“The Bush Administration’s 2005 Trade Agenda: Promoting Economic Growth

and Opportunity”

Zion’s Bank’s 4th International Trade and Business Conference

Salt Lake City, Utah

May 17, 2005

Remarks by Dr. Christina Sevilla

Director for Intergovernmental Affairs and Public Liaison

Office of the U.S. Trade Representative

Executive Office of the President

 

Good morning. I’m delighted to be back again in Salt Lake City at Zion’s Bank’s 4th

International Trade and Business Conference. Thanks to Scott Anderson and Conan

Grames for the kind invitation and hospitality. It is truly an honor to speak in the same

program with the Honorable Jon Huntsman, Governor of Utah and formerly Deputy

United States Trade Representative, appointed by President Bush. It was my privilege to

serve with Governor Huntsman during his tenure at USTR. Governor Huntsman truly

has a global business vision, and his leadership is recognized in Asia and around the

world. Utah’s citizens will benefit from his experience.

 

As you may be aware, President Bush recently asked Congressman Rob Portman of Ohio

to join his Cabinet as the United States Trade Representative. He brings many strengths

to the office. He has represented a state with broad manufacturing, agriculture, and

services interests, and he is known for reaching across the aisle to achieve results. As a

Member of the House Ways and Means Committee, and its Subcommittee on Trade, he

has been involved with trade issues and legislation for years. Ambassador Portman plans

to pursue an aggressive agenda with a focus on opening new markets, enforcing our trade

agreements and trade laws, spreading economic freedom, and working in close

partnership with Congress.

 

I’m here today to speak on the Bush Administration agenda, and highlight how our trade

agreements are promoting economic growth, better-paying jobs, and higher standards of

living here in Utah and across our country, as well as spreading hope and opportunity for

millions of people around the world.

 

Utah and Trade

 

Salt Lake City is considered one of the most historically important cities in the western

United States. Founded in 1847 by Brigham Young, it is among the region's oldest cities.

Mining and the railroad initially brought economic growth, and the city became known as

the "Crossroads of the West".

 

Today, in the 21st century the modern economy of Salt Lake City is service-oriented, with

a global outlook. Today the city’s major industries are government, trade, transportation,

utilities, professional services and business services. The city has developed a strong

tourism industry and was proud host to the 2002 Winter Olympics. A major employer is

the regional Delta Airlines hub at Salt Lake City International Airport. Serving 18.3

million passengers in 2004, the facility is ranked 26th busiest in the United States and 51st

busiest in the world. Salt Lake’s status as an international hub of the West underscores

Utah’s extensive linkages to world markets which support economic growth and jobs in

the state.

 

Today, at the beginning of the 21st century, President Bush supports free trade, because it

is an engine of economic growth and wealth, supports millions of existing jobs in the

U.S. and constantly creates new opportunities for Americans seeking to improve their

livelihoods. At the same time, growth through international trade offers hope to millions

of people around the globe who also seek freedom and economic opportunity, and also

spreads important American values to the world.

 

But trade in recent times has become a controversial topic. Let me read you the words of

a prominent American. He said, “with America’s high standard of living, we cannot

successfully compete against foreign producers because of lower foreign wages and a

lower cost of production… [lowering tariffs] would force Americans to compete with

laborers whose wages are sufficient to buy only one-eighth to one-third of [what you] can

buy.”

 

Maybe you’re thinking you heard someone say this recently on TV or read it in the paper.

But in fact these words were spoken by President Herbert Hoover, to justify the Smoot-

Hawley Tariff Act of 1930. Here we are in 2005 having the same debate about trade that

we had in this country more than seventy years ago. In the 1930s, Hoover and the

protectionists won the argument, and the world paid a terrible price. Tariff walls were

raised, America isolated itself, and the misery of the Great Depression was deepened and

prolonged.

 

Despite the lessons of the past, the struggle for free trade is never over. In 2005, we

have a very ambitious agenda which includes renewal of the President’s Trade Promotion

Authority, passage of the Central American-Dominican Republic Free Trade Agreement,

which will level the playing field and remove disadvantages against U.S. exporters

seeking to sell goods, services, and agriculture products into Central America-- a bigger

export destination for us than Brazil; moving the WTO Doha Round of trade negotiations

forward; concluding bilateral free trade agreements with countries in Asia, Latin

America, and the Middle East, and working to vigorously enforce our existing trade laws

and trade agreements around the world. But we will also face a much more basic

challenge at home: once more we’ll need to make the case for free trade to a public

frequently unaware of its benefits.

 

Why Does Trade Policy Matter?

 

We sometimes need reminding that trade is essential to America’s economic growth,

higher standards of living, and job creation at home. Today, the United States is the

world’s greatest trading nation, exporting $1.15 trillion in goods and services in 2004. In

the last two decades, U.S. trade (exports plus imports of goods and services) increased

significantly, growing from 18 percent of GDP in 1984 to 25 percent of GDP in 2004. At

the same time, the U.S. economy grew by 86 percent, and the real per capita income of

Americans rose by 50 percent. In the U.S., trade supports 3 million more jobs in today’s

economy than it did in 1990, with over 12 million jobs supported by exports, and 1 in 5

manufacturing jobs. These are good-paying jobs that pay 10-15% higher than the

average wage.

 

And our exporters are not just the big companies. On the contrary, 65% of all U.S.

exporters are businesses with fewer than 20 employees. We also have a trade surplus in

services- exporting over $339.6 billion in services each year, a $48.4 billion surplus.

The services sector comprises 80% of US employment and 64% of GDP. Just a few

examples of world-class U.S. services industries include financial services, management

consulting, law, insurance, architecture, engineering, accounting, medicine, education,

environmental services. On the agricultural side, 1 in 3 farm acres in America is planted

for export. If you think about it, 96% of the world’s customers reside outside the U.S.

Americans can’t consume much more beef and wheat than we already do, so our farmers

and ranchers need export markets.

 

Moreover, we have 6.5 million jobs supported by foreign companies opening factories

and operating here in the United States. Consider Utah’s case: In 2002, majorityowned

affiliates of foreign companies employed 31,100 workers in Utah. Almost onethird

of these foreign-investment-supported jobs (32.5 percent, or 10,100 workers) were

in the manufacturing sector in 2002.

 

Utah Depends on World Markets

 

Economic globalization and increased trade is critical for Utah’s economy. Utah

exported globally to 174 foreign destinations in 2003. Utah’s export shipments of

merchandise in 2003 totaled $4.1 billion. That is a 31.3 percent increase over the 1999

level of $3.1 billion, which was the seventh fastest growth rate among the 50 states over

the 1999-2003 period.

 

The state’s largest market in 2003 was Switzerland, which received $1.1 billion (27

percent) of Utah’s merchandise export total. Switzerland was followed by NAFTA

member Canada ($544 million) and the United Kingdom ($487 million). Other top

markets included Japan, the Netherlands, Germany, China, Mexico, the Philippines, and

South Korea. Among Utah’s biggest growth markets over this period were Japan

(exports up $97 million), China (up $97 million), and Germany (up $43 million). Of

Utah’s 30 top markets, exports to Costa Rica grew the fastest over the 1999-2003 period,

increasing from just $2.7 million to $32.2 million (over 1,100 percent).

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Among manufactured products, the state’s leading export category is primary metal

manufactures, which accounted for $1.5 billion (36 percent) of Utah’s total merchandise

exports in 2003. Other top manufactured exports are computers and electronic products

($624 million), transportation equipment ($467 million) and chemical manufactures

($340 million). Utah’s fastest-growing manufactured export category is beverage and

tobacco products, which grew 424 percent from $5 million in 1999 to $26 million in

2003. Other manufactured exports that more than doubled during the 1999-2003 period

were plastic and rubber products, chemical manufactures, non-apparel textile products,

processed foods, and furniture and related products. Nearly one-fifth (18.8 percent) of all

manufacturing workers in Utah depend on exports for their jobs.

 

And beyond the millions of U.S. jobs it supports at home, trade also expands consumer

choice and lowers the cost of everyday goods at the department store and the grocery

store for working families. A tariff is just a fancy word for a tax on imports. Recent trade

agreements in the WTO and NAFTA, by cutting hidden import taxes, have saved every

working family in America as much as $2000 per year. Arguing for trade barriers is like

arguing for a tax on lower-income families, because that is who pays the most in import

taxes as a percentage of household income. As a study by the Progressive Policy Institute

points out, the hidden costs of U.S. trade barriers and restrictions hits a single working

mother much harder than a company vice president – she probably loses three days’ pay a

year to tariffs.

 

President Bush and the Administration are committed to freer trade, not only because it is

essential to America’s economy, accounting for a quarter of our growth over the last

decade, but also because of its moral dimension - it offers hope and opportunity at home

and abroad for millions of people. The World Bank estimates that over the last decade,

trade liberalization has helped lift 144 million people around the world out of poverty,

and the Center for Global Development estimates that a new WTO round could lift an

additional 500 million out of poverty. America will not prosper in a world where

destitute societies lead to lives without hope.

 

Trade is also helping to spread democratic values around the world – look at Mexico,

which elected it’s first opposition party candidate as President in 70 years after NAFTA

was enacted, and its free press and NGO community which have been bolstered by

greater freedom in that society. Or South Korea, a star exporter which turned its political

system towards democracy. The President wants to work with economic reformers in the

Middle East through Free Trade Agreements that will promote liberty and opportunity for

their people, and provide for effective enforcement of labor and environmental laws. The

9/11 Commission urged the US to expand trade with Middle East, and cited the

Administration’s recently completed FTA’s with Morocco and Bahrain as positive steps

in that direction.

 

In order to foster these goals, four years ago, the Bush Administration initiated a new

trade strategy for America: to pursue reinforcing trade initiatives globally in the WTO,

regionally, and bilaterally with individual countries. By pursuing multiple free trade

initiatives, the United States is creating a “competition for liberalization” that establishes

models of success on many fronts and keeps the U.S. on the trade offensive. I will say a

word about the trade agenda’s accomplishments to date, and then outline the agenda for

2005.

 

Accomplishments to Date

 

When President Bush took office in 2001, America was falling behind the rest of the

world in pursuing trade agreements. Worldwide, there were 150 regional free-trade and

customs arrangements- the United States was party to only three- the NAFTA with

Canada and Mexico, and our FTA with Israel. America lagged as the European Union,

Mexico, and many other nations negotiated dozens of trade agreements that set new rules

and opened growing markets for their exports, putting the United States at a competitive

disadvantage. To give just one example: a Caterpillar motor grader made in Illinois

faced a $15,000 tariff being sold into Chile, while a similar Brazilian product would face

a $3000 tariff, and a Canadian product, due to its FTA with Chile, faced a zero tariff.

In a challenging environment, President Bush took office in 2001 and worked to open

markets, remove discrimination against American exports, and strengthen our economy.

With bipartisan support in Congress, he pressed hard to get passage of Trade Promotion

Authority, or TPA in 2002- an authority which every President has had since 1975. With

TPA, this Administration has completed free trade agreements (FTAs) with 12 countries

and is working to level the playing field and eliminate barriers with 12 more - this is

significantly more FTAs than completed by all previous administrations combined. New

FTAs have been passed by Congress with broad support- Chile and Singapore in 2003,

Australia and Morocco in 2004.

 

Billions in Tariffs on American Exports Removed. And we are seeing the results. This

Administration has achieved over $6.4 billion in tariff reduction commitments from

countries with which we have negotiated trade agreements. And we are working to

achieve another $1.9 billion in tariff reductions through our ongoing trade negotiations.

That is an $8.3 billion cost disadvantage that the Bush Administration is taking off the

back of American workers and farmers whose products are sold abroad. For example:

 

• More than 99 percent of U.S. exports of manufactured goods to Australia became

duty-free immediately on January 1, 2005, when the United States – Australia

Free Trade Agreement (FTA) went into effect. U.S. manufacturers estimate that

the elimination of tariffs could result in $2 billion per year in increased U.S.

exports of manufactured goods.

 

• Since implementation of the United States- Chile FTA on January 1, 2004, U.S.

exports to Chile have increased 32 percent as compared to the same period the

previous year -- over double the rate of growth in U.S. exports to other countries

in Latin America. Among the benefits of tariff reductions negotiated in the FTA,

U.S. exports of certain construction machinery have grown by 415 percent;

tractors by 371 percent; shelled almonds by 329 percent; and motor vehicles used

to transport goods by 60 percent.

 

• The United States-Singapore FTA went into effect on January 1, 2004. As a

result, U.S. exports of furniture products to Singapore are up nearly 100 percent,

U.S. workers producing information technology equipment have increased their

sales by 62 percent, and overall U.S. exports have grown by more than 19 percent.

But there is still more to do. Other countries typically have much higher tariffs than we

do- for example our average tariff is about 3%, whereas the average tariff for countries

like Egypt, India, Argentina, and Brazil is closer to 30%. That’s why trade agreements

are needed to level the playing field, and its one of the reasons why U.S. engagement in

the WTO is so important.

 

Leadership in the WTO. Under the President’s leadership, the United States played a

leading role in launching the Doha Development Agenda (DDA) of the World Trade

Organization in November 2001, and in advancing ambitious U.S. proposals in

agriculture, goods, and services. The record of U.S. participation in the WTO over the

last ten years clearly demonstrates that continued engagement in the global trading

system is vital for America. Through the WTO, the United States has lowered trade

barriers in 147 economies around the world -- delivering expanded access to the 95

percent of global consumers who live outside our borders and helping to drive a 63

percent increase in U.S. exports of goods and services between 1994 and 2004. U.S.

efforts in the WTO have extended a system of trade rules globally that protect innovation,

provide for certainty and predictability, and form the vital legal infrastructure for

enforcement. Without the WTO, other countries could impose higher duties on American

exports. And without the WTO, the United States would not have the leverage it needs to

address trade barriers that disadvantage American farmers, ranchers, workers, and

businesses, including discriminatory tax policies and customs procedures, subsidies,

unjustified antidumping actions and weak intellectual property protections. With

unwavering U.S. leadership, ongoing negotiations through the WTO Doha Agenda can

provide even greater economic benefits. The December 2005 WTO Ministerial in Hong

Kong will be an important marker in these negotiations.

 

Enforcement. At the same time that we have been negotiating new agreements, we are

serious about strong enforcement at all levels, which is critical to ensure that American

exporters reap the full benefits of global, regional, and bilateral agreements. The

Administration is using all available tools to promote compliance. Through bilateral

engagement, the United States has resolved trade disputes with China, Japan, Mexico,

Russia, Korea and many other countries. For example:

 

• Telecommunications. Opening Korea's closed telecommunications and wireless

market to ensure that American telecom companies and workers can continue to

expand by selling their products in this important market.

 

• Textiles. Relaxing India's burdensome import certification requirements on

American textiles exported to India.

 

• Protecting U.S. Intellectual Property Rights in China. Pressing the Chinese to

agree to a detailed action plan to address the piracy and counterfeiting of

American ideas and innovations, particularly through increased Chinese criminal

penalties for violators.

 

Highlights of 2005

So let me now highlight the top priorities of our 2005 trade agenda, building on this

record of accomplishment:

 

• We are seeking renewal of the President’s Trade Promotion Authority, essential to

our economic leadership and our continuing efforts to open markets globally,

regionally and bilaterally.

 

• We will lead the way in the ongoing Doha Development Agenda trade

negotiations under the WTO that promise substantial economic gains for the

United States and for the world.

 

• A very important priority is passage of the Central America-Dominican Republic

Free Trade Agreement. These are small countries, but big markets- our exports to

CAFTA DR are actually bigger than our exports to Russia, India, and Indonesia

combined – nearly $32 billion in trade. CAFTA-DR will level the playing field-

80% of CAFTA-DR imports are already duty free in the US- but we face upwards

of 10%, 15% tariffs and more selling our agricultural products and goods into

those markets. Moreover, after years of civil war in Central America, this is a

chance to lock in the gains of important political and economic reforms- the FTA

will strengthen the rule of law, democracy, transparency, and anti-corruption in

these countries.

 

• The Administration has launched and is seeking to conclude free trade

negotiations with Panama and the Andean nations (Colombia, Ecuador, and Peru,

with Bolivia participating as an observer), and is committed to a Free Trade Area

of the Americas which would encompass all democracies in the Western

Hemisphere;

 

• In Asia we are negotiating an FTA with Thailand and looking at other

possibilities, in Africa we are negotiating with the five nations of the Southern

African Customs Union including South Africa (Botswana, Lesotho, Namibia,

South Africa, and Swaziland);

 

• and in the Middle East: To create hope and opportunity in a region beset by

violence and despair, the President announced his vision to establish a Middle

East Free Trade Area by 2013. The 9/11 Commission unanimously recommended

that the United States expand trade with the Middle East as way to “encourage

development, more open societies, and opportunities for people to improve the

lives of their families.” In 2005, the Administration will continue to advance

these historic goals- by passing the agreement negotiated with Bahrain, and

finishing negotiations with Oman and the UAE.

 

China

Let me spend a few moments on a country that looms large on the trading horizon, China.

The rising incomes of China’s nearly 1.3 billion consumers have fueled strong demand

for U.S. farm products, manufactured goods and technical services. China entered the

World Trade Organization (WTO) in 2001 – opening its large and growing market to

American goods and services and committing to a series of sweeping economic reforms.

From 1999 to 2004, U.S. exports to China increased nearly 10 times faster than US

exports to the world. As a result, China has risen from our 11th largest export market five

years ago to our fifth largest export market today. For example, U.S. exports of

computers, electrical equipment and other electronic products to China increased by 20

percent between 2002 and 2003, topping $7 billion; chemicals exports grew 24 percent to

$3.7 billion over the same period. Strong U.S. exports of transportation and education

services contributed to an overall $2 billion U.S. services trade surplus with China in

2002. We also have an agricultural surplus with China of $3.7 billion.

 

The United States did not reduce a single tariff or make any other market-opening

concessions to China as a result of China’s WTO accession. But membership in the

global rules-based trading system subjects China to the same rigorous standards of

fairness, transparency and predictability that apply to the United States and 147 other

economies around the world.

 

• China has taken many steps to meet WTO requirements – repealing or revising

more than 1,100 laws and regulations, reducing tariffs, removing market access

barriers, and establishing new transparency procedures.

 

• Where progress has been lacking, U.S. officials have pressed China to remove

remaining trade barriers and to implement its WTO commitments on schedule.

We resolved 7 potential WTO cases with China through intense bilateral

negotiations- for example, opening its market for high technology and other

manufactured products, financial and high-value services, and farm products like

cotton, soybeans and corn. At the WTO, we pressed to ensure fair tax treatment

for U.S. semiconductors in China, the world's fastest growing semiconductor

market. Within four months, the Chinese agreed, ensuring fair access to a market

worth over $2 billion to America's manufacturers and workers. Thus, the United

States is working to increase U.S. exports and further open China's market to

American goods and services, through engagement, intensive and ongoing

consultations, and tough enforcement measures where necessary.

 

Training and Trade Adjustment Assistance

 

While trade is essential to keeping our economy growing and strong, accounting for one

fourth of our GDP, we also want to make sure that all our people are ready to take

advantage of these opportunities and have help if they need it to manage change.

President Bush has an aggressive agenda to help workers obtain the skills to meet the

jobs of the 21st century.

 

• Jobs Training. The President's FY 2005 budget proposes $23 billion for job

training and employment assistance. He has proposed a comprehensive plan to

better prepare workers for the high skilled jobs of the 21st century.

Federal Job Training: The President has proposed to double the number of

workers trained by the largest job training program. He would provide an

additional $250 million for community colleges that train workers for high

growth jobs.

 

• Trade Adjustment Assistance. The Administration tripled the amount of Trade

Adjustment Assistance to $1.1 billion per year in FY 2005 for training and cash

benefits for workers dislocated by increased imports or a shift of production.

 

Conclusion

In sum, the Bush Administration has successfully made the case for free trade and built a

solid record of accomplishment. People in Salt Lake City and throughout the state

depend on free trade and open markets for jobs, for exports, for low prices and choice for

consumers, and for investment to create growth. As a state whose companies and

workers sell goods and services to 174 overseas markets, and as a city which played host

to the world’s greatest competitive athletic games, the Olympics, I’d like you to consider

what you think the vision for Utah should be. And if you believe that economic

freedom, opportunity, a dynamic and competitive economy, and a global presence for

Utah are the right vision for your state and your future, then I hope you will make your

voices heard and seize these opportunities. Thank you very much for your time today.