The Stakes for U.S. Engagement in Asia - Thomas J. Donohue, U.S. Chamber of Commerce
THOMAS J. DONOHUE
at AmCham Singapore
November 11, 2009
Thank you very much, Steve (Okun). I’d like to thank you and your executive director, Laura Deal, for organizing today’s breakfast.
We greatly appreciate all of the hard work done by you, your colleagues, and your members in promoting business ties between the United States and Singapore—and the rest of Southeast Asia.
I’d also like to acknowledge Scott Davis. He is not only a great supporter of the U.S. Chamber, but one of the true leaders back home in support of free trade.
Speaking of “back home”, there are a few things happening there—just in case you haven’t noticed! Fierce debates over health care, energy and climate change, financial regulations, workplace policies such as card check, and many more.
The Chamber is in the middle of all of these important issues.
We have also recently launched a major effort to remind, educate, and persuade all Americans that it was a free enterprise system, based on free trade, open capital markets, hard work, and individual initiative that built the greatest economy in the world. And it is free enterprise—even with its foibles and occasional excesses—that can lead us back to prosperity.
In fact, it appears that the U.S. economy is indeed on the mend.
We grew 3.5 percent in third quarter. We should grow at around that level in the fourth quarter and through the first half of next year. Housing has stabilized, and, consumption, investment in equipment, and industrial production are all up.
The jobs picture is another matter. The official unemployment rate increased to 10.2 percent last month. When you factor in discouraged workers and part-timers who want to work full-time, it is more like 17 percent.
I’d be happy to address any of these issues with you during the discussion period. But first, I’d like to offer a few thoughts about the APEC meetings here this week and what the future might hold for the United States in this critical region of the world.
APEC and the U.S. in Asia: Key Questions
When the first APEC leaders’ meeting was held in 1993, the United States, Europe, and Japan represented the commanding heights of the world economy.
Since then, we have witnessed a tremendous shift to the East. More than half of the world economy is now centered in the Asia-Pacific region. These developments are not only reshaping global economics, but they are altering geopolitics.
Emerging powers are projecting their commercial influence into other spheres—securing capital and the best human talent, making deals for oil and natural resources, and flexing their economic muscle to advance their strategic interests.
Within Asia, economic cooperation is moving forward. Regional trade agreements are being formulated which, in a number of cases, do not include the United States.
While we remain the world’s largest exporter and largest importer—and our trade with Asia continues to grow—our share of Asian trade has declined over the last decade as countries here increasingly trade among themselves.
This has raised some important questions about America’s role in Asia going forward, and about our leadership and influence across the globe.
Furthermore, we face these questions at a time when the global recession has, in many countries, undermined support for free and open markets.
We face them against the backdrop of growing deficits in the United States—including an unsustainable current accounts deficit between our country and Asia.
Yet despite these challenges, who could not be anything but excited about the opportunities and potential that exist across the Asia-Pacific?
As APEC leaders gather here this week, my message is simple: expanding free trade across the Pacific can drive the global economic recovery, create badly needed jobs, and advance economic and social progress in developing and developed countries alike.
Expanding Free Trade
So what must be done to make this happen?
First, APEC leaders must vigorously fight trade isolationism not only with their words, but with their deeds.
The business community bears a big responsibility for helping to educate our citizens about the benefits of trade and to resist our own temptations to seek competitive advantage through government action.
Second, APEC economies should enact inclusive trade agreements that open and expand markets—rather than deals that simply dole out preferences and carve up existing markets.
A key part of this challenge includes leading the world in jumpstarting the Doha round. The United States, in particular, needs to get off the sidelines and embrace an ambitious trade agenda.
Third, while setting the right trade policy table, we shouldn’t overlook the nuts and bolts of trade that can either make commerce work or throw it off track and out of balance.
This includes improving trade facilitation, enhancing intellectual property protections, ensuring national treatment for all investors, strengthening the rule of law and regulatory transparency, and evolving towards market-based currencies.
Fourth, as the largest economy in APEC and the world, the United States must remain strongly engaged in Asia—geopolitically and commercially.
American engagement is essential to peace, security, and prosperity in the Pacific. And, it is in the vital interest of every APEC country.
Allow me to briefly elaborate on these priorities.
Fighting Trade Isolationism
The APEC community is full of compelling examples that illustrate the benefits of open markets and free trade.
Singapore is one vivid example. So is the United States of America.
57 million American workers are already employed by firms that benefit from exports. One in five factory jobs depends on exports, and one in three acres on American farms is planted for hungry consumers overseas. U.S. services companies and their 90 million workers—the most competitive in the world—export more than half a trillion dollars worth of services annually.
Foreign-based companies in the United States have directly created more than 5 million American jobs. They indirectly support tens of millions of additional jobs. U.S. investment in other countries is also important because it allows our firms to tap into global markets that they may not be able to access from home.
We also see great benefits of having access to a global labor and talent pool, which is why some of our restrictive visa and immigration policies make absolutely no sense.
Despite such benefits, there are those who want to turn inward and erect new barriers to U.S. markets.
Similar trade restrictions are being proposed throughout the G-20. In fact, since G-20 leaders promised last November to avoid protectionism, at least 66 trade restricting measures have been proposed or implemented.
Recently, the Chamber issued a study which shows that another half-million Americans could soon lose their jobs if we fail to move forward on trade deals—and, if we continue to insist upon wrong-headed ideas like “Buy American.”
That study was just one part of an expanded effort by the U.S. Chamber to explain the benefits of open trade and global engagement to policymakers and our fellow citizens.
It’s a message that needs to be heard throughout the Asia-Pacific and beyond, and we need our APEC leaders to strongly embrace it this week.
Embracing a Free Trade Agenda
Fighting isolationism must also be accompanied by a forward-looking free trade agenda.
Many countries in APEC have been very busy! According to USTR, there are 168 FTAs in force in Asia today, up from only 22 in 1980. Eighteen more have been completed but not yet implemented, and 70 more are being negotiated.
The United States has exactly two FTAs in Asia —with Singapore and Australia. We are standing on the sidelines while Asian nations clinch new trade deals.
The result is a de facto East Asia Free Trade Area—effectively a third bloc in the global economy alongside North America and Europe.
The United States is increasingly on the outside, looking in. And we will pay a price if this continues.
The consequences are real. Expanding Asian production supply chains shut out U.S. suppliers of intermediate goods. U.S. farmers are shut out because highly-protected agricultural markets are open to U.S. competitors but not to American food products.
Washington’s failure to engage in regional trade initiatives not only hurts U.S. companies and workers, it limits our ability to advance America’s broader interests in Asia.
A stronger U.S. economic presence would boost America’s ability to achieve its security, political, and economic goals in the region.
It would also increase U.S.-Asia cooperation on an energy security and climate change.
We have seen some encouraging signs from the Obama administration about its desire to engage more robustly in Asia.
President Obama’s upcoming visits to Japan, China, South Korea, his meetings here at APEC, and the meeting Sunday with the ASEAN nations are most welcome steps.
And, we hope the administration will soon announce that it will join the negotiations for the Trans-Pacific Partnership, or TPP.
These talks aim to establish a free trade area among Singapore, Australia, New Zealand, Brunei, Vietnam, Chile, and Peru. In the longer term, the TPP could lay the foundation for a Free Trade Area of the Asia-Pacific, or FTAAP.
But there’s a lot more to do.
We can start by approving the pending free trade agreement with South Korea.
The U.S. International Trade Commission estimates that American exports will increase by more than $10 billion a year once this agreement is implemented—with substantial benefits for our Korean partners as well.
The Chamber study I mentioned earlier also found that the United States will pay a high price if it fails to enact its trade accord with Seoul while the European Union moves forward with its own agreement.
If that happens, European manufacturers will easily undercut their American competitors in the Korean market. Nearly 350,000 American workers could lose their jobs. U.S. exports will decline. That’s unacceptable.
Finally, we need to complete the global Doha Round negotiations, which the Peterson Institute for International Economics recently said could boost the worldwide economy by $700 billion.
APEC played a pivotal role in securing the success of the Uruguay Round in 1993 round—and it should step up this time as well.
Strengthening the Nuts and Bolts
Yet all the trade agreements in the world, no matter how ambitious or visionary, won’t produce the economic results we all want unless we fix the policies, practices, systems, and institutions that underpin domestic and global commerce.
The United States must get its financial house in order and address our fiscal, trade, and current accounts deficits. Saving more, investing more, and especially exporting more can help us do that.
For their part, Asian economies need to spur consumption and imports.
But to do that, and achieve the balance and stability that all parties seek in trans-Pacific commerce, there must be further action on reforms within Asia.
That includes enhanced protections for intellectual property, a level playing field for all investors, regulatory transparency and a stronger rule of law, and a greater openness to global services, distribution, and logistics companies—to name just a few.
Nor can the question of currency be overlooked. For years, China has intervened in the currency markets to keep the value of its currency from rising.
Alongside America’s low savings rate and big fiscal deficits, this is one reason why the United States has a large trade deficit with China.
China has taken important steps since 2005 to widen the band in which its currency trades, and its currency has appreciated by 20%.
Given the size of China’s economy today, Beijing needs to move more rapidly to liberalize interest rates and let the market determine exchange rates.
These actions are in China’s own interest. They would serve as a hedge against domestic inflation and asset bubbles. They would raise the buying power of Chinese consumers.
We also strongly encourage a liberalized approach to energy exploration. The entire world is hungry for energy—traditional energy and alternative energy—and there are tremendous untapped resources in this region.
Asia should play to this strength. But doing it right takes capital, technology, and know-how. Again, the United States can be a helpful partner.
U.S. Engagement and Leadership in Asia
And that brings me to the point I want to conclude on—the question of American engagement in Asia.
Let me state again that continued U.S. leadership and commercial engagement in Asia remain vital to peace, security, and prosperity throughout this region and across the globe.
As Asia builds a new trade architecture, the United States simply must have a seat at the table.
We have a tremendous opportunity to exercise the “soft power” of American business, commerce, and diplomacy—to advance our national interests and improve the state of the world.
We must not squander this great potential. We must not sit on our hands while others contrive to draw a line down the Pacific.
Trade brought prosperity to America, and it has lifted tens of millions from poverty in Asia. By expanding trade in the world’s most dynamic region, we can create millions of new jobs, and take millions more out of poverty.
Strong American leadership in the APEC community need not—and should not—come at the expense of any other nation’s economic aspirations.
By the same token, few would seriously suggest that the region would be better off with a shrunken and diminished U.S. role.
And no significant business or economy can ignore the extraordinary opportunities of commercial engagement with the largest, most open market in the world—the $14 trillion American economy.
So with all the challenges we face, I am optimistic about the future. I can’t help it—I’m Irish!
There could not be a better time or a better place to convene this critical APEC summit.
We have a new American president who did a lot of his growing up not too far from here, and who has a fresh opportunity this week to embrace a vigorous trade agenda.
We see hopeful signs of economic recovery at home.
And we see extraordinary opportunities to create a vibrant APEC community that drives growth and innovation and invents new solutions to common problems … an APEC community that is made up of strong partners and vigorous competitors, and not of adversaries or enemies.
Thank you very much.
AmCham Vietnam’s Hanoi Chapter was established in 1994 by a handful of members. Today there are nearly 200 members companies, including financial services, architecture and construction, manufacturing, information communications technologies, logistics, and NGO development organizations.