Trade: America’s Next Great Success Story
Remarks by
THOMAS J. DONOHUE
President and CEO
U.S. Chamber of Commerce
Economic Club of Grand Rapids
February 23, 2015
Grand Rapids, Michigan
Introduction
Thank you, Steve [Van Andel], and good afternoon everyone.
It’s a great pleasure to speak at this prestigious forum. I want to thank Lorna Shultz for inviting me.
I’d like to welcome all of the U.S. Chamber members and partners here today, including Rich Studley from the Michigan State Chamber and Rick Baker from the Grand Rapids Chamber. Thanks for your support.
I’d especially like to recognize my friend Steve Van Andel. Steve, along with his dad Jay, are one of two sets of fathers and sons who served as Chamber chairmen. And Steve is only one of two people who served more than one term.
Given the tremendous expansion of Amway’s business overseas in recent years, it’s no surprise that Steve focused his chairmanships on expanding exporting opportunities for American goods and services.
As Steve likes to tell it, we’re creating good-paying jobs here by selling our stuff over there. In fact, 90% of Amway’s sales are outside the United States. Let me put that another way: Without trade, 90% of the people Amway employs here in Michigan might be out of a job.
That’s at the heart of what I want to talk about today—creating jobs, growth, and opportunity by opening more markets to American-made products and services around the world.
Why focus on trade when there are so many other pressing issues facing the business community and the country? It’s simple—dramatically increasing American exports is one of the best opportunities we have to create jobs, spur growth, and reassert American leadership.
Exports have been one of the rare bright spots in the American economy. They have risen by more than 50% over the past five years. More than 38 million American jobs depend on trade.
And yet we are only scratching the surface. More than 95% of the people we want to sell things to live outside our borders. We have negotiated 14 market-opening agreements covering only 20 countries. Opportunities abound. If we don’t seize these opportunities, our competitors surely will.
In fact, they already are. According to the World Trade Organization, there are 398 trade agreements in force around the globe today. The United States is party to only 3% of them.
Here’s another reason to focus on trade—the United States has the most aggressive export agenda in recent memory, including deals that would open markets in the dynamic Asia-Pacific region and expand our commercial relationship with Europe. Approving these agreements would put hundreds of thousands of Americans back to work, jump-start our economy, and restore America as a global leader.
But I have news for you. The bipartisan consensus in support of trade that we’ve enjoyed for decades is somewhat frayed. More members from the extreme ends of both political parties are being elected to Congress, and they tend to oppose trade. Our opponents have stepped up their game and raised their voices in the public debate.
We can no longer take for granted widespread support for trade among the public and lawmakers. We have to fight to win their support. The good news is they are willing to listen. They can be convinced. We just have to make the case.
We need to change the misconceptions surrounding this issue. We need to make a smart, fact-based case for opening new markets and leveling the playing field through trade agreements. We need to explain the broad-based benefits of increased exports to all Americans. We need to recognize that sometimes our opponents have a fair point … that trade can cause disruption.
But we can’t stand still. If we want to win the debate on trade and advance our agenda, here are some of the arguments we have to make.
Fairness, Accountability, and a Level Playing Field
The single most important message is this: Our trade agreements must ensure accountability, fairness, and a level playing field for American workers and companies.
Both trade supporters and opponents agree on one thing—right now the playing field isn’t always level. Not all the rules are fair and some are stacked against American workers and businesses.
So what’s the smart way to fix this? Is it to erect more barriers of our own, which is a lose-lose proposition for workers and consumers? Or is it to lower barriers abroad through trade agreements—a win-win proposition?
In my book, win-win beats lose-lose every day of the week!
Trade agreements achieve exactly what trade opponents say they want—to level the playing field for American workers and businesses by cutting tariffs and other barriers to U.S. exports. If we don’t negotiate agreements, then we lock in the status quo. We lock in our competitive disadvantage.
If trade opponents are saying that Americans can’t compete and win on a level playing field, we strongly disagree. We believe they can, they do, and they will!
Trade skeptics demand that America only enter into agreements that are based on accountability and fairness. Well, guess what? We agree! Trade agreements being negotiated today do a better job of ensuring openness, accountability, and a level playing field for all.
Make no mistake—enforcement is vital. The trade agreements we sign aren’t worth the paper they’re written on if they aren’t enforced. Today’s agreements are clear about what parties are expected to do. They contain methods to ensure enforcement and fairly resolve disputes.
This is the principal rationale for trade agreements—to generate economic growth, new exports, and good jobs through the elimination of trade barriers … and to do so in a way that is fundamentally fair.
Trade Agreements—A Great American Success Story
Earlier I mentioned that we need to stick to the facts when making our case for more American exports.
So what do the facts tell us about America’s trade agreements?
The facts say that these agreements have succeeded in creating new jobs, boosting economic growth, and facilitating cross-border trade.
While our 20 trade agreement partners represent just 6% of the world’s population, they buy nearly half of our total exports. We even have a trade surplus with these countries.
American workers are among the biggest winners. Commerce with our trade agreement partners supports more than 17 million American jobs.
Small businesses, farmers, manufacturers, and services industries have also greatly benefited.
Small and medium-size companies account for 98% of all U.S. exporters. 40% of their merchandise exports go to our trade agreement partners. That spells success for America’s small businesses.
Exports of U.S. farm and food products to our trade agreement partners increased by more than 130% between 2003 and 2013, according to the U.S. Department of Agriculture.
American manufacturers sold $674 billion in products to our 20 trade agreement partner countries in 2014.
The facts are clear. America’s trade agreements have been an impressive success.
Countering the Critics
Even in light of these facts, many trade opponents still argue that trade—and imports, in particular—cost jobs and have decimated the manufacturing industry. They also maintain that nothing is being done to help those workers who really are displaced by trade.
How should we respond?
Jobs
Let’s look at jobs. Trade skeptics claim NAFTA has cost factory jobs.
The Bureau of Labor Statistics disagrees. In fact, there was a net increase of 800,000 jobs in U.S. manufacturing alone during the first four years of NAFTA, when job losses were most likely to happen.
Critics are telling us something we already know when they say Americans are losing manufacturing jobs, as we saw in the recent recession. But they are dead wrong to place the blame on trade.
Survey data from the federal government consistently show that less than 1% of layoffs are attributable to offshoring.
Where have the lost manufacturing jobs gone? Not to Mexico—or China. A RAND study found that China shed 25 million manufacturing jobs between 1994 and 2004, 10 times more than the United States lost in the same period.
Most of these jobs have been lost to a country called “productivity.” Technological change, automation, and widespread use of information technologies have enabled firms to boost output even as some have cut payrolls.
More recently, U.S. manufacturers have enjoyed steady growth thanks in large part to an increase in exports to our trade agreement partners.
And the tremendous expansion of American energy hasn’t hurt either! An abundance of affordable energy has drawn a great deal of manufacturing back to America’s shores.
Imports
Similarly, trade opponents argue that imports are hurting our economy. The facts tell a different story. Imports bring lower prices and more choices to families striving to make ends meet, as well as exciting new technologies that make our lives better.
Access to imports boosts the purchasing power of the average American household by about $10,000 annually. Imports of intermediate goods and raw materials help lower costs for manufacturers and other businesses, which can pass on savings to customers.
Displaced Workers
While trade opponents generally exaggerate jobs losses due to trade, it’s true that some workers are displaced by changes in the economy, technology, consumer preferences, and the competitive landscape in a global economy.
Again, critics often lay the blame on trade. They’re wrong.
Regardless of where the blame lies, we have a responsibility to do more to help displaced workers. But the answer to a worker losing his job at a typewriter factory is not to force the factory to keep making typewriters. It’s to make sure that that worker can move from a 20th century job to a 21st century job without turning his or her life upside down.
Business is already making a major contribution by investing in training and development across the U.S. workforce. The American Society for Training & Development estimates that U.S. businesses spent $164 billion on employee learning and development in 2012, or about $1,200 per worker.
There’s more that can be done. Government and business must work together to ensure that any worker displaced by trade can be retrained for another good-paying job.
The Trade Agenda
Armed with the facts, we can help advance a bold trade agenda that will create jobs, growth, and opportunities for our workers and businesses.
New Trade Agreements
We should start by bringing several trade negotiations to a successful conclusion.
The Trans-Pacific Partnership agreement would open the Asia-Pacific’s dynamic markets to American goods and services. It’s critical that we do so because nations across the Pacific are clinching their own trade agreements that exclude the United States, denying American exporters access to their markets.
TPP gives the United States a strong hand in writing the rules for trade for this important region—it makes us an active player, not a bystander stuck on the outside looking in. TPP would affirm and deepen America’s ties to Asia at a time when there is a perception that we are pulling back.
There’s also an agreement being negotiated called the Transatlantic Trade and Investment Partnership, which would further remove barriers between the United States and Europe. The agreement could not come at a better time—both America and Europe are dealing with struggling economies, aging populations, and new competition from emerging nations.
TTIP would be a welcome economic boost to both sides of the pond. How big a boost? Think about this—together, the United States and the European Union account for nearly half of global economic output, with each producing more than $16 trillion in GDP.
In a relationship that huge, eliminating today’s relatively modest trade barriers could bring big benefits. According to a study by the Atlantic Council and the British Embassy, the agreement would create 740,000 new U.S. jobs.
The Trade in Services Agreement is another big opportunity—a free trade zone for services with 50 countries around the globe. Eliminating barriers to trade in services could create as many as 3 million American jobs.
Passing these agreements would build on the momentum of the World Trade Organization’s Trade Facilitation Agreement adopted last year. This is the first multilateral trade agreement in a generation. It will streamline the passage of goods across borders by cutting red tape and bureaucracy and could boost the world economy by as much as $1 trillion.
While these trade pacts can’t solve all of our economic problems, they can help spur growth, create jobs, and ensure positive American engagement in global affairs.
That’s why the Chamber has been an ardent supporter of these agreements from the very beginning … why we have been at every major negotiating session … and why we’re working to ensure accountability, fairness, strong intellectual property protections, and a level playing field.
Trade Promotion Authority
But we can’t secure new trade agreements without Trade Promotion Authority. TPA is indispensable—the United States has never passed a major trade pact without it.
There’s been a lot of misinformation and controversy surrounding TPA. Let’s be clear about what it does and doesn’t do.
TPA is based on the radical notion that Congress and the White House should work together on trade. It’s especially important to strengthen the voice of Congress on trade. TPA allows Congress to set negotiating objectives, and it requires the executive branch to consult closely with Congress during trade talks. Finally, TPA reserves for Congress the final say on any new trade agreement in the form of an up-or-down vote.