The State of World Trade, Remarks

Remarks by
THOMAS J. DONOHUE
President and CEO, US Chamber of Commerce

National Press Club
Washington, D.C.
May 14, 2010

As Prepared for Delivery

Introduction

Thank you very much and good afternoon everyone.

The greatest priority for our country today is creating jobs.

The unemployment rate is 9.9%. It soars beyond 17% when you count those who have stopped looking for work and the underemployed.

We have lost roughly 8 million jobs in the last two years. By the U.S. Chamber's estimate, we will need to create 20 million jobs in the next decade to replace those lost during the recession and to keep up with a growing population.

Although we have created about 145,000 jobs per month on average this year, it is not near enough.

Under these circumstances, World Trade Month is the perfect time to point out that expanding American exports makes more sense than ever.

Unlike past recoveries, we cannot simply rely on domestic consumption. American consumers are tapped out and the U.S. government is maxed out.

So if domestic demand is weak and the government's ability to stimulate the economy minimized, who will buy our products and services? Where will demand come from?

The answer—the rest of the world. Ninety-five percent of the world's consumers, 87% of its economic growth, and 73% of its purchasing power resides outside U.S. borders.

Last September, the Chamber set a national goal of doubling U.S. exports in the next five years, and then doubling them again.

If we succeed, this would put us well along the path of creating those 20 million jobs.

We were pleased President Obama echoed that goal in his State of the Union address.

So, what is standing in the way of our achieving that shared goal? Look abroad—and right here in Washington—for the answer.

Countries all over the world continue to raise protectionist barriers to tilt the playing field to their advantage, favor domestic industries, and keep markets closed.

Here at home, U.S. trade policy seems stuck in a state of suspended animation. There's been a lot of good talk—but precious little action.

So what does this all mean as we attempt to assess the state of world trade today?

On the one hand, there is plenty of trade and cross-border investment going on. After a sharp decline during the financial crisis, global commerce is now recovering.

Yet that's only part of the picture. The rest of the picture is not so attractive.

In fact, if I had to describe the state of world trade today, I would do it in two words: missed opportunities. Missed opportunities to create new jobs, lift millions out of poverty, raise the global standard of living, and bring peoples and nations closer together.

The good news is we have the capacity to recapture those opportunities and unleash a new wave of growth, progress, and prosperity here at home and across the globe.

International Obstacles

We must begin with the reality that global markets are not as open to American products and services as we are to theirs.

The playing field is not level. In fact, since the financial crisis, the playing field has become even more unlevel.

We're aware that the WTO has found that new protectionist measures enacted since the financial crisis began cover just 1% of world merchandise trade.

But it has done little to gauge the impact of "behind the border" measures that countries around the world are deploying at an alarming rate.

At the forefront of our concern is the resurgence of state-owned enterprises, which are then bestowed with preferential treatment that puts foreign enterprises at a disadvantage.

China, for instance, is using industrial policies and an array of regulatory tools to foster national champions and promote the transfer of technology and innovative capacity to its country. A case in point is China's so-called "indigenous innovation" strategy.

I'll be going to China next week to meet with leaders in Beijing and Shanghai to address the growing concerns of our members on issues ranging from innovation, procurement, IP, and currency.

Looking beyond China … India, Brazil, Korea, and other emerging and developed markets also need to play by the same rules that we play by. They should take steps to further open their markets.

India, for example, needs to open its market to services, retail, insurance, and express delivery services.

Japan Post—a government-owned enterprise that provides insurance, banking, and express delivery services—enjoys unfair regulatory advantages over its private competitors, both domestic and foreign.

Nearly 90% of the world's proven oil reserves are in countries where exploration and production are dominated by state monopolies.

And how did Brazil respond to its large new offshore oil find? By laying plans for a new state-owned company to control it.

In the antitrust arena, some nations are manipulating their policies to protect domestic producers and keep competitors out.

There is also an ongoing assault against intellectual property around the world.

In addition to criminal enterprises, IP is also under threat by some governments that promote the view that IP rights are an obstacle, rather than a catalyst, to economic development and growth.

The United States must continue to work with like-minded nations to raise standards for the protection of IP by concluding a robust and comprehensive Anti-Counterfeiting Trade Agreement this year.

Obstacles at Home

This array of obstacles facing American exporters and investors abroad raises a critical question: How should we respond?

Let me begin to answer that by first stating how we must not respond. We must not respond by closing our own markets. There's just too much at stake.

Even with all the obstacles, the United States is still the world's largest exporter of goods and services.

One in four factory jobs depends on exports, and one in three acres is planted for hungry consumers abroad.

More than five million American jobs are supported by foreign direct investment.

An example of one way not to respond was the Buy American provisions in the 2009 Recovery Act. These provisions delayed shovel-ready infrastructure projects as local governments sought legal advice on how to comply.

Because other countries retaliate with "buy national" policies of their own, such measures are much more likely to destroy jobs than create them.

American workers are also paying a high price for the U.S. failure to open our highways to safe Mexican trucks.

Mexico has imposed $2.4 billion worth of retaliatory tariffs on U.S. manufactured and agricultural products.

By our estimates, these actions have cost the United States approximately 25,000 jobs.

There are other policies and proposals here in our own country that throw sand in the gears of commerce and sap U.S. competitiveness.

We already have an uncompetitive corporate tax system. Yet every day, we hear about some new punitive tax proposal that would put key industries at a disadvantage globally—banks, insurers, energy companies, and firms that defer income tax on profits earned abroad … pick your target!

Furthermore, our immigration and visa policies are plainly broken—a complex and emotional subject that requires a whole other speech.

Then there are the suggestions we should lash out at the wrongs of others with high tariffs or quotas.

But I fail to see how punishing our own consumers will help families or create new jobs. These measures would do nothing to expand our own sales abroad.

The Path Forward—Free Trade Agreements

We need a smarter, bolder, and more comprehensive approach—one that opens markets and expands trade and investment, not one that closes markets and cedes the global marketplace to our competitors.

It all starts with our need for a robust trade expansion agenda built on ratifying and negotiating trade and investment agreements across the globe.

Regrettably, we do not have such an agenda today. The reason why is as clear as it is indefensible.

Organized labor spent in excess of $400 million in the last election to help elect the current administration and congressional majority.

And for reasons that defy logic or common sense, they vehemently oppose the very policies that could create millions of new jobs for American workers.

As so, as the rest of the world races to complete new deals, America is being locked out and left behind.

According to the WTO, there are 262 free trade agreements in force around the globe today, but the United States has just 11 FTAs covering 17 countries.

America is party to only one of more than 100 negotiations of bilateral and regional trade agreements.

We are also far behind in the race to enact bilateral investment treaties. Guess what? The unions don't likes those either.

It is especially inexcusable for Congress and the administration to be sitting on three excellent FTAs—with Colombia, Panama, and South Korea.

Six months ago, the U.S. Chamber released a study which warned that the United States could suffer a net loss of more than 380,000 jobs and $40 billion in lost export sales if it failed to implement the Colombia and South Korea agreements while the EU and Canada went ahead with theirs.

Unfortunately, this scenario is already unfolding. The EU will sign its FTA with Colombia next Wednesday. The EU concluded negotiations for an FTA with South Korea last November.

Canada's parliament is poised to give final approval to an FTA with Colombia as early as next month, and Canada and Panama are signing an FTA today.

Let's be very clear what this will mean. It will mean that the EU and Canada will be able to sell their products in those markets at a better price. That means we will lose market share and jobs. It's a simple as A-B-C.

But that's not all. The South Korea pact has the potential to be a model for other agreements across the Asia-Pacific … a region that now accounts for half of the global economy. We're talking about the future here!

And then there's President Uribe and the people of Colombia … good friends and critical regional allies who have courageously—and at great cost—stood up to the drug lords in order to reclaim their country.

And the United States gives them the back of the hand? It's unconscionable.

Now, if facts matter at all, I hope those who oppose these market-opening, job-creating agreements will listen closely to the result of a new study we commissioned and are releasing today.

We looked at our FTAs implemented over the past 25 years covering 14 countries.

Here's what we found: the FTAs created 5.4 million American jobs.

The overall trade relationship with those 14 countries supports a grand total of 17.7 million American jobs.

I defy anyone in town to name another budget-neutral government initiative that has generated anything like this number of jobs.

And what about the trade deficit? Trade skeptics always cite the trade deficit as a reason not to negotiate FTAs.

But taken as a group, the United States is now running a trade surplus in manufactured goods with our FTA partner countries.

And that's on top of our global trade surpluses in services and agricultural products.

Let me underscore a critical point—if we don't act, not only will we miss out on opportunities to create new jobs, we will lose existing jobs as well.

How can Congress, the administration, and the unions sit by and allow this to happen?

The Path Forward—Other Vital Steps

Bilateral trade and investment agreements are critical, but we must take other vital steps as well.

We must not give up on Doha, no matter how many obituaries are written. A global pact covering goods, agriculture, and services is essential to the goal of opening markets and leveling the playing field for the United States.

Regional pacts also hold promise— especially a Trans Pacific Partnership agreement and other arrangements designed to expand our presence in the world's fastest growing region.

Of course, we need to enforce our existing trade and investment agreements. They aren't worth the paper they're written on if we don't act to enforce them.

We must work with allies around the globe to combat economic nationalism. We must also resist economic isolationism at home.

Failure to comply with our own principles or obligations under trade agreements endangers American jobs and undercuts our efforts to open markets abroad.

We need to modernize the U.S. export control system. And on this point I want to give the administration credit. We know they are reviewing this matter and crafting a proposal. We like what we are hearing and hope to see progress very soon.

We need to do a better job promoting exports. More than 280,000 U.S. small and medium-sized companies export, and they account for nearly a third of U.S. merchandise exports.

Even so, 99 out of every 100 U.S. small companies don't export—and we need to change that.

Finally, we need to get our own house in order to compete globally. Fiscal discipline is critical. Runaway entitlement spending may be the biggest challenge—domestic or international—that our country faces.

In addition, poor K-12 education systems, inadequate infrastructure, and high U.S. corporate tax rates all erode the global competitiveness of U.S. companies.

The Chamber is working to forge positive solutions to these challenges.
Conclusion—A Call for Leadership

Let me end where I began—assessing the state of world trade.

There's a lot of trade going on around the world, all the time. It's growing again and it's going to keep growing.

Policymakers at home and abroad can act to accelerate this growth or stand in its way. Standing in the way means fewer jobs, less prosperity, and missed opportunities.

The global business community could be doing a lot more to create jobs, lift people out of poverty, raise living standards, and foster greater understanding and stability among nations, if only our government and political leaders would let us.

Leaders from Beijing to Brussels to New Delhi to Washington must rise above parochial views and narrow political interests.

They must foster a positive, dynamic environment in which capital, goods, services, and people—with all appropriate ground rules and safeguards—can flow freely across the globe.

Leaders in the business community and the labor movement have responsibilities as well.

Businesses must refrain from running to government to seek unfair competitive advantages in the global marketplace.

Union leaders must accept the reality that their members' livelihoods rely on the growth of world trade. They can no longer be allowed to dictate our global trade and commercial policies.

Those of us who believe in free enterprise and free trade have a responsibility, too. We must do a far better job explaining the benefits of opening markets while not glossing over the disruptions that afflict some workers and communities.

Make no mistake about it—the ceaseless change that characterizes today's global economy will eliminate some jobs and hurt some communities. We must devise and support effective programs to help them.

But that's no excuse to turn our back on the promise of trade expansion and all the new jobs and opportunities we can prove it will create.

Friends and allies abroad are starting to wonder and worry and ask, "Where is the United States when it comes to a bold, ambitious, and visionary trade policy?"

We understand the political pressures facing the administration and Congressional leaders. But understanding it doesn't mean we should accept it. Jobs are at stake. America's competitiveness is at stake. Our role and image in the world are at stake.

Waiting until after the next election is neither plausible nor defensible—because there will always be another next election.

It is no secret that the business community and our current national leaders differ on some issues.

But I am here to say that bold, positive action to move the nation's trade agenda forward would receive the enthusiastic support and praise from Chamber and the American business community.

Not only would we support and praise it, we would work our hearts out on the Hill and across the country to move that agenda forward.

The world economy is not what it was 50, 20, or even 10 years ago. It's time to embrace the future.

We've got the best products, services, and innovations made by the best workers and companies in the world. We've also got more and tougher competition facing us than ever before.

We've been sitting on the sidelines too long. It's time to get back into the game.

Thank you very much.

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