December 17, 2018
Madam Chair, Ambassadors, colleagues,
We are pleased to participate once again in the trade policy review of the United States. We are honored to see the large number of ambassadors and permanent representatives at today’s meeting. Thank you for the time you are taking to participate in this important process.
We especially appreciate the participation of Ambassador Frances Lisson, Permanent Representative of Australia, whom we are honored to have as our discussant. And I want to thank Ambassador Sunanta Kangvalkulkij of Thailand for stepping in and serving as chair of this TPR.
We also want to acknowledge the Secretariat’s team for their work in producing an informative report that provides a basis for today’s discussion. Again this year, as in past reviews, our colleagues in Washington appreciated the chance to engage in a vigorous and productive discussion with the professionals of the Secretariat’s TPR Division. So, I want to thank you and your team.
The United States places high value on the trade policy review process, which is important for promoting greater awareness and understanding of Members’ trade policies and practices. It is for this reason that we actively engage in all Members’ trade policy reviews and that we work diligently to answer the ever increasing number of questions we receive every two years. We have set a new U.S. record of more than 1700 questions with this review. We provided answers to all questions that were submitted two weeks prior to today’s meeting, as well as those submitted within a few days after the deadline. We are working hard to respond to the additional questions received just last week, and we hope to have responses as soon as possible.
As the United States undergoes its fourteenth Trade Policy Review— that’s more than any other Member—we are committed to reforming the global trading system in ways that lead to fairer outcomes for U.S. workers and businesses, and more efficient markets for countries around the world. U.S. trade policy is driven by a pragmatic determination to secure these objectives. Our trade policy is steadfastly focused on the national interest, including retaining and using U.S. sovereign power to act in defense of that interest. U.S. trade policy rests on five major pillars: supporting U.S. national security, strengthening the U.S. economy, negotiating better trade deals, aggressive enforcement of U.S. trade laws, and reforming the multilateral trading system.
Colleagues, I want to leave you today with three key points. First, the United States maintains one of the world’s most open trade regimes that is firmly based in the rule of law and that is a powerful engine for global growth. Second, we continue to seek trade liberalization and will deepen our relationships with countries who share our commitment to fair market competition and reciprocity. Third, the United States is raising serious concerns with the functioning and direction of this important institution, and the fundamental challenge posed by China’s state-led, mercantilist approach to the economy and trade. This is not mere chatter, nor is it unilateralist or protectionist. The United States is taking important steps to begin to address these fundamental issues, and we are committed to working with like-minded Members to do so.
Open Economy, Engine for Global Growth
The United States is one of the most open and competitive economies in the world. We appreciate that this TPR process offers reminders of the openness of the U.S. trade regime, and of our interest in working with other Members of this institution to promote free, fair, and reciprocal trade.
Exemplifying our openness is the fact that the United States is the world’s largest single-country importer, importing goods and services that exceed the total size of the economies of all but three other countries in the world. In 2017, the United States was the recipient of 19 percent of global goods and services exports, excluding U.S. exports and intra-EU exports, and 78 countries had the United States as their first, second, or third largest export partner.
U.S. tariffs are among the lowest in the world. The current U.S. simple average tariff is 3.4 percent on an applied basis under the WTO and 2.4 percent on a trade-weighted basis. By comparison, simple average applied tariffs in our top five trading partners range from 4.0 percent to 9.8 percent, and trade-weighted average tariffs range from 2.5 percent to 5.2 percent. When tariff preferences are taken into account, the U.S. trade-weighted average tariff is under 2 percent on an applied basis. In 2017, nearly 70 percent of all U.S. imports, including those under preference programs, entered the United States duty-free. U.S. service markets also remain open to foreign providers and U.S. regulatory processes are transparent, accessible, and open to the public, including to non-U.S. citizens.
As these figures underscore, it is no exaggeration to say that the openness of the U.S. economy to goods and services is one of the most important sources of global economic stability.
In addition, the United States continues to be the world’s largest recipient of foreign direct investment (FDI). The independent Secretariat Report attributes this to the United States’ “open markets, liberal investment regime, large consumer base, higher education system, skilled and productive workforce, a business environment that encourages innovation, legal protections, and the world’s largest venture capital and private equity market.” The stock of FDI in the United States in 2017 was $4.03 trillion, and the United States had the largest inward flow of FDI of any country, at $275.4 billion, according to UNCTAD. The United States is committed to remaining an attractive investment destination.
Since its founding, the United States has recognized the importance of protecting intellectual property to providing an open, competitive, and innovative economy. The Constitution of the United States grants to Congress the power “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” In his first State of the Union speech, President George Washington, our first President, called for Congress to encourage the introduction of inventions from abroad and those produced at home. Within months, the first Congress of the United States passed the Patent Act of 1790, and then the Copyright Act. Two hundred and twenty-eight years later, in an age of unprecedented creativity and technological advances, the United States continues to place high value on the protection and enforcement of intellectual property.
Committed to Competitive Markets and Free, Fair, and Reciprocal Trade
The United States seeks to work with those Members who are ready and able to negotiate free, fair, and reciprocal trade agreements, with the expectation that participants in these agreements will contribute commensurate with their status in the global economy. We are committed to promoting fair market competition and trade liberalization around the world. Countries that share our commitment and that are willing to provide reciprocal opportunities in their home markets can count on us as a partner.
The United States has been putting these words into action, vigorously pursuing bilateral arrangements aimed at promoting more efficient markets and obtaining better trading terms for American workers, farmers, businesses, and ranchers. In late September, the United States, Mexico, and Canada reached an agreement to modernize NAFTA into a 21stcentury, high-standard agreement. The three Parties signed the United States-Mexico-Canada Agreement (USMCA) in late November. By addressing market access barriers and modernizing and rebalancing the obligations among the Parties, the agreement will support mutually beneficial trade leading to freer markets, fairer trade, and robust economic growth in North America. The USMCA will enter into force after it is approved by all three Parties.
In September, the United States and Korea signed final texts reflecting the outcomes of our negotiations to improve the United States-Korea Free Trade Agreement. The outcomes focus on improving automobile trade, in addition to other provisions including on investment. Progress on implementation-related issues also was announced, including in the areas of customs. The modernized provisions will enter into force after completion of applicable procedures by both countries.
This is just the beginning of our ambition. In October, the U.S. Trade Representative notified Congress that the Administration intends to negotiate three separate trade agreements with Japan, the European Union, and the United Kingdom, seeking to expand trade and investment. These notifications followed a number of fruitful dialogues with each of these partners.
At the same time, the United States continues to promote mutual accountability and shared ambition as we work with other partners around the world through a variety of trade and investment avenues. Throughout the review period, the United States continued to engage our trading partners through free trade political and technical committees and councils, through Trade and Investment Framework Agreement Councils, and through other arrangements with non-FTA partners.
The United States also engages with partners at a regional level to develop free, fair, and reciprocal trade and investment opportunities. I want to use my brief time today to share just a few examples.
In 2017-18, the United States supported the launch of the ASEAN Single Window under the U.S. Agency for International Development’s US-ASEAN Connectivity through Trade and Investment program. Looking forward, the United States and ASEAN have decided to work together on agricultural biotechnology regulatory cooperation and to continue discussions on proposals regarding automotive standards and electronic payment services. We recognize that in the digital economy, electronic payment services are critical to facilitate global digital trade, to promote open and competitive markets that welcome foreign and domestic suppliers on a level playing field, and to drive development, innovation, and economic growth.
This understanding of the growing importance of digital trade informs our work in APEC, where we are leading the effort to adopt building blocks to facilitate global trade, including principles related to enabling cross-border data flows and preventing forced localization of data. We also welcome APEC’s continuing efforts to strengthen the implementation of good regulatory practices. We look forward to working with APEC’s next host country, Chile, to advance these priorities in 2019.
The United States continues to work with our African partners to advance our long-term commitment to Africa’s growth and prosperity. Since 2000, the African Growth and Opportunity Act (AGOA) has been the cornerstone of U.S.-African engagement on trade and investment. By providing duty-free entry into the United States for almost all products of beneficiary countries, AGOA has helped to expand and diversify two-way trade between the United States and sub-Saharan Africa, and it has helped to foster an improved business environment in many sub-Saharan African countries. The United States-Sub-Saharan Africa Trade and Economic Cooperation Forum, informally known as the “AGOA Forum,” is an annual ministerial-level meeting with AGOA-eligible countries. In July 2018, the U.S. Trade Representative led the USG delegation to the AGOA Forum, this time held in Washington, DC. Given AGOA’s scheduled expiration in 2025, the U.S. Trade Representative, Ambassador Robert Lighthizer, laid out the Administration’s rationale and vision to move beyond AGOA and pursue a free trade agreement with an African country that could serve as a model for other U.S. trade agreements in the region. He and other U.S. participants met with numerous African senior officials, including trade ministers, leaders of African regional economic organizations, and representatives of the African and American private sectors and civil society to discuss strategies for advancing trade, investment, and economic development in Africa.
The United States in the Multilateral System
Madam Chair, the United States traces our leadership role in the multilateral system back more than seven decades, to the signing of the GATT. During the Uruguay Round, we were a key architect of the WTO. In the Marrakesh Declaration, we joined other original Members to confirm the principle that Members were to participate in a multilateral system, “based upon open, market-oriented policies.”
Since 1995, the United States has been deeply engaged in every facet of work at the WTO. And today we still are. My colleagues at the table are deeply engaged with me at the WTO. Time and time again, we have provided the leadership and political will necessary to advance the goal of using the WTO to create and enforce rules that lead to more efficient markets, reciprocal benefits, and greater wealth for our citizens. We are steadfastly committed to working with all WTO Members who share this goal.
However, we must recognize that the WTO that we helped create, and the WTO we seek, is in key respects not the WTO we have today. This is not a new or sudden development. For years, the United States and many others in this room have voiced concerns with the WTO system and the direction in which it has been headed.
We discussed several of these concerns in the U.S. Government Report for this meeting. And I will elaborate on them briefly.
- First, the WTO dispute settlement system has strayed far from the system agreed to by Members. It has appropriated to itself powers that the WTO Members never intended to give it. This includes where panels or the Appellate Body have, through their findings, sought to add or diminish WTO rights and obligations of Members in a broad range of areas. The United States has grown increasingly concerned with the activist approach and overreaching of the Appellate Body on procedural issues, interpretative approach, and substantive interpretations. These approaches and findings do not respect WTO rules as written and agreed by the United States and other WTO Members.
- Second, the WTO is not well equipped to handle the fundamental challenge posed by China, which continues to embrace a state-led, mercantilist approach to the economy and trade. China pursues an array of non-market industrial policies and other unfair competitive practices aimed at promoting and supporting its domestic industries while simultaneously restricting, taking advantage of, discriminating against, or otherwise creating disadvantages for foreign companies and their goods and services. From forced technology transfer to the creation and maintenance of severe excess industrial capacity to a heavily skewed playing field in China, the results of China’s approach are causing serious harm to the United States and many other WTO Members and their companies and workers. Simply put, China’s actions are incompatible with the open, market-based approach expressly envisioned and followed by other WTO members and contrary to the fundamental principles of this organization and its agreements.
- Third, the WTO’s negotiating arm has been unable to reach agreements that are of critical importance in the modern economy.Previous negotiations were undermined by certain Members’ repeated unwillingness to make contributions commensurate with their role in the global economy, and by these Members’ success in leveraging the WTO’s flawed approach to developing-Member status.
- Fourth, certain Members’ persistent lack of transparency, including their unwillingness to meet their notification obligations, have undermined Members’ work in the WTO committees to monitor compliance with WTO obligations. Their lack of transparency has also damaged Members’ ability to identify opportunities to negotiate new rules aimed at raising market efficiency, generating reciprocal benefits, and increasing wealth.
The United States is not simply raising concerns; we are taking important steps to address them. To date, the application of our trade laws to address injurious and unfair competition has perhaps garnered the most public attention. For example, the United States’ investigation under Section 301 of the Trade Act of 1974 determined in March 2018 that the acts, policies, and practices of China related to technology transfer, intellectual property, and innovation covered in the investigation are unreasonable or discriminatory and burden or restrict U.S. commerce.
Some are criticizing the United States’ approach as unilateralist and protectionist. In our view, this is a serious and perhaps purposeful misread of our actions and intentions. In the case of the Section 301 investigation, the facts demonstrating forced technology transfer were quite clear, and the United States had a stark choice: either take action to protect itself against the serious, ongoing harm from China’s policies and practices or accept that this harm will continue because the WTO does not provide the necessary disciplines or remedies. We would prefer being able to use the WTO, but China’s trade regime increasingly is not compatible with it.
The United States is committed to working with like-minded Members to address our concerns with the functioning of the WTO. Reforms are necessary for the continued viability of the institution. Our long record of leadership at the WTO makes us clear-eyed about the challenges ahead. In our assessment, Members are in the early stages of grappling with our collective failure to confront problems that have been growing for years.
The United States will be at the forefront of these efforts. We were the first Member to put forward a concrete proposal for WTO reform, in November 2017, with our proposal aimed at improving Members’ compliance with their notification obligations. In November 2018, Argentina, Australia, Chinese Taipei, Costa Rica, the EU, Japan, and the United States presented an updated transparency and notification proposal for consideration in the WTO Council on Trade in Goods. We stand ready to work with our co-sponsors and other Members to advance this proposal.
We are pursuing reform-related discussions in other configurations, as well. In December 2017, Ambassador Lighthizer and the trade ministers of Japan and the EU announced new trilateral cooperationto undertake measures to combat the non-market-oriented policies of third countries. Following Ministerial meetings in March, May, and September 2018, the Ministers confirmed their shared objective to address non-market-oriented policies and practices, their shared view that no country should require or pressure technology transfer from foreign companies to domestic companies, and the need to deepen and accelerate discussions regarding possible new rules on industrial subsidies and state-owned entities. The Ministers further agreed to deepen cooperation and exchange of information, including with other like-minded partners, to find effective means to address trade-distorting policies of third countries.
We are also giving serious thought to the problem of differentiation. The assertion by a number of Members that developing country status is “self-declared” has severely damaged the negotiating arm of the WTO by creating resistance to differentiation among Members. Export powerhouses and other relatively advanced Members demand the same flexibilities as much smaller, poorer Members, creating asymmetries that ensure that ambition levels in WTO negotiations remain far too weak to achieve meaningful outcomes.
Madam Chair, Ambassadors, distinguished representatives: the seriousness of our message today, once again, underscores the seriousness of the moment. The problems that have led us to this moment did not arise overnight, and they will not be resolved easily. They will require leadership and a steadfast commitment to the principles which brought us here many years ago. The United States will work with any Member that is committed, as we are, to making good on an old promise – to build a system based on open, market-oriented policies.
We look forward to participating with you in our exchange over the next few days, and we thank you for your interest and attention.