Leading on Trade to Secure Our Economic Future
I spoke today in Los Angeles, California, about national security opportunities of the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (T-TIP) with members of the Pacific Council for International Policy. After literally traveling around the world — from Washington to California; by way of Bahrain, Iraq, Afghanistan, and Japan — my journey brought me to the familiar neighborhood of Bunker Hill, a community that is constantly evolving and is now a revitalized cultural and commercial hub.
Just as Bunker Hill, and much of Los Angeles, has changed over time so has our world. We are part of a 21st century international landscape that is constantly shifting. In the past quarter century, since the Berlin Wall came down, we have seen the old East-West, North-South divisions lose relevance as economic might has shifted toward the Pacific and some communist or former communist countries have recently developed a surprising appetite for capitalism.
But even while hundreds of millions of people have lifted themselves up out of poverty, periodic financial shocks have highlighted the growing divide between rich and poor in the world. There have been other shocks as well: the 9/11 attacks; conflict in Afghanistan; the second Gulf War; the so-called Arab Spring; a devastating civil war in Syria; and the emergence of non-state actor terrorist groups, particularly Daesh.
So, the globe is in constant motion, with one storm overlapping the next.
Our Influence in Today’s Globalized Marketplace
Even amidst an incredible array of frozen conflicts and new conflicts, one of our top priorities always remains our economic strength. It is the source of our influence in the globalized marketplace and it is vital to everything we are trying to accomplish around the world. To promote prosperity here in the United States and to advance our broader interests around the globe, we are pursuing international economic policies that reflect the dynamic nature of the era in which we live. One of the central pillars of our leadership is to negotiate and adopt 21st century agreements TPP and T-TIP.
As Secretary of State, I have worked from day one to emphasize that foreign policy is economic policy, and economic policy is foreign policy. Without a doubt, that these trade agreements are at the center of defending our strategic interests, deepening our diplomatic relationships, strengthening our national security, and reinforcing our leadership across the globe. And the importance cannot be overstated.
We all know that the United States and the European Union have long boasted a broad and mutually beneficial economic partnership. Together, we account for roughly half of the world’s GDP, and about one-third of global trade. And every day, $3 billion in goods and services cross the Atlantic — all of which supports jobs and growth in both our economies.
America’s Role as a Pacific Power
But as times change, our relationship must adapt to new challenges and opportunities. T-TIP will do this by implementing common sense reforms to remove tariffs, eliminate red tape for goods crossing our borders, and promote services enabled by the Internet — all the while upholding consumer, environmental, and labor protections consistent with our shared values. Even as we seek to complete T-TIP and strengthen our bonds across one ocean, we know that our future prosperity and security will also rest on America’s role as a Pacific power. Central to that effort is the adoption of TPP, which we and 11 other countries concluded last October and signed early in February.
This is literally a big deal in every way, as it unites nations comprising nearly 40 percent of the global economy.
The Asia Pacific is the single most dynamic part of the world today, and it is where much of the history of this century will be written. It includes three of the world’s four most populous nations and the three largest economies, which means the region will have a huge say in international rules governing the Internet, digital commerce, financial regulation, maritime security, the environment, and more.
This is a region where American leadership is welcomed enthusiastically and where our engagement makes a measurable difference — precisely because our partners know that our markets, our security, and our futures are absolutely linked together.
When we deepen our trade ties to countries along the Pacific Rim, we become better able to promote essential reform. Reforms that strengthen the rule of law, and encourage partners to secure property rights, enforce contracts, fight corruption, and respect the basic dignity of their workers and citizens.
When we bolster the economic bonds between us and key allies in the Asia Pacific, we are better able to build our cooperation on other shared challenges such as the threats posed by terrorism, extreme nationalism, conflicts over natural resources, territorial disputes, and poverty.
And when we deepen our commercial connections through TPP, we will rewrite the rules of the road governing the global economy in accordance with our values and the crucial standards of transparency, accountability, and rule of law.
But, the most important part: unlike in most past trade agreements, these standards are not part of some side deal; they are not contained in a letter or a side document. They are defined within the text of the agreement itself; which makes them fully enforceable. That means that each participant in TPP has to keep the promises they make — or face tough sanctions for every violation.
Dispelling the Myths Surrounding Trade Agreements
Regrettably — though probably no surprise there’s a tremendous amount of misinformation floating around TPP. So here are the facts.
First, TPP is absolutely a net plus for our workers and farmers, for businesses of every size, and for our economy here at home. The best studies out there tell us that TPP can be expected to lift incomes for Americans by over $130 billion per year by 2030. The flip side of that is that, if Congress should delay implementation for even one year, that decision will cost our economy $94 billion. It’s also a fact that if TPP is good for our national economy, by definition, it can only be so because it is in fact bolstering local economies that make up the national economy.
Right now U.S. tariffs average 1.4 percent those of our partners average 20 to 50 times that level. Under TPP, nearly all of those tariffs will drop to zero. In fact, when fully implemented, TPP will eliminate over 18,000 foreign taxes on Made in America products. That’s good or American workers, factories, farmers, and service providers.
And on top of reduced tariffs, TPP will ensure that our partners treat American products the same way that we treat products from their own firms. It will cut red tape. It will reduce bureaucracy for our small businesses and family farms. It will help our companies participate more directly in new global supply chains that are creating unprecedented opportunities all around the world.
Yet even given these facts, many Americans still feel a sense of anxiety about TPP and T-TIP. In fact, many Americans are reluctant to embrace anything related to trade. This hesitation stems from mistrust and anger about the economic status of millions of our fellow citizens, and, frankly, I understand. For many Americans, free trade is seen as a proxy for the underlying and disruptive forces reshaping the global economy — forces like the evolution of new technologies; the increased mobility of labor and capital; and the accelerated pace of travel.
But those changes would occur without trade and probably at a faster, more debilitating rate. The problem is not trade itself. The primary reason old jobs disappear is not trade; it’s technology, and certainly not trade agreements. When machines do more, productivity goes up, and the demand for human labor will shift to other industries. That we have been seeing for centuries.
And that’s one of the reasons that protectionist trade policies just don’t work. You can’t build a wall against knowledge, particularly in a world where everybody has that knowledge at their fingertips on a daily. Protectionism is not the remedy to economic pain, and it’s not even a harmless placebo. It’s the way to stop our economy and this new world we’re living in dead in its tracks. So we have to find a better path.
Here’s the reality. No politician, no government, no one can put the genie of globalization back into the bottle. There is no policy that can reverse what communications, the marketplace, and citizens around the world have embraced. You cannot reverse the course on trade and globalization, and nor should we want to. What we can do is mitigate the harm that may be done to some, maximize the benefits to all, and lift the standards that govern global trade so that it levels the playing field for American workers and businesses.
That’s why the Obama Administration has proposed ways to ensure — these forces are why we have undertaken efforts to ensure that any student or worker can gain the skills required to compete through vocational education, community college, lifelong learning, on-the-job training. It’s why we provide support for entrepreneurs and innovators who are designing and manufacturing the next big thing on L.A.’s Silicon Beach or in Silicon Valley or in the garages and basements somewhere, anywhere up and down California.
It is also why our Administration has worked tirelessly to fight back against unfair trade practices, impose duties on those illegally dumping goods on our shore, and challenged illegal subsidies at the WTO.
Put simply, the solution to our economic future isn’t shutting the door to trade; it’s opening the door to a system that will make trade work for everybody. And TPP is, by far, the best way to build that system today.
Ultimately, this whole debate — about TPP, T-TIP, trade generally — comes down to a fundamental question: Will we bind our nation closer to partners and allies in the Asia Pacific and Europe, and strengthen our existing and emerging relationships in key markets and regions? Or will we pull back from our role as the indispensable global leader and leave others to fill the void, and delude ourselves into somehow believing that will make us safer?
Leading on Trade: From the New Frontier to the Next Frontier
My own belief is that, when the stakes are this high, Americans will decide to lead. That’s who we are.
Indeed, wise decisions about our future have long defined critical moments in our history. For my generation, one of those moments occurred at the fabled Los Angeles Memorial Coliseum when, in July of 1960, Senator John Kennedy accepted the Democratic presidential nomination and summoned the American people to join him as pioneers and explorers in a “New Frontier.”
That frontier, he said, would be one of “unknown opportunities and perils…of unfilled hopes and unfilled threats.” The same could be said about the challenges we face today. Our world may be filled with perils, but it is absolutely defined by boundless opportunities and boundless possibilities — by hopes for security and growth.
This era of change and of globalization, of interconnectedness and of new alliances, is coming whether we seek it or not. As so many generations of Americans have proven again and again, we will not shrink from the challenges before us. We will overcome them and turn them into opportunities that will make our country stronger.
We will move forward from the “New Frontier” to the “Next Frontier” with characteristic American imagination, courage, perseverance to advance our interests and our ideals at the same time. And we will thereby shape a future that makes possible our highest hopes for peace and prosperity at home and across our ever-spinning, ever-shrinking planet.
The above was adapted from a speech delivered on April 12, 2016 hosted by the Pacific Council on International Policy in Los Angeles, California. You watch the full video on video.state.gov.