Next Steps for U.S. Trade Agenda
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The growing zeal for new, lucrative commercial relationships among the world’s strongest economies is evident by the fact that more than 100 separate free trade agreements are now being negotiated worldwide. But the United States is participating in just one of them, the Trans-Pacific Partnership.
Meanwhile, economies in Europe and Asia are frantically negotiating new trade pacts to give their businesses access to new markets and more customers—and a leg up over the competition. The EU and China are negotiating dozens of trade agreements.
In his remarks at a State Department conference of American Chambers of Commerce leaders from around the world in February, U.S. Chamber President and CEO Tom Donohue reminded the audience that of the more than 300 trade agreements in force around the world, we’re only involved in 20 of them.
“That’s not very smart,” Donohue warned. “We can and must do better.” In 2009, the Chamber set a goal of doubling U.S. exports in five years. It’s an ambition shared by the Obama administration, which established the National Export Initiative to open up flourishing foreign markets.
Exports are broadly viewed as key drivers of domestic economic growth and job creation. Domestic consumption alone can’t drive demand for U.S. goods and services to higher, more productive levels. So many economists, government officials, and business leaders are looking overseas. Eighty percent of the world’s purchasing power is outside of the United States, along with 92% of its economic growth and 95% of its customers.
Data released by the Department of Commerce show that U.S. exports are on the uptick. Jobs supported by U.S. exports increased by 1.2 million between 2009 and 2011. But to take manufacturing as an example, the United States exports less than half as much of its total manufacturing output as the world average and seriously lags top exporters like Germany and Korea.
Michael Ducker, chief operating officer of FedEx Express and president of its International Division, wants action, not words. “U.S. officials are saying all of the right things on trade. But we’d like some clear signals that we’re going to pursue new agreements and start the hard work of negotiating them. We’re making progress on growing exports—but there’s a lot more potential to reach new markets,” says Ducker. FedEx provides both inbound and outbound trade services.
Where We Go From Here
The business community is calling for the completion of negotiations this year on the Trans-Pacific Partnership, which will grant the United States access to booming markets in the Asia-Pacific region. It is also pushing for renewed focus on the underleveraged relationship between the United States and the EU.
Though the American and European economies are relatively open to trade with one another, even minor barriers can impose steep costs in the context of the world’s largest trading relationship. Simply eliminating tariffs would boost bilateral trade by more than $120 billion in five years.
Business groups on both sides of the Atlantic are rallying around a Transatlantic Economic and Trade Pact covering goods, services, investment, and regulatory cooperation. Ahead of theG8 Summit at Camp David, representatives of U.S. and European business associations gathered in March at the Chamber to ratchet up pressure on government leaders to begin transatlantic talks.
Peter Rashish, the Chamber’s vice president for Europe policy, says, “We have the opportunity to drive significant growth and job creation in the U.S. and EU at a time we both badly need it. We hope to see talks started on a new trade and economic framework by the end of the year.”
In his State Department speech, Donohue noted that the United States should also aggressively pursue more bilateral free trade agreements, similar to pacts with South Korea, Colombia, and Panama, which passed last fall after years of political delays. Businesses polled by the Chamber are largely eyeing opportunities with rapidly growing economies like Brazil, India, Indonesia, and Egypt. Donohue also called for more bilateral investment treaties and efforts to attract global capital.
Donohue added that while these types of negotiations are a long-term proposition, “We’ve got to get started now.” There are actions that lawmakers can take immediately to help facilitate trade negotiations. The business community, led by the Chamber, is pushing Congress to renew Trade Promotion Authority so that the president will have executive authority to negotiate trade agreements without fear of them being picked apart by lawmakers.
Congress is on the hook to approve permanent normal trade relations with Russia so that U.S. companies can take advantage of market opportunities as Moscow joins the World Trade Organization this summer. Lawmakers must also ensure that U.S. businesses have access to competitive financing for trade by keeping the Export-Import Bank authorized and competitively funded.
Fresh Evidence of Opportunity
The benefits of preferential trade pacts are evident in the U.S. free trade agreement with South Korea, which became active on March 15. U.S. companies large and small now have improved market access to Korea’s $1 trillion economy.
Pennsylvania-based Helicopter Tech, an aircraft parts replacement company with 12 employees, is gearing up for more business as a result of the trade pact entering into force. Some 80% of industrial exports to Korea are now duty free.
“I expect implementation of this agreement to directly increase Helicopter Tech’s presence in Korea and generate jobs at our headquarters in King of Prussia, Pennsylvania, as well as for our many suppliers,” says President and CEO Rachel Carson.
Exports to 23 countries already account for 10% of Helicopter Tech’s business. According to Carson, “Valuable exports and jobs are made possible by U.S. free trade agreements that have opened up foreign markets to American exports and given small businesses like mine the opportunity to compete on a level playing field.”
Businesses, like Carson’s, hope that this is just the beginning of a spate of new trade opportunities to create jobs, spur economic growth, and sharpen America’s competitive edge.