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International Trade Symposium - remarks by Thomas J. Donohue
Luncheon Keynote Address by Thomas J. Donohue.
President & CEO, U.S. Chamber of Commerce
March 29, 2005
Thank you. It's great to be back in Fairfield County. When I was a young man, I worked at Fairfield University. You'd think being around a lot of intelligent academics would have made me smarter, but instead I decided to go into the Washington association world!
I think it's great that Stamford has established a Sister City relationship with Jiangdu. China is to be engaged - not feared or rebuffed - and your city has shown great foresight in forging commercial, cultural, and educational bonds with that country. I'll have more to stay about China a little later.
I'm very pleased to have this opportunity to talk about trade - an issue that is poorly understood by many people. Every day, we read or hear misconceptions about trade and its impact on our communities.
Here's one: expanded free trade depresses wages and results in the loss of American jobs to overseas competitors.
We've also been told that trade creates a race to the bottom in which the lowest-wage countries with the worst working conditions benefit the most.
Or how about this one: trade is only for multinational companies like GE, Ford, or Pitney Bowes. Maybe you've been led to believe that there's no place in the global arena for your small or mid-size business.
I'm here today to tell you the real story of free trade: that it is good and important to our economic future that it creates better jobs and more wealth for U.S. workers and that without more of it, by more U.S. companies, the competitive gap that separates us from the rest of the world could rapidly narrow.
The benefits of foreign trade and investment are so pervasive and so woven into the fabric of our society that they go largely unnoticed and unreported.
Consider a few facts: Thirty-five years ago, trade and returns on international investment represented 13% of the value of the U.S. economy.
Today, they represent 30% of the value of our economy. That's right-trade and returns on foreign investment account for nearly a third of the U.S. economy.
A decade ago, U.S. exporting industries supported 7 million U.S. jobs. Today, they support 20 million jobs. And guess what? They are high-paid, high-skill jobs that pay 13 to 18 percent more, on average, than non-export jobs.
There is an international market for virtually every American product, service, and commodity. Exports account for more than a third of the value of U.S. manufacturing output. Software producers earn more than half of their revenues overseas, and nearly a quarter of gross cash sales for U.S. farmers are generated by exports.
And it's not the large multinationals that are doing most of the exporting. In fact, almost 97% of all U.S. direct exporters are small businesses, and 65% of all exporters are businesses with fewer than 20 employees. So the message is clear for small and mid-size companies: think globally, because if you don't, your competitors are going to eat your lunch.
Trade also creates a higher quality of life. It lowers prices and boosts incomes, which creates greater purchasing power for American families.
A decade ago, a new home computer was a luxury for many families. Today, the price of computers, in part because of trade and global competition, has dropped to the point where computers have become a fixture in just about every family room or home office. And, by the way, most of those computers are connected to the Internet and are used to buy goods and services, creating even more economic growth.
Finally, free trade is a powerful agent for improved living conditions around the world. It lifts people out of poverty, reduces disease and hunger; and improves environmental conditions.
A World Bank study shows that in developing countries that opened themselves to global competition in the 1990s, the income per person grew more than 5% a year, while incomes in non-globalizing poor countries grew just over 1%.
The point is that trade is not a zero-sum game. It does not create winners and losers. Everybody-from an office worker in Stamford to a grape grower in Brazil-wins when trade barriers are torn down and markets are opened.
Through the Chamber's national trade education and grassroots program, TradeRoots, we are building greater knowledge of and support for trade in communities just like Stamford.
The great debate over trade is going to be won at the local level and will require grassroots activism. They'll point to a factory closing and blame it on trade but fail to mention that a new plant a few blocks down the street - with better jobs at better wages - is the result of trade.
We must encourage U.S. companies to engage international markets, and to enact policies that will increase U.S. access to and level the playing field in foreign markets. I'd like to share with you the key components of our trade agenda.
First, we are strongly pushing for a variety of bilateral, regional, and multilateral free trade agreements, building on successful implementation of recently enacted deals with Australia, Singapore, and Chile.
An agreement with the Dominican Republic and Central America-known in Washington speak as DR-CAFTA-is at the top of the list. This stands to be the largest U.S. free trade agreement in decade-since the NAFTA.
Already, the 45 million citizens of Central America and the Dominican Republic purchase more U.S. goods than the 1.5 billion citizens of India, Indonesia, and Russia-combined.
But the pot could become a lot sweeter with DR-CAFTA, and here's how. These countries already enjoy duty-free access to the U.S. market for 75% of their exports. But American exports face tariffs that are 30 to 100% higher than what we impose.
DR-CAFTA would level the playing field by immediately eliminating tariffs on more than 80% of U.S. consumer and industrial goods. This trade deal would open the telecom, insurance, and express shipment markets; provide new legal protections for copyrights, patents, and trademarks; and create greater transparency in government procurement.
DR-CAFTA would be a boon for Connecticut businesses and agricultural producers, which together already export nearly $100 million to the region. The six countries included in DR-CAFTA represent Connecticut's second largest export market for fabric mill products and are the largest export market for Connecticut crops.
Now remember, DR-CAFTA has already been negotiated and signed by both countries. The only thing holding it up is approval by Congress, and so we've got to crank up the pressure.
DR-CAFTA is critical to United States trade policy for more than just obvious reasons. If it is enacted, it will create momentum on a host of other trade agreements in the works. A defeat could have the opposite effect: it could deal a blow to our other top priorities, including a Free trade Area of the Americas agreement, renewal of trade promotion authority for the president, completion of the Doha Round of multilateral trade talks, and free trade agreements with Thailand, Panama, and a trio of Andean countries,
Second, we must preserve the right of U.S. companies to source around the world. It's that global sourcing does send some U.S. jobs overseas. No one knows for sure how many, but it's a drop in the bucket compared to the 140 million Americans on U.S. company payrolls-the most in history, by the way.
And the jobs that move overseas are far outnumbered by the jobs that we gain from "insourcing."
In 2003, the U.S. enjoyed a nearly $60 billion surplus in services trade, which means foreign-owned companies hire far more office workers right here in the United States than we hire in other countries.
Foreign companies have invested $487 billion in the United States, directly supporting 6.4 million jobs and indirectly supporting tens of millions of additional jobs.
Let's face facts. 95% of the people we want to sell a product or service to live somewhere else, so we have to go to where they are. Isolationism is not an option in today's global economy.
Placing restrictions on the ability of U.S. companies to source around the world would trigger retaliation from our trading partners, shut us off from valuable export markets, destroy jobs, and raise the price of goods.
The Chamber is leading the fight against those who want to erect walls around the United States instead of tearing them down. Last year, when the presidential campaign added fuel to the outsourcing debate, Congress and nearly every state legislature proposed anti-sourcing measures. But the Chamber, working with our allies around the country, helped defeat nearly all of them, and we intend to stay vigilant on this issue.
Third, we need stronger protection of intellectual property. U.S. products are in high demand worldwide - and therefore are targeted by counterfeiters and intellectual property thieves.
This challenge is much greater than most people assume it to be - a street vendor here and there selling a fake watch or a fake purse.
Rather, it's estimated that IP theft costs U.S. companies as much as a quarter of a trillion dollars annually. Everything from automobile brake pads to pharmaceuticals to batteries are copied illegally and slipped into our supply chains.
Piracy and counterfeiting kills jobs, hurts innovation, and stalls economic growth - to say nothing of the tremendous threat it poses to public health and safety. For example, some 2% of airplane parts are estimated to be fake, and these parts are believed to have been the cause of more than 100 airplane accidents.
In China, 200 babies died because of counterfeit formula. Counterfeit cell phones have been known to explode, causing severe harm to their owners.
Counterfeiting and piracy is serious business - and it's getting bigger.
We're educating policymakers and the public on the extent of and the harm caused by counterfeiting and IP theft, and we're collecting better data around the globe to support our arguments.
We're working to strengthen intellectual property rights law in this country through legislation now pending before Congress; working with the Justice Department, the Department of Homeland Security, and other agencies to step up enforcement; and pushing to include intellectual property protection provisions in free trade deals.
We've also launched an international component to our effort, working for reforms in four problem countries, including China, which accounts for an estimated two-thirds of all counterfeiting and intellectual property. China's inadequate laws and lax enforcement are potentially a violation of the conditions of its accession to the World Trade Organizations, and we'll press the issue should China fail to show greater progress in this area.
Let me move to the final major piece of our trade agenda. We must do a better job of easing the flow of goods and commerce across borders.
This is often referred to as "trade facilitation"-and it means having customs and market-entry rules that are clear, fair and transparent.
We can have all the nicely worded treaties in the world, but they won't amount to very much if the channels of commerce are clogged with obstructions - including endless bureaucratic delays...wrong-headed inspections, tax and security policies...and all too often, corrupt, self-appointed gatekeepers at international ports of entry.
Let me add that the United States is host to some of these problems as well because of our burdensome security and visa policies. Forcing people and goods to pile up at points of entry into this country could severely damage the just-in-time supply chain that all our businesses have come to depend on.
We must strike the right balance between security and mobility and keep our borders safe but open. Going too far in either direction will produce disastrous consequences for our economic competitiveness.
Ladies and gentlemen, some see global competition as something to be feared, ignored, or suppressed.
Others see it as an opportunity to reach new customers, create new jobs, and generate greater wealth.
The business community has an important role to play in bridging this fundamental divide. We must be bold. We must be principled. We must educate the public and lawmakers, engage the global economy, press for greater opportunities and a level playing field, and showcase for all the world the hope, progress, and prosperity that results from free trade.
Thank you very much.