Remarks by U.S. Trade Representative Michael Froman at the Economist Buttonwood Conference
October 30, 2013
It’s a pleasure to join you today to talk about the changing dynamics of trade and how President Obama’s trade policy fits into the broader economic strategy of the United States.
We gather at an uncertain moment in the global economy. Europe has stabilized, but most expect flat to slow growth for years to come.
Japan is trying to reboot its economy, but the Abe Government has only just begun to implement the hard economic reforms needed to break out of 20 years of malaise. It is unclear whether certain emerging economies will be able to sustain the high rates of growth they’ve enjoyed the last couple of decades.
In many respects, the United States is the nicest house on a relatively ugly block. We have dealt aggressively with problems in our financial sector, are seeing a recovering housing and jobs market, de-leveraging of household debt, and the discovery of new sources of energy creating the potential for a renaissance in American manufacturing while significantly lowering greenhouse gas emissions.
For the United States, our risk is that our political system fails to do what it needs to do – on fiscal issues, immigration, trade and other issues – to lock in this virtuous cycle. Let me focus today on trade.
In the United States, notwithstanding headwinds coming from the Eurozone crisis, our exports have been growing an average of nearly 12 percent a year since 2009, while the global economy has grown only at 3.2 percent a year and global trade has grown at 2.7 percent a year.
Exports have accounted for nearly one-third of our GDP growth during this period.
And as President Obama has made clear, increasing exports – as part of our broader effort to rebalance global growth – is critical to supporting jobs, promoting growth and supporting and strengthening the middle class in the United States.
But now, global trade is expected to grow more slowly in the future than it has in the past.
And what does this decline in trade mean for the global economy? And how should we address it?
One action we can take is to open markets further, creating new opportunities for trade and investment, and to reduce unnecessary costs and inefficiencies in the global trading system.
In that regard, President Obama is pursuing what is perhaps the most ambitious trade agenda in American history – to create new export opportunities for the United States in concrete ways and to ensure that American workers and firms are dealt into emerging global supply chains rather than being dealt out of them.
That’s why we’re pursuing the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership or (T-TIP), which together will allow us to conduct free trade with economies representing nearly two-thirds of global GDP.
And that’s why we’ve been driving sectoral agreements to liberalize trade in services among countries representing 70 percent of the global services market and in information technology products among countries representing 90 percent of that market.
It’s also why we’ve pressed for a binding agreement on trade facilitation at the WTO – which has the potential to reduce the costs of customs, clearance, logistics, border measures, and other inefficiencies by 10 percent for developed countries and nearly 14 percent for developing countries – estimated to increase global incomes by literally hundreds of billions of dollars.
These negotiations have even greater importance at the moment because their success or failure by the time of the WTO Ministerial in December could well determine whether the WTO is a viable forum for trade liberalization going forward.
In addition, we’ve engaged China in a Bilateral Investment Treaty (BIT) negotiation to put to the test whether China’s expressed commitment to reform will translate itself into actual liberalization. And we are working with India and Brazil, with Sub-Saharan Africa and the Middle East, to deepen those trade and investment ties as well.
There is a common thread woven throughout all of these initiatives. All of them are intended to raise the standards of international trade, introduce new disciplines to address emerging dynamics in the international trading system and ultimately strengthen the multilateral trading system.
Like those brokers who met long ago under the buttonwood tree, we have an opportunity to help define the new rules of the road. But we also face a stark choice: We can either set the pace in a race to the top or try to compete in a race to the bottom – a race we have no interest in winning.
The Obama Administration has chosen to focus our efforts on raising standards among a critical and increasing mass of like-minded states until those standards become the global standard.
We don’t have the luxury of sitting on the sidelines.
Other countries are busy negotiating preferential access to key markets. They may not share our high standards on labor or environmental or intellectual property rights issue protections. They might have a different perspective on the role SOE’s should play in the global economy.
So we need to take the field and help set the standards. Otherwise, we will be standard-takers in a global economy that does not necessarily reflect America’s interests and values.
We all appreciate that multilateral trade liberalization is the highest and best form of trade liberalization, but that can only succeed if and when all countries, including the emerging markets, are prepared to take on responsibilities and open their markets commensurate with their role in the global economy.
And until that time, all we can do is collaborate with what we expect to be an increasingly broad coalition to raise the standards, develop new disciplines and set new norms.
As these norms make their way into the bloodstream of the international trading system, it is our hope that they ultimately will become hallmarks of the multilateral trading system.
The stronger we can make TPP, T-TIP, and these other agreements, the more compelling it will be for other countries to raise their own standards to compete with them or to join them outright.
We need to ensure that trade agreements level the playing field on which American workers compete and makes sure, through the enforcement of our trade rights, that we hold other countries to the highest possible standards.
That’s why the Obama Administration is forging a very different path when it comes to trade policy.
The President believes that trade policy should advance both our interests and our values by promoting economic growth, strengthening the middle class, and creating jobs – including manufacturing jobs – in the United States.
That's what motivated the President’s to go back to Korea, Colombia and Panama to improve those agreements before submitting them to Congress for their approval. And it's what motivated a substantial increase in our enforcement efforts.
Sometimes when I hear the domestic debate over trade, it sounds like nothing has changed. There is little recognition that this is 2013, not 1993. The reality is that the Obama Administration has explicitly chosen to take a very different approach to trade than in the past.
That debate is important as we begin congressional consideration of Trade Promotion Authority, or TPA.
This is another area where I hear a lot of misinformation or misleading information.
Trade Promotion Authority is the explicit exercise of Congress’s Constitutional authority. TPA is the mechanism by which Congress sets the framework for trade negotiations.
Under TPA, Congress gives us our marching orders about what we should negotiate, how we should work with Congress throughout the negotiations, and the circumstances under which Congress will consider agreements once completed.
It's the mechanism that Congress has used since 1974 to work its will on trade policy while giving every President since then the leverage needed to negotiate.
So for those who want to see the U.S. economy grow and innovate, for U.S. workers and consumers who want to gain the benefit that the international economy has to offer, and for those who want us to lock in the virtuous cycle I mentioned at the beginning, it will be essential to work with us and Congress to move forward on TPA.
Because TPA is part of what we need to keep the economy moving forward.
Too many speeches I know you've all been to claim that this or that moment are an important turning point, or a crossroads, or a historical inflection point. But I honestly think, looking around at the global economy and the role the international trading system plays in it, it is hard to imagine a more dynamic time in the history of the global trading system.
There is much at stake. We have to get it right. And we’re well on our way to doing so.