The State of World Trade: How a Bold Trade Agenda Can Spur the Michigan Economy, Create Jobs, and Enhance America’s Competitiveness, Remarks by Thomas J. Donohue President and CEO, U.S. Chamber of Commerce
The Great Lakes Bay Regional Chamber Summit
Thank you very much Scott Holman, and good afternoon ladies and gentlemen. Scott has been a powerful voice for business in Michigan and throughout the nation for many years. We are proud to count him among our members and we’re grateful for his dedicated service on the U.S. Chamber’s board.
I’d like to thank the leaders of the Midland, Saginaw County, and Bay Area Chambers for inviting me to join you at today’s summit. It is a pleasure to once again be in your beautiful state.
It wasn’t long ago that the Michigan Chamber hosted me in East Lansing, where I laid out the U.S. Chamber’s vision for trade … a vision for rebuilding America’s economy and revitalizing hard hit communities through global commerce.
In a few minutes, I’m going to give you an update on our trade agenda—and the great potential it still holds to spur growth and create jobs right here and across our country. But let me first say a few words about the good, cooperative work being done by the chambers of the Great Lakes Bay region.
You’re smart to pool your resources, coordinate your efforts, and expand your influence. Together, you’re driving economic development and making this region an attractive place to do business. You understand that one of the best ways to get more customers is to bring them to you. You’ve positioned the Great Lakes Bay as a premier destination. As a result, business travelers and tourists are flocking to your communities from great distances. It’s no surprise that the Great Lakes Bay area is on the leading edge of Michigan’s economic recovery.
But none of us—not Midland, Saginaw, or Bay City, not Michigan, not America—none of us are out of the woods in this economy.
At its best, our recovery has been sluggish—with growth nowhere near the pace needed to curb the unemployment crisis that has kept thousands of people in this state and millions of Americans barely scraping by. And we recently saw fresh signs of slowdown with first quarter growth dipping to 2.2%. The unemployment rate has ticked down to 8.1%. But that isn’t a reflection of Americans finding work—it’s a reflection of Americans leaving the workforce.
In addition to a weak recovery, the business community is facing a number of other major developments that could help or hurt the economy or create greater uncertainty:
… the Supreme Court ruling on Obamacare … a Wisconsin recall race that could embolden labor unions nationwide … budget fights and a possible government shutdown … the most consequential presidential election in a generation … a Lame Duck Congress heading into 2013…and a new year that could bring a historic tax hike and forced budget cuts.
All these things, directly or indirectly, will impact your businesses, our economy, and American jobs.
In the face of these daunting challenges, some might throw up their hands in despair. Not me, and not the Chamber. This is a time to step up, not step away. This is a time to shape the future, and not be shaped by it. It’s a time to lead.
That’s why the Chamber has put forward a positive plan to spur economic growth and job creation in a hurry—without adding to the deficit or costing taxpayers a dime.
What I’m about tell you isn’t rocket science. It’s just common sense. It’s what we know needs to be done. But we’ve got to put the pressure on to get it done, to overcome opponents of business, and to break the gridlock in Washington.
We need to sharply increase domestic production of energy. If we do it, we can create more than a million new American jobs, inject revenue into government coffers and private capital into local communities, and strengthen national security.
We need to put Americans to work rebuilding our crumbling infrastructure. We should do it now while the labor is available, the materials are cheap, and the need is great.
We need to enact regulatory and legal reform. Let’s stop the onslaught of new rules and ridiculous lawsuits that are breeding uncertainty and burdening companies nationwide.
We’ve got to encourage innovation, modernize our antiquated tax code, and foster a 21st century workforce—this is vital to keeping America competitive in the global marketplace.
We need to end the deficit spending binge and reform entitlements.
I’m happy to discuss these and any other issues during our discussion period, but today I’d like to focus on one of the most important parts of our plan—advancing a bold trade agenda.
Trade as an Economic Driver
Let me start with a quote:
“America cannot have a growing economy or lift the wages and incomes of our citizens unless we continue to reach beyond our borders and sell products, agricultural goods, and services to the 95% of the world’s population that lives outside the United States.”
Who said it? I’ll give you a hint—it wasn’t the U.S. Trade Representative, the president, or a member of Congress.
It was a small businesswoman who owns a manufacturing plant here in Michigan. Less than 15 years ago her family-owned manufacturing business recognized the potential of global markets, and they shipped their first load of hydro-seeding mulch to the United Kingdom.
Today, the company’s products are sold in markets in 40 different countries. This Michigan businesswoman better understands the reality about the global economy than many of the so-called smart people in Washington!
She understands that trade is no longer an optional luxury—it’s an economic imperative. Fifty years ago it might have been “nice to do”—the United States was calling most of the shots in the global economy.
Today, economic leaders are popping up across the globe. China, India, Brazil—just to name a few. They are projecting commercial and political influence in their spheres. They are negotiating deals left and right and we’re sitting on the sidelines. Around the world, 100 separate trade agreements are under negotiation. And we’re only involved in one of them!
The upshot is if we’re not in the game, we’re not going to be able to sell American goods and services … and we’ll lose the jobs and prosperity that go along with it.
We must be a leader in global commerce.
What will we get in return? Hundreds of thousands of badly needed jobs… More foreign investment, travelers, and talent that will drive growth and put even more Americans back to work... And our rightful place as a global leader on trade.
Michigan already plays a major role in the global economy. With its skilled workforce, natural resources, and leadership in engineering and R&D, Michigan companies are gaining competitive ground in global markets. But there’s plenty of room to grow.
Michigan’s Growing Potential
Two years ago I announced the Chamber’s goal of doubling U.S. exports within five years. We’re on track to meet that goal, and Michigan is leading the way. Last year, your state’s exports topped $50 billion for the first time ever. That’s up by more than 50% over just the past two years.
Just look at the auto sector, where about a fifth of U.S. production is exported. Improvements in quality, more competitive labor costs and exchange rates, and new free trade pacts have combined to make the U.S. a more attractive place to manufacture cars. General Motors, for example, exported more than 275,000 vehicles last year. The U.S. auto industry plans to dramatically expand exports in the next five years.
But you don’t have to be a GM-sized operation to be an exporter. More than a quarter-million small and medium-sized companies already export—and they account for nearly one-third of all U.S. sales abroad. We’ve seen major advances in global logistics, internet communications, and worldwide shipping services like Fed Ex and UPS. As a result, there are fewer and fewer barriers standing between smaller companies and international trade.
Many of you here today are already in the game. Scores of companies based in Midland, Saginaw, and the Bay Area are exporting to growing markets. Others of you may still be considering to what extent a local company can be a global operator.
Last week the Chamber hosted Steve Van Andel, chairman of Amway, for our CEO Leadership Series. Steve is a family friend and a strong Chamber partner, and I think Amway is a wonderful example of a local business that happens to operate on a global scale.
You may know the story—the corporation we now know as Amway started when a couple of young entrepreneurs began selling cleaning products out of their Michigan basements. In the beginning, their business was primarily regional. But with a forward-looking business plan and an eye on global markets, they grew Amway into the $10 billion enterprise it is today.
Now Amway products are sold in 80 markets and territories all over the world, and 90% of their business is done outside the U.S. But a significant portion of their manufacturing is done locally. And much of the company’s tremendous success—largely resulting from global commerce—is invested right back into the community where it all started.
The opportunities should be virtually limitless for companies with ambition to grow through trade and international investment. But for that to be possible, Washington is going to have to inject more ambition in our trade agenda.
When we ask Chamber members where to focus U.S. trade policy, we always get the same answer: Wherever the money is. That means we should focus on big, growing markets. It’s no surprise Asia is at the top of the list.
Two billion Asians have joined the middle class in the last 20 years, and they love American goods and services. That’s why U.S. trade with East Asia reached nearly $1 trillion last year.
There’s more growth in the pipeline. It’s projected that global GDP will expand by $22 trillion over the next five years, and nearly half of that will be in Asia.
But Michigan’s exports to Asian markets are low relative to exports to our nearby neighbors in the Americas. There is a lot of untapped potential.
One way to tap that potential is to pass the Trans-Pacific Partnership.
In the TPP, the United States is negotiating with eight of the most dynamic economies around the Pacific Rim. We need an ambitious TPP agreement with high standards that will create jobs, spur growth, and raise living standards … and that will strengthen our nation’s commercial, strategic, and geopolitical ties across the region.
The Chamber is also pushing for Canada to be admitted to the negotiations. Canada is already Michigan’s top single destination for exports—which is evident by the fact that more international trade flows through the Detroit-Windsor border crossing than anywhere else in North America. With Canada in the TPP, Michigan products would have a smooth entry point to Pacific markets because our neighbor to the north is already completely integrated in the U.S. supply chain.
The TPP is our focus in the Pacific. But what about across the Atlantic?
The European Union is by far America’s largest commercial partner and—in the size of its economy—our only true peer.
The Chamber has been exploring proposals to harness the transatlantic economic relationship to generate the jobs and growth needed on both sides of the pond. Simply eliminating tariffs would boost U.S.-EU trade by more than $120 billion within five years. It would also generate GDP gains of $180 billion—a major boost to the U.S. and European economies that would be budget-neutral. Michigan alone exports nearly $5 billion annually to the EU. Think of the growth potential for your businesses if we tear down more barriers to trade.
So last year the Chamber called for a Transatlantic Economic and Trade Pact to eliminate tariffs, ensure compatible regulatory regimes, and address investment, services, and procurement.
Next week, President Obama will be meeting with European leaders at Camp David. In conjunction with the European business community, we’ve been urging our leaders to announce plans to negotiate such an agreement.
It’s worth looking at what our neighbors are doing with Europe. The EU has a free trade agreement with Mexico and is negotiating one with Canada. Why on earth would we want to see the United States left behind?
For the sake of jobs and growth, it’s time to fully leverage our partnership with the EU.
New Partners for FTAs
The United States also needs to quickly follow up on the completion of our recent free trade agreements with Colombia, South Korea, and Panama by negotiating new deals with additional partners. Brazil, Egypt, India, and Indonesia are all examples of countries with bright economic prospects and rising geopolitical importance. Many Chamber members believe those nations would make outstanding FTA partners.
However, in each case a great deal of work would need to be undertaken before negotiations could begin. To do any of these things, Congress must renew Trade Promotion Authority. The executive branch needs to be able to negotiate trade agreements that won’t be picked apart by Congress. Instead, they must be subject to an up or down vote. That’s the only way our trading partners will seriously negotiate with the United States.
Investment, Travel, and Tourism
And let’s not forget the benefits of international investment—and it goes both ways. Foreign investment in the U.S. sustains 5 million jobs, including 135,000 in Michigan. On the other side of the equation, U.S. investment abroad is often the only way we can tap overseas markets.
Negotiating more bilateral investment treaties will keep capital and jobs flowing through our economy.
Next, let’s stop overlooking the extraordinary benefits of expanding tourism and business travel to the United States.
Your Chambers have done a great job attracting regional and Midwest visitors to your new convention center. With all the amenities the Great Lakes Bay area has to offer—and with all of the global commerce local businesses are driving—it has the potential to draw worldwide visitors.
We need to better promote America as a premier travel destination and put out the welcome mat for foreign visitors. Because when tourists spend money here, it’s counted as an export. So let’s make visiting and investing in the United States more convenient and desirable, without compromising security.
Ex-Im Bank and Russia PNTR
Congress also needs to reauthorize the Export-Import Bank, which is set to expire this month. For small businesses that may be hesitant to export because of capital limitations, the Ex-Im Bank can be an important resource. It helps provide export financing for U.S. companies in foreign markets where commercial financing is hard to come by. And, it’s a good taxpayer investment. Over the past six years, it has pumped more than $4 billion into the Treasury.
When other countries are providing their own exporters with an estimated $1 trillion in export finance, failure to reauthorize Ex-Im would amount to unilateral disarmament and cost tens of thousands of American jobs.
Finally, Congress must grant Russia Permanent Normal Trade Relations. To join the World Trade Organization, Russia had to commit to further open its market, protect intellectual property, and safeguard foreign investors. American workers, farmers, and companies won’t get the full benefits of these reforms unless Congress acts.
We must create global opportunities for trade so businesses can create local opportunities for American workers.
The heartland may be geographically far from what people consider the jumping off point for global commerce. But the industries, businesses, and workers in the heartland are very central to a competitive trade agenda. That is why I wanted to speak to you about what I believe is our best chance for revitalizing our economy and putting America back to work.
Keep doing what you’re doing regionally. Continue the good and important work of making a difference in your communities and local economies.
But think globally—there’s a world of opportunity out there. Seize it.
Some fear it, and others are excited by it. Let’s be the ones who get excited. Let’s be the ones who put the world’s buying power to work in our communities and for our own enduring prosperity.
I’d like to thank you again for inviting me to speak with you. I look forward to our continued partnership.