«A VALUES-DRIVEN TRADE POLICY U.S. TRADE REPRESENTATIVE MICHAEL FROMAN FEBRUARY 18, 2014 Thank you, Neera, for that introduction. Thank you for all of ...»
A VALUES-DRIVEN TRADE POLICY
U.S. TRADE REPRESENTATIVE MICHAEL FROMAN
FEBRUARY 18, 2014
Thank you, Neera, for that introduction. Thank you for all of your work, in government and here
at CAP, that has contributed so much to progressive economic policies that have improved the
well-being of millions of Americans. And thank you for hosting me here today.
Five years ago, the United States was experiencing the worst economic crisis in 80 years. Global trade was dropping at a fastest rate since the Great Depression and we were losing nearly half a million jobs a month.
In the intervening five years, we have worked hard to get our economic house in order through a variety of measures, from the Recovery Act to the financial stability plan. The turnaround story
of the last five years has been extraordinary. As the President noted in the State of the Union:
Eight and half million new jobs;
At 6.6 percent, the lowest unemployment rate in over five years;
A rebounding housing market;
A manufacturing sector that’s adding jobs – more than 600,000 of them -- for the first time since the 1990s;
More oil produced at home than we buy from the rest of the world for the first time in twenty years;
Deficits cut by more than half; and For the first time in over a decade, business leaders around the world declaring that China is no longer the world’s number one place to invest. America is.
Yet for all the progress of the last five years, the middle class is still hurting from a long trend of stagnating wages and growing inequality. Since 1979, productivity has increased over 90 percent, but real wage growth has increased only 3 percent. There are still too many people who want to work and cannot find a job.
We are seeking to address these challenges in every aspect of our policy, from investing in infrastructure and manufacturing to improving our educational system and raising the minimum wage to redoubling our efforts to promote new investment in the United States.
It is also the reason that the President is pursuing an aggressive trade strategy.
I’m here today to talk about our efforts on the trade front, how they relate to the President’s overall economic strategy, and how we’re committed to doing trade in a way that is consistent not just with our economic interests, but also with our values.
EXPORTS DRIVE JOBS AND GROWTHTrade has been an important part of America’s economic recovery.
Under President Obama, U.S. exports have increased by 50 percent, growing four times faster than the economy as a whole, adding $700 billion dollars to our economic output and contributing a third of our total economic growth. 300,000 American companies now export, 96 percent of which are small and medium size businesses.
This surge of exports means jobs. Each billion dollars of increased exports supports between 4,000 and 5,300 jobs, on average.
Over the last four years, exports have supported 1.3 million additional private sector jobs – jobs that pay 13-18 percent more on average than non-export related jobs.
Behind all these statistics are real, flesh-and-blood success stories for working families: the auto parts firm that would have closed its line and gone dark had it not been for overseas markets; the family farm now finding customers around the world via the internet; the medical device company that secured that new contract abroad.
Take Flanders Electric, a medium size business in Evansville, Indiana. Flanders manufactures and works on electric motors. In 2007, they decided to expand their business to international customers. Our trade agreement with Chile played a major role in their decision to start exporting there.
Without tariffs and non-tariff barriers, they could compete on the merits of their hard work and the quality of their products.
They also began trading with Australia, another of our trade agreement partners. As their exports and business grew, so did Flanders. It now employs 700 Americans.
There are thousands more stories like it.
Yet despite the proven benefits of trade, there continues to be uneasiness around pursuing new trade opportunities. That is understandable. Advances in technology and automation, combined with the continued pace of globalization, have increased pressure on wages and the sense that there are fewer opportunities for working Americans.
Now, no one says we should stop the development of new technology, even though most economists would argue that technological advances have had the greatest impact on manufacturing employment.
No one suggests we should try to stop the emergence of a global middle class which is driving globalization.
But some focus on trade agreements, asserting that they are responsible for our economic challenges. When you get beyond the rhetoric and look at the facts, however, that assertion just doesn’t hold up.
Here are the facts.
America already has one of the most open economies in the world.
Our average applied tariffs are 1.3 percent and we don’t use regulation to discriminate against foreign goods.
Whether we pursue trade agreements or not, the U.S. will continue to see foreign imports because our consumers demand them and we have virtually no barriers to imports.
The same is not true for the rest of the world.
And that’s what the trade agreements we are negotiating are all about: lowering tariffs on Made in America products, breaking down barriers to our goods and services, and setting standards higher to level the playing field for American workers and firms, American farmers and ranchers, American entrepreneurs and investors.
From the start of this Administration, we have been clear about the importance of building on the past and learning the lessons from it.
Our trade policy has evolved substantially from what it was twenty years ago, but many of the criticisms have not.
Some of the criticisms I hear of our agenda describe the state of the trade policy in1994, not 2014.
They are criticisms of a trade policy this President has explicitly rejected.
The reality is this: Trade, done right, is part of the solution, not part of the problem.
Through negotiations we are able to create new opportunities. Through enforcement actions we are able to stand up for our rights and fight for our people.
Today, the post-crisis surge in exports we experienced over the past few years is starting to recede.
That’s why we are working to open markets in the Asia-Pacific and in Europe, to eliminate tariffs on information technology products and on environmental goods and to open new markets for U.S. services where we are a global leader.
These agreements will support good, high-paying jobs in the United States by increasing our market access.
But more than that, they will level the playing field by raising labor and environmental standards, putting disciplines on state-owned enterprises and dealing ourselves into global supply chains, rather than being left on the sidelines by others.
The pace of that globalization and technological change is not slowing down and our trade agreements need to take on that challenge.
Consider this: In the last five years, the capacity of the world’s container fleets has grown by 50 percent.
The number of Internet users has doubled – from 1.5 to 3 billion people – and the amount of Internet traffic has tripled.
The world’s urban population, the pool of workers entering the global economy, has grown by 380 million people.
This trend is not going away.
The question we face is not whether we can roll back the tide of globalization.
It is whether we are going to shape it or be shaped by it, whether we are going to do everything we can to ensure that it reflects our values or let the values of others define it.
Let me say a word about income inequality. This is a real issue and one that we must address with every tool at our disposal.
Trade policy, done right, can be an important tool in our efforts to address income inequality.
We know that increasing exports creates more and better paying jobs.
We know that our economy is already open and that trade agreements tend to reduce other countries’ barriers disproportionately.
We know that half our imports are intermediate goods – goods that go into competitive Made-inAmerica products that are sold in the U.S. and around the world.
We know that increased trade has added $9,000 on average to each American family’s real income, allowing them to enjoy higher standards of living.
We know one more thing: Right now, executives from hundreds of firms are considering whether or not to invest in the United States.
They are reassessing the risks and benefits of producing here vs. somewhere else.
They see all the things that have traditionally made America attractive: our skilled workforce, our rule of law and the size of our market.
And now they see here abundant sources of affordable energy – sometimes at a quarter of the price of energy in their own countries – and they see on the horizon these trade negotiations – TPP and T-TIP with the Asia Pacific and Europe.
Once these agreements are in place, firms in the U.S. will enjoy unfettered access to markets representing two-thirds of the global economy.
That has the potential to make the U.S. the production platform of choice, the place where firms want to make things, not just for this market, but to send all over the world.
In this sense, our trade policy is a major lever for encouraging investment here at home –in manufacturing, agriculture and services – creating more high-paying jobs and combatting wage stagnation and income inequality.
Trade policy can and should help make American the global production platform of choice.
Chairman Wyden has called for “expanding the winner’s circle,” pursuing policies that result in more widely shared gains and greater fairness.
This Administration believes that we can achieve that by ensuring that our trade policy reflects not just our interests, but also our values. Indeed, they are one in the same.
In that regard, there is much more to be said about the powerful role trade can play in alleviating poverty and raising living standards in the poorest countries in the world, which is why we are working to renew programs such as AGOA and GSP.
But I will save that for another day.
Today, I’d like to focus on trade policy’s role in furthering three of our core values: Standing up for workers, protecting the environment and promoting widely shared innovation.
First and foremost, just as the heart of America’s economy is the American worker, the heart of the global economy should be working people who stand to share in the benefits of global growth.
This is not a new idea, but a longstanding aspiration of American trade policy, as CAP’s “Virtuous Circle” essays on international economics suggested some years ago.
It is noteworthy that Franklin Roosevelt brought the United States into the International Labor Organization in 1934, the same year that a Democratic Congress created the first ever version of trade negotiating authority.
But the full inclusion of labor standards in trade agreements is a quite new development, and an innovation that Democrats should be particularly proud of.
Twenty years ago, the idea that labor standards should be part of trade agreements was at best an afterthought.
That was certainly the case in NAFTA. But it is not the case anymore.
As a candidate for President, then-Senator Obama said he would renegotiate NAFTA, put labor and environmental standards at the core of trade agreements and make those standards enforceable like any commercial commitment.
That’s exactly what we’re doing in TPP, upgrading our trade relationships, not only with Mexico and Canada, but with nine other countries as well.
As in the case of the three trade agreements signed into law by President Obama, in TPP we are seeking to include disciplines requiring adherence to fundamental labor rights, including the right to organize and collectively bargain, and protections from child and forced labor and employment discrimination.
We are pressing for regular consultative mechanisms, and a means for the public to raise labor concerns and demand action.
And we are working to include new commitments to address trade in goods produced by forced labor and regarding acceptable conditions of work.
We are working with Vietnam and the other TPP parties to make sure they live up to the highstandard, enforceable commitments of a final agreement.
Countries such as Vietnam face serious challenges in this regard, and we see TPP as the mechanism most likely to incentivize these countries to make progress in reforming their labor system and upholding worker rights.
We expect that T-TIP will lay the foundation for cooperation with Europe in promoting highstandard labor practices around the world.
But the negotiation of disciplines is only the first step.
We need to remain vigilant as to the implementation of commitments.
Under this President, a joint submission from U.S. and Guatemalan labor unions prompted the first trade-related labor rights enforcement case in history.
Similar cooperation with labor unions prompted labor enforcement-related actions and engagement with Bahrain and the Dominican Republic.
We have acted to improve labor conditions by suspending preferential trade treatment for Bangladesh after the Rana Plaza collapse in Dhaka, and are working to ensure that exporters in Haiti respect fundamental labor rights.
We have also used trade policy to address broader systemic concerns under the Colombia Labor Action Plan.
With our assistance, Colombia has enacted critical legal reforms and begun to build institutions to address structural deficiencies in their labor system.
We are now working with them to ensure that these reforms translate into day-to-day concrete progress on the ground.
In each of these cases, we are making progress, but more work remains to be done. We’re committed to do that work.