Looking for a bright side

Business groups focus on positives of mixed messages on trade

By: Eric Kulisch
Photo: Holbox/Shutterstock
   The heads of business groups with interest in making it easier for American companies to do business overseas are taking a conciliatory approach toward the incoming Trump administration, which has signaled it intends to restrict trade unless other countries accede to new rules benefiting domestic manufacturers and exporters.
   The U.S. Chamber of Commerce and the National Foreign Trade Council recently outlined their visions for economic growth and if their leaders are worried about Donald Trump’s populist message, or Cabinet members with enforcement-first philosophies, they did a good job hiding it.
   Instead, the association chiefs framed trade expansion as an important element of a broad agenda that aligns with Trump’s goal to grow the economy, while expressing optimism that objectives enshrined in regional trade deals such as the Trans-Pacific Partnership (TPP) might still be achievable if re-packaged with some new terms and conditions.
   They also stressed more needs to be done to expand the benefits of trade to communities and workers negatively impacted by globalization and technology.
   “A lot of people like to focus on part of his [Trump’s] comments on trade, not the entire catalog of remarks on trade," Neil Bradley, the Chamber’s chief policy officer, said during a recent Q&A session with reporters. "Whatever he has said about TPP as an agreement, he’s also talked about the virtues of trade writ large to the United States. And the opportunities and objectives that TPP embodied are objectives we think the president-elect’s team shares, and now it’s just a matter of executing.”
   In his annual address on the “State of American Business” ahead of the press event, Chamber President Thomas Donahue emphasized that “there ought to be a serious deliberation on how we can achieve the economic and geopolitical objectives of the TPP. Inaction on the part of the United States creates an opportunity for other countries to gain benefits for themselves at the expense of American workers, American businesses, and American influence.”
   Trump has also stated he plans to renegotiate the North American Free Trade Agreement, or exit it if Mexico and Canada don’t go along, because he claims the trade deal has influenced companies to outsource production to save on labor costs and led to unbalanced trade flows. Many experts and industry officials insist the United States has benefitted from the hemispheric relationship, with all three countries now offering a common manufacturing platform for products with large amounts of U.S. content that supports millions of American jobs.
   Trump has also expressed disdain for large trade deals, saying he prefers to negotiate deals one by one on a bilateral basis. That approach is more complex and time-consuming, and also creates more agreements for shippers to manage, argue trade advocates.
   NAFTA and TPP were not perfect, so the goal is maintain the progress and address issues that hinder U.S. companies in overseas markets, Rufus Yerxa, president of the National Foreign Trade Council, said in a meeting with reporters last month. The NFTC advocated for ratification of TPP, but still had concerns in areas such as financial services and biologics.
   “We continue to support efforts to get better rules in areas like the digital economy, state-owned enterprises, regulatory reform, services trade and many of the other areas covered in TPP," he said. "We’re willing to work with the new administration on how they’re going to get better access and rules in the world for our industries. There are a lot of very important gains that the United States has made through these trade agreements . . . and we want to preserve those. What I’ve heard from people in the transition is that they are interested in negotiating better agreements. So we need to see how they define better agreements.”
   NAFTA is 23 years old, Donahue noted, “so we welcome the discussion on how it can be modernized and strengthened.”
   Both organizations are champions of trade liberalization, with the condition that new agreements lower barriers to U.S. exports, protect intellectual property and digital industries through policing against theft, ensure the rule of law protects corporate investments abroad, and goods and data can flow across borders without interference.
   The Chamber, for example, wants to work with the Trump administration to find ways to cut down on barriers to trade and investment that exist in China, Myron Brilliant, the executive vice president for international affairs, said during a colloquy with reporters.

An essential component of having open trade in the world is having a reciprocal relationship with your trading partners.

   At the same time, Donahue and Yerxa endorsed the need to aggressively enforce existing trade rules when partners engage in unfair trade practices. Under World Trade Organization rules, countries can impose targeted duties on imports when countries cheat to make certain products artificially cheaper in world markets. But they didn’t support Trump’s idea of slapping punitive tariffs on imports from certain countries because they have a positive balance of trade with the United States or to force U.S. manufacturers to return factories back home.
   “Many of my members would not favor the increased use of trade restrictions at home for protectionist purposes, but we’re prepared to see efforts to negotiate better terms of trade with our major partners,” Yerxa, a former deputy U.S. Trade Representative and deputy director of the WTO, said. “An essential component of having open trade in the world is having a reciprocal relationship with your trading partners. The U.S.-China relationship is a big and complex one. We have a lot of concerns about things that China is doing and many of our companies have been supportive of a tougher approach to negotiating these issues even in bringing disputes where necessary. But at the same time, we have a huge economic relationship with China, many of our companies have important markets in China, and we want to see a positive direction.”
   “No agreement is worth anything if it’s not enforced,” Brilliant agreed. “What also makes sense is looking at what we’re going to do to knock the barriers down abroad. And to do that you can’t just talk about dumping or countervailing duty cases, you’ve got to look at what we’re going to do to pursue America’s economic leadership abroad. And what we want to do is work with this president on a holistic strategy that ensures continued American leadership.”

   Beyond trade deals. Sounding an optimistic note, Chamber officials stressed that multilateral and regional deals aren’t the only way to advance U.S. trade interests.
   “We are committed to engagement in the Asia-Pacific region because it’s helpful to American business, will help our economy,” Brilliant said. “ That means we got to cut down those barriers, those impediments to trade, the regulatory issues, we face across the region. And TPP was one step forward. But there are ways to improve it. We think we can strengthen the architecture of the Asia-Pacific region. We don’t care about the name. The name is not important. What’s important that is that we advance our trade objectives.
   “I think we need multilateral, bilateral and regional trade. So it’s a false choice to say regional, vs. bilateral or multilateral. The point is we got to look at all opportunities and we’ve got to get some wins on the board. And I think this administration coming in wants to be very laser-like focused around what can get done. So one of the things that we have learned is that every administration comes in with their own ideas, but you also learn quickly it takes time to get new ideas off the table, so let’s look at what’s out there and ways to improve it.
   "So whether it’s upgrading and modernizing NAFTA in very tangible ways, or whether its rebranding the engagement in the Asia-Pacific region so we deal with some issues that were not fully addressed in the previous negotiations, or whether it’s looking at bilateral opportunities, we’re going to evaluate all those opportunities on the basis of whether they are going to create more commercial opportunities for American businesses, whether it’s going to level the playing field, whether it’s going to deal with some of the huge impediments.”

Every administration comes in with their own ideas, but you also learn quickly it takes time to get new ideas off the table, so let’s look at what’s out there and ways to improve it.

   But creating broad rules of the road for e-commerce, free data flows, state-operated enterprises and other broad categories of cross-border business require a multilateral approach to remove impediments, Brilliant added.
   “The multilateral system is important to preserve. Doesn’t mean it’s perfect. But it has served to support increasing trade flows around the world and we want to find ways to not only double-down on the multilateral trading system, but also make sure that whatever we’re advancing brings benefits to our economy,” he said.

   Workforce Development. There is widespread consensus today that programs such as Trade Adjustment Assistance have not done an adequate job retraining workers and helping them find new jobs when companies ship their jobs overseas.
   Yerxa and Donahue acknowledged that modernization and globalization have left many workers behind. Serious action is needed to reform the education system and offer specialized training outside the four-year college system to give workers the skills they need for employment and make U.S. companies competitive. They called for a much more intensive effort by the government and private sector to cooperate in creating comprehensive, coordinated programs at the federal and state level that can adapt to changing skills needs and give people the independence to pursue occupational opportunities wherever they present themselves.
   Identifying the kinds of skills and training people are going to need in the coming years is critical, especially since job displacement is tied more to technology than trade, Yerxa said.
   He pointed to Eatsa, a new restaurant concept where patrons order items off their smartphone and a conveyor belt brings the food to a cubbyhole at one’s table without having to interact with a human, as an example of how technology is changing the work place.
   “People always say technology will eliminate jobs," the veteran trade attorney said. " When they put in supermarket scanners it was significantly going to reduce employment because it was introducing all this efficiency, but actually supermarket employment increased, just in different kinds of jobs. We need programs that are going to be a broader look at how all of this stuff – technology, productivity, globalization, new industries, realignment of industries – is going to impact our workforce, and close the gap between the skills of our workforce and the needs of our new productive sectors.”
   And those types of programs need more resources, he added.

   Taxes and Infrastructure. The Chamber and NFTC share the broad consensus view within the business community favoring a lower corporate tax rate and a move toward a territorial system of taxation so that corporate profits earned overseas aren’t taxed twice. That motivates firms to reinvest their earnings in other countries rather than bringing back home where they could produce more jobs and tax revenue. Business groups complain that U.S. corporate taxes are the highest in the developed world, when state taxes are factored in.
   The private sector also is unified in seeking greater investment to modernize American transportation, energy, border and broadband infrastructure to more efficiently move goods around the work and get workers to places of employment.
   “If we have a competitive tax structure, good programs for workers, and state of art infrastructure, there will be a lot less need for politicians to be focusing on counterproductive trade actions as a way of solving our economic problems,” Yerxa said.

NFTC Core Recommendations for National Economic Competitiveness

   · An outward-looking and dynamic trade policy that maintains a commitment to open markets, appropriately addresses unfair trade and economic policies and creates better, more transparent rules for global competition
   · A more globally competitive tax system that acts as incentive for companies to produce, invest and build employment at home through lower rates and the principle of territorial taxation
   · A workforce development strategy that allows workers to close the skills gap in manufacturing and value-added service industries, and that supports labor mobility
   · A national infrastructure program aligned at the federal, state and local level that ensures more public-private cooperation