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Remarks by Ambassador Ron Kirk to the Austin Chamber of Commerce

Ambassador Ron Kirk

Austin Chamber of Commerce
February 25, 2010
Austin, Texas

* As Prepared for Delivery *

“Thank you, Tim. Good afternoon, everyone. It’s great to be back in Austin. Yesterday I met with your Mayor, Lee Leffingwell. Lee and I discussed a wide range of issues as he was putting the final touches on his State of the City address.

“Our conversation brought back fond memories of my own mayoral days in Dallas. It also reinforced why I really enjoy my current job as U.S. Trade Representative – because the Obama Administration’s agenda to increase trade and double exports naturally complements your local leaders’ efforts to attract job-creating business investments to your communities.

“As President Obama said in his State of the Union address, ‘The future is ours to win...but to get there, we can’t just stand still…to compete for the jobs and industries of our time…we need to out-innovate, out-educate, and out-build the rest of the world.’

“Here in Austin you’re well on your way to winning the future with world-class universities, strong infrastructure, and an entrepreneurial spirit that encourages innovators to take big ideas and turn them into blockbuster products. As a result high-tech businesses both large and small continue to thrive and create jobs in your community. And increasingly those jobs depend on trade.

“Texas companies like yours are tackling the challenges of global competition, and winning. Your international businesses contributed to Texas’ total $206 billion of goods exports last year, making it the number one exporting state in the country. These totals are especially impressive when you consider that behind every trade number is the story of at least one business whose employees’ jobs depend on trade.

“For example, this morning I toured Formaspace Technical Furniture, which designs and manufactures custom technical furniture, accessories, and services. With about 50 employees right now, Formaspace has been ranked as one of Austin’s fastest growing small businesses on the Inc. 5000 list. In fact, they just moved into a bigger facility.

“Formaspace CEO Jeff Turk estimates that 20 to 25 percent of their products right now are being exported overseas, with about half of that figure going to Asia-Pacific markets. And he told me that getting more access to foreign markets, especially in the Asia-Pacific, will have a big impact on their ability to continue growing steadily.

“All around Austin – and here today – there are dozens of stories like this. That’s why at USTR we are moving forward with a number of initiatives to help businesses and workers realize the full potential of trade opportunities in Asia, Latin America, and around the world. Among these is the U.S.-Korea trade agreement, which will bring substantial benefits to the Austin area. Let me tell you how:

“The Republic of Korea is our seventh largest trading partner and one of the most dynamic markets in the rapidly growing Asia-Pacific region. In fact, exports of U.S. manufactured goods to Korea were up 37 percent in 2010, which makes Korea the fastest growing market for U.S. manufactured goods among our top ten trading partners. The U.S.-Korea trade agreement will help increase trade and exports to Korea even more, boosting sales of some of your top local exports such as computer equipment, machinery, and beef, just to name a few.

“In 2008, the Austin-Round Rock area exported $4.9 billion of computer and electronic products worldwide, making it Austin’s top export category by far. Now part of the story behind your huge exports of computer and electronic goods – besides the inherent quality of the innovation hub you have built here – might be that for years U.S. computer and electronic goods exports have benefited from something called the World Trade Organization Information Technology Agreement (ITA), which substantially allows duty-free trade in these categories. Without tariffs applied to your goods, many of you are able to compete more effectively in global markets, including Korea.

“So, with respect to the U.S.-Korea trade agreement, some of you might say now: ‘Well, if you’ve already eliminated tariffs on computer and electronic products, what’s in it for me?’ That is a logical question and it brings up an important point. Because the U.S.-Korea trade agreement doesn’t just reduce or eliminate tariffs – it tackles and reduces non-tariff barriers to trade as well.

“Non-tariff barriers can refer to any of the rules, regulations, customs, and other procedures that U.S. companies, farmers, ranchers, manufacturers, and service providers sometimes encounter in foreign markets. Often these non-tariff barriers can prove just as burdensome to trade, and affect international business just as much as tariffs, if not more.

“The good news is we’ve addressed non-tariff barriers in the U.S.-Korea trade agreement. First, it contains strong enforcement provisions to ensure that American intellectual property rights are efficiently and effectively protected in Korea. These include strong protections for patents, trademarks, and copyrighted works and tough penalties for piracy and counterfeiting.

“Furthermore, the agreement contains provisions to protect against Korea adopting new regulations that create unnecessary barriers to trade, and establishes an early warning system for potential trade barriers. Korean authorities will be required to publish proposed regulations and provide U.S. producers with both opportunities to comment and sufficient time to adjust before new rules take effect. Finally, under the agreement we will be engaging in an ongoing dialogue with Korea to ensure that their regulations accomplish their objectives in the least burdensome manner possible.

“Together all of these provisions to reduce non-tariff barriers will help U.S. computer and electronic producers – including Austin high-tech manufacturers – compete even more effectively in the Korean market. And in fact, measures to address non-tariff barriers will help promote trade in goods and services across all sectors.

“Now let’s consider machinery, the second-highest global export category for greater Austin. In 2008, this area exported $1.8 billion in non-electrical machinery, supporting thousands of jobs in communities around the 25th congressional district. Right now exported U.S. non-electrical machinery goods face a tariff of up to 13 percent in Korea. But upon entry into force the agreement would eliminate 85 percent of those tariffs within three years. When that happens Austin area small businesses that make things like pumps, tools, and valves will be able to compete more effectively in the Korean market. And there will be similar benefits in many categories of manufacturing because approximately 80 percent of the tariff reductions in the U.S.-Korea trade agreement cover non-agricultural goods.

“Of course, we can’t talk about trade and exports in Texas without mentioning beef. And I want to be clear – the U.S.-Korea trade agreement is good for American cattle ranchers and U.S. workers throughout the beef and beef product supply chain.

“Because Korean consumers are already hungry for U.S. beef and they want to buy more. Last year they bought over $500 million worth of U.S. beef and beef products, which is more than twice the 2009 total of $216 million. That’s an encouraging trend in demand as the global economy recovers; particularly in the face of the high current Korean tariff on U.S. beef of 40 percent.

“If Korean consumers are buying half a billion dollars worth of U.S. beef now, just think about how much they might buy once the agreement goes into effect and Korea phases out its tariff by roughly 2.7 percent a year over 15 years. The tremendous growth potential of these tariff reductions is a big reason why industry groups like the American Meat Institute and the National Cattlemen’s Beef Association support the U.S.-Korea trade agreement. And there are similar benefits for nearly every product category in the agricultural sector including pork, poultry, fruits, nuts, and grains.

“Finally, I would be remiss if I didn’t note the substantial benefits for American service providers in the U.S.-Korea trade agreement. We don’t have the same kind of detailed data on services as we do on goods, but let me give you two numbers to help illustrate my point. The first figure is 80 percent – that’s how many Americans are employed in the services sector in jobs ranging from contractors to cargo handlers. And the second figure is $560 billion – that’s the size of Korea’s services market. Put them together and you can start to see why the U.S.-Korea trade agreement will support more service jobs here in Texas and across the United States.

“Right now the United States already enjoys a $10 billion services trade surplus with Korea. Moving forward the agreement will require Korea to match the level of openness provided by the United States in a host of sectors, ranging from energy and environmental services to financial services and distribution. And the agreement’s provisions to ease the flow of trade in services and products delivered over telecommunications networks offer particular benefits to Austin area providers of cutting edge communications services like social networking.

“That’s just a quick snapshot of far-reaching benefits that the U.S.-Korea trade agreement offers to Austin area manufacturers, farmers, ranchers, and service providers. Furthermore, when we look beyond statistics, it is really stories of growing U.S. small businesses like Formaspace that help make the case.

“To be sure, there is no doubt the agreement will help to increase U.S. exports to Korea. But just as importantly it will also strengthen the broad and deep trading partnership we have with Korea that is essential to mutually beneficial economic growth. Because as U.S. companies sell more goods and services in Korea, so too will Korean companies build up their businesses here in America. Closer trade ties will encourage cooperation in business and investment, supporting better jobs for U.S. workers who will win the future in places like Austin.

“For example, most of you know the Korean company Samsung has been building semiconductors here in Austin since 1996. In fact, Samsung Austin Semiconductor (SAS) is the company's only semiconductor manufacturing plant located outside Korea.

“Over 1,000 Austinites already work at the advanced manufacturing facility where Samsung’s state-of-the-art NAND Flash memory chips are made. And last year Samsung announced a $3.6 billion investment to expand its 12-inch semiconductor fabrication capacity. The company expects this project to create 600 additional jobs that pay an average of $70,000.

”But that’s not just good news for future Samsung employees. The Greater Austin Chamber of Commerce estimates that Samsung’s presence in Austin accounts for more than $1.4 billion each year in local economic activity. And they estimate businesses that support the Samsung facility sustain 6,500 additional jobs in the area.

“These businesses include firms like Fabworx Solutions, Inc., a small company that designed a robot to reduce the amount of scratching that occurs in semiconductor production. Based originally in New Hampshire, Fabworx moved its corporate and manufacturing operations to Austin a few years ago. Because as Samsung ramps up capacity to meet global demand for its semiconductors, Fabworx hopes to see steady business growth as well. These two companies – one large and one small – are both preparing for the future with an eye toward increasing exports.

“The stories of Samsung, Fabworx, Formashape, and many others like them are motivating us to move forward quickly. After all, Korea is also moving toward trade agreements with its other trading partners like the EU, China, and Australia, whose exports compete against American goods and services in many sectors.

“In fact, the EU-Korea trade agreement is scheduled to take effect on July 1 of this year. The moment that agreement goes into effect, tariffs on thousands of European exports will be reduced or eliminated, potentially putting American producers at a competitive disadvantage if tariffs on U.S. products remain in place. We don’t want that to happen, so we’re working hard to win approval from Congress this spring.

“We are also working with Congress as we pursue trade opportunities in the dynamic markets of the Asia-Pacific through the Trans-Pacific Partnership (TPP). The TPP is our ambitious effort to craft a high-standard, broad-based regional trade agreement as a 21st century model for the future of American trade. Current TPP participants include the United States, Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam. Last week we concluded the fifth round of negotiations in Santiago, Chile where we discussed a range of issues including new technologies, emerging business sectors, and the needs of small businesses alongside labor and environmental concerns.

“Also this year the United States will host the 21 economies of the Asia-Pacific Economic Cooperation forum for the first time since 1993. With them, we intend to take practical and concrete steps to make it cheaper, easier, and faster for our firms to trade in a greener regional economy. That’s good news for you again, because in 2008 Austin area producers exported $6.1 billion of goods to Asia-Pacific countries, making them the top export destination by far.

“We are also pursuing opportunities in Latin America. The President recently directed me to immediately intensify engagement with Colombia and Panama with the objective of addressing the outstanding issues as soon as possible this year and bringing those agreements to Congress for consideration immediately thereafter.

“And at the World Trade Organization (WTO) we are focusing on the Doha Round of multilateral trade talks with the goal of achieving a truly market-opening result that will deliver new trade flows. We also support efforts to bring Russia into the WTO, and we plan to work with Congress this year to pass legislation granting Russia Permanent Normal Trade Relations status.

“In the next few months we’ll continue to advance trade policies that will help American innovators and job creators like you win the future. And of course we hope you will support these efforts as well. Together we can lead the way forward by building a broad coalition for trade that increases U.S. exports and supports job creation in America. Thank you.”