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Remarks by Ambassador Michael Froman to the U.S. Conference of Mayors
January 20, 2016
*As Prepared for Delivery*
Thank you, Mayor Fischer, for the kind introduction.
I see a lot of familiar faces here, and I want to thank you all not only for being here today, but more importantly, for the work that you’ve been doing every day. Thanks to your efforts and advocacy, including by the task force chaired by Mayor Buckhorn, the coalition supporting TPP is strong and growing stronger.
There’s always something refreshing about being around mayors. You’re the masters of a rare art: getting things done. You favor pragmatism over politics. Solutions over sound bites. Constructive action over complaining.
According to last year’s metro economies report, metropolitan areas are home to more than eight out of every ten Americans, more than 90 percent of our nation’s GDP, and 94 percent of new jobs, in 2014. As Lyndon Johnson famously said, “When the burdens of the presidency seem unusually heavy, I always remind myself it could be worse. I could be a mayor.”
Last year, I spoke to this organization about the promises of TPP. The promise of additional higher-paying jobs here at home. The promise of raising standards abroad and leveling playing field for American workers and businesses. And the promise of shaping tomorrow’s global economy so that it reflects both our interests and our values.
Today, I’d like to explain how the agreement we reached last October delivers on those promises. The full text has been available for over two months now. I’d encourage everyone to take a look for yourself. We set out with high ambitions, and we not only realized those ambitions, but brought home historic results.
We promised to remove barriers to American exports. The agreement we brought home cuts more than 18,000 foreign taxes on American exports.
For example, headphones that are made in California and sold to the Asia-Pacific region have been hit with taxes of up to 15%. Under TPP, those taxes are cut to zero. Foreign taxes on Made-in-America car engines will fall from highs of 50% to 0%. Foreign taxes on American exports of paint will fall from 25% to 0%; on hammers, from 20% to 0%; on optical fiber, also from 20% to 0%.
If you’re seeing up a pattern here, you’re not wrong – TPP will eliminate every single tariff these countries now impose on American manufactured goods. And you can see more examples, covering all 50 states, by reading a report on our website, USTR.gov, called “18,000 Tax Cuts on Made-in-America Exports.” That’s what these slides we’re showing are based on.
As our exports rise to markets around the world, so does our economic opportunity here at home. We know that every $1 billion of exports supports 5,000-7,000 jobs and that companies that export tend to grow faster, hire more employees, and pay higher salaries—up to 18% more than non-export related jobs in the same sector.
But in too many cases, taxes on American exports are holding our workers back from those higher wages. In fact, some estimates have shown by enabling businesses to serve wider markets, and encouraging investment in capital and technology, elimination of foreign taxes on U.S. exports could raise wages in manufacturing industries by up to 12%.
And of course, for maritime cities from Miami to Mobile, Norfolk to New Orleans, San Diego to Seattle, and so many others, a larger flow of exports and cargo means new business for ports. This in turn means higher demand for skilled blue-collar workers in warehousing, trucking, and other high-wage transport industries.
Historically, reducing tariffs like these has been the main focus of U.S. trade policy. Knowing that we have what it takes to compete with the world, successive administrations and Congresses--Democrats and Republicans alike, going back to FDR--have worked to remove foreign barriers to our economic progress. This tradition, strength through openness, has delivered some impressive gains. Since World War II, trade liberalization has contributed nearly $13,000, on average, to the annual income of every American household.
But TPP is not simply the next step in this long bipartisan tradition. Where many of our past trade agreements have been incremental, TPP is transformational. In addition to cutting 18,000 foreign taxes on our exports, TPP breaks new ground on a host of issues.
For example, TPP has a comprehensive set of services commitments that help American innovators, everyone from our artists to our engineers, tap into the growing Asian markets. It will enable our express delivery industry to bring goods direct to Asia-Pacific consumers, create new opportunities for U.S.-based insurers, engineering firms, environmental remediation firms and others. Across your cities, you could see new opportunities – as anchor employers like hospitals offer specialist care and patient monitoring to Asian and Latin American patients, or as community colleges and universities offer online courses, tutorials, and other education services.
The agreement we brought home also has a strong, balanced, state-of-the-art set of commitments on intellectual property rights. These will provide incentives for the research and development that make America the world’s leading innovation economy.
Last year, I also spoke about TPP’s potential to raise labor and environmental standards abroad. The agreement we brought home has the highest labor and environmental standards in history. It fights abuses like child labor and forced labor, and requires countries to maintain laws on acceptable conditions of work, including minimum wages, working hours, and workplace health and safety. Among other achievements, it requires countries to eliminate all tariffs on green technologies, prohibits some of the most harmful fishing subsidies, and strengthens our ability to address collective challenges like wildlife trafficking.
Just as importantly, TPP gives us the tools we need to enforce these high standards. We’ve actually put these high standards at the core of the agreement. In practice, that means labor and environmental standards are subject to the same enforcement procedures as other obligations in the agreement, including recourse to trade sanctions.
Higher standards will help start a race to the top, incentivizing other nations to raise their standards and giving our workers and businesses a fair shot in one of the world’s fastest-growing regions. With all our strengths--our talented workers, our innovative companies, our dynamic cities--I’d bet on the United States winning that race every time.
In addition to dropping barriers to U.S. exports to new lows and raising standards to new highs, TPP tackles new areas that trade agreements have never addressed.
For example, last year, I spoke about the potential for TPP to set rules that will help keep the Internet open and free. To date, we’ve only scratched the surface of the digital economy’s growth potential. According to the International Trade Commission, removing measurable foreign barriers to digital trade could add more than $40 billion to the U.S. economy, increase U.S. wages by as much as 1.4 percent, and create as many as 400,000 jobs.
If the Internet – bolstered by fair and open rules that keep markets open, protect privacy, and ensure security – remains free and continues to grow, we can dramatically expand our exports and support more good jobs here at home. In the 21st century, these efforts are as critical for the success of a leading high-tech company in Silicon Valley as the small business down the street.
And that’s another promise I discussed last year: the potential for TPP to help small businesses. The agreement we brought home does more than any agreement before it to address the challenges that our small businesses face.
Currently, around 300,000 small businesses across the 50 states export goods to foreign destinations, supporting millions of American jobs through direct exports and participation in supply chains. We’ve talked with many of these small businesses: A San Antonio family business that makes innovative industrial materials, a Cleveland-based manufacturer of wastewater treatment systems, a San Diego brewery, a Boston firm inventing tools to help rescue workers do their job better, and many more. Just last week, I visited a small business in the Bronx that manufacturers and exports acoustic equipment to five of our TPP partners.
These are remarkable stories of ingenuity, hard work, and entrepreneurial success. And there can be many more. With the vast majority of our small businesses not exporting at all, and more than 95 percent of the world’s customers living beyond our borders, there’s a huge opportunity waiting to be tapped.
The agreement we concluded is the first free trade agreement to dedicate a full chapter to addressing many of the barriers that prevent our small businesses from succeeding globally. For example, TPP makes it cheaper, easier, and faster for businesses to get their products to market by ensuring rights to express shipment, and creating efficient and transparent customs procedures that help move goods quickly through borders.
For many small businesses, these and other steps in TPP add up to significant improvements in efficiency and cost. In that sense, for many small businesses, TPP could be difference between exporting or not. Between hiring more workers or not. Between paying those workers higher wages or not.
As I said earlier, I admire this group because you get things done – pragmatically – using every tool in the tool box. In an increasingly competitive world, TPP is one of our best tools for sharpening America’s economic edge. For supporting the types of jobs our communities need. For making America the world’s production platform of choice: the premier location for investing and setting up shop in order to do business with the world.
With this historic agreement in hand, the question isn’t whether America should lead on trade, but why wait? Why wait on cutting thousands of foreign taxes on American exports? Why wait on supporting additional high-paying middle class jobs here in the United States? Why wait on helping our small businesses succeed overseas?
We know that many of you are asking similar questions. Across America, we have seen mayors get involved in an unprecedented way. In Atlanta, where we concluded our TPP negotiations, I stood with Mayor Benjamin, Mayor Stodola, Mayor Reed, and Mayor Buckhorn in front of a small mattress business that will benefit from trade – discussing the benefits for all of our cities. Just last week, Mayor Cabaldon testified before the ITC on behalf of the U.S. Conference of Mayors. Votes on trade are always close, and its efforts like these that will tip the scales in favor of TPP.
In the coming months, we want to work with each and every one of you – visiting small businesses in your cities, speaking on calls with the press, writing op-eds, and telling the great stories each of your cities have. As mayors, your voices carry as much weight as the great responsibilities that rest on your shoulders. Over one hundred of you supported passage of Bipartisan Trade Promotion Authority last summer, and that was critical in helping us get it done. Now, with this historic TPP agreement in hand, your cities are closer than ever to realizing its benefits. Together, we can get it done.