Remarks at the World Boston Forum

Jose W. Fernandez
Assistant Secretary, Bureau of Economic, Energy and Business Affairs
Boston, MA
September 1, 2011

Introduction & Roadmap
Thank you, Mr. Clifford, for your kind introduction. It is an honor to speak here today. The World Boston Forum has a long association with the State Department, hosting International Visitors for more than 50 years. These types of people-to-people exchanges are still an essential component of foreign policy, even as the world becomes more and more connected via technology.

In my Bureau of Economic, Energy and Business Affairs at the State Department, I lead a talented, select group of civil and foreign service officers with backgrounds in banking, finance, engineering, entrepreneurship to create opportunities to renew America’s economic strength, create jobs, and invest for the future. Let’s be clear: A strong American economy is essential to both a strong foreign policy and a strong national security policy. I want to talk about four of the State Department initiatives that my team and the thousand-plus economic officers in Missions around the globe are focusing on:

1. Helping to create U.S. jobs;
2. Promoting U.S. exports;
3. Promoting trade; and
4. Expanding international access for U.S. companies.

1. Building U.S. Jobs: Attracting FDI, Pursuing BITs
Foreign investment in America is responsible for more than five million American jobs, including two million in manufacturing alone. That’s why the Commerce Department recently launched a new program called SelectUSA to better coordinate the efforts of our ambassadors, our state governors, and our officials from the Departments of State and Commerce to attract more investment to America. The United States welcomes foreign investment and is always the first or second destination for FDI. For example, in the last couple of years, we have seen transactions leading to a multibillion dollar steel mill in Alabama, and new monies going into our wind energy sector in Colorado, and in solar energy in California.

We are also pursuing bilateral investment treaties, BITs as we call them. Not only do these agreements make it easier to invest in America, but they also protect overseas investments by American firms. Chinese President Hu Jintao and President Obama recently reaffirmed our commitment to BIT negotiations, and we recently agreed to resume our BIT talks with India and other countries.

But, we are now seeing a new challenge to the global consensus on free markets and competitiveness that fueled the tremendous growth of the global economy since the early 1990s. Led by China, but practiced in various forms by many other countries, a new form of “State Capitalism” is emerging. State-owned enterprises and state-supported enterprises or “National Champions” are emerging from protected domestic markets to become serious global competitors, with the backing of their governments through things like tax incentives and free land. This trend has accelerated in the wake of the financial and economic crisis. We are working to ensure a level playing field within this new environment, by coordinating both within the U.S. Government and with multilateral organizations such as the OECD to create “competitive neutrality” rules of the road. At the end of the day, we’ve got to help our companies compete, not through favorable treatment, but by making sure that everyone follows the same rules.

Much of what we do to promote development overseas benefits Americans. We help countries build infrastructure like roads and ports, fight corruption, strengthen the rule of law, and write better commercial codes. These efforts shape tomorrow’s trading relationships and create thousands of short- and long-term opportunities for American business and for a stable and prosperous world.

2. Promoting U.S. Exports: National Export Initiative (NEI), Commercial Diplomacy
We are aggressively promoting U.S. exports to fulfill the President's National Export Initiative (NEI) goal of doubling exports by the end of 2014, supporting two million American jobs and helping to put the American people back to work. Only 1% of U.S. companies export; 50% of those export to only one or two countries: Canada or Mexico. Our Ambassadors are actively promoting U.S. exports to their countries, and we are partnering with more Chambers of Commerce here and abroad to help American companies find new opportunities.

Part of our commercial diplomacy involves helping companies become not only aware of opportunities but also are creative about what to export. For example, we are working to build markets and find customers overseas for industries that haven’t always traded beyond our borders, like higher education or medical technology. To increase exports, we need to take advantage of all of our strengths, and we have a comprehensive approach that involves the Department of Energy, Commerce, USTR, OPIC and TDA.

Half of our exports already go to emerging economies. There are huge opportunities in these markets. Infrastructure projects are an area where the US should be more present. Countries are spending billions of dollars on infrastructure projects – Brazil alone is investing $100 billion in the run up to the 2014 World Cup and 2016 Olympics, and India is putting $500 billion in private infrastructure projects. We need to make sure American architects, construction management and engineering companies and their U.S. suppliers are positioned to compete for overseas contracts and benefit from the global construction boom.

3. Promoting Trade: FTAs and TAA
Now more than ever, America’s ability to create jobs here at home depends on our ability to export goods and services to the world. Today, exports support nearly 10 million American jobs. And jobs that are tied to trade are well-paying positions: Americans whose jobs depend on trade earn 13 to 18% more than the national average.

These facts are what make it more important than ever to conclude our pending trade agreements with Korea, Colombia and Panama. It is also critical that, at the same time, we renew a strong and robust Trade Adjustment Assistance (TAA) Program that supports American workers to get re-trained, still receiving their medical benefits while getting re-trained.

Of the three trade agreements – Korea, Panama and Colombia – Korea is by far making the biggest difference. In fact the U.S. - Korea trade agreement, which we call KORUS, would cover a trade volume larger than our last nine free trade agreements combined. KORUS also represents a new, cutting-edge trade deal that raises the standard for fair competition as it opens new markets. KORUS will eliminate tariffs on 95% of U.S. consumer and industrial exports within five years. Its tariff reductions alone could increase exports of American goods by more than $10 billion. The deal includes significant improvements on intellectual property, environmental protection, regulatory due process and labor practices.

The U.S.-Colombia Free Trade Agreement would allow our businesses to sell goods in Colombia duty-free, the same way Colombian goods have entered the United States for many years. And it comes with important new guarantees on labor and human rights. In Panama, instead of paying tariffs as high as 81%, as American businesses do now, 88% of the consumer and industrial goods we export would enter Panama duty-free under the free trade agreement.

Passing these deals is therefore important to our economic recovery, but even more than that, it is also essential for national security reasons. These nations are three important partners in strategically vital areas. Countries everywhere are watching to see whether America will deliver for its friends and allies.

On a more local level, these agreements will benefit you here in Massachusetts. Exports are big in Massachusetts. More than 28% of all manufacturing workers in Massachusetts depend on exports for their jobs. So we know that free trade benefits Massachusetts. Consider the U.S.-Chile agreement, which went into effect in 2004. As a result of that agreement, Massachusetts’s exports to Chile grew by 134%.

We need to act quickly. The world is not standing still. The European Union's free trade agreement with Korea, which entered into force in July, has already seriously disadvantaged U.S. exporters in the Korean market. Colombia’s new free trade agreement with Mexico went into effect in June, and the EU is in the process of ratifying its FTA with Colombia.

If we do not pass our pending FTAs with these countries, we disadvantage our American companies at the very time when we most need to help them create jobs.

I can assure you that the President and the Secretary are committed to ensuring U.S. firms are not disadvantaged, and this is why the Administration is working so hard now with Congress. We need to secure a commitment from Congressional leadership on the specifics of how to move the three trade agreements, as well as the Trade Adjustment Assistance program. We realize this is not all about profits; it’s also about people. There will be temporary dislocations for workers, and we need to find ways to help those workers.

4. Expanding International Access for U.S. Companies: Open Skies, Public-Private Partnerships, Good Governance
Before concluding, I briefly want to touch on a few other areas where we are working to expand trade and access for our companies. We have signed over 100 Open Skies Agreements for air carrier service to new markets. Each agreement the State Department negotiates opens new cities to air carriers and new markets for business. We still have a few big markets, such as China and Mexico.

We are working closely with the private sector, including new public-private partnerships. The Global Entrepreneurship Program identifies promising new entrepreneurs overseas, trains them, links them with U.S. mentors and potential investors, advocates for supportive policies and regulations in developing countries, and helps spread best practices. This is very useful in reaching out to Muslim-majority countries: Egypt, Indonesia, Turkey and North Africa.

We are working with a number of countries around the globe to encourage and help them uphold their commitments to inclusive growth by practicing good governance. We are working to create a level playing field by ensuring countries abide by rules with respect to protection of intellectual property rights, anti-corruption, fiscal transparency and making sure their elites pay their taxes.

What I have laid out for you is indeed an ambitious agenda, but one we fundamentally believe will not only benefit the American people and American companies, but will also create jobs.

As the world grows smaller, American companies must secure access to global markets. The centerpiece of a strong international economic policy, national security policy, and foreign policy is a strong national economy. This why Secretary Clinton elevated economic policy to the forefront of our foreign policy, why in the next few weeks she will be giving a large address on economics and America’s strategic choices, and why we need Congress to pass the pending free trade agreements. Thank you for your time, and I am happy to answer questions.