Remarks by U.S. Trade Representative Michael Froman at Rice University’s Baker Institute for Public Policy
September 19, 2016
As [Secretary Baker] said, trade has long been a bipartisan issue. For more than 70 years, Democratic and Republican administrations alike have worked to open markets for American exports, and to establish open and fair rules through American leadership.
In fact, Secretary Baker played a key role in some of the major bipartisan trade achievements, working closely with Dan Rostenkowski and Lloyd Bentsen on the launch of the Uruguay Round, and design of the U.S.-Canada Free Trade Agreement. And it's in that same bipartisan spirit that we are working closely now with Chairman Brady of Texas and Chairman Hatch of Utah to move the Trans-Pacific Partnership, or TPP, forward.
Today, we find ourselves in the midst of a major national debate about America's role in the world. Whether to engage with the global community or retreat from it. Whether to define the rules of the road or resort to isolationism and protectionism. Whether to lead or to cede that role to others. It's hard to overestimate the significance of this debate in U.S. economic and strategic interests around the world.
And in the midst of this debate, there seems to be consent about one issue: China. China is not our adversary. But it is a competitor that in many respects holds very different views of its role and responsibilities than other major powers. There is a perception that China doesn't play by the same rules that we and much of the rest of the world do, that it's taking advantage of us, and that it's asserting its interests in the Asia-Pacific region, and more generally, at the expense of ours and at the expense of its neighbors.
But what's interesting about this debate is that while the diagnosis might be right, many have come to exactly the wrong prescription. The answer to this challenge is not to allow China to write the rules of the road for trade, but for the United States to lead that effort. The answer is not to allow China to carve up the markets of the future, but to level the playing field and give American workers and businesses a shot to compete and win. The answer to China's challenge is not to withdraw from TPP, but to put it in place as soon as possible.
And at a time when political discourse in the U.S. is increasingly turning inward, it's worth recalling what's at stake in the Asia-Pacific. We are a Pacific power with a long history of leadership and deep interests in the region.
In 1900, Secretary of State John Hay said, "the Mediterranean is the ocean of the past. The Atlantic is the ocean of the present. The Pacific is the ocean of the future." Now, as a global power of course we don't have a luxury of writing off any ocean. But what's clear is that our interests in the Asia-Pacific region have only grown over time.
Since World War II, the United States has advance three core interests in the region. First, we have provided security for our allies. Second, we have enhanced economic opportunity. And third, we have promoted democratic values. And these interests have been remarkably consistent. They have been pursued by American leaders of both parties and they endure today.
Backed by American leadership, the open rules-based trade system helped Asia rise peacefully, lifting over one billion people out of poverty. It's impossible to count the number of conflicts that never occurred, but we know that for the last 40 years — those years have been the longest stretch of time in [modern] history without interstate wars in the Asia-Pacific. And it's clear that the entire world is safer when rules allow disputes to be settled by gavels, not guns, and when economic opportunity exists where it might otherwise not have been present.
Over the years, the bonds we have forged through commerce have grown into broad partnerships between countries. Take Vietnam. Since diplomatic relations were reestablished in 1995, trade has been one of our strongest tools for progress. From the signing of a bilateral trade agreement in 2001, to the establishment of permanent normal trading relations in 2006, to Vietnam's entrance into the WTO in 2007. Over the last two decades, our bilateral trade has grown tenfold, and we now work together on everything from disaster relief to maritime security.
By promoting democratic values, we have transformed adversaries into friends, friends into partners, and partners into allies. Consider Japan. Since World War II our competition has been confined to the commercial realm, while our cooperation has only expanded. In recent years we have worked together to stop Ebola, to stabilize Afghanistan, and to advance human rights, among many other joint efforts.
The Trans-Pacific Partnership represents the next chapter in this bipartisan tradition of promoting security, prosperity, and democracy in this region.
Let's start with the economics. Any trade agreement must be judged first and foremost on whether it promotes growth, supports well-paying jobs, and strengthens our middle class. That's the standard President Obama laid out when we set off on these negotiations, and that's the standard that we achieved in TPP.
For the United States, turning inward means turning away from this century's greatest economic opportunity. The Asia-Pacific is one of the world's fastest-growing regions, home to nearly half of humanity and over one-third of the world economy. In less than 15 years, two-thirds of the world's middle class will call the Asia-Pacific home, and they'll want more of everything that America is great at making. From cars to cosmetics, from apps to streaming movies, from beef and pork to fresh fruits and vegetables. And their governments and businesses will be among the fastest-growing investors in everything from infrastructure to aircraft to satellites — all of which we lead the world in producing.
TPP puts us at the center of that growth story. It brings together 12 countries comprising nearly 40 percent of the global economy, countries large and small, developing and developed, to define high standard rules of the road for the future of international trade. And it cuts or eliminates over 18,000 foreign taxes or tariffs on US exports, making it easier for American workers, farmers, ranchers, and businesses of all sizes to compete and win in the global economy.
It all comes back to the economic benefits here at home. We know that businesses that export tend to grow faster, hire more, pay their employees more, and be more resilient. And by removing foreign barriers to American exports, TPP will support more of those well-paying jobs here at home – jobs that pay up to 18 percent more on average than non-export related jobs. The Peterson Institute estimates that gains from TPP include more than $130 billion of additional income each year and more than $350 billion of additional exports each year. And according to both the Peterson Institute and the International Trade Commission, two thirds of those benefits go to workers, both skilled and non-skilled through higher wages.
When it comes to benefiting from TPP, Houston is a case and point. Houston is home to about 13,000 businesses that export. More than 90 percent of which are small and medium sized companies, exporting almost $100 billion in goods a year. Houston’s inventors and scientists, including those here at Rice, secure more than 3000 patents a year. The port of Houston handles 200 million tons of cargo a year. There are few, if any, cities in the world that stand to benefit more from TPP than Houston. And at a time of slow and uneven global economic growth, TPP would provide the much welcome boost to the American economy and that in itself has broader implications.
As General James Jones, former National Security Advisor and former commandant to the US Marine Corps has put it, “promoting robust international trade contributes to national prosperity”, a simple and empirically based fact of modern economic life. A strong economy won’t solve all of our problems, foreign or domestic, but without it, we can solve very few of them.
Beyond the economics lie the strategic importance of TPP. The Asia Pacific is a region in flux where broader issues about the rules based system are in question. On one hand, we can allow countries to throw their weight around and engage in behavior that is essentially statist and mercantilist. And on the other hand, through TPP, we can strengthen the rules based system that has served us all so well. Backed by American leadership, that system has delivered an era of peace and prosperity unequaled in history. Indeed, TPP is as strategic as it is economic.
As Defense Secretary Ash Carter said recently, “Passing TPP is as important to me as a new aircraft carrier. TPP strengthens our partners and allies by sending an unmistakable signal of United States intent.” Just today, Japan’s Prime Minister, Abe, said “Through the TPP, the US can make clear its commitment to playing a leadership role in the growing Asia Pacific.”
But failure to pass TPP this year would also send an unmistakable signal. Singapore’s Prime Minister Lee has said, “If you are not prepared to deal when it comes to cars, services, and agriculture, how can we depend on you when it comes to security and military arrangements.” If we don’t act, we will create a vacuum. And as New Zealand’s Prime Minister Key has explained, “These economies are not going to stand still. Beijing will step in to fill the void.”
Now let me be clear, every country in the Asia-Pacific region, including ourselves, needs a positive and constructive relationship with China, but the more China asserts itself in the region, the more our trading partners want us to be involved. Not to contain China, but to diversify their partnerships and markets and to avoid becoming overly dependent on just one country.
China is executing on its regional strategy: the One Belt, One Road initiative, the Silk Road Fund, the Asian Infrastructure Investment Bank, the challenges in the East and South China Seas, and its push to conclude the regional comprehensive economic partnership, or RCEP. RCEP is a mega-regional trade agreement with 16 countries, spanning from India to Japan. It would be the largest regional trading block in history. Russia too has an active regional strategy, signing partnership agreement with countries in the region and through its Eurasian economic union.
And these kinds of arrangements present a very different future than that envisaged by TPP. Unlike TPP, these agreements do not raise labor and environmental standards. They do not ensure that government owned corporations have to compete fairly against private firms. They don’t protect intellectual property rights and they don’t maintain a free and open Internet.
Without TPP, our partners in the region will question the wherewithal of the United States as a Pacific power. If Congress fails to follow through in a timely fashion, they will have no choice but to question the reliability of our commitment to the region. And failure to lead in the Asia Pacific will have broad spillover effects around the globe. Whether it’s negotiating other trade agreements, leading international economic policy, or making commitments to countries outside of the economic realm, turning inward and failing to deliver on our promises undermines the credibility of the United States more generally.
What Congress does on TPP in the upcoming months will send a powerful signal, one way or the other. Trade deals have always been tough votes and in today’s political environment, TPP becomes an even more powerful signal of America’s commitment to the Asia Pacific. During a time of great uncertainty, the approval of TPP will send a reassuring message. It would give our partners and allies the confidence to stand by their principles. It would put the entire region on notice that the rules based system is here to stay, defended by the United States and other like-minded countries. And it would show the world that higher standards, standards that reflect US interest and US values are where the global economy is heading.
At the end of the day, policymaking is not about perfection. There is no free vote here. It is about deciding under which alternative we are better off.
So what does the world look like with and without TPP? We can write the rules and promote market economies and democratic principles or we can allow others to provide alternative models that reflect neither our interests nor our values. We can strengthen the rules based system, as we are working to do on everything from maritime security to trade, or we can open the door to a system in which might makes right and our allies and partners in the region have little recourse. We can give our partners and allies the strength and assurances they seek or we can weaken their confidence and encourage them to look elsewhere for support.
Ultimately, these consequences come home. We can knock down barriers to American exports and raise standards abroad to preserve and support more well-paying jobs here at home or we can allow other countries to capture the growth from global markets and see our economic opportunities decline. We can level the playing field for our workers or we can condemn them to fighting the same fight against unfair trade with one hand tied behind their backs. We can lead or we concede that role to China.
Life is about alternatives, not hypotheticals. It is hard to imagine that the alternative to TPP is better for our economic and strategic interests, for our workers, farmers, and ranchers, for our innovators and creative artists, and for our allies and partners. The choice is just that clear.
Thanks very much.