Apr 21, 2015 - 10:15am

Chamber’s Donohue Tells Congress to Renew TPA: Trade Must Play ‘Central Role’ in Creating Jobs

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U.S. Chamber of Commerce President and CEO Tom Donohue testifies before the Senate Finance Committee on Trade Promotion Authority and trade policy.
U.S. Chamber of Commerce President and CEO Tom Donohue testifies before the Senate Finance Committee on Trade Promotion Authority and trade policy. Photo credit: Joshua Roberts / © U.S. Chamber of Commerce.

On Tuesday, U.S. Chamber President and CEO Tom Donohue testified before the Senate Finance Committee on the need for Trade Promotion Authority renewal and the benefits of the trade agreements that can come from it.

Noting that “Approximately 17.4 million Americans are unemployed, underemployed, or have given up looking for work,” Donohue said, “World trade must play a central role in reaching this job-creation goal. After all, outside our borders are markets that represent 80% of the world’s purchasing power, 92% of its economic growth, and 95% of its consumers.”


Here are some excerpts from his testimony as prepared for delivery.

Leveling the Playing Field

The U.S. market is largely open to imports from around the world, but other countries continue to levy tariffs on U.S. exports that in some cases are quite high, and foreign governments have erected other kinds of barriers against U.S. goods and services.

Americans rightly sense that this status quo is unfair to U.S. workers, farmers, and businesses. U.S. exporters face higher tariffs abroad than nearly all our trade competitors. The United States received a rank of 130th among 138 economies in terms of “tariffs faced” by its exports, according to the World Economic Forum’s Global Enabling Trade Report.

U.S. Benefits from Current Trade Agreements

[Previous] trade agreements boosted U.S. output by more than $300 billion and in turn supports an estimated 5.4 million U.S. jobs….

The United States has a trade surplus with its 20 trade agreement partners as a group. This includes sizeable trade surpluses in manufactured goods, services, and agricultural products.

U.S. manufacturers’ exports to trade agreement partners have topped $650 billion in recent years, generating revenue of about $55,000 for each American factory worker.

U.S. agricultural exports to trade agreement partners increased by more than 130% in the past decade and today exceed $56 billion.

Topping $700 billion last year, U.S. services exports are growing rapidly and support millions of high-wage jobs even though the potential for services industries to engage in international trade is almost untapped.

Trade agreements sweep away trade barriers that are especially tough on the 300,000 small and medium-size companies that account for 98% of all U.S. exporters and one-third of goods exports.

Imports play a critical role in the U.S. economy as well. Companies’ imports of intermediate goods, raw materials, and capital goods account for more than 60% of all U.S. goods imports and help them maintain their global competitiveness.

TPA is “Critical” to New Trade Agreements

TPA is a critical tool to help Americans sell their goods and services to the 95% of the world’s customers living outside our borders. The United States has never entered into a major trade agreement without it….

While foreign governments may initiate negotiations with the United States without TPA in place, they have historically proven leery of making the difficult political choices associated with the final stages of negotiations in its absence. In this sense, TPA strengthens the hand of U.S. negotiators, helping them secure the best possible deal for U.S. workers, farmers and companies.

Without TPA, the United States is relegated to the sidelines as other nations negotiate trade agreements without us—putting American workers, farmers, and companies at a competitive disadvantage. According to the World Trade Organization (WTO), 398 bilateral or regional trade agreements are in force around the globe today, but the United States has agreements in place with just 20 countries. There are more than 100 trade agreements currently under negotiation among our trading partners.

The United States cannot afford to stand on the sidelines as foreign governments rewrite the rules of international trade and American companies are placed at a competitive disadvantage in market after market. If we do, American workers, farmers and companies will pay the price.

The Need for the Trans-Pacific Partnership (TPP)

The booming Asia-Pacific region is a logical focus for America’s trade negotiators. Over the last two decades, the region’s middle class grew by 2 billion people, and its spending power is greater than ever. That number is expected to rise by another 1.2 billion by 2020. According to the International Monetary Fund, the world economy will grow by more than $20 trillion over the next five years, and nearly half of that growth will be in Asia.

U.S. workers, farmers and businesses need access to those lucrative markets if they are to share in this dramatic growth. However, U.S. companies are falling behind in the Asia-Pacific. While U.S. exports to the Asia-Pacific market steadily increased from 2000 to 2010, America’s share of the region’s imports declined by about 43%, according to the think tank Third Way. In fact, excluding China, East Asia in 2014 purchased a smaller share of U.S. exports in 2014 than it did five years earlier, despite a 54% increase in total U.S. merchandise exports in that period.

One reason U.S. companies have lost market share in the Asia-Pacific region is that some countries maintain steep barriers against U.S. exports. A typical Southeast Asian country imposes tariffs that are five times higher than the U.S. average while its duties on agricultural products often soar into the triple digits. In addition, a web of nontariff and regulatory barriers block market access in many countries….

The TPP is America’s best chance to secure a level playing field for trade in the Asia-Pacific region….

Completing the TPP would pay huge dividends for the United States. The agreement would significantly improve U.S. companies’ access to the Asia-Pacific region, which is projected to import nearly $10 trillion worth of goods in 2020. A study by the Peterson Institute for International Economics estimates the trade agreement could boost U.S. exports by $124 billion by 2025.

Transatlantic Trade and Investment Partnership (TTIP)

The United States and the European Union account for nearly half of global economic output, with each producing approximately $17 trillion in GDP. Total U.S.-EU commerce—including trade in goods and services and sales by foreign affiliates—tops $6.5 trillion annually and employs 15 million Americans and Europeans.

The U.S.-EU investment relationship is even more impressive. Companies headquartered in EU Member States had invested nearly $1.7 trillion in the United States by the end of 2013 and directly employ more than 3.5 million Americans. Similarly, U.S. firms have invested $2.4 trillion in the EU—a sum representing more than half of all U.S. investment abroad. It’s also nearly 40 times as much as U.S. companies have invested in China. Because of this unique investment-based relationship, approximately 40% of U.S.-EU trade is intra-industry and intra-firm, which means that removing barriers to this trade will substantially boost the competitiveness of our companies in global markets. The United States and the Member States of the EU share common values as strong democracies with an enduring commitment to civil liberties and the rule of law. We uphold similar social, labor and environmental standards in our laws and regulations. For these reasons and more, the United States and the EU in July 2013 launched the TTIP negotiations. The goal is to eliminate tariffs; open up services, investment and procurement; and promote regulatory cooperation to ensure high

The benefits could be immense. The sheer volume of transatlantic commerce is so large that eliminating today’s relatively modest trade barriers could bring big benefits. According to the London-based Centre for Economic Policy Research (CEPR), the TTIP would boost U.S. exports to the EU by $300 billion annually, add $125 billion to U.S. GDP each year and increase the purchasing power of the typical American family by nearly $900—with similar benefits for Europeans.

Conclusion

The United States cannot afford to sit on the sidelines while others set the rules of world trade. To create the jobs, growth, and prosperity our children need, we need to set the agenda. Otherwise, our workers and businesses will miss out on huge opportunities….

The United States is home to many of the best workers and companies in the world. We create many of the world’s most innovative products. We have also got tougher competition facing us than ever before. But our productivity is high, and our energy costs are going down. The facts show we can compete and win.

Adding to Donohue's testimony, a letter signed by almost 300 business associations was sent to Senators Mitch McConnell (R-Ky.) and Harry Reid (D-Nev.) and Speaker John Boehner (R-Ohio) and Representative Nancy Pelosi (D-Calif.) supporting TPA renewal:

While our market generally is open, U.S. exports face significant barriers abroad. Trade agreements tear down these barriers and create a level playing field. They help firms in this country and the millions of workers they employ compete successfully overseas. America's 20 existing trade agreement partners represent just 10 percent of the global economy, but purchase nearly half of all U.S. exports. 

To expand these benefits, the United States is negotiating new trade agreements with some of the world's largest and fastest growing economies, including with Europe and 11 Asia-Pacific nations. The United States also is pursuing multilateral deals that would reduce barriers to trade in services and environmental goods worldwide. However, to realize the potential of these agreements for U.S. jobs, economic growth and competitiveness, Congress must pass Trade Promotion Authority.

TPA is a longstanding and proven partnership between Congress and the President that enables Congress to set negotiating objectives and requires the executive branch to consult extensively with legislators during negotiations. We urge you to act on this essential legislation as soon as possible this year.

UPDATE: Video clip from Tom Donohue added.

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