Inside Economic Diplomacy Podcast- Episode 3: Trade Promotion Authority

Remarks
Charles H. Rivkin
Assistant Secretary, Bureau of Economic and Business Affairs
Washington, DC
February 20, 2015


OMAR PARBHOO, SENIOR ADVISOR, BUREAU OF ECONOMIC AND BUSINESS AFFAIRS, DEPARTMENT OF STATE: There's this one issue that's been popping up in the news lately. But it really caught my attention when President Obama mentioned it at the State of the Union.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: That's why I'm asking both parties to give me trade promotion authority to protect American workers with strong new trade deals from Asia to Europe that aren't just free, but are also fair. It's the right thing to do.

EMILY-ANNE PATT, FINANCIAL ECONOMIST, BUREAU OF ECONOMIC AND BUSINESS AFFAIRS, DEPARTMENT OF STATE: Trade promotion authority. Now, I know it has something to do with the two big trade deals that we're negotiating, but I'm not exactly sure how it's related.

OMAR PARBHOO: Well, you're in good company, because neither was I. But trade promotion authority is legislation that has a long history in the United States. It's been central to how we've negotiated trade deals in the past.

EMILY-ANNE PATT: And now the Administration is asking Congress to renew it, right?

OMAR PARBHOO: Right. On today's episode, we'll cover why this authority is important to our trade agenda and why it's a priority for the President. I'm Omar Parbhoo.

EMILY-ANNE PATT: And I'm Emily-Anne Patt. Welcome to another episode of Inside Economic Diplomacy.

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OMAR PARBHOO: Today, we're going to hear from Assistant Secretary of State for Economic and Business Affairs Charles Rivkin. He'll explain what trade promotion authority is and how it fits into our larger economic priorities.

EMILY-ANNE PATT: But before we get there, I think it's a good idea to provide context on the outstanding trade deals. People may have heard of the Trans-Pacific Partnership, or TPP, and the Transatlantic Trade and Investment Partnership, or TTIP. But what did they entail exactly?

OMAR PARBHOO: That's a very fair question. I actually sat down with one of our trade experts here at State.

BILL CRAFT, DEPUTY ASSISTANT SECRETARY FOR TRADE POLICY, BUREAU OF ECONOMIC AND BUSINESS AFFAIRS, DEPARTMENT OF STATE: My name is Bill Craft. I'm the Deputy Assistant Secretary for Trade Policy in the Economic Bureau at the State Department.

OMAR PARBHOO: I asked him to explain what these deals are, starting with TPP.

DEPUTY ASSISTANT SECRETARY BILL CRAFT: Well, we are currently negotiating a free trade agreement with 11 other countries in the Asia-Pacific region, ranging from countries as big as Canada and Japan to as small as Vietnam or Brunei. This is a very dynamic part of the world, but one that's growing very, very rapidly. Right now there are 525 million middle-class consumers in those countries and it is projected that that number will grow to be over 2 billion in the next 30 years, which will far dwarf the size of the market in the United States. And we want to open up those markets and guarantee that U.S. exporters, and the U.S. workers that create those exports, have a level playing field to sell their goods in those rapidly growing countries.

OMAR PARBHOO: Those are very impressive numbers, and the TPP seems really ambitious when you lay it out, but it makes me think that it'll require a lot of effort and political capital to get off the ground. Is it really worth it?

DEPUTY ASSISTANT SECRETARY BILL CRAFT: Well, it is absolutely worth it. The Peterson Institute has indicated that their studies show that it is going to raise U.S. exports to the region by billions of dollars. But from the foreign policy perspective that we here at the State Department think about a lot, as important as the economics are, it's also important that we show that we are refocusing our efforts on the Asia-Pacific, that we can work very closely with our friends and allies in the region to strengthen our economy and theirs to create jobs in the United States and theirs, and to show the world that we are unified both politically and economically.

OMAR PARBHOO: Can we shift gears a bit and actually shift to the other ocean? What's the Transatlantic Trade and Investment Partnership? The Transatlantic Trade and Investment Partnership is a negotiation between the U.S. and the 28 member countries of the EU, which already has the world's largest economic relationship. We already have $4 trillion of investment in each other's markets, and there are already over 13 million people in the U.S. and Europe whose jobs are owed to the fact that we trade so much across the North Atlantic.

We're talking about a trillion dollars a year in bilateral trade across the North Atlantic. So if we can reduce or eliminate market access barriers to goods and services, we stand to tremendously increase the economic growth and job creation on both sides of the Atlantic. And we are seeking to reduce, to the extent that we possibly can, regulatory barriers that make it complicated or difficult for companies to sell products in both markets.

OMAR PARBHOO: One last question. And I ask this with all due respect, but are we crazy for trying to do both of these negotiations simultaneously?

DEPUTY ASSISTANT SECRETARY BILL CRAFT: When you've got an opportunity to create as many jobs and to encourage as much economic growth as we have with these two agreements, you do what you have to do. Thank goodness the United States Government has enough dedicated negotiators at the State Department, at USTR, and Agriculture, and Commerce, and our other agency friends, that we can do these two things simultaneously.

We are hopeful of finishing the substantive negotiations on the Trans-Pacific Partnership this spring. We're making great progress in the ongoing negotiations there. And that will give us even more momentum to try to finish the TTIP as quickly as possible soon thereafter.

EMILY-ANNE PATT: So now I get what we're negotiating in Asia and Europe. These deals will help expand U.S. exports by lowering barriers to trade.

OMAR PARBHOO: And hence the costs for U.S. companies wanting to sell goods to these countries.

EMILY-ANNE PATT: But where does trade promotion authority come in?

OMAR PARBHOO: Well, that's what I spoke to Assistant Secretary Rivkin about. But before we got into the details, I wanted to get a sense of the bigger picture on trade. This is from our conversation.

Let me start with timing-- we're just recovering from a recession. Should we really be focusing on large trade deals with other countries?

CHARLES RIVKIN, ASSISTANT SECRETARY OF STATE FOR ECONOMIC AND BUSINESS AFFAIRS, DEPARTMENT OF STATE: Well, that's exactly why we should be focusing on trade. Over the past five years alone, U.S. exports have generated one third of our overall economic growth. So trade actually strengthens the American economy. Our exporters can sell more goods in more markets while consumers benefit from lower prices and more variety.

And when you think of the fact that 95% of the world's consumers live outside our borders, that's a clear case for more trade. And by the way, new trade agreements like TPP and TTIP will generate more opportunities for American companies, boost our economy, create jobs, and bring overall prosperity to our country.

You know, Omar, these aren't just empty promises. I mean, during the next two decades, we expect that nearly 50% of the world's economic growth is going to come from the Asia-Pacific region and that translates into a billion new middle-class consumers. So we can't let the United States miss out on this opportunity.

OMAR PARBHOO: Well put, but there are a lot of legitimate complaints about income inequality in this country. Will TPP and TTIP exacerbate the issue?

ASSISTANT SECRETARY CHARLES RIVKIN: Well, income inequality is a serious problem. But these trade deals are focused on building up our middle class and closing the gap between rich and poor. In the U.S. today, more than 300,000 companies are exporters. And in the past four years alone, these companies added 1.6 million more jobs to our economy. These are jobs that pay 13% to 18% more on average than non-export-related jobs. If we want stronger, more equitable growth, we need to trade.

OMAR PARBHOO: But what about manufacturing jobs?

ASSISTANT SECRETARY CHARLES RIVKIN: Well, exactly. And the reality today is that the world wants high-quality U.S.-manufactured goods. And since early 2010, American manufacturers have added over 700,000 jobs, largely due to our increased exports. Not everyone realizes, Omar, that 1 in 4 U.S. manufacturing jobs is supported by exports.

OMAR PARBHOO: Looking through a macroeconomic lens, why would we expand our free trade agreements when we have such a large trade deficit? Wouldn't these agreements be a net loss for the United States?

ASSISTANT SECRETARY CHARLES RIVKIN: I've heard this argument before. But the fact is the trade deficit is not the result of trade agreements. There are any number of factors that contribute to the trade deficit, including global rates of economic growth and patterns of savings and investment. But honestly, it's a bit disingenuous to blame trade agreements for our deficit, because the purpose of our trade agreements is to increase U.S. exports. And that's exactly what they do.

When you take a step back and look at the countries the United States currently has free trade agreements with, we actually have a trade surplus. This includes surpluses in agriculture, manufacturing, and services. And remember, this is primarily about small- and medium-sized businesses. Even though 98% of U.S. exporters are small businesses, only 1% actually export. And that's because the cost of navigating differing standards and technical regulations is so high that for a small business, it can make the difference between exporting or not. The agreements we're negotiating in Asia and Europe addressed these challenges, lowering barriers for small businesses that might otherwise be locked out of foreign markets.

OMAR PARBHOO: OK. So to accomplish all of what you just laid out, the President is asking Congress for trade promotion authority. What does that mean exactly?

ASSISTANT SECRETARY CHARLES RIVKIN: Well, trade promotion authority, or TPA as it's known, is legislation that's written by Congress that defines the objectives and priorities of our trade negotiations. And it also spells out clear oversight and consultation requirements for the administration to follow throughout the negotiations. But this is not a new thing, Omar. Congress has enacted TPA legislation to provide every administration with these types of objectives and priorities going all the way back to 1974. It's time. We need a renewal of TPA.

OMAR PARBHOO: But why is TPA so important? Why shouldn't Congress have more say in these trade agreements?

ASSISTANT SECRETARY CHARLES RIVKIN: Because the benefit of TPA is that it provides us with clear guidelines from Congress when negotiating trade deals. It also lends extra credibility to the Administration's position at the negotiating table. I mean, the concern from partner countries is that Congress will amend and already negotiate a deal when it's up for a vote. So TPA would ease this concern and make it easier for America to conclude a deal.

Now, Omar, I want to be clear about one very important point. Once an agreement is struck, Congress still gets the final say on whether or not the Administration has met their goals. Congress has an up or down vote on these trade agreements before they're ratified. So their power is not circumvented by TPA. And TPA would lock in many of the gains we've made in recent trade negotiations, including enforceable labor and environmental standards. But the reality is that TPA hasn't been updated in over a decade. And it really is time to do so.

EMILY-ANNE PATT: OK. So with TPA, the Administration gets clear guidelines from Congress and more authority at the negotiating table. I can see the importance of it being renewed.

OMAR PARBHOO: Right. Now it's up to Congress to decide whether and when to provide this authority. But hopefully today we've provided some more clarity on what TPA is.

Of course, we'd love to hear that from all of you, so please leave a comment on our Facebook page, Facebook.com/econbizengage, or on Twitter @EconEngage.

EMILY-ANNE PATT: And if you haven't already, don't forget to subscribe to us on iTunes. Until next time, Omar.

OMAR PARBHOO: Thanks for listening everyone.

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