Priorities for U.S.-Korea Relations and the G-20: The Business Perspective
THOMAS J. DONOHUE
President and CEO, U.S. Chamber of Commerce
November 10, 2010
As Prepared for Delivery
Thank you very much, David (Ruch) and good morning everyone.
I’d like to thank David, Amy, and the entire team at AmCham Korea for organizing this event and for your strong leadership in one of the most important, dynamic markets for American business.
I’m also honored that Chairman Sohn of the Korean Chamber of Commerce and Industries has joined us. In fact, the Korean business community, led by his Chamber and the Federation of Korean Industries, has been an indispensable partner in building support for the Korea-U.S. Free Trade Agreement.
The U.S.-Korea Business Council has also been a key player in this cause. Chairman Bill Rhodes is here and it’s always good to see you, Bill.
Congressman Pete Roskam is co-chair of the working group on the Hill dedicated to passing this historic agreement. Thank you, sir, for your efforts and for being here today.
This is my second trip to Korea in as many years. It comes at a critical time.
The United States has just completed an historic election with potentially significant consequences for the U.S. trade agenda, for our economy, and for our engagement in Asia …
We are on the eve of an important G-20 meeting that will seek to avert a global currency war and reach some consensus on fiscal, trade, and financial regulatory policies…
Later this week, APEC members will discuss important trade issues, including the breadth and ambition of the Trans-Pacific Partnership …
And tomorrow, we hope that Presidents Lee and Obama will announce major progress towards a goal we have all worked long to achieve—the completion and enactment of KORUS, the Korea-U.S. Free Trade Agreement. We need to do this right now!
Let me begin with the elections. The American people spoke loud and clear on November 2nd. Their message: Focus on jobs and economic growth. They rejected increased government spending, higher taxes, burdensome regulations, and what many saw as a government takeover of health care.
And they sent this message by voting for the largest shift in the number of Congressional seats since 1938.
As for the Chamber, our goal all along was to restore some balance in the House and Senate—so that both parties would have to sit down and negotiate genuine solutions to our nation’s challenges.
To achieve that goal, the Chamber waged the most ambitious, aggressive, and expensive voter education campaign in our history.
And we got a lot of heat for it! But we took that heat and we were successful. And now, we’re looking forward—not backwards. We’re ready to roll up our sleeves and go to work, whenever possible, with the President and his administration, with both parties in Congress, and with our trading partners across the globe.
What do the election results mean for business and for the U.S. trade agenda? They have created a moment of great opportunity and we must seize it before it passes us by.
President Obama’s reflections last week were encouraging. He said he understood the essential role that businesses have to play in restoring economic growth and creating jobs.
He said he needed to do a better job reaching out to the business community, and acknowledged that too often, business has been made to feel like the enemy.
Even more encouraging is the significant trip the President is taking right now—to India, Indonesia, Korea, and Japan.
One of his first stops was to speak to the Chamber’s affiliate, the U.S.-India Business Council, in Mumbai. He announced important export control reforms, which we strongly support.
And after an election campaign where a lot of candidates were unfairly attacked for supporting trade and foreign investment, the President is now saying again that expanding trade and commerce abroad is a recipe for creating American jobs at home.
This change in the tone is welcome and encouraging. Yes, we’ve heard these words before—words that weren’t always backed up by action. And yes, the unions are still out there as a formidable political force against trade and global engagement.
Yet as I said, we now have an opportunity to move the trade and jobs agenda of the United States forward in a vigorous way—and to reaffirm America’s role and leadership in Asia.
The place to start is to enact the Korea-U.S. Free Trade Agreement. Isn’t it about time we got the job done?
In June, President Obama and President Lee pledged to address pending concerns by the time of this G-20 meeting. This was the first time President Obama put his credibility on the line on any trade issue.
Taken along with last week’s election, we have a new lineup for trade in Washington:
- a President who has committed himself to the agreement;
- Senate leaders, such as Mitch McConnell and Max Baucus, who say they want it; and
- Republican leaders in the House who say they want to pass it.
I have a message today for the White House and Congressional leaders: You move the deal forward, and the Chamber will pull out all the stops to get the votes.
I also have a message for our friends in Korea: This is the moment when progress must be made. This is the moment when U.S. concerns need to be addressed.
With Korea shining on the world stage this week with the G-20…with our two Presidents putting their leadership on the line, the moment and opportunity to act will not get any better than this.
The American business community is poised and ready to move a finished deal through Congress. If a deal is not finished in a timely way, then I’d be very concerned that the administration, the new Congress and business might just move on to other priorities.
The American people have made it clear that their top priority is jobs—and this agreement is all about jobs. Jobs we will gain if we pass it, and, jobs we will lose if we don’t.
The administration has said the pact would support American 70,000 jobs—just in the trade of goods alone. We know there would be many, many more jobs—when you consider services, finance, logistics, and the momentum that a successful agreement would bring to U.S. companies throughout the region.
But the price of continued inaction would be just as steep.
As you know, Korea and the EU last month signed a similar FTA, which is on course to be implemented by mid-2011. According to a Chamber study, failure by the United States to enact this agreement would cost 340,000 American jobs and $35 billion in exports.
So it’s critical that tomorrow’s meeting between Presidents Lee and Obama concludes with an announcement of major progress.
The areas of difference now under discussion have been narrowed to a defined set of issues. Failure is not an option. We have to get it done or everyone loses.
I can assure you that the U.S. Chamber of Commerce will not rest until KORUS is signed. We will spare no effort to get the job done.
We are also strongly committed to the passage of our two other pending trade deals with Colombia and Panama—and we urge the administration and Congress to finish all three agreements in rapid succession.
Colombia and Panama are also important allies of ours in a region that faces many challenges. They’ve put a lot on the line for the United States, and continued delay on these agreements would be indefensible and inexcusable.
Trade Priorities in Asia
Enacting KORUS would have important and positive ramifications extending well beyond the interests of our two countries. It would put America back in the game here in Asia.
This can’t happen too soon. The U.S. share of Asia’s international trade has actually declined by 9% since 1990 as Asian nations have negotiated trading agreements among themselves.
The number of FTAs in Asia has exploded. There are over 175 agreements in force, 20 awaiting implementation, and 50 under negotiation. By contrast, the United States has entered into exactly two FTAs with Asian countries—Singapore and Australia.
Many U.S. manufacturers and farmers are being displaced by local competitors or firms based in the EU or Australia, which are forging deals across the region.
And as Asian production chains have expanded to meet booming regional demand, U.S. suppliers of intermediate goods are being left behind.
APEC and the TPP
So in addition to passing KORUS, the United States must seize another tremendous opportunity to boost our competitiveness in the region—and that is to successfully negotiate the Trans-Pacific Partnership—the TPP.
APEC leaders have long articulated the goal of creating a Free Trade Area of the Asia Pacific. TPP would mark a major step towards achieving that bold objective.
With the United States and 8 other countries taking part in the negotiations, the TPP has the potential to become a cutting-edge free trade agreement which other APEC countries may join over time.
Some are expressing interest in joining the negotiations now, which we welcome. But our first goal is to achieve a comprehensive agreement—one that covers all sectors, including agriculture, with no exceptions for any party.
And the talks must stay on track. In fact, we’re urging our own officials to press the current TPP partners to complete negotiations by the November 2011 APEC summit in Hawaii.
Now, with the G-20 summit about to get underway, let me conclude with a few comments about some of the challenges the leaders have on their plate.
Addressing global imbalances, dealing with currency issues, and further strengthening the global financial system will be top agenda items.
As leaders try to erect a new global financial infrastructure, they must be very careful not over-regulate capital markets to such a degree that businesses can’t grow and create jobs.
We already made that mistake in the United States with the Dodd-Frank bill, which the Chamber is now working to fix. That one bill contains over 300 new regulatory mandates, over 200 suggested rulemakings, and calls for more than 170 studies and reports.
Of course, the Chamber and the business community support measures to fix obvious flaws and gaps in regulatory systems. And in an interdependent global economy, regulators must talk to each other across national boundaries.
While we don’t need or want an all-powerful global regulator, there must be a significant degree of compatibility and convergence in national regulations—and especially in accounting standards.
But as G-20 leaders focus on how better to manage the global economy, they must also focus on how to better grow the global economy.
Some proposals on the table for discussion here could actually move us away from that essential goal.
While the United States was a strong supporter of the greater capital requirements in Basel III, the G-20 must take more time to understand its potential impacts. Uneven implementation could hurt credit markets.
We are also concerned that the G-20 deadlines on global accounting convergence will lead to hastily completed standards that won’t improve financial reporting, but will instead create unintended consequences.
The G-20 will consider recommendations on designating and dealing with so-called systemically important financial institutions.
The challenge is that special designation of an array of institutions as “too big to fail” will create moral hazard, which we must avoid.
And then there are some ideas that should simply be rejected—such as the imposition of a financial transaction tax or a bank tax, which will only drive capital and business away from those countries that impose these taxes.
While we are prepared to work with regulators to bring more transparency into the commodity and derivatives markets, the G-20 should reject any requirement for end users of derivatives to post margin.
That would result in a significant reduction in cash put to use to grow our economies and create jobs.
Global Imbalances, Currency, and Doha
Addressing global imbalances will also be a topic of great interest at the meeting. The Chamber supports a multilateral effort to address global imbalances. We commend Secretary Geithner for starting this necessary discussion.
It’s commonly recognized that some countries, such as the United States, have consumed and imported too much while saving and exporting too little.
Others, such as China, have done the opposite.
The United States is responding: Our savings rates have risen significantly and households are paying down their debts. The U.S. trade deficit is half the size it was three years ago.
Voters last week told the government in no uncertain terms—stop the overspending and start cutting the deficit. A bipartisan commission will soon present its deficit reduction ideas. And, as we have discussed this morning, there are new opportunities to expand U.S. exports and with them, jobs and economic growth.
But the United States can’t resolve these imbalances alone. China’s currency and other trade practices have contributed to the U.S. trade deficit, and we need to focus on it.
As part of a successful effort to rebalance the global economy, China should adopt a market-driven exchange rate as soon as possible and allow the RMB to appreciate in line with market forces.
Doing so is in China’s own interest as well as other nations of the G20.
The currency legislation now under consideration in the Congress cannot compel China to alter its currency practices. But Beijing needs to understand that there’s a high level of frustration in the United States—and the new political makeup of Congress will not spare China from heightened scrutiny.
The United States and China are not the only nations that need to step up to the plate here—but as the two largest economies in the world, we must demonstrate our commitment, action, and leadership.
And finally, the G-20 must seize the opportunity to expand trade, growth, and jobs by breathing new life into the Doha Round.
At the Chamber, we’re not writing any premature obituaries on Doha. In fact, we’ve got some ideas on how to resuscitate the patient.
We’re pushing the idea that the United States and the EU should negotiate an agreement to eliminate all tariffs on goods traded across the Atlantic.
Some worry that taking this step would undercut Doha. We think it would do just the opposite—by jolting the more recalcitrant players into action.
Let me end by underscoring the importance of the U.S.-Korea relationship.
Today our nations have a strong relationship based on mutual ideals—our commitment to democracy and freedom … to a peaceful and prosperous Asia … to open trade and commerce … and to our mutual defense and security.
The relationship between the U.S. Chamber and AmCham Korea is likewise strong and getting stronger. A close working relationship between our organizations is essential given the range of complex policy challenges here and in Washington.
Tomorrow I am hopeful we will hear a positive announcement on the Korea-U.S. FTA. It would mark a new beginning for the U.S. trade agenda and for America’s leadership and competitive position in Asia.
And, it would set forth something very real and very positive for the administration and the business community to work on together.
Most important, completing an agreement of this size and significance will put us on the road to doubling U.S. exports in five years and creating millions of new American jobs. No task before us today is more important.
I want to thank everyone here who has worked so hard to bring us to this point. We are getting close—let’s get the job done!
Thank you again for being so warm in your welcome and for giving me this opportunity to share my views with you. I deeply appreciate it.
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