Promoting American Economic Leadership
Assistant Secretary, Bureau of Economic and Business Affairs
It is great to be in Denver, and celebrate World Trade Week with you. Denver’s unique location - midway between key trading partners Canada and Mexico and the exact midpoint between Tokyo and Frankfurt – makes it the perfect place to discuss the importance of trade and investment to our nation’s security and prosperity.
Secretary Clinton has made Economic Statecraft a central pillar of U.S. foreign policy. She has made it clear to anyone who is willing to listen that as emerging nations increasingly deal in economic power as their primary means of measuring and exercising influence, how we think and practice U.S. foreign policy, and what we do in the commercial realm, must adapt. And she also made clear that many of the strategic and military challenges facing the United States today must be met with economic solutions. In short, the United States’ global leadership is critically linked to the vitality of our economy, and now more than ever, U.S. foreign policy must be a force for U.S. economic renewal.
This intersection of economic strength at home and security abroad is what we try to work on every day at the State Department. Much of what I do is work to break down barriers, so companies can invest, trade, and compete on equal footing through the world. What we are trying to do is: 1) promote U.S. exports, 2) attract foreign investment into the U.S., which sometimes get short shrift, and 3) help U.S. companies take advantage of opportunities. I will discuss each of these areas today.
Promoting U.S. Exports
Let’s start by talking about exports. Ninety-five percent of the world’s consumers live outside of the United States. Given this reality, exports are critically important for the health of our economy. Here in Colorado you are no strangers to exports. Nearly one-quarter of all manufacturing workers depend on exports for their jobs. Companies like the 2011 recipients of the “Governor’s Award for Excellence in Exporting” – StoneAge Inc., Abound Solar, Magnolia Trade, and RNL. And this is why two years ago in 2009, President Obama launched the National Export Initiative, with the goal of doubling U.S. exports in five years. This month’s trade data shows that U.S. exports have continued to increase this year, despite some really difficult economic conditions abroad. We are on track to meet the President’s goal. U.S. exports over the past 12 months have reached historic highs, and represent an increase of nearly 36 percent over the levels we started with. Although U.S. exporters are facing headwinds, particularly from what’s going on in Europe, the U.S. is well on pace to again achieve record levels of exports in 2012. And remember, the President’s export goal was coupled with a promise that those exports would support as many as two million good, high-paying, export-related jobs here at home. In fact, record-breaking levels of U.S. exports have already supported an additional 1.2 million U.S. jobs.
Free Trade Agreements
Free trade agreements are an important piece of meeting this export and jobs goal. Last year the three agreements that passed – South Korea, Colombia, and Panama – were the result of years of negotiations. They are vital for ensuring the United States does not fall behind competitor countries in our market access. The U.S.-South Korea agreement – entered into force March 15, and American companies are already reaping the benefits. The Colombia agreement entered into force just this past Tuesday, May 15, – a fitting event for World Trade Week. And we are working with Panama to get their agreement into force, hopefully this year.
Let me take a minute to talk about Korea and Colombia and why these two agreements are so important.
Colombia is the third largest economy in Central and South America. This comprehensive trade agreement eliminates tariffs and other barriers to U.S. exports, expands bilateral trade and promotes economic growth for both countries. Since last Tuesday, 80 percent of U.S. industrial and consumer goods enter Colombia duty free. And this agreement does all of this while ensuring protections for labor, the environment, and intellectual property. Something else it did and we spent a lot of time negotiating with the Colombians on. The Agreement also creates market access for the services sector, which is a $180 billion market in Colombia.
KORUS was the largest U.S. trade agreement in almost two decades, basically since NAFTA, and our first with a north Asian partner. The entry into force of the agreement meant countless new opportunities for U.S. exports in goods, services, and agricultural products. Experts in the know estimate the reduction in Korean tariffs and tariff-rate quotas on goods alone will increase merchandise exports to Korea by $10 billion annually. The KORUS FTA will also provide U.S. suppliers with greater access to the Korean government procurement market – a major market in Korea. This is good news for Colorado since Korea is one of your top ten export markets.
Now Colorado is no export neophyte. You exported over $7 billion worth of goods last year. Your largest export markets of Canada, Mexico, China, the Netherlands, and Germany represent an impressive geographic mix. And while one-third of your exports go to NAFTA partners, China is one of your fastest growing markets. This pivot to Asia, while maintaining the importance of the Western Hemisphere, mirrors what we are trying to do with respect to our economic foreign policy.
We are starting to think of the increasingly interconnected regions of the Americas and Asia as an integrated whole – a broader Pacific with commonalities beyond geographic proximity. And I’ll get into this later as I talk about the next agreement coming down the pike. This Broader Pacific already includes more than half of the world’s population, many of its most important economies, key allies, and emerging powers. More on that in a minute.
Closer to home, the Americas are a natural complement to our strategy in the 21st century Pacific. Nearly all nations of the Americas are growing markets. We export over three times as much to Latin America as we do to China. We sell more to Colombia than to Russia. And last year our trade with Latin America increased by 20 percent. In fact, the increase in trade between Canada and the U.S. last year alone was double our entire bilateral trade with India, which shows the importance of the Western Hemisphere.
With the passage of the Colombia and Panama free trade agreements, we move closer to our ultimate goal of a hemispheric trade partnership reaching from the Arctic to the tip of South America. What this will do is turn to our advantage as Secretary Clinton has said, the power of proximity, our shared history and geography, to turn growth across the Americas into recovery and jobs here at home.
But we are not standing still on trade, we are looking ahead to the next generation of trade agreements, and this is where the Broader Pacific comes in. We are aiming to craft a high-standard agreement that addresses new and emerging trade issues and challenges, including those in agricultural market access. And this new agreement is the Trans-Pacific Partnership (TPP). Even as I speak, the TPP countries are in Dallas negotiating the details.
The United States, along with eight other countries, is negotiating this high-standard, broad-based, regional agreement that we call a 21st century trade agreement. The Trans-Pacific Partnership will bring together both developed and developing countries’ economies from across the Pacific into a single trading community.
It will address new cross-cutting issues, such as helping small- and medium-sized enterprises to take advantage of this FTA. And we are working to ensure TPP, includes protections for workers rights, the environment, and intellectual property. The TPP aims to promote a level playing field to ensure that private companies have just as much of a chance to compete as state-owned enterprises. Our hope is basically that the Trans-Pacific Partnership can serve as the gold standard for future trade agreements, and will serve as a platform for broader regional integration and eventually a Free Trade Area of the Asia-Pacific. That’s exports.
Let’s talk about something related to it – foreign investment. Foreign investment flows are vital currents of the global economy. Foreign investment, both inward and outward, contributes to economic growth and job creation in the United States and around the globe. Foreign firms investing in the United States create jobs, spend money on research and development, and make capital investments. They also fuel American exports. In 2009, 55 percent of exports flowed from U.S. firms that invest abroad, and 21 percent of all exports came from U.S. subsidiaries of foreign firms. Firms that had invested in the United States.
In Colorado, you know the value of investment from abroad. Foreign investment is responsible for nearly five percent of Colorado’s private industry employment. Renewable energy companies from Denmark and Japan have headquarters in this state for solar and wind products. Firms from the United Kingdom, Canada, France and Germany are leading investors in your economy.
And so we’re doing two things in the investment realm that I’d like to talk about – a new Model Bilateral Investment Treaty and a program called SelectUSA.
Bilateral Investment Treaties, or BITs, promote a level playing field for U.S. companies abroad when they invest abroad, promote market access and the rule of law, and provide fair dispute settlement procedures when our investors get into trouble abroad. Negotiating new BITs also helps us keep pace with economic competitors that have entered into, or are negotiating investment agreements with major economic players, such as China, India, and Russia. High-quality Bilateral Investment Treaties not only support our engagement with the major emerging economies, they can help our developing country partners attract foreign investment that boosts economic development.
For two years, about since I came into office, we negotiated with ourselves on a new model. The 2012 U.S. model BIT provides the basis for all new BIT negotiations. It improves protections for U.S. firms, enhances transparency and public participation, and strengthens the protection of labor rights and the environment. These agreements will not only protect overseas investments by American firms, but they will also make it easier to invest in America. Now that we have agreed on a model for negotiations, we will be in a position to restart BIT negotiations with China, India, and other large markets. That’s investment treaty.
Let’s go to the other side of the coin and talk about foreign direct investment. Last year, $220 billion in foreign direct investment flowed into the United States. That was #2 in the world. Through our new SelectUSA initiative, we are working to attract more investment to the United States. Because investment means jobs. We want to let everyone know that the United States, including states like yourselves and cities like Denver, has an attractive business and investment climate, is one of the easiest places in the world to do business, the world’s center of innovation, has transparent and predictable legal system, and has a highly educated workforce.
This September, President Obama will host the first annual SelectUSA Investment Summit in Washington, DC. Hundreds of foreign firms looking to expand their operations in the U.S. are expected to be in attendance. State and local economic development professionals, including from Colorado, will also be invited to attend. This first-of-its kind Summit will create an opportunity for state and local leaders to meet directly with an array of foreign firms. Details of the Summit will be available soon on the SelectUSA website. I encourage you to look at the SelectUSA website run by Commerce.
How We Support Business
We are committed to helping our small- and medium-sized businesses take advantage of the great opportunities that exist overseas. Eighty-eight percent of companies exporting from Colorado are small and medium-sized enterprises. We know that it is not always easy for these companies to develop the know-how to break into overseas markets. Now, we also know that it can be a challenge for SME’s to learn about opportunities abroad or how to take advantage of them. That is why the State Department recently started a program called Direct Line. This program provides a unique opportunity for American businesses, particularly small- and medium-sized enterprises, to engage directly via teleconferences with U.S. ambassadors overseas. Each call is specific to a country and a sector, and often includes a local government official as well. There is always time to ask questions. For example, our embassy in Peru held a call focused on infrastructure, while our embassy in Turkey used their call to discuss on investment incentives promulgated by the Turkish government. I personally participated in both of these calls, and I really would encourage you to find out more information and register by visiting the State Department’s website.
This brings me to infrastructure. There are huge opportunities in these markets. Infrastructure projects are an area where the U.S. should be more present. On a trip this past winter to Peru and Colombia, I kept hearing the same thing: there are lots of infrastructure opportunities, but U.S. companies are not showing up. Countries are spending billions of dollars on infrastructure projects. I visited Brazil a month ago with Secretary Clinton, and Brazil alone is investing $100 billion in the run up to the World Cup and Olympics. The Indians have announced $1 trillion in the next five years. We’re trying to find ways to make sure American architects, construction management and engineering companies, and U.S. suppliers are positioned to compete for overseas contracts and benefit from the global construction boom – believe best opportunity for American companies for years to come. I could on with North Africa – Tunisia, Morocco.
We are helping companies take advantage of these opportunities by talking directly with our counterparts in foreign governments who are often the decision-makers in large infrastructure contracts. We are also coordinating with our partners in the federal government, such as the Department of Commerce and the Small Business Administration, to make sure U.S. companies know about these opportunities. Just two weeks ago, I took 30 American companies to Libya to explore infrastructure opportunities in the Libyan reconstruction. I hadn’t been there since before the revolution and slept next to a flack jacked, but there are opportunities. If you take anything away from my talk this morning, it is get involved in infrastructure. If you don’t, other countries will.
Colorado already takes advantage of its strategic geographic location to export to Asia, Europe, and the Americas. But we need to help you do more. We need to help all states take advantage of each state’s unique attributes to take advantage of opportunities out there to maximize exports and encourage foreign investment.
At the State Department, with our far-reaching platform overseas and Washington-based expertise, we are uniquely positioned to promote American economic leadership around the world. We have over 1,000 economic officers at our embassies and consulates and a staff of 200 in Washington working on these issues. We intend to use all of the tools at our disposal, especially the tools of diplomacy and business advocacy, to support American economic priorities. Our goal is to promote a world where open, free, transparent, and fair trade and investment is the norm of the world and if we can do that, I’m sure our companies will benefit.