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Remarks by Ambassador Michael Froman at The Wilson Center: ‘The Strategic Case for Trade’

Remarks by Ambassador Michael Froman at The Wilson Center:
‘The Strategic Case for Trade’

 Washington, D.C.
November 19, 2014

*As Delivered*

“Thanks very much, Jane, for that introduction. And really, it’s tough to think of anyone better suited to talk about trade and the strategic dimensions of trade, than Jane Harman given her extensive background in national security - Armed Services, Homeland Security, as well as, of course, her commitment to free trade.

“And no better forum, really, than the Wilson Center to talk about this. Because it was, I believe Wilson’s first Congressional address after his inauguration when he first called for reducing U.S. tariffs. It was a year later, when he asked his Secretary of Commerce, one hundred years ago this year, to organize the National Foreign Trade Council. And it was, as Jane said, the third point of the ‘Fourteen Points’ was about his vision for increasing trade among nations. 

“And in the aftermath of World War II, the U.S. helped create a rules-based trading system that helped speed up the reconstruction of Japan and Europe and helped turn developing countries into emerging economies, lifting hundreds of millions out of poverty.  That system has served American interests well for over seven decades. It has brought jobs to our shores and peace and prosperity to those around the world who have embraced openness and fairness.

“But for much of our history, international economic policy was seen as strategically important, essentially because the economy paid the bills for the military. It was seen as an enabler of military power. In more recent years though, economic power has become more than a purse for military power. Today, economics is, and in some people’s view the principal means by which nations measure and exercise power.

“That’s why everything we do in trade, first and foremost, has to be evaluated first and foremost on its economic merits: whether it will support jobs, strengthen the middle class, and spur economic growth.  Simply put, we need to consider trade first and foremost within our broader economic policy. And at a time when economic power is more important than ever before, the results of President Obama’s overall economic strategy have been quite impressive.

“Five years ago, we forget how quickly we have turned things around, five years ago, we were losing 700,000 jobs a month and unemployment touched 10 percent.  Now we are growing at 3.5 percent, the unemployment rate has dipped to 5.8 percent. We’re creating on 200,000 jobs per month, and we’ve seen private sector job creation for the last 56 months – the longest uninterrupted streak since records have been kept.

“The banks have been cleaned up, corporate balance sheets are flush, the auto industry is expanding and the stock market has doubled. 

“And we’re seeing a renaissance in manufacturing. We’ve created more than 700,000 new manufacturing jobs over the last four years.

“Trade has been one of the strongest engines within this successful economic strategy. 

“During the last four years, U.S. exports have hit record highs, topping $2.3 trillion. 

“Those exports support 11.3 million jobs in the U.S. We know that export-related jobs pay more than non-export-related jobs. And over the last five years, exports has contributed one-third of our economic growth and supported an additional 1.6 million jobs.               

“This isn’t just big companies, 98 percent of companies that export in the U.S. are small and medium-sized businesses. And yet, only a small fraction of all small and medium-sized businesses export, and those that do tend to export to just one country.

“So we see tremendous opportunity. When we look outside our country, we see 95 percent of the world’s consumers are outside our country, 80 percent of the world’s purchasing power. We see all this potential for small and medium-sized businesses to get involved in international trade and engage with the international economy.

“To unlock that opportunity, we’re pursuing the most ambitious trade agenda in history, both in terms of its economic and its strategic objectives.

“It’s based on a fundamental realization that the system we’ve led since World War II needs an update. We’ve welcomed the rise of emerging economies, for example, and that’s evidenced through the institutionalization of the G-20. But when it comes to trade, they’ve been reluctant to take on responsibilities commensurate with their increasing role in the global economy. And that has led to drift and deadlock in most of our multilateral negotiations.

“We refuse to wait for that situation to change. And that’s why we’ve taken our fate into our own hands, by pursuing agreements with like-minded countries at the WTO on issues like services and environmental goods.

“But it’s also why we’re pursuing regional and other arrangements to establish rules of the road, strengthen U.S. partnerships, and spur broad-based development around the globe. Those are the three key pillars of our strategic rationale for trade.

“For example, one of our flagship efforts, the Trans-Pacific Partnership, would set rules of the road and help bring stability to a critical region in flux. This agreement, which the U.S. is negotiating with 11 other countries in the Asia-Pacific, encapsulates 40 percent of the global GDP and roughly a third of all trade. 

“At a time when this region is in flux, the TPP is a concrete manifestation of our rebalancing strategy toward Asia. TPP would level the playing field for U.S. businesses and workers by establishing the strongest labor and environmental standards of any trade agreement in history, and ensuring that those obligations are fully enforceable, just like any other obligation in the agreement. TPP is also the first trade agreement that will take on the issue of state-owned enterprises, and ensure that when state-owned enterprises, with all the benefits that they have, compete against private firms, they do so on a commercial basis. And if they don’t, we have a mechanism for addressing it. It’s the first trade agreement in history to take on the digital economy, and bring into the digital economy principles from the real, physical economy, to ensure that there is a free and open Internet, which is absolutely critical to small and medium-sized businesses being able to take advantage of the global economy. Most of our small and medium-sized businesses engage in international commerce through e-commerce. And that means making sure that there is a free flow of data among countries, that we can provide software services, telecommunication services, and electronic payment services. All those are very much a part of TPP.

“We’re also looking to strengthen our international partnerships and our allies. And that’s why we’re pursuing an agreement with the EU called the Transatlantic Trade and Investment Partnership that would not only break down run-of-the-mill barriers like tariffs and traditional non-tariff barriers, but also work to try and bring two well-regulated markets closer together to bridge divergences between two high-wage, well-regulated markets. That will allows us, not only to trade more with each other, but to work with each other to raise the bar around the world.  T-TIP will allow us to be standard-setters, rather than standard-takers. 

“Here again, the economic case is absolutely clear. We would be deepening what is already a broad and deep economic relationship -- $1 trillion in trade every year, $4 trillion in investment, and 13 million workers on both sides of the Atlantic who owe their jobs to the trans-Atlantic economic relationship.

“But we should also consider the strategic implications. At a time when developments in Russia and the crisis in Ukraine have triggered deep unease across Europe, this agreement reminds the world that our trans-Atlantic partnership is second-to-none.

“In Europe, many are looking to T-TIP to spur on much-needed reforms in the energy sector, so they can achieve greater energy security in their partnership with us as well.

“Finally, we’re also using trade policy to promote broad-based, inclusive development through efforts like the African Growth and Opportunity Act, or AGOA.

“This is the cornerstone of our trade policy toward sub-Saharan Africa, it has supported hundreds of thousands of jobs in the region, and created countless market opportunities for American firms as well.

“Updating and renewing this program to reflect changes in Africa over the last 15 years, and to reflect changes in Africa’s relationship to the global economy would send a very strong message that the U.S. remains deeply committed to this dynamic region and to promoting broad-based economic development through trade.

“We benefit from this, not only from the stability that comes with greater prosperity in Africa, but also from the market opportunities that Africa’s growing middle class offers.

“These are just few of the efforts in the President’s Trade Agenda, but I hope it gives some sense of how they’re important both economically and strategically to us.

“We’re updating the post-World War II order system by setting new rules of the road. We’re protecting that system by strengthening our partners and allies. We’re expanding that system so that its benefits are widely shared. And in doing all of this, we’re solidifying America’s position at the center of that rules-based system.

“And at the end of the day, we need to recognize, as Jane said, that others are not standing still, and neither can we.

“By leading on trade, we can promote a global order that reflects both our interests and our values.

“By leading on trade, we can launch a race to the top, rather than be subject to a race to the bottom that we cannot win and should not run.

“By leading on trade, we can carry forward the torch that President Wilson held up a century ago, when he said, ‘The time for provincial thinkers has gone by. We must play a great part in the world whether we choose it or not.’

“We choose to do so, and we thank you for your support in doing so. Thanks very much.”