As the world's innovation leader, the United States already pays a high price for the lax protection of IP rights—$250 billion in theft and 750,000 forfeited American jobs.

The United States must continue to play a leadership role internationally by establishing pro-IP policies at home and by pressing the global community of nations to do the same.

We need the right people in key positions at the White House and at government agencies. We need commitments to IP rights from global organizations such as the WTO.

We should also conclude the ongoing negotiations of the Anti-Counterfeiting and Trade Agreement. Such an agreement would strengthen enforcement, improve legal frameworks, enhance international cooperation, and develop best practices for combating counterfeiting and piracy.

Above all, defenders of IP must educate key audiences around the globe about this vital issue. The Chamber created the Global Intellectual Property Center to lead a worldwide effort against the assault on IP.

Conclusion

I have touched on only a few of the things we must do to ensure that America remains a global leader.

While many today argue that America's best days are behind it … that we can't possibly compete with the likes of China and India, and that we shouldn't even try … and that we have too many problems at home to worry about the rest of the world … I hold a different view.

I believe that America's global leadership is essential to a prosperous and peaceful world. I believe that Americans understand our nation has a special role to play. And I believe that Americans can compete and win on any level playing field in the world.

During the first World Trade Week in 1933, America was mired in a depression and retreating from the world. It was the existential threat of fascism and tyranny that forced America to assume its role as a global leader.

Our country went on to literally rebuild Europe and Japan from the ashes. We became indispensable leaders and the largest trading nation in the world.

It is in our nature to engage, compete, and lead.

And I believe that as long as we adhere to the principles of this great nation, we will continue to do so for generations to come.

America's path to success lies in openness and engagement, not in retreat and isolationism.

Thank you very much.