Remarks by Ambassador Michael Froman to the Economic Club of Minnesota
Upon Receiving the Bill Frenzel Champion of Free Trade Award
Minneapolis, Minnesota
March 7, 2016
*As Delivered*
Thank you very much, Carla.
One of the great things about being USTR is the bipartisanship of this position and those who have held it, and Carla exemplifies that. She has been a good and wise friend and supporter from the beginning, and I am deeply grateful to her.
Let me thank Congressman Emmer for being here, and former Senator Boschwitz, former Congressman Kennedy, Consul Generals of Japan, Canada, and Mexico. It’s really a privilege to be here and to receive this award. It’s especially humbling given the legacy of the man who it honors. Congressman Frenzel remains an inspiring example for his commitment to bipartisanship, his mastery of complex issues, and his willingness to speak the truth. In response to calls, for example, that the United States should raise trade barriers to “send a message” to the world, he encouraged a less expensive route: he said, “Let’s try Western Union, or the Post Office.”
He served on the Committee that advised me and a number of my predecessors in this job. He was an active supporter of our efforts to negotiate the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (T-TIP). In fact, in 2013 he wrote a column urging President Obama to make TPP the centerpiece of the international economic agenda of the second term, and that’s exactly what we’re doing. He had a global view, but I can’t help but think that view was informed by the perspective he developed here in Minnesota.
Trade has helped Minnesota become one of the most diverse and dynamic economies in the country. The state is a leading center for advanced manufacturing, mining, agriculture, education, health, design, and other sectors – all inextricably linked to trade, with more than $21 billion in goods exports alone supporting more than 120,000 jobs in 2014.
Already, over 8,500 Minnesota businesses export, from Medtronic to the Mayo Clinic, from Dombrovski Craft Meats to ReconRobotics. Minnesota is the fourth-largest agricultural exporter in the nation, and the Minneapolis-St. Paul metropolitan region is the 15th leading urban area for exports in the country. Across the state, and around the country, TPP will open markets to our goods and our services, raise standards in those countries, level the playing field for our workers, our ranchers, our farmers, and our businesses of all sizes.
That’s the promise of TPP, which was concluded in October and signed just last month. This is an agreement that brings together economies responsible for roughly 40 percent of the global economy, and nearly one third of all global trade, including three of Minnesota’s top five export markets.
TPP opens up those markets to more Minnesota goods by eliminating over 18,000 foreign taxes currently levied against U.S. exports, including many of Minnesota’s most recognizable products: tape from 3M, which faces tariffs up to 17 percent in certain TPP countries; breakfast cereal from General Mills, which faces tariffs up to 27 percent; chili from Hormel, which faces tariffs up to 34 percent; and the list goes on. Under TPP, all of those tariffs will go to zero.
And those tax cuts add up to greater competitiveness for U.S. workers and businesses in one of the world’s fastest-growing regions of the world. By 2030, this region is anticipated to have more than 3 billion middle class consumers – and we know the first thing the middle class consumers want, is more protein and more Made-in-America products. And those are products that come from right here.
And as our exports rise, so does our economic opportunity here at home. We know that companies that export more tend to grow faster, hire more employees, and pay up to 18 percent more on average than non-export related firms. Increasing exports is an important way to deal with the wage stagnation and income inequality in our country. The Peterson Institute, which is an independent economic institute in Washington, D.C., estimates that gains from TPP will reach an estimated $131 billion in additional income, and $357 billion in additional exports every year by the year 2030. The majority of the benefits will go to workers, both skilled and non-skilled. The American Farm Bureau estimates that TPP will increase American net farm income by $4.4 billion, in part by increasing exports for a range of Minnesota’s chief agricultural products.
Now this isn’t just about big business. In TPP, we’ve created the first chapter focused specifically on the needs of small and medium-sized businesses. We took steps to simplify customs procedures, enhance the transparency of regulations, promote the key drivers of e-commerce. For example, TPP makes it cheaper, easier, and faster for businesses to get their products to market by ensuring the right to do express shipments, and ensuring pre-clearance procedures to help move goods quickly through borders.
Currently, around 300,000 small businesses across the 50 states export goods to foreign destinations. That’s a small share of all the small and medium-sized businesses, and those exports support millions of American jobs through direct exports and participation in supply chains. 7,500 of those small and medium-sized business exporters hail from Minnesota.
Small businesses like Towmaster, which manufactures trailers in Litchfield with a team of 175 employees. One-third of their jobs are directly supported by exports.
Or Jonti-Craft, a family company in Wabasso that makes children’s furniture. Since they started looking to export in 2008, their international business has gone from being one percent of total revenue to 12 percent, and they now have direct trade partners in over 30 countries. I had a chance to meet Don and Cathy Schwarz of Jonti-Craft when they visited the White House last year, and they are a true American export success story.
And there can be many more. But in both of these cases, and countless others, foreign tariffs are constraining future growth. Right now, Jonti-Craft’s products face tariffs of up to 20 percent in TPP countries. Towmaster’s products face tariffs of up to 25 percent. TPP will bring those tariffs, and tariffs on all manufactured products, to zero, leveling the playing field for these American small businesses and hundreds of thousands more like them.
For many small businesses, these and other steps in TPP could be the difference between exporting or not. Between hiring more workers or not. Between being profitable or not.
Beyond tariffs, TPP opens up markets for U.S. exports in everything from engineering to architectural to express delivery to electronic payment services. We are the world’s services powerhouse with a substantial trade surplus in our services exports.
TPP supports our innovators and inventors and creative artists through strong and balanced commitments on intellectual property rights. Minnesota may only be the 21st-largest state by population, but it’s number 10 when it comes to patent awards.
TPP is the first trade agreement with rules that take on the issues of the digital economy with a commitment to make the Internet open and free. Rules that make sure that data can flow freely across borders, and countries can’t force companies to locate their infrastructure in that country in order to serve that market.
There’s plenty more that I can talk about in TPP, but the negotiation of a trade agreement is only the first step. It’s implementation, the monitoring, and the enforcement are equally important. So I want to focus on what we and other agencies are doing everyday on behalf of American workers and companies to ensure that our trade rights are being respected around the world.
We’ve pursued the most aggressive enforcement effort in history, using all of the tools at our disposal. We’ve brought 20 cases before the World Trade Organization, and we’ve won every case that’s gone to conclusion. We brought the first-ever labor case, and in just the past two weeks, we won a case against India’s discrimination against our solar panels, we resolved a dispute with South Africa to allow our poultry, beef, and pork exports in, we engaged with Peru to help combat illegal logging, and we reached agreement with Honduras to strengthen their intellectual property rights protections.
We’ve worked with the Minnesota delegation and with Governor Dayton to strengthen our capacity to take action. With the leadership of Senator Klobuchar, Senator Franken and others, we secured the passage of the “Level the Playing Field Act” which gave new tools to the Commerce Department to deal with unfair trade practices. We passed a Customs Bill which increased our trade enforcement authorities and resources, and gave us new tools to deal with currency manipulation.
Let me say a word specifically about steel, an area of particular concern here and around the country. More than a year ago, long before this issue was on the front pages of newspapers around the world, Secretary of Commerce Penny Pritzker and I went to the Chinese leadership and said we needed to have a conversation about China’s overcapacity. This is a problem that affects a broad range of sectors, it affects steel, it affects aluminum, it affects solar panels, and many others. We brought in experts from the U.S. and China and made it clear that this was a problem that was going to have to be dealt with. We are now enforcing 149 anti-dumping and countervailing duty orders against foreign steel. Just last week, the Commerce department made another determination on Chinese steel imports. We have mobilized the international community – in North America and more broadly – and there will be a series of high-level discussions in the coming weeks at the OECD and elsewhere about what to do. And we have used all of our bilateral mechanisms with China to continue pressing for progress.
But there’s more work to do, and we remain focused on holding our trading partners to account. Our commitment to these issues extends to the very highest level and we’re focused on everyone who is affected, not only the steel mills but also the mining workers and communities on the Iron Range. Recently, President Obama’s Chief of Staff (and at least equally importantly, a native son of Stillwater, Minnesota), Denis McDonough, visited the Mesabi Range College with Senator Klobuchar, Senator Franken, and Governor Dayton to further our work together.
And just last week, we called for a public hearing on overcapacity and how it affects the steel and other key sectors. We welcome broad range of input from of stakeholders and look forward to working with them to maximize our understanding of the causes and impact of overcapacity as we consider the range of enforcement tools and options we have going forward.
What’s clear, though, is that aggressive enforcement efforts, while absolutely necessary, are not entirely sufficient. We don’t have any permanent tariffs on steel imports. Our market is open. So we need to raise standards in other countries and tackle emerging issues. In today’s fast-changing world, we need to lead on trade to shape globalization so that it benefits our workers and our businesses.
That’s why, for example, TPP is the first trade agreement in history with disciplines on state-owned enterprises. These are the big companies that foreign governments own, that they may provide subsidies to, and that compete against our private firms. TPP ensures that if foreign governments subsidize and use these enterprises to gain unfair advantages against our private firms, American workers and their businesses will now, for the first time, have the ability to impose sanctions on them. That’s good news for American workers and businesses of all sizes, including Minnesota’s steel producers.
TPP is a real opportunity, one that’s well within our reach. But there is a cost to waiting. According to the Peterson Institute, a one-year delay of TPP would cost an estimated $94 billion in national income. That’s about $700 per American family. And there’s an incalculable cost of ceding our leadership role on trade. Because the rest of the world is not waiting. They’re going ahead with the agreements of their own, and they carve up the market at our expense, and with rules that don’t necessarily reflect our interests and our values. So that is ultimately the question Congress will face this year: Cut more than 18,000 taxes on Made-in-America exports or cost every American household $700? Shape globalization or be shaped by it? Lead on trade or be led?
The answer should be clear, but trade votes are always very difficult, they’re always very close, and your engagement, as Ambassador Hills said, is going to be critical during the weeks and months ahead. There are compelling studies, there are lots of statistics, but studies and statistics won’t be enough to get the job done. We need your stories and your voices. We need you to speak up and explain why America’s leadership on trade matters. The economic stakes are significant and far-reaching, and so are the strategic stakes. As Bill Frenzel once said, “We are all in this together.” And I know that together, we can get this done.
Thank you very much.
