Remarks by Ambassador Michael Froman to the Atlantic Council
October 27, 2015
Thank you, Jon. Governor Huntsman, Ambassador Huntsman. Presidential candidate Huntsman. I’d like to think it all started with your time at USTR.
Sixty years ago, during a press conference at the White House, President Eisenhower observed that “trade is the greatest weapon in the hands of the diplomat.” That observation is worth repeating not just because of President Eisenhower’s military record, but because of the linkage it suggests between the economic and the strategic importance of trade.
Our trade agreements first and foremost have to be based on their economic merits – whether they support high-paying jobs and strengthen our middle class here in the United States. And that is exactly what the TPP agreement we concluded earlier this month will do.
The economic case for TPP is clear. It begins by acknowledging an important reality: The United States is already one of the most open economies in the world. Our average applied tariff is only 1.4 percent, we don’t use regulations as a disguised barrier to trade, and 80 percent of our imports from TPP countries already come in duty-free. For decades, this openness has been a source of strength, with trade liberalization since World War II contributing $13,000, on average, to every American household’s annual income.
But the picture looks very different overseas, where the playing field is too often tilted against our workers and our businesses. Currently, average tariffs on American exports are more than double what they are here at home. We face peak tariffs of 70 percent on autos, 50 percent on machinery, and as high as 700 percent on certain agricultural products.
And the playing field is tilted other ways as well. Our small businesses have to navigate mazes of complex customs regulations and other procedures. Our workers have to compete against foreign counterparts that lack basic labor protections. Our businesses are up against state-owned enterprises that receive government subsidies and competitors that don’t have to maintain environmental standards. In all these areas, lower standards and new forms of protectionism undercut America’s competitiveness in the global economy.
TPP tackles these challenges, leveling the playing field for American businesses and workers by disproportionately reducing barriers to our exports and raising standards across the region. It brings together twelve countries responsible for nearly 40 percent of the global economy, and it is the deepest, most ambitious trade agreement the United States has ever concluded.
TPP cuts over 18,000 different tariffs, or taxes, that Asia Pacific countries currently impose on Made-in-America exports, ranging from beef to tractors. It opens Asian markets, including the Japanese market, to Made-in-USA cars, trucks, and parts. Its fishery subsidy reduction is both an environmental achievement and the first subsidy reduction any trade agreement has achieved since the Uruguay Round over 20 years ago. Its Internet freedom provisions, protecting the right to free flows of data and preventing forced localization, will be a foundation of the future global digital economy. And I could go on and on. Bringing all this back home, we know that companies that export hire more, pay more, and grow faster. So by boosting our exports to the world’s fastest-growing region, TPP will help support more of those good, well-paying jobs in the United States.
But the importance of America’s leadership on trade extends well beyond economics. There’s a strategic logic, too. The positive power of trade, and of TPP in particular, is one of our most important tools for dealing with one of this century’s greatest challenges.
In recent years, a series of tectonic shifts—globalization, technological change, the rise of emerging economies—have combined to challenge the underpinnings of the post-World War II order. You can see that stress behind many of today’s global problems, whether it’s territorial disputes in the Asia Pacific, conflict on Europe’s periphery, or uneven global economic growth.
The overarching strategic aim our trade policy is to help revitalize the rules-based order and to do so at a time when there are competing visions for the global economy.
First, TPP is the highest-standard trade agreement in history, and it will establish rules of the road to ensure that tomorrow’s global trading system is consistent with American values and American interests. The choice is not between the status quo and TPP. It’s between TPP and a more statist, mercantilist approach – one in which there are no labor or environmental protections, no emphasis on intellectual property rights enforcement, no disciplines on state-owned enterprises, no commitment to a free and open Internet. It is very much in our interest that the global trading system be open and rules-based; that it reflect our interests and our values; and that we lead, rather than sit on the sidelines and leave that role to others.
Second, TPP will strengthen our partners and allies, positioning us to more effectively tackle the collective challenges of today and laying the foundation for pursuing broader mutual interests tomorrow. For many of our partners, the benefits of TPP go way beyond the economics of trade. They are rooted in the desire to strengthen political and strategic ties with the United States at a critical time for a region in flux. Prime Minister Abe, for example, has been very vocal in saying how important the deal is not only to Japan’s economy, but also to its security and to regional stability.
Third, TPP will promote inclusive development to expand the current order so that its benefits are both greater and broadly shared. TPP’s high standards, including its labor and environmental standards, its provisions on good governance and anti-corruption, will encourage sustainable growth and development in the region, helping to alleviate poverty and promote stability.
For all these reasons, TPP is a concrete manifestation of our rebalancing strategy toward Asia. It’s a powerful signal to the world that America is a leading force for prosperity and security across the region.
The economic and strategic logic of TPP is already having a magnetic effect. TPP was designed to be an open platform that will grow over time and help raise standards across the region and around the world. Since negotiations concluded three weeks ago, we’ve already been contacted by a number of economies expressing interest in potentially joining TPP. It is becoming clear that even non-members are going to have to raise their game to compete in a TPP world. And that’s good for everybody.
Being here at the Council, I would be remiss if I did not look across the Atlantic as well. With TPP concluded, there is even greater focus on advancing the T-TIP negotiations with the European Union. We are working to accelerate that process and just completed an important round in Miami. When we complete TPP and T-TIP, we’ll have free trade with two-thirds of the global economy, making it easier to multilateralize high standards.
But movement on trade outside of Geneva is already impacting discussions in Geneva – on the Trade Facilitation Agreement, on the Information Technology Agreement, on the Environmental Goods Agreement, on the Trade in Services Agreement, and even on the Doha Round itself where – as we prepare for the WTO Ministerial in Nairobi in December – we’ve had more honest conversations over the past 9 months than we had in the previous 13 years. What is crystal clear is that we cannot expect success from an architecture that has failed so consistently in the past. There is too much at stake in a well-functioning multilateral trading system that deals with both existing and future issues to allow the WTO just to languish.
Indeed, the stakes could not be higher. As President Eisenhower said, “If we fail in our trade policy, we may fail in all. Our domestic employment, our standard of living, our security, and the solidarity of the free world – all are involved.”
We’re heading into a critical period for this effort. Trade is politically difficult. No agreement is perfect. And it’s easy to be negative. But at the end of the day, the decision we have to make is whether we’re better off with TPP or with the alternative future we are likely to face. Economically and strategically, the choice is clear.
Thanks very much.