A Trade Agenda for American Jobs and Prosperity, Remarks by Tami Overby, Vice President for Asia U.S. Chamber of Commerce

Illinois Chamber of Commerce Annual Meeting
June 17, 2011

*As Prepared for Delivery*

Thank you, Doug (Whitley), for your kind introduction and for inviting me to join you and the members of the Illinois Chamber at your annual meeting today.

I would also like to acknowledge Chair Mary Crego and all the many distinguished members of this audience here today.

It is an honor to have the opportunity to talk with you this afternoon about the U.S. trade agenda and its benefits for the Illinois economy.

The U.S. Chamber really appreciates the network of chambers throughout the country, and the Illinois Chamber is truly one of our most valued partners. We cannot do what we do without their help. So a very special thank you again to all the tremendous leadership and members of the Illinois Chamber.

Also, I understand congratulations are in order for this year’s Edie Award winners: CAMTek, Inc., American NTN Bearing Manufacturing Corporation, and Exelon Generation.

I am delighted to be back in Illinois. Last August, I had the chance to visit Chicago, Peoria, Naperville, and Schaumberg as part of our U.S.-Korea Partnership Tour.

This initiative is a national series of forums that the Chamber’s TradeRoots program and the U.S.-Korea Business Council, of which I also serve as president, launched in March 2010 to build awareness about the importance of trade and investment with Korea to the U.S. economy.

Through this series, we have been working in close partnership with the Chamber’s regional offices, and with chambers of commerce and businesses across the country, to highlight the ways the U.S.-Korea FTA will help create American jobs and contribute to new growth, including here in Illinois.

I would like to give a shout-out to Ben Taylor, the Chamber’s Executive Director for the Great Lakes Region. He does a great job keeping the U.S. Chamber linked into all the activities here.

We have been joined at almost every stop on this tour by Korea’s Ambassador to the United States, Han Duk-soo, who has long been a powerful advocate for actions that strengthen the U.S.-Korea economic relationship.

Our visit to Illinois last August was an incredible opportunity to learn firsthand about the ways that Illinois businesses, workers, and communities are already enjoying the benefits of exports and global trade to support jobs and growth.

We met with a broad range of local government and business leaders—including members of the Illinois congressional delegation, then Chicago Mayor Daley, Peoria Mayor Ardis, Caterpillar CEO Douglas Oberhelman, and many other local officials and executives—to discuss the ways that the Korea trade agreement will support the Illinois economy.

We also met with small and medium-sized Illinois companies that are already successfully exporting their products to Korea—including manufacturers such as Quality Float Works in Schaumberg and Fermilab in Batavia.

The bottom line: Illinois manufacturers, farmers, services providers, and workers are successfully exporting “made in Illinois” goods globally—and creating jobs and growth locally.

The Prairie State is a shining example of the mutual prosperity and growth American workers can achieve by doing even more business with Korea, Colombia, and Panama once these three pending free trade agreements have been approved by Congress—which I will discuss in more detail later on.

Today I wanted to share some perspectives on three topics central to the national discussion on trade.

First, how trade benefits the U.S. and Illinois economies.

Second, the ways that the Obama Administration and the U.S. private sector are working together to achieve their shared goal of doubling U.S. exports in five years.

And third, the status of the pending three trade agreements with Korea, Colombia, and Panama and how these agreements will benefit Illinois businesses and workers.

Benefits of Trade for U.S. and Illinois Economy

When President Obama delivered his State of the Union address in January 2010, the U.S. business community welcomed his call for a national goal to double U.S. exports within five years.

With nearly 10% of the U.S. workforce unemployed, trade expansion represents one the best avenues to stimulate growth and create badly needed jobs.

Trade is essential to U.S. economic recovery. The United States cannot rely on domestic consumption to generate more demand because U.S. consumers are busy deleveraging and trying to save more. Similarly, the federal government faces an unsustainable budget deficit equivalent to roughly 9% of U.S. GDP this year.

So we can’t count on the U.S. to dig us out of this whole.

Moreover, overseas markets represent 73% of the world’s purchasing power, 87% of its economic growth, and 95% of its consumers. Yes, you heard correctly, 95% of the world’s consumers reside outside the U.S.

Most Americans don’t know it, but the United States is the world’s largest exporter of goods and services, with exports that will approach $2 trillion this year.

Trade today plays a major role all across the economy. President Obama has pointed out recently that one in three manufacturing jobs depends on exports, and the United States exported one trillion dollars worth of exports last year.

That’s one reason why the United States remains the world’s largest manufacturer. U.S. factories account for 20% of the world’s manufacturing output, according to the UN Industrial Development Organization — or 40% more than China.

U.S. manufacturers have boosted their output by 81% in 1988-2008, a period marked by unprecedented openness to trade as the Uruguay Round and NAFTA were implemented.

One in three acres of U.S. farmland is planted for export. Agricultural exports broke the $100 billion mark for the first time in 2008 and on track to do so again this year.

Exports of services are also booming, and they reached $500 billion last year. The United States enjoys a trade surplus in services of more than $100 billion.

Exports from Illinois are also increasing rapidly. In 2010, Illinois producers exported $49.8 billion in goods overseas—up from $36 billion in 2005. To more than 12 markets overseas, Illinois exported more than $1 billion in goods each.

In this context, tremendous benefits have followed from our free trade agreements, which cover 17 countries that today purchase more than 40% of U.S. exports. Trade deficits are not the best measure of the success of these agreements, but they are often cited by trade skeptics as a reason why we shouldn’t negotiate trade agreements.

And yet, taken as a group, the U.S. is now running a trade surplus in manufactures, services and farm goods with those 17 FTA partner countries. In fact, imported oil and gas from Canada and Mexico accounts for most of the remaining U.S. trade deficit with these countries, and that’s a result of geology, not trade policy.

Also overlooked in our trade debate is the fact that more than 97% of the quarter million U.S. companies that export are small and medium-sized companies, and they account for nearly a third of U.S. merchandise exports.

By the way, the great state of Illinois exported more than $24b to U.S. FTA partners last year.

National Export Initiative and Doubling Exports

Against that backdrop, what can U.S. and Illinois companies do to export more of their goods and services globally?

Standing in the way of doubling U.S. exports in five years is a complex array of foreign barriers. Those barriers present a major competitive challenge to U.S. industry and agriculture —and the millions of U.S. workers who depend on exports.

From a business perspective, the foremost goal of trade policy should be to tear down those barriers.

Tariffs are just part of the problem, as they are often found alongside a wide variety of non-tariff barriers that effectively shut U.S. goods and services out of foreign markets.

In the view of the U.S. Chamber, eliminating foreign barriers to U.S. exports — and ending the U.S. inaction on the trade agreements that can remove those barriers — should be the principal focus of the U.S. government’s efforts to create jobs through trade.

Export promotion also plays a useful role. This is particularly true in the case of small and medium-sized businesses, which represent the vast majority of members of both the U.S. Chamber and the Illinois Chamber.

There are many seasoned exporters among small businesses here in Illinois and across the country, and the U.S. Chamber has told many of their success stories as part of our “Faces of Trade” series.

These stories celebrate companies with fewer than 500 employees that are exporting “made-in-USA” products to destinations all over the world, and depend on new markets for profit and growth.

If more small businesses were able to seize export opportunities, the gains could be immense.

According to the Council of State Governments, U.S. states have spent over $200 million in state funds for export promotion, educational exchanges, and other international programs. The federal government allocates about $335 million annually to promote the exports of manufactured goods. This, however, is an insufficient amount of funding to promote exports effectively.

To address this need, the U.S. Chamber has supported the Obama Administration’s efforts to increase funding for export promotion under the National Export Initiative.

In a good first step, the National Export Initiative includes commitments to step up the efforts of the U.S. Commercial Service, the U.S. Export-Import Bank, and other agencies to help small businesses tap foreign markets.

A successful National Export Initiative can help bring progress on all these fronts, but in the end, it must be evaluated on whether it succeeds in creating the millions of jobs American workers need.

The assistance offered by the federal government needs to be promoted more effectively. The services, expertise, and dedication of representatives of the U.S. Commercial Service, Export-Import Bank, and Small Business Administration are world class. However, many U.S. companies are not aware of the government services that are available to help them break into new markets.

For this reason, the U.S. Chamber’s TradeRoots initiative puts on programs across the United States highlighting the resources that are available to companies such as U.S. Export Assistance Centers (USEAC), Small Business Loans, and World Trade Centers.

In addition to the National Export Initiative, there is another important area where it is critically important for the Obama Administration and the business community to work together to double exports, and that is through passage of the pending FTAs with Korea, Colombia, and Panama.

It’s important to put these agreements in the broader context of U.S. trade policy and competitiveness globally. The rest of the world is racing to complete new deals, while America is being locked out and left behind.

According to the WTO, there are 297 free trade agreements (FTAs) in force around the globe today. In the Asia-Pacific region alone, the number of FTAs has risen from six to 70 over the past 15 years; 18 more have been completed but not yet implemented, and an additional 70 are under negotiation.

However, 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 and that is the Trans Pacific Partnership or TPP. The TPP is a 21st century regional trade agreement being negotiated among the U.S., Peru, Chile, Vietnam, Malaysia, Singapore, Brunei, Australia and NZ.

In September 2009, 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 signed its FTAs with Colombia and Panama last March, and its FTA with Korea will take effect on July 1. Canada’s parliament has approved an FTA with Colombia that will take effect on August 1.

This means that EU and Canadian exporters will be able to sell their products in those markets at a better price than U.S manufacturers, farmers, and workers—costing U.S. jobs and opportunities.

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.

Last year, the U.S. Chamber commissioned a study that 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.

Can anyone else here name another budget-neutral government initiative that has generated anything like this number of jobs?

Pending FTAs and Benefits to Illinois

I would now like to give you an update on the item that’s at the top of our agenda for doubling U.S. exports—the pending FTAs with Korea, Colombia, and Panama—and how these will benefit the Illinois economy.

Each of these countries are already important trading partners for Illinois businesses and workers.

Korea is currently the 16th largest market for Illinois exports. Last year, this state exported over $787 million worth of goods to Korea’s trillion dollar economy.

Illinois producers exported nearly $307 million to Colombia last year, and nearly $118 million to Panama. These figures do not include exports by Illinois services providers to these three markets.

Bringing the FTAs into effect will only help grow these numbers as tariffs and regulatory barriers to Illinois’ largest exports, such as computer and electronic products, industrial machinery, and food and agricultural products, are eliminated or reduced significantly.

I would note that Korea is also one of the largest markets worldwide for the U.S. services sector, U.S. cross-border exports of services to Korea were more than $12 billion in 2009, while imports were $6 billion, netting a U.S. services-trade surplus of $6 billion.

Illinois is bustling with activity and businesses of all sizes and in all sectors ready to reach the global market. These agreements will open up untapped potential for Illinois businesses, and provide new trade and investment opportunities, investor protections, regulatory transparency, and other benefits.

When we visited Illinois last August, President Obama had just announced his goal of resolving outstanding issues related to the U.S.-Korea FTA by the time of his visit to Seoul in November 2010 for the G-20 summit.

And in fact, in early December, the U.S. and Korean governments successfully reached a solution to address concerns that some U.S. stakeholders had about the auto provisions of the Korea FTA. As a result, not only do the big three U.S. automakers support the agreement, but the United Auto Workers have also endorsed the deal.

Moreover, earlier this spring the Administration announced that—after the U.S.-Korea FTA enters into effect—it would seek consultations with the Korean government to address Korea’s last few remaining restrictions on U.S. beef exports there.

I would point out that, during the first quarter of 2011, Korea was the largest market worldwide for U.S. beef exports. We sold more American beef in Korea during that time than in Canada, Mexico, or Japan. Just imagine what the sales of U.S. beef in Korea will be like when Korea’s 40% tariff is removed under the FTA!

While positive momentum has been building for the Korea trade agreement, important progress has also been made towards bringing forward the pending trade agreements with Colombia and Panama.

On Colombia, President Obama and Colombian President Juan Manuel Santos agreed on April 7 to an Action Plan under which Colombia is undertaking specific labor reforms to address longstanding concerns voiced by U.S. labor unions. The Action Plan enjoys broad support among U.S. Congressional Democrats and Colombian unions, who have hailed it as “the most important agenda for labor in Colombia today.”

The Colombian government pledged to make specific reforms by April 22 and another set by June 15; and I am pleased to inform you they beat both deadlines! The Administration also announced in April that the U.S.-Panama trade agreement is ready to go.

So why hasn’t Congress already voted on these agreements? The Administration has said that it will not send the FTAs to Congress for a vote until a deal on Trade Adjustment Assistance has been reached. TAA is a program design to provide benefits to workers who lose their jobs due to trade.

However, we believe there is ample evidence a deal will be reached very soon. The Chamber and other business groups have consistently called for its approval.

The business community is urging a deal on TAA to be struck by mid-June, which will allow the administration to keep its goal of sending the implementing bills for the three FTAs to the Congress this month.

We need to act now. Further delay will be costly, and we cannot let votes on the pending trade agreements with Korea, Colombia, and Panama slip past August.

And this is an important area where the Illinois Chamber and the U.S. Chamber can work closely together.

Folks, we need your help now.

Everyone in this room can do your part to help make the already strong partnership between Illinois and Korea, Colombia, and Panama even stronger.

Please contact your members of Congress, local officials, and your colleagues and partners in the business community to let them know how important these agreements are for supporting new jobs and opportunities for growth here in Illinois.

We encourage you to write letters, pen op-eds in your local newspapers, and—especially you small and medium-sized businesses here today that export to these markets—get your story out! Please forgive my shameless promotion: www.USKOREAFTA.org for facts and a tool kit.

Conclusion

In closing, for the Illinois and U.S. business communities, the agenda is clear. The United States cannot afford to sit on the sidelines while others design a new architecture for the world economy and world trade.

The path forward should include these steps:

The United States must begin with a laser-like focus on opening foreign markets. This means approving the pending trade accords and negotiating more of them, including the Trans-Pacific Partnership.

Moreover, the United States needs to prioritize enforcement of its existing trade and investment agreements.

Second, we must work with allies around the globe to combat economic nationalism, and the United States must resist economic isolationism at home.

Third, the United States needs to do a better job promoting exports.

Finally, the United States must get its own house in order to compete globally. Fiscal discipline is critical. Education, infrastructure, the threat to end deferral of taxes on foreign earned income, and high U.S. corporate tax rates all erode the global competitiveness of U.S. companies.

If we stand still on trade, we fall behind. At stake are hundreds of thousands of existing jobs and, according to President Obama, millions more that could be created if the United States doubles exports. Also at stake is the standing of the United States as one of the world’s leading powers, its ability to exert positive influence around the world, and its best hopes for escaping high unemployment, massive deficits, and exploding entitlements.

The United States has been sitting on the sidelines for too long. It’s time to get back into the game.

Thank you for your kind attention.