The Global Economic Outlook - What It Means For the Future of Legal Practice
Assistant Secretary, Bureau of Economic and Business Affairs
Thank you for that introduction, Brad. And my special thanks to Paul, Weiss, Rifkind, Wharton & Garrison for hosting and sponsoring this event.
Let me also take a moment to laud my cousin, David W. Rivkin, the first American to serve as President of the IBA in 25 years.
When David attended our embassy’s Fourth of July event in Paris several years ago, people actually confused our identities and assumed he was the ambassador! That’s a true story! Something tells me that won’t happen here in reverse in front of the IBA in New York City.
David is widely known as a brilliant tactician, and one of the top lawyers in international dispute resolution. He has worked – as he said in his mission statement – to make the rule of law central in – quote “every aspect of life, big and small. Every transaction we undertake and every dispute we resolve builds the rule of law and binds us together.”
I am proud to know him, not only as a first cousin and close friend, but as a champion of the values we cherish as Americans.
As Brad told you, I come here as a former businessman, former U.S. Ambassador to France, and the current Assistant Secretary for Economic and Business Affairs – or EB as we call it.
As someone who works exclusively in the world of economics, I have come to realize that economists are like the Rodney Dangerfields of the social sciences. They’re frequently portrayed in jokes as boring equivocators whose seemingly convoluted theories bring nothing to the table.
On Valentine’s Day, for example, most people buy flowers and might take their husbands or wives to a special dinner. But an economist turns to his wife and says: “Let’s assume a ritzy hotel room and a bottle of Dom Perignon.”
Perhaps my favorite economist joke came from Walter Heller, who was President Kennedy’s chief of economic advisors. He once said: “An economist is a man who, when he finds something works in practice, wonders if it works in theory.”
I like this joke in particular because, when it comes to foreign policy, economics is rapidly becoming the most effective tool in our foreign policy.
Now, the title of my speech is “The Global Economic Outlook – What It Means for the Future of Legal Practice,” which seems to suggest that I will be dispensing clairvoyant predictions.
I won’t be doing that – and I don’t want to be like that Yale College professor who gave a student a C grade one day because his concept paper for an overnight delivery service wasn’t – quote – “feasible enough.” The student in question was Fred Smith who went on to create Federal Express, one of the most successful and transformative companies of our time.
Nor do I want to be like the music executives from the Decca Recording Company, in the early 1960s, who listened to a demo tape from a new band and rejected it because – as they put it – “We don’t like their sound and guitar music is on the way out.” Well, the band just happened to have been the Beatles!
Neither I nor EB are in the prediction business but we are in the business of building the economic futures we want to see for all Americans. So today, I would like to talk about the future that Secretary Kerry envisions – one that completely reframes our thinking about the role of economics in our foreign policy.
As the Secretary puts it, “economic policy is foreign policy – and foreign policy is economic policy.”
This centralization of economics in our foreign policy flows from the increasingly widespread recognition that most of our global challenges are, in one way or another, economic in nature. Economic situations have either caused the problem in the first place; or the problem poses enormous economic consequences if unaddressed.
It stands to reason that, if most of our challenges are economic in nature, our best response is to formulate economic strategies to address them.
I say “strategies” rather than “tactics” because, to get the future outcomes we want, we need proactive policies that are designed for the long game, not the quick fix.
This newly framed agenda and way of thinking happen to complement the work you do. After all, on any given day, in any direction you look, lawyers like you are assessing challenging environments, so you can give clients high stakes legal advice about the risks involved and the opportunities available.
Also on any given day, and in any direction you look, the U.S. State Department is trying to address the underlying economic causes behind those challenges, so that Americans can wake up every morning in a slightly more peaceful world than the day before and, even more actively, maximize the economic opportunities that abound everywhere.
I would also like to add that, as a former CEO in the media business whose success depended upon the protection of intellectual property rights, I understand the power and necessity of having a legal framework for investment.
As a former U.S. Ambassador, I have also come to understand the unique capabilities of the State Department to provide U.S. companies with advice and counsel based on our broad view of foreign policy issues.
That includes helping U.S. corporations navigate tricky waters in different countries. So I am always eager to find new ways to synthesize our work – particularly in light of our complementary economic interests abroad, where so much of our potential future prosperity lies.
What many Americans don’t realize is that approximately 95 percent of the global market exists beyond our borders.
If we are to create prosperity for our investors, businessmen and women, our workers, and our consumers, we cannot afford to keep selling to only ourselves.
That’s why we are negotiating two of the most significant trade deals of our time. When completed, both will level the playing field for trade and investment so that we can have unrivaled access to two thirds of the global economy.
One is the Trans-Pacific Partnership or TPP, which includes the United States and 11 other countries in the Asia-Pacific. We hope to be able to conclude this deal by the end of the year.
The other is the Transatlantic Trade and Investment Partnership – or T-TIP, which will bring together two of the world’s largest trading and strategic partners – the United States and the 28 member countries of the European Union.
The Trans-Pacific Partnership – TPP – is in the final stages of negotiation. The 12 countries involved encompass 30 percent of world trade, 40 percent of global GDP and 50 percent of the projected future economic growth on the planet. As with any complex arrangement, there are still many details to be negotiated, but the reasons why it is important are pretty clear.
As Secretary Kerry said in a powerful speech in Seattle last month, the Asia-Pacific is – quote – “the single most dynamic part of the globe today. It includes the four most populous countries, the three largest economies, and a middle class that is many times the size of North America’s.”
Furthermore, as he also said – and I’m quoting again: “If we accept – as we must – that prosperity depends at least in part on trade, then we should want to be at the front of the line when it comes to writing the global rules for trade.”
Our goal in TPP is to raise standards across the board, from promoting strong, enforceable labor and environmental protections to opening markets for our service providers, to ensuring that American investors do not face unfair discrimination when investing abroad.
All of these provisions are rooted in the rule of law – an arena in which most people in this room – if not everyone – certainly operate and thrive. And TPP is as much strategic as it is economic – a centerpiece of our importance rebalance to Asia.
As I just mentioned, the United States and the European Union are two of the world’s biggest and closest allies. The EU is already our largest trading partner, and together we account for 40 percent of the world’s GDP and 30 percent of global trade.
T-TIP is a landmark deal that will make our transatlantic alliance even closer and even stronger. It will spur economic growth and job creation, and establish better and less divergent regulations consistent with our shared democratic principles and high levels of consumer safety and environmental protections.
We are also working, through TPP, T-TIP and our other trade negotiations, to update trade rules to address the challenges of the 21st century digital environment. We are looking to negotiate broad rules eliminating barriers to investment and the cross-border supply of services.
In particular, we are working to ensure that data flows, the lifeblood of the digital economy, are not impeded by unnecessary trade barriers, such as requiring the localization of servers and other Internet infrastructure.
In addition to these two trade deals, we are working to negotiate bilateral investment treaties – or BITs – which are binding international legal agreements designed to protect companies, businesses, and individuals as they invest overseas.
These treaties help U.S. companies benefit from a level playing field in foreign markets, and provide fair, independent, and international dispute settlement in the form of ISDS.
Of course, few economic relationships are more important than ours with China. Together we account for a third of global GDP, $600 billion of trade between our countries, and 40 percent of recent global growth. That’s why we are pursuing a high-quality BIT which would improve openness, transparency, and predictability for our companies in China’s market. My colleagues in EB are in the room with USTR as we speak, conducting our 19th round of negotiations, where we hope to exchange “negative lists” for the first time.
We are also assessing the prospects for a BIT with India, and are engaged in exploratory discussions with Cambodia and the East African Community.
As I said before, we cannot predict the future, but with new trade deals, and better standards that are rooted in the rule of law, we believe we can address many of the causes of instability and uncertainty which you routinely monitor on behalf of your clients. By doing that we can build a better and more promising future for all Americans – and by extension, lawyers like you who work to put many of those deals together.
For the remainder of my time at the State Department, I will continue to seek ways to bring our private and public sectors together, so that we can embody and follow the advice of a famous lawyer by the name of Abraham Lincoln, who once said: “The best way to predict your future is to create it.”