trade handbook

8/7/2019 Trade Handbook

1/90

Understanding TradeKey Issues and Facts


2/90

Understanding Trade: Key Issues and Facts | 1

Table o ContentsIntroduction to Trade ................................................................... 2What American Presidents Think About Trade......................................3

The Bene ts o Trade Liberalization ............................................................5

Answering the Critics ...........................................................................................6

Bene ts o Trade .............................................................................. 8 Trade and Jobs .........................................................................................................9

Trade and Business ..............................................................................................10

Trade and Consumers ......................................................................................11

Trade and the Poor .............................................................................................12

Trade and Political Re orm .............................................................................13

Trade and National Security .........................................................................14

Trade and Labor Conditions ..........................................................................15

Trade and the Environment ..........................................................................16Providing a Trade Sa ety Net ........................................................................17

Foreign Investment ............................................................................................18

Answering the Critics ..................................................................20 Trade with Low-Wage Countries ...............................................................21

Worldwide Sourcing ..........................................................................................22

Foreign Investment and Labor/Environment Regulations .......23

Temporary Entry ..................................................................................................24

Trade and Sovereignty .....................................................................................25

Free Trade Agreements (FTAs) .....................................................................26

Trade and Sectoral Issues .........................................................28 Trade and Labor ...................................................................................................29

Trade and Domestic Standards ..................................................................30

Trade and Agriculture .......................................................................................31

Trade and Services ..............................................................................................32

Trade and Telecommunications .................................................................33

Trade and Intellectual Property ..................................................................34

Trade and Un air Competition ....................................................................35

Trade and High Technology .........................................................................36

Winning Policies or the 21st Century ................................37Facing the Challenges o a New Century .............................................38

Requirements or U.S. Success in the World Economy ................40

Export-Import Bank o the United States ..............................................41

Trade Promotion Authority ...........................................................................42Maintaining Americas Competitiveness ..............................................44

Keeping Pace with Our International Competitors ...................47

Improving the Sa ety Net .........................................................49Bringing the Bene ts o Liberalized Trade andInvestment to the Least-Developed Countries ..........................51

Free Trade Agreements ............................................U.S.-Colombia Free Trade Agreement (FTA) ...........................54

U.S.-Panama Free Trade Agreement (FTA) ..............................56

U.S.-Korea Free Trade Agreement (KORUS FTA) ...................57

Trans-Paci c Partnership (TPP) .................................................59

Permanent Normal Trading Relations (PNTR) or Russia ......60

China and Trade.......................................................Principles or Re-Establishing a Consensuson U.S.-China Trade ..................................................................63Chinas World Trade Organization (WTO) Membershipand U.S.-China Trade Bene t the United States .......................65

Chinas Exchange Rate Policies ................................................67

Chinas Indigenous Innovation .................................................68

World Trade Organization ........................................World Trade Organization (WTO) and the U.S. Economy .......70World Trade Organization (WTO) Builds onHistorical Successes ..................................................................71

World Trade Organization (WTO) and the Future ....................72World Trade Organization (WTO) Dispute

Settlement System .....................................................................73Bene ts o the World Trade Organization (WTO)Dispute Settlement System .......................................................74World Trade Organization (WTO) Decisionsand the United States .................................................................76

Business Roundtable Reports .................................Roadmap or Growth (2010).........................................................78Regaining the Initiative: A Blueprint or U.S. Trade

and Investment (2009).................................................................79

We Cant Sit on the Sidelines: The Race or Exportsand Jobs (2010)............................................................................81Trade and American Jobs: The Impact o Trade on the

U.S. and State-Level Employment (2010).......................................83How U.S. Multinational Companies Strengthen the

U.S. Economy (2010).....................................................................84Mutual Bene ts, Shared Growth: Small and Large

Companies Working Together (2010)............................................85


3/90

2 | Business Roundtable www.brt.org

Introduction to Trade

Introduction to Trade


4/90


What American Presidents Think About Trade

Since the Great Depression, all American PresidentsDemocrat and Republicanhave supported international trade negotiationsto open markets as a means to promote American economic growth and to create new jobs.

The action o the Congress in continuing the operation o the trade agreements program is expressiveo the determination on the part o our people to retain unimpaired, or the next three years, this power ulinstrument or promoting our national economic well-being and or strengthening the oundation o astable peace.

President Franklin D. Roosevelt on Signing the Reciprocal Trade Agreements Bill

April 12, 1940

World prosperity also requires we do all we can to expand world trade.

President Harry S. Truman State o the Union Address

January 4, 1950

World trade supports a signi cant segment o American industry and agriculture. It provides employmentor our and one-hal million American workersI we use [trade] wisely to meet the expanding demands

o the world, we shall not only provide uture opportunities or our own business, agriculture, and labor, butin the process strengthen our security posture and other prospects or a prosperous, harmonious world.

President Dwight D. Eisenhower State o the Union Address

January 9, 1958

[W]e cannot protect our economy by stagnating behind tari wallsthe best protection possible isa mutual lowering o tari barriers among riendly nations so that all may bene t rom the ree ow o goods. Increased economic activity resulting rom increased trade will provide more job opportunities

or our workers. Our industry, our agriculture, our mining will bene t rom increased export opportunitiesas other nations agree to lower their tari s. Increased exports and imports will bene t our ports,steamship lines, and airlines as they handle an increased amount o trade. Lowering our tari s willprovide an increased ow o goods or our American consumers. Our industries will be stimulated byincreased export opportunities and by reer competition with the industries o other nations or aneven greater e ort to develop an efcient, economic and productive system. The results can bring adynamic new era o growth.

President John F. Kennedy Remarks Upon Signing the Trade Expansion Act

October 11, 1962


5/90


6/90


The Bene ts o Trade LiberalizationTrade Liberalization Is Good or the U.S. Economy, U.S. Workers and U.S. Consumers

Open markets create new growth and job opportunities or American companies and workers, and improve consumer choice and

the standard o living o American amilies. Ninety- ve percent o the worlds consumers live outside the United States. U.S. companies and workers must be able to

reach those consumers to expand the U.S. economy and create new jobs.

According to the U.S. Department o Commerces Census Bureau, exports accounted or about 26 percent o U.S. econom-ic growth in the 1990s and 18 percent in the last decade. In the last 10 years and despite the global recession, open tradeand investment have helped raise U.S. gross domestic product (GDP) by 25 percent. This contribution to growth stems

rom the importance o trade to American companies and workers. In 2009, U.S. goods and services exports accountedor nearly 12 percent o GDP. Exports o goods have increased by more than 20 percent in the last decade, and services

exports have more than 37 percent.

Trade means jobs.

In 2008, more than 38 million U.S. jobs depended on trade (exports and imports o goods and services), compared with 14million in 1992, the year be ore implementation o a long string o multilateral and bilateral trade liberalizing agreements.1

Most o these jobs are at small businesses. The Commerce Department reports that more than 97 percent o exporters aresmall or medium-sized companies. According to the Bureau o Labor Statistics, small and medium-sized businesses ac-count or just over hal o all U.S. employment.

More than 10 million U.S. jobs directly and indirectly depend on exports. Despite sluggish economy-wide job growthbetween 2003 and 2008, export-related jobs actually increased by nearly 3 million during this period. Export-supportedmanu acturing jobs totaled nearly 3.7 million, or 36 percent o total jobs supported by exports and 27 percent o all jobs inthe manu acturing sector.2

Trade creates U.S. job growth. Every $1 billion in exports o goods and services creates an estimated 6,000 new jobs.3

U.S. exporting plants increase employment 2 to 4 percent aster annually than plants that do not export. Exporting plantsalso are less likely to go out o business.4

Jobs that depend on trade generally pay about 13 to 18 percent more than the average U.S. wage. 5

Increased trade bene ts consumers and amilies.

The bene ts o liberalized trade are apparent rom our past trade agreements. The North American Free Trade Agreement(NAFTA) and the World Trade Organization (WTO) agreements increased U.S. GDP by $14 billion6 to $40 billion7 a year, respectively.When that is combined with lower prices on imported products, the average American amily gained $1,000 to $1,300 ayear rom these two agreements.8

Restricting trade sti es economic growth, slows the creation o high-paying jobs and harms consumers by driving up prices orgoods and services.


7/90


Answering the CriticsThe Myths and Realities o Trade Liberalization

An honest and intelligent debate about the impact o trade and investment liberalization on the United States requires the

separation o act rom ction.

MYTH:Liberalization undermines environmental protection laws and harms the environment.

TRUTH:

Trade agreements do not dictate U.S. environmental laws or undermine U.S. environmental laws. International tradeagreements require the United States only to apply the same standards to imported products that it applies to domesticproducts. Trade agreements do not prevent other countries rom applying the same environmental standards to U.S.goods that they apply to their own goods.

To achieve environmental sustainability, countries need good environmental laws and e ective en orcement o thoselaws. Liberalized trade produces higher incomes and economic growth that make it possible or countries to improve theenvironmental laws and law en orcement.

U.S. trade agreements with Australia, Bahrain, Central America, Chile, Jordan, Morocco, Oman and Singapore all requirethe United States and our trade partners to (1) e ectively en orce environmental laws, (2) ensure that they do not weakentheir environmental laws to encourage trade or investment, and (3) ensure that violations o their respective environmentalaws are subject to sanctions by legal procedure.

Liberalized trade helps improve environmental protection by lowering the barriers to the sale o environmental technologies

enabling new investments in environmental in rastructure; and making it easier or environmental scientists, engineersand technicians to provide services to developing countries.

MYTH:Liberalization undermines protection or labor.

TRUTH:

Trade agreements do not require the United States to change its labor laws or undermine U.S. laws protecting labor rights

Trade liberalization does not undermine worker rights. In act, the opposite is true. In a study o 44 developing countriesthat engaged in signi cant trade liberalization, the Organization or Economic Co-operation and Development (OECD)

ound that there was notably no case where the trade re orms were ollowed by a worsening o association rights andthat reedom-o -association rights improved in 32 o the countries a ter trade liberalization.

U.S. trade agreements with Australia, Bahrain, Central America, Chile, Jordan, Morocco, Oman and Singapore requirethe United States and our trade partners to (1) e ectively en orce labor laws, (2) work to ensure that International LaborOrganization (ILO) principles are protected by their domestic laws, (3) ensure that they do not weaken their labor laws toencourage trade or investment and (4) ensure that legal proceedings are available to sanction violations o labor laws.

IntroductiontoTrade


8/90


MYTH: Trade agreements undermine U.S. sovereignty by giving international bureaucrats the power to strike down U.S. laws.

TRUTH:

Only U.S. Congress and the U.S. President can make U.S. law. No international institution or oreign country can change U.S. laws

Decisions by the WTO dispute panels cannot override U.S. law. Those panels can only issue recommendations, and theserecommendations have no orce in the United States. Only Congress and the President can decide whether to implementa panel recommendation. They can (1) revise U.S. law, (2) compensate a country harmed by a U.S. law through reductionsin tari s or other trade barriers, or (3) do nothingand accept the risk that the other country may retaliate by raising tari sor other barriers to U.S. exports.

The United States may withdraw rom the WTO, NAFTA, ree trade agreements and all other trade agreements at any time.

MYTH:Trade liberalization causes good U.S. jobs to move overseas.

TRUTH:

Trade creates good jobs in the United States. In 2008, more than 38 million U.S. jobs depended on trade (exports andimports o goods and services), compared with 14 million in 1992, the year be ore implementation o a long string o multilateral and bilateral trade liberalizing agreements.9 Jobs that depend on trade generally pay about 13 to 18 percentmore than the average U.S. wage.10


U.S. rms that are deeply integrated in worldwide markets are more likely to succeed in generating good jobs in theUnited States. Such jobs pay an average wage in the United States o $12,000 more than jobs in rms that are less globallyintegrated, or $63,000 versus $51,000.12

Contrary to the predictions o a giant sucking sound, NAFTA has created good jobs in the United States. NAFTA supportednearly 4 million direct and indirect U.S. jobs in 2007. These are jobs that would not exist in the absence o NAFTA. Bothtrade with Canada and Mexico generally, and NAFTA speci cally, have had a positive impact on American incomes.National income is higher, as are wages. Every U.S. household has the equivalent o nearly $2,000 in extra incomeeveryyearbecause o our current trading relationship with Canada and Mexico.13


9/90


Bene ts o Trade

Bene ts o Trade


10/90


Trade and JobsTrade and Investment Liberalization Creates More and Better Paying Jobs

Exports are an important source o U.S. economic growth and job creation.

In the past decade, Commerce Department data has shown that exports accounted or roughly one-quarter o U.S.economic growth and helped increase our gross domestic product by 25 percent.

In 2008, more than 38 million U.S. jobs depended on trade (exports and imports o goods and services), compared with 14million in 1992, the year be ore implementation o a long string o multilateral and bilateral trade liberalizing agreements.14

More than 10 million U.S. jobs directly and indirectly depend on exports. Despite sluggish economy-wide job growthbetween 2003 and 2008, export-related jobs actually increased by nearly 3 million during this period. Export-supportedmanu acturing jobs totaled nearly 3.7 million, or 36 percent o total jobs supported by exports and 27 percent o all jobs inthe manu acturing sector.15

Foreign investment in the United States creates U.S. jobs. According to Commerce Department data, oreign companiesemploy nearly 6 million U.S. workers in the United States.

Firms that participate in a global economy grow aster and pay more than those that do not.

Increases in export demand lead to more job growth than do comparable increases in domestic demand. A 10 percentincrease in American exports leads to a 6.9 percent increase in domestic employment. By comparison, a 10 percentincrease in domestic demand creates just a 4.2 percent increase in U.S. employment.16 Similarly, increased sales by

oreign afliates o U.S. companies produce U.S. employment gains at the U.S. parent company.

Jobs that depend on trade generally pay about 13 to 18 percent more than the average wage. 17

U.S. rms with global operations generate better domestic jobs at home. Such rms pay an average wage in the UnitedStates that is $12,000 more than jobs in rms that are less globally integrated, or $63,000 versus $51,000.18


11/90


Trade and BusinessTrade Matters or Small and Medium-Sized Businesses

Increased market access bene ts U.S. small and medium-sized business enterprises (SMEs).

As international trade has liberalized, SMEs have increased exports markedly. Increased market access or SMEs is criticcontinued SME success and to the overall health o the domestic economy.

According to the Commerce Department, SMEs comprise 97.5 percent o all exporters. O the SMEs that do export, neathree- ths o them sell into only one oreign market.

Expanding market access through ree trade is essential or SMEs. Unlike big multinational companies that can a ord toestablish oreign afliates to avoid trade barriers, exports are o ten the only way or SMEs to sell into these markets.Approximately 73 percent o oreign sales by SMEs were conducted through direct exports, compared with 85 percento oreign sales by large rms that were conducted indirectly through their oreign afliates.19

Exporting SME manu acturers in 2009 had more than twice the total revenue o their non-exporting counterparts. ServicSMEs depend more heavily on exporting than the larger services providers. In 2007, direct exports o goods and servicesby U.S. SMEs accounted or 28 percent o total U.S. exports; i the value o inputs to other companies exports is incluthat share increases to 41 percent o the total value o U.S. exports o goods and services. SMEs that exported goods anservices directly support an estimated 1.9 million U.S. jobs in 2007adding the indirect exports boosts SME export-rela jobs by another 2.1 million, or a total o about 4 million jobs. Thus, SME exports account or approximately 40 percenall export-supported jobs in the United States.20

Commerce Department data shows that SMEs comprised 91 percent o all U.S. exporters to China in 2008, up rom 77

percent in 1992. From 1992 to 2008 the number o SMEs exporting to China surged by 783 percent, compared with 179percent or large-company exporters. SMEs are responsible or more than one-third o total U.S. exports to China.

In 2008, SME exports totaled $49.6 billion to Canada and $40.9 billion to Mexico. Other leading markets include China,$23.5 billion; Japan, $19.6 billion; and the United Kingdom, $17.1 billion.

BeneftsoTrade


12/90


Trade and ConsumersTrade Provides a Wide Variety o A ordable Products or U.S. Families

Removing barriers to imports makes goods and services less expensive or U.S. consumers and operates as a tax cut or

American amilies.

Imports o goods and services help to keep in ation down. Lower in ation means low interest rates, which is a real bene tor consumers, homebuyers and businesses seeking to nance growth.

Trade liberalization allows Americans to shop the world or the best prices and highest-quality goods.

Trade provides U.S. consumers with access to a wider variety o goods at reasonable prices, including items notproduced domestically.

Liberalized trade brings competition to the marketplace, helping to keep consumer prices down and quality high. Fromautomobiles and electronics to clothing and oodstu s, an open trade policy gives American consumers their choice o the best and most competitively priced products in the world. Low-cost consumer goods particularly bene t low-incomeAmericans who can least a ord rising prices.

Capacity or innovation is the single most important actor determining a countrys rate o economic growth. Liberalizedtrade and open markets accelerate innovation by intensi ying competitive pressures to come up with new products andnew ways o doing business and by providing companies and workers access to new products and production methods.


13/90


Trade and the PoorLiberalized International Trade and Investment Raise Global Living Standards

Trade liberalization increases a countrys wealth overall and reduces tari s that burden the poor.

The World Bank estimates that eliminating all agricultural and goods trade barriers would cut the number o people inextreme poverty (living on no more than $1 per day) in developing countries by 31.9 million over 10 years.21

Increased trade increases the wealth o countries as a whole, allowing governments to allocate more resources to antipovertyand other social programs.

Developed countries provide assistance to developing countries that liberalize trade. The United States, or example, o edeveloping countries capacity-building assistance and pre erential market access in trade agreements.

During periods o rapid economic growth associated with greater integration into the world economy, China reduced itspoverty incidence rom 28 percent in 1978 to 9 percent in 1998, India rom 51 percent between 1997-78 to 27 percentbetween 1999-2000 and Vietnam rom 75 percent to 37 percent.22

Trade liberalization o ers important opportunities or economic growth and poverty reduction.

Increased trade raises average incomes and reduces tari s, resulting in more a ordable and available basic consumergoods, such as ood and medicine.

Free trade leads to economic growth, including increased employment and real wages. Trade liberalization has a positiveoverall e ect on the employment and income o the poor.

Trade liberalization acilitates the exchange o necessary technologies, such as water and ood sanitation. New tradeopportunities in Lesotho, or example, led to more than $120 million in new investments.

BeneftsoTrade


14/90


Trade and Political Re ormLiberalized Trade Strengthens Democracy and Empowers Citizens

Trade encourages open and transparent government institutions, improves the lives o individuals and osters democratic governance.

Trade liberalization brings about structural changes that are essential to democracy.

Increased trade encourages the elimination o corruption and the establishment o the rule o law. Strong, transparentlegal and regulatory regimes are necessary to attract investment and encourage economic exchange, and they also serveas the building blocks o ree societies.

Increased trade acilitates the exchange o new ideas and exposure to di erent ways o thinking and organizingeconomically, civilly and politically.

Free trade agreements promote the rule o law, government transparency, increased citizen participation in the political

process and reedom rom central state regulation.

According to Daniel T. Griswold o the Cato Institute, The most economically open countries today are more than threetimes as likely to enjoy ull political and civil reedoms as those that are relatively closed. Those that are closed are ninetimes more likely to completely suppress civil and political reedoms than those that are open.

Economic re orms can lead to the emergence o an economically independent and politically aware middle class.

Trade liberalization raises incomes and creates a larger middle class o citizens who enjoy new opportunities, more choicesand more control over their daily lives.

Increased trade opens societies to new technologies, communications and democratic ideals. In China, or example,nearly 300 million people now have access to the Internet.23

According to The 9/11 Commission Report , an expanded middle class increases the voices or democracy. Economicallyempowered members o the middle class have a stake in political society and in their uture.

In China, an emerging middle class is bene ting greatly rom Chinas recent economic growth. Chinese citizens are nowbecoming independent homeowners, traveling internationally, studying abroad and engaging in international commerce.

Governments that grant citizens the right to engage reely in commerce nd it difcult to simultaneously deprive citizens

o political and civil liberties.

Countries that open their economies and eradicate trade barriers also increase transparency and citizen participation in theirgovernment institutions.


15/90


Trade and National SecurityLiberalized Trade Promotes National Security

Free trade integrates important regions o the world into the global economy and creates opportunities or youth.

High levels o poverty and poorly per orming economies lead to violence and political instability.

The World Bank reports that unemployment rates in the Middle East and North A rica exceed 10 percentregion-wide, with rates jumping to 26 percent in the West Bank/Gaza. According to the National IntelligenceCouncil, Terrorism is unlikely to disappear by 2025, but its appeal could diminish i economic growth continueand youth unemployment is mitigated in the Middle East.24

Hal the population o sub-Saharan A rica and more than 40 percent o the population o South Asia live on lthan $1.25 a day, according to the World Bank. Forty-six percent o the population o A ghanistan is betweenthe ages o 0 to 14 years.

According to the World Bank, by 2025-2030, the portion o the world considered poor will shrink by about 23percent, but the worlds poor63 percent o the globes populationstill stands to become relatively poorer.

Liberalized trade and investment raises global standards o living and is key to sel -sustaining growth in developing countr

Increased trade creates job opportunities or youth, who may otherwise eel disen ranchised and become targetor extremist recruiting.

Increased trade and investment help developing countries grow and support a vibrant and economicallyindependent middle class and an engaged civil society.

Liberalized trade is necessary or the U.S. to remain globally competitive with high population rising powers. Indias population is projected to climb by around 240 million by 2025, reaching approximately 1.45 billion people. From

2009 to 2025, China is projected to add more than 100 million to its current population o over 1.3 billion.25

I the current trends persist, by 2025 China will have the worlds second largest economy and will be a leading militarypower. It could also be the largest importer o natural resources.26

In addition to orging solid economic relationships, trade agreements build lasting partnerships based on reedom and democracy

According to The 9/11 Commission Report , a national strategy to combat terrorism should include economic policies thatencourage open societies and increased opportunities or individuals to improve their lives and the prospects or their childre

Trade builds lasting relationships between individuals and nations. People who trade and invest in each others countrieshave a greater stake in global peace and security. For example, Quali ying Industrial Zones in Egypt and Jordan havestrengthened their ree trade ties and political alliance with Israel.

The U.S.-Middle East Free Trade Initiative, or instance, is aimed at combating terrorism by advancing economic growthand reedom throughout the Middle East region. Through ree trade agreements, the United States has already orgedstrategic trade relationships with Israel, Jordan, Morocco, Oman and Bahrain.

BeneftsoTrade


16/90


Trade and Labor ConditionsTrade and Foreign Investment Improve Labor Conditions

Trade liberalization creates more and better jobs in the United States, while also protecting U.S. labor standards.

In 2008, more than 38 million U.S. jobs depended on trade (exports and imports o goods and services), compared with 14million in 1992, the year be ore implementation o a long string o multilateral and bilateral trade liberalizing agreements.27 Export-supported manu acturing jobs totaled nearly 3.7 million, or 36 percent, o total jobs supported by exports and27 percent o all jobs in the manu acturing sector.28 Jobs that depend on trade generally pay about 13 to 18 percentmore than the average U.S. wage.29


U.S. rms that invest abroad are more likely to succeed in generating good jobs at home. Such jobs pay an average wagein the United States o $12,000 more than jobs in rms that are less globally integrated, or $63,000 versus $51,000.31

U.S. workers real compensation has risen. While critics o NAFTA and the WTO say they have suppressed wages, growth inreal compensationwages plus bene tshas risen notably since 1993. In the case o manu acturing workers, or instance,average real compensation grew at an average annual rate o 1.3 percent rom 1993 to 2007, compared with 0.8 percentannually between 1979 and 1993.32

Recently negotiated trade agreements require the signatory countries to e ectively en orce their own labor laws and notderogate rom internationally recognized standards. They also include strong en orcement mechanisms on par with those

or goods and services.

Trade liberalization improves worker rights and labor standards in developing countries.

In 44 developing countries that engaged in signi cant trade liberalization, there was no case where the trade re ormswere ollowed by a worsening o association rights, according to the OECD. In addition, reedom-o -association rightsimproved in 32 o the countries a ter trade liberalization.

Liberalized trade creates economic opportunities that give workers the reedom to choose to work or employers o eringbetter pay and better working conditions. Liberalized trade also contributes to rising standards o living, which economicstudies suggest is key to raising labor standards.

Recently negotiated ree trade agreements contain provisions designed to sa eguard internationally recognized workerrights such as the right o association; the right to organize and bargain collectively; a prohibition on the use o orcedlabor; a minimum age or the employment o children; the elimination o the worst orms o child labor; and acceptableconditions o work with respect to minimum wages, hours o work and occupational sa ety and health.


17/90


Trade and the EnvironmentTrade and Foreign Investment Improve Environmental Protection

Trade liberalization can improve environmental protection and lead to better en orcement o environmental laws.

Countries with higher national incomes tend to have stronger environmental protections and lower rates o pollution.

To achieve environmental sustainability, countries need good environmental laws and e ective en orcement o thoselaws. Liberalized trade produces higher incomes and economic growth that make it possible or countries to improve theenvironmental laws and law en orcement.

Liberalized trade can help improve environmental protection by lowering the barriers to the sale o environmentaltechnologies; enabling new investments in environmental in rastructure; and making it easier or environmental scientistengineers and technicians to provide services to developing countries. Drinking water supply, wastewater treatment andsolid waste management are subsectors where oreign direct investment and cross-border services are particularlyimportant or improved public health and environmental protection.

Trade liberalization does not lead to increased pollution or lower environmental standards.

Contrary to popular myths, trade agreements do not prevent national governments rom taking steps to protect theenvironment. The WTO agreements, NAFTA and the more recently negotiated ree trade agreements take environmental,health and sa ety concerns into consideration and recognize the right o all governments to take measures to protect theenvironment. Trade agreements only require that such measures must be applied without discrimination.

Recently negotiated ree trade agreements include explicit sa eguards or environmental protection. Parties are required

(1) e ectively en orce environmental laws, (2) ensure that they do not weaken their environmental laws to encouragetrade or investment and (3) ensure that violations o their environmental laws are subject to sanctions by legal procedure.

BeneftsoTrade


18/90


Providing a Trade Sa ety NetIncreased Trade Adjustment Assistance and Private Programs Assist Displaced Workers

More money is being dedicated to empowering workers displaced by imports.

The Trade Adjustment Assistance (TAA) program provides training and bene ts to workers dislocated by trade liberalization. These workers also may be entitled to receive a Health Coverage Tax Credit covering 65 percent o the premium orquali ed health insurance.

The American Recovery and Reinvestment Act o 2009 dramatically expanded TAA programs, nearly tripling training undingto $575 million.33 There are numerous programs or dislocated workers, including adjustment assistance or trade-relateddislocations. These programs are designed to improve worker skills and mobility.

In addition, creative ideas are emerging rom wage insurance to a human capital investment tax credit to personalli elong learning accountsto strengthen existing programs and ensure that U.S. workers are ready to be hired or thenext generation o jobs.

U.S. businesses are creating opportunities or workers a ected by trade as well as other competitive orces like technological change.

U.S. employers, especially large companies, spend more than $70 billion each year on worker training and education bene ts.34

Many U.S. employers who ace oreign competition provide a range o services to assist their employees.


19/90


Foreign InvestmentForeign Investment Creates Jobs and Spurs Economic Growth

Foreign investment is a signi cant part o the U.S. economy, as it creates jobs or U.S. workers, contributes to research and

development, and spurs economic growth. The United States o ers a stable investment climate that acilitates investment andprotects investor rights.

The U.S. economy is the largest source o , and destination or, oreign direct investment. Since 1980, the total amount ooreign direct investment in the economy has increased eight- old and nearly doubled as a share o U.S. GDP rom 3.4

percent to 6.4 percent. 35

Foreign investment in the United States promotes U.S. exports and results in increased employment and productivity.Foreigninvestment in the United States accounts or more than $232 billion in U.S. exportsmore than 18 percent o all U.S. expo

Foreign companies invest signi cantly in research and development, capital goods and new technology in the United States.

Foreign direct investment in the United States was $325 billion in 2008, up rom $96 billion in 2004. Foreign rms havedirect investment presence in every state and employ about 6 million Americans.36

U.S. subsidiaries o oreign companies pay higher wages than U.S. companies and reinvest a signi cant portion o theirpro ts in the United States. In 2007, the afliates o oreign rms spent $187 billion in the United States on new plantsand equipment.

In 2007, 38 percent o oreign rms employment was in the manu acturing sector, more than twice the share o manu acturing employment in the U.S. economy as a whole.

The United States invests signi cantly in countries around the world. U.S. oreign investment bene ts U.S. companies, U.S. workand their amilies, and the U.S. economy.

Trade and investment liberalization bene ts U.S. industries, which in turn stimulates economic growth and raises standardo living.

American companies with oreign operations make signi cant contributions to the U.S. standard o living. These companaccount or a signi cant portion o U.S. research and development expenditures, capital investments and exports.

In 2008, the Commerce Department reported that U.S. companies with oreign investments employed more than 21million U.S. workers and produced more than $2.3 trillion in goods and services.

U.S. multinational companies invest abroad to get closer to their markets and enhance their global competitiveness. Thisallows companies to continue to expand their business overall and create more jobs in the United States. The vast majorityo U.S. multinational jobs are located in the United States.

BeneftsoTrade


20/90


U.S. oreign investment in other countriesoutsourcingis not a zero-sum game where one oreign worker replacesone American worker. This is not how the dynamic and competitive world economy operates.

In 2007, Matthew Slaughter, an economist at Dartmouths Tuck School o Business, published a comprehensive study o the hiringpractices o 2,500 U.S.-based multinational companies. He ound that when U.S. rms hired lower-cost labor at oreign subsidie

overseas, their parent companies hired even more people in the United States to support expanded oreign operations.

In a 2010 report prepared or Business Roundtable, Dr. Slaughter con rmed that worldwide American companies createmore U.S. jobs through their international business operations and that oreign investment and exports are even morecritical as the United States works to emerge rom the global nancial crisis and deep domestic recession.

Worldwide American companies per orm large shares o domestic productivity-enhancing activities hereat home, generating:

24.3 percent o total U.S. private-sector output 29.4 percent o total U.S. private-sector capital investment 74.4 percent o total R&D per ormed by all U.S. companies 45.2 percent o total U.S. exports

These domestic activities and participation in the global economy drive more job creation and higher averagecompensation or American workers.

The 22 million U.S. workers employed at worldwide American companies make on average about 20 percentmore than their private sector counterparts.

In dollar terms, that means these workers are bringing home an extra $10,000 every year. With the loss o nearly 8.5 million jobs since 2007, creating millions more o these high-paying jobs by

helping companies access more markets is essential to ully emerge rom the recession and ensureprosperity over the long term.

The international operations o worldwide American companies complementrather than substitute ordomestic employment, compensation and investment; the U.S.-based operations o these companies account or:

69.8 percent o their total worldwide output 74.1 percent o their total worldwide capital investment 85.1 percent o their total worldwide R&D 68.7 percent o their total worldwide employment

The international afliates o these companies are primarily located in high-income countries with economicstructures similar to oursnot in low-income countries.

Afliates in developed countries accounted or more than 75 percent o output at these companies. Worldwide American companies employ more than two workers in the United States or each worker

employed at an international afliate.


21/90


Answering the Critics


22/90


Trade with Low-Wage CountriesDomestic Manu acturers Can Compete with Cheaper Labor Abroad

MYTH: Domestic manu acturers need to lower their wages and bene ts to remain competitive with manu acturers in

developing countries.

TRUTH:

Developing countries pay lower wages primarily because o low labor productivity. U.S. manu acturers pay U.S. workershigh wages and bene ts because o their high productivity. The high productivity o U.S. labor makes the labor cost perunit o U.S. goods very competitive in the global economy.

China and Mexico are the only important U.S. trading partners with unit labor costs that are considerably lower than U.S.labor costs. Rapid economic development in both countries is causing their wage rates to increase dramatically, roughly12.4 percent per year in China rom 2002 to 2008 according to the Bureau o Labor Statistics, and this trend will continue.

MYTH: The cost o labor in a nished product determines whether the product will or will not be competitive in the global economy.

TRUTH:

For most manu acturers, direct labor costs represent only a small portion o total manu acturing costs. The modern concepto manu acturing incorporates a broad group o activities, rom design to nance to production to sales and marketing toa ter-sales service.

Overhead costs, such as corporate taxes, actual or threatened tort litigation in the United States, and complex regulatory

compliance add nearly $5 per hour worked to the unit labor costs o U.S. manu acturers. These overhead costs have a argreater impact on U.S. manu acturers cost competitiveness than do oreign wage rates.37

MYTH: High-wage manu acturers cannot compete against low-wage oreign labor.

TRUTH:

Despite paying comparatively higher wages and bene ts, the United States and Germany are among the worlds twolargest exporters o manu actured goods. As the United States makes up only 5 percent o the world population, tradeprovides domestic manu acturers access to 95 percent o the worlds consumers.


23/90


Worldwide SourcingWorldwide Sourcing Is a Net Creator o Jobs

MYTH: Domestic and oreign companies no longer invest in the United States.

TRUTH: U.S. companies with oreign operations are, rst and oremost, American companies. According to the latest available d

(2007), they per orm large shares o Americas productivity and economic-enhancing activities in the United States.38

They purchased $482.5 billion in new property, plants and equipment in the United States29.4 percent o all private-sector capital investment. For every one dollar in oreign capital expenditures, U.S. multinationalcompanies invested $2.85 in the United States.

They employed more than 22 million American workers19.1 percent o total U.S. private-sector employment

U.S. multinational companies exported $515.4 billion in goods to the rest o the worldnearly hal 45.2 perco total U.S. exports.

Between 2003 and 2009, U.S.-owned assets abroad grew by more than $7.2 trillion, according to Commerce Departmentdata. In the same period, oreign-owned assets in the United States grew by $8.0 trillion.

Dollars invested abroad help the domestic economy. One dollar o worldwide sourcing generates $1.45 o bene t, $1.12which accrues to the United States.39

U.S. subsidiaries o oreign companies outsource 5.5 million jobs to the United States.

MYTH: Worldwide sourcing is negatively a ecting all sectors o the U.S. economy.

TRUTH: Innovation and deep business expertise will continue to be delivered predominantly onshore.

According to a Global Insights study, worldwide sourcing o IT jobs generated 257,042 net new U.S. jobs in 2005; by 20net new jobs will total 337,625.40

According to the Commerce Department, services account or 68 percent o the U.S. economy in 2009, and the sector isthriving. The United States maintained a positive services trade balance o $132 billion in 2009.

MYTH: The U.S. economy cannot adjust to worldwide sourcing.

TRUTH: In 2008, more than 38 million U.S. jobs depended on trade (exports and imports o goods and services), up rom 14 mill

in 1992, the year be ore implementation o a long string o multilateral and bilateral trade liberalizing agreements.41

Trade Adjustment Assistance plays a critical role in making worldwide sourcing success ul by providing U.S. workers thtraining and skills they need to enable them to participate in the changing global economy.A

nsweringtheCritics


24/90


Foreign Investment and Labor/Environment RegulationsThere Is No Race to the Bottom

MYTH: Countries weaken regulation o the environment and labor to attract investors seeking low standards.

TRUTH: Nations with low labor and environmental standards do not attract additional oreign investment or increase export markets.

Multinational companies o ten adopt uni orm global standards to lower their costs and they con orm these standardsto the environmental regulations in their most important markets, which typically have the highest, not lowest,environmental standards.

Foreign-owned plants in developing countries tend to pollute less than domestic plants in the same industry.

MYTH: Labor and environmental standards are overlooked consistently when governments negotiate increased oreign marketaccess.

TRUTH: By law, a principal negotiating objective in every U.S. trade negotiation is to ensure each o our trading partners does

not ail to e ectively en orce its environmental or labor laws.

U.S. international bilateral ree trade agreements have provisions that encourage our trading partners to en orce theirdomesticlabor laws. They encourage compliance with the undamental conventions o the International Labor Organization, whichinclude reedom o association, the right to collective bargaining, the abolition o child labor and orced labor, and equalityo treatment and opportunity. They also include en orcement provisions; the newer agreements include en orcementmechanisms on par with goods and services.

MYTH: International trade exacerbates worldwide pollution and labor-rights violations.

TRUTH: Trade helps developing countries reach the middle-income level where, history demonstrates, environmental protection

will improve in tandem with increased economic development.

Trade increases per-capita income and the higher a countrys per capita income, the better the quality o its environment.

E orts by developing countries to use weak labor standards as a competitive advantage have been associated with lowproductivity; have undermined the rule o law; and have discouraged, not attracted, oreign direct investment.


25/90


Temporary EntryTemporary Entry o Skilled Pro essionals Promotes U.S. Economic Growth, FostersInnovation and Complements the Talent and Skill o Americas Workers

The United States bene ts economically rom the temporary entry o skilled pro essionals.

Liberalizing temporary entry o oreign business pro essionals into the United States acilitates the establishment o neenterprises that create jobs or U.S. citizens. Skilled oreign employees help produce cutting-edge technologies, productand exports.

Temporary employment o oreign pro essionals complements the U.S. work orce by contributing unique skills and llcritical gaps in high value-added sectors o the U.S. economy when quali ed domestic workers are in short supply.

Temporary entry is precisely thattemporary. The United States does not have to rework its immigration policy to allowtemporary entry o skilled pro essionals to spur economic growth.

U.S. businesses bene t rom temporary entry privileges granted to U.S. citizens by our trading partners.

Services providers, which now account or 80 percent o the U.S. private-sector gross domestic product, according toCommerce Department data, cannot expand efciently or e ectively in oreign markets without the temporary on-siteassistance o key U.S. personnel.

U.S. companies requently need to trans er personnel across borders on a short or medium-term basis, but existing visaprocedures can be expensive and time consuming. Temporary entry commitments rom our trading partners solve thisproblem. Such commitments are particularly important or providers o pro essional services, such as accountants,

architects, engineers, lawyers and health care personnel.

AnsweringtheCritics


26/90


Trade and SovereigntyInternational Trade Agreements Do Not Undermine the Ability o the United States toDetermine Its Own Trade, Labor, Environment and Foreign Policy

The U.S. government alone makes U.S. law and policy, including U.S. trade law and policy.

Congress and the President make U.S. law. No international organization or oreign country can change U.S. laws, eithertoday or in the uture.

Decisions by the WTO panels cannot override U.S. ederal, state or local laws. Those panels may only make recommendations.Congress and the President decide whether or not to implement a panel recommendation. Congress can (1) revise U.S.law; (2) keep U.S. law unchanged and compensate a country harmed by that law through reductions in tari s or othertrade barriers; or (3) do nothing (and accept the risk that the other country may retaliate by raising tari s or other barriersto U.S. exports).

International trade organizations have no en orcement authority. They cannot impose nes, levy sanctions, modi y tari rates or change the laws o any country. The only sanction or a violation o WTO rules is that countries damaged by theviolation may, in some cases, impose retaliatory measures on the trade o the country that violates the rules.

The WTO agreement permits the United States to regulate and even stop trade to protect U.S. national security, publichealth and sa ety, natural resources and human rights.

International trade agreements can enhance the reedom and prosperity o Americans.

Trade agreements provide Americans greater reedom to buy, sell and invest in the international marketplace by lowering

barriers to trade.

The United States uses trade agreements e ectively to promote U.S. exports. Since 1995, the United States has led 97cases at the WTO, nearly a quarter o all cases. As o 2009, according to the Ofce o the U.S. Trade Representative, theUnited States has prevailed in 59 o the 63 concluded cases that it has led, either by winning a WTO panel ruling orthrough an out-o -court agreement.

WTO member countries, including the United States, implement panel decisions not because o the coercive power o the WTO, but because they think that their people will bene t in the long run rom rules that promote mutual economicgains through trade liberalization.

Negotiating trade agreements that create jobs, oster growth and give consumers more choices at better prices is a wise exerciseo U.S. sovereignty.


27/90


28/90


FTAs Help U.S. Companies and Workers Expand Exports

400%

300%

200%

100%

0%

DR-CAFTA Australia Singapore Bahrain Jordan NAFTA Morocco Chile

50%

337%

199%191%174%

136%

68%59%

2008 U.S. Exports v. Exports in the Year Before FTA Implementation

Source: U.S. International Trade Commission, U.S. Bureau of Economic Analysis, U.S. Department of Agriculture* Manufactured Goods includes all products in NAICS categories 31-33

U.S. Trade Balances 2009

Billions-$375 -$300 -$225 -$150 -$75 $75 $150

Services

Agricultural Products

Manufactured Goods:FTA Countries

Oil Products

$0

-$345.6

-$204.9

$26.9

$26.1

$136.3

S ur pl u s

D e f c i t

Manufactured Goods*:Non-FTA Countries

FTAs bene t American consumers and amilies by increasing wealth and improving access to a wide variety o a ordable products.

Lower prices on goods and manu acturing inputs as a result o FTAs help keep U.S. in ation low. Low in ation means lowinterest rates, making homeownership and business loans more a ordable or Americans.

FTAs help keep down the price o U.S.-produced goods due to a greater supply o inputs at lower prices, enabling U.S.businesses to produce more a ordable products while remaining competitive.

Economists estimate that in 2008, trade with FTA partners increased U.S. GDP by 7.2 percent, or $1.0 trillion. Trade withthe 14 countries with FTAs in e ect that year supported 17.7 million U.S. jobs.42

FTAs create new opportunities or American businesses, workers and consumers.


29/90


Trade and Sectoral Issues

Trade and Sectoral Issues


30/90


31/90


32/90


Trade and AgricultureU.S. Agriculture Has Much to Gain rom Liberalized Trade

Agricultural exports are essential or American armers and ranchers.

American armers and ranchers are the most competitive and technically advanced in the world. With 95 percent o theworlds population living outside U.S. borders, American armers depend on being able to export their products and cropsto the rest o the world.

The equivalent o one in our acres o U.S. agricultural land is planted or export, and 40 percent o American ood grainproduction, 15 percent o eed grain production and 43 percent o oilseed production is grown or export.44

U.S. agricultural exports totaled $98.6 billion in 2009, the second-highest dollar amount on record behind $115 billion in 2008.In 2009, the United States ran a nearly $27 billion surplus in agricultural goods, U.S. Department o Agriculture data shows.

Commodities, such as corn, soybeans, rice, cotton and wheat rely on overseas markets or more than one-third o theirtotal sales. Many high-value products, such as almonds, cattle hides, walnuts and many types o ruit are extremely relianton overseas markets.

Agricultural trade is an important part o the U.S. economy.

In 2008, total U.S. agriculture exports were $115 billion. These exports produced more than $157.2 billion in supportingeconomic activity, as agricultural producers purchased inputs such as uel, ertilizer and transportation services.45

American agricultural exports create good U.S. jobs. In 2008, agricultural exports created 920,000 ull-time civilian jobs,including 608,000 in the non arm sector.46

Agricultural imports bene t American consumers and amilies by increasing variety and keeping ood a ordable.

Trade negotiations o er the best hope or persuading our trading partners to move toward ree trade in ood.

America is consistently the worlds largest agricultural exporter and the worlds second largest importer o agricultural products.

According to a 2008 USTR report, U.S. agricultural exports ace substantial barriers to trade. The global average tari onagricultural products is 62 percent. Elimination o distorting subsidies and tari s on trade in agricultural products will helpU.S. armers gain market access and make ood more a ordable or everyone, including American amilies.47

Trade agreements help American armers access markets. U.S. agriculture exports to new FTA partners in Latin America,A rica, the Middle East and Asia have grown nearly 50 percent aster than agriculture exports to the rest o the world since2000, according to U.S. Department o Agriculture data.

Success ul completion o the Doha Round o multilateral trade negotiations will eliminate export subsidies and domesticsupport programs that make it difcult or U.S. armers to compete on a level playing eld with armers in other countries,particularly those in the European Union and Japan.

Elimination o our trading partners distorting tari s and subsidies helps level the playing eld or Americas highly competitive armers


33/90


Trade and ServicesThe Services Industry is a Power ul Engine o Growth or the U.S. Economy

The services industry is the astest growing sector in the U.S. economy.

U.S. companies increasingly provide oreign rms with nancial, pro essional and in ormation services to meet theirbusiness needs. In 2008, U.S. income rom services investment abroad was $249.8 billion.48

Between 1992 and 2009, U.S. services exports increased by 183 percent, reaching $502 billion in 2009, according toCommerce Department trade data. This represents more than 30 percent o the value o all U.S. exports.

Services cover an enormous range o industries, including banking and insurance, travel, entertainment, legal and otherbusiness services, and pro essional services. The large and diverse sector accounted or 83 percent o all non arm payroemployment in 2009, based on data rom the Bureau o Labor Statistics. From 2008 to 2018, the Bureau o Labor Statisprojects that service-providing industries will add 14.6 million jobs, or 96 percent o the increase in total employment.

The services industry is the largest component o the U.S. economy, employing eight out o 10 Americans and accountinor more than 75 percent o U.S. private sector GDP in 2008, according to the Department o Labor.

The U.S. services industry is growing rapidly and creating new jobs. From 1940 to 2009, 92.3 million net new jobs werecreated in the services sector o the economy, compared with 6.2 million in the manu acturing sector. U.S. employmentgrowth over the next 10 years will be concentrated in the services industry.

U.S. trade policy correctly ocuses on liberalizing trade and investment in services through multilateral and bilateral cooperation.

The United States has a competitive advantage in the high-value, high-skilled services industry, which results in more jobor Americans and contributes to the growth o the U.S. economy.

In 2009, Commerce Department data showed that U.S. exports services were $502 billion, while U.S. imports o servicewere $370 billion, resulting in a $132 billion trade surplus in services.

The United States should pursue open trade policies that expand export markets or U.S. services and build on thestrength o the services sector in the United States.

The U.S. economy will bene t greatly rom liberalized trade in services.

TradeandSectoralIssues


34/90


Trade and TelecommunicationsTrade Liberalization Creates Opportunities or U.S. Telecommunications Companies

Growth in the telecommunications sector has been ast, and continued openness in the sector will uel urther development

o the global economy.

Global revenues or telecommunications reached $2.92 trillion in 2008 and are predicted to reach $3.35 trillion by 2012.49

Emerging market customers now account or more than 50 percent o global telecommunications subscriptions. Sixpercent o telephone customers will be located in emerging markets by 2010.

Countries must continue to implement the core principles o the WTO re erence paper on telecommunicationsincluding requiring dominant service providers to allow all service providers to connect to their transmission networksand promoting the independence o government regulators.

Trade liberalization and en orcement o trade rules help ensure a level playing eld and market access or U.S.telecommunications companies.

The U.S. telecommunications sector is essential to the U.S. economy, national productivity and the global economy. The United States should continue to press its trading partners to eradicate the discriminatory and trade-stunting useo single technology standards.

Trade negotiations have secured more open competitive markets or U.S. telecommunications companies.

Every recent ree trade agreement contains speci c provisions to ensure access to public networks and prohibit

the use o exclusionary standards in the telecommunications sector.

As the result o bilateral negotiations, China recently shelved plans to implement a mandatory wireless encryptionstandard that un airly avored Chinese companies. China also agreed to support multiple-use technology thatwill allow market access or all third-generation wireless phone service providers.

Trade rules and dispute settlements also ensure access to a level playing eld or U.S. telecommunications companies.A recent WTO decision requiring Mexicos dominant telecommunications supplier to provide U.S. companies with air,cost-oriented interconnection rates should provide uture annual savings o several hundred million dollars or U.S. industry.

The United States must work to urther eliminate un air and costly regulations that discriminate against U.S. companies and limitchoices or oreign consumers.


35/90


Trade and Intellectual PropertyStrong Intellectual Property Protection is Key to Promoting Innovation and Economic Growth

Piracy and counter eiting o intellectual property is costly and dangerous. Intellectual property protection is a oundation o

sustained economic development.

Adequate intellectual property protection is an indispensable incentive to increased innovation, development o newindustries, technology trans er and the creation o new jobs.

Foreign direct investment increases as oreign governments en orce intellectual property protection, particularlypatent rights.

Increased intellectual property protection in oreign markets increases the availability o medicines and other importantproducts in those markets. For example, the intellectual property protection rules in the U.S.-Jordan Free Trade Agreemenhave led to a substantial increase in the rate o regulatory approval o innovative drugs in Jordan.

Compulsory licensing inhibits uture research and development and can result in the proli eration o dangerous productthat are o in erior quality because o substandard manu acturing processes. Compulsory licensing o intellectual propshould, there ore, be used only when absolutely necessary, such as in ghting malaria, tuberculosis and HIV/AIDS.

Widespread counter eiting causes enormous economic losses and endangers public health and sa ety.

Worldwide, roughly 41 percent o all so tware installed on personal computers is obtained illegally.50 Industries that relyon copyrights, trademarks and design have been hardest hit, but other a ected industries include ood and beverages,pharmaceuticals, electrical appliances, watches, cigarettes and cosmetics.

Global revenue losses rom so tware piracy totaled $53 billion in 2008.51 Piracy rates in many developing countries, includinChina and Vietnam, exceed 75 percent.52

Reducing so tware piracy by just 10 percent in two years would create an estimated $193 billion in new economic activiand generate $43 billion in new tax revenues.53

Not only does the proli eration o counter eit products undermine legitimate commerce, but it also poses a serious publhealth and sa ety risk. People are harmed and killed by consuming or using substandard counter eit products, believingthe products to be reliable and legitimately produced.

Adequate protection or intellectual property rights is essential or scienti c innovation and economic growth.



36/90


Trade and Un air CompetitionStrong Trade Laws and Remedies Ensure a Level Playing Field or U.S. Businesses and Workers

Under U.S. law, U.S. companies have e ective remedies or un air trade practices by exporters to the United States.

The U.S. Countervailing Duty Law o sets the e ect o oreign government subsidies that bene t products exported tothe United States. The U.S. Antidumping Law o sets the e ects o below-cost sales or sales by an exporter whose homemarket is protected rom competition.

Section 337 o the Tari Act o 1930 prevents the importation o products that in ringe on U.S. patents, copyrights andtrademarks to protect the value o U.S. companies R&D spending.

In 2004, the U.S. Department o Commerce established an Un air Trade Practices Task Force to make recommendations onhow to eliminate un air trade practices that harm U.S. businesses.

The U.S. government can protect the interests o U.S. exporters in oreign markets by en orcing WTO agreements.

The U.S. government can and does use the WTO agreement to eliminate barriers to exports o U.S. goods. For example,the agreement puts a cap on the amount o most duties, prohibits discrimination against imports (such as un air standardsrequirements or imports) and requires transparent and honest customs procedures.

The U.S. government uses the WTO dispute settlement procedures to en orce the rules when U.S. exporters are unlaw ullydenied access to oreign markets. As o 2009, the United States has prevailed in 59 o the 63 concluded cases that it has

led, either by winning a WTO panel ruling or through an out-o -court agreement.54

All countries must trade airly to maximize the gains rom international trade.


37/90


Trade and High TechnologyAgreements That Liberalize Trade and Protect Intellectual Property Are Critical to theSuccess o Americas High-Technology Industry

International trade in high-technology products is important to U.S. business and the U.S. economy.

As much as two-thirds o revenues or the leading U.S. high-technology companies are generated rom sales outside theUnited States.55

Without global trade, the U.S. high-technology industry would be just one-third o its current size, and the dynamic U.S.high-technology sector would employ proportionately ewer people and generate less income and tax revenue in theUnited States.

The U.S. so tware industry alone was estimated to generate a $36.4 billion trade surplus in 2008. Without trade in high-technology products and the resulting exports, the U.S. trade de cit would be larger each year.56

Trade and investment agreements that remove barriers to high-technology products and protect intellectual property are critical tomaintaining U.S. leadership in the high-technology eld.

The most rapid increase in spending on IT products is expected to take place outside the United States. The BRIC countri(Brazil, Russia, India and China) are expected to account or nearly 25 percent o global personal computer sales in 2011up rom 16 percent as recently as 2006.57

Trade agreements have signi cantly reduced tari s on high-technology products, allowing U.S. exporters to enter newmarkets and expand overseas sales.

The Uruguay Round agreements reduced tari s on high-technology products, and the subsequent In ormation

Technology Agreement (ITA) removed many tari s entirely in signatory countries.

U.S. ree trade agreements with various countries also lowered signi cant barriers to U.S. high-technology exports. TheCentral America Free Trade Agreement (CAFTA), or example, is estimated to save U.S. exporters $75 million a year inimport duties by reducing or eliminating tari s on technology products.58

Continued e ort to reduce barriers is vital to high-technology trade. In many markets, signi cant barriers to high-technologproducts remain. For example, Brazil, one o the worlds largest markets or high technology, continues to maintain signi ctari s and taxes that can add as much as 100 percent to the cost o a personal computer.

Trade negotiations must protect intellectual property in addition to lowering high technology trade barriers. Failure to

adequately protect intellectual property is a signi cant deterrent to international trade in high-technology products. TheBusiness So tware Alliance estimates that global revenue losses rom so tware piracy totaled $53 billion in 2008. Piracyrates in many developing countries, including China and Vietnam, exceed 75 percent.59

Reducing so tware piracy by just 10 percent in two years would create an estimated $193 billion in new economactivity and generate $43 billion in new tax revenues.60

Continued U.S. leadership in high technology requires agreements that open oreign markets to U.S. exports and strong protectionor intellectual property.



38/90


Winning Policies or the 21st Century

Winning Policies orthe 21st Century


39/90


Facing the Challenges o a New CenturyPolicymakers Need to Squarely Face New Challenges to Ensure that International Tradeand Investment Continue to Be a Source o U.S. Strength

An array o new realities in the 21st

century will test the United States and require smart policies to ensure that the United Statescontinues to lead internationally.

Major new trading nations. With the success o global economic liberalization, economic power has become moredi used and competitive challenges more erce. The U.S. share o world trade is still large, but it has steadily declined amajor new trading nations have emerged.

Cumbersome negotiating vehicles. The success o trade liberalization also has led to a rapidly expanding membershipin the world trading system, which ironically makes urther global liberalization difcult to achieve. The WTO now compri153 governments, accounting or more than 97 percent o world trade. A group this size will almost inevitably moveslowly as the global economy rapidly changes.

Economic integration without the United States. With the di usion o economic powerand the increased difcultyo making progress in the expanded global systemother countries have aggressively pursued trade and investmentarrangements that leave U.S. exporters and investors at a competitive disadvantage.

Lack o coherent system integrating U.S. agreements. Between 1985 and 2009, the United States has negotiatedFTAs with 17 countries. Each FTA has a rationale, but U.S. FTAs are not being orged into a coherent system. This lack ointegration has led to unnecessary transaction costs or businesses that deny commercial bene ts and broader strategicbene ts to the United States.

Missing competitive tools with some o our key markets. Although the United States has pursued an aggressive

strategy o negotiating FTAs, we still lack FTAs or similar agreements with some o our largest trading partners. In somekey emerging markets, such as Brazil, China and India, U.S. businesses lack competitive tools that European and othercompetitors enjoy, such as bilateral investment treaties and tax treaties.

New regulatory challenges. U.S. rms ace no greater set o challenges internationally than in the regulatory arena.Meanwhile, the European Union is increasingly the regulatory model o choice or third countries.

Unmet expectations o least-developed countries. Least-developed countries, particularly in sub-Saharan A rica anthe Middle East, have received only limited bene ts rom global economic liberalization.

Worker anxiety at home. U.S. workers harmed by job losses due to technological innovation and changes in the globaleconomy are rustrated by inadequate job retraining and assistance.

U.S. policymakers should explore new policies to maximize American global competitiveness.

Maximize the e ectiveness o the WTO. The United States and its trading partners must conclude the Doha Roundand explore ways to speed trade and investment liberalization in the uture, including through rolling negotiations,plurilateral agreements among smaller groups o like-minded countries, nonbinding agreements, capacity building,increased high-level political engagement and increased transparency.

WinningPoliciesorthe21Century


40/90


Make bilateral and regional trade agreements work better or the United States. The United States should buildon the series o FTAs already negotiated to ensure that current and uture agreements are most e ectively serving theneeds o U.S. business, armers, consumers and workers by:

Harmonizing and integrating existing FTAs.

Building regional agreements on existing FTAs.

Seeking agreements with major U.S. trading partners.

Adopt a proactive approach to oreign regulatory issues. International regulatory issues need to be a centralcomponent o U.S. international economic policy.

Close the gaps on investment and tax protection. The United States should embark on more aggressive negotiationo investment and tax treaties to level the playing eld with oreign competitors.

Lay the groundwork or American competitiveness through domestic policy. Domestic policies a ect U.S. globalcompetitiveness and need to be designed to strengthen U.S. competitiveness. This means making a serious commitmentto worker training, adjustment assistance, innovation, education and job creation; narrowing the current account de cit;and identi ying and eliminating disincentives or U.S. exports and investments.

Bring the benefts o trade and investment to the poorest countries. The United States and other industrializednations need to ocus on providing the worlds poorest countries with the tools they need to bene t rom economicliberalization and li t their citizens out o poverty. The United States and its trading partners should explore steps to makethe advanced developing countries ully participating members o the global economic system.

The challenges o the new century demand an energetic and creative international economic policy.


41/90


Requirements or U.S. Success in the World EconomyU.S. Businesses and Policymakers Need to Work Together to Ensure that American FirmsHave What They Need to Compete Success ully in World Markets

U.S. businesses require a comprehensive set o conditions to grow domestically and compete success ully around the world,including the ability to do the ollowing:

Export and import goods and services without high U.S. or oreign trade or other barriers. Invest reely in global markets and enjoy basic protections or those investments. Operate in air and transparent regulatory environments that apply uni ormly to oreign and domestic rms alike. Rely on developed legal systems and air arbitration systems to resolve disputes. Export globally without having to adjust product testing or design or each market because o unique local standards. Operate under trade and investment rules consistent with business realities and changing technology. Rely on and protect their intellectual property and know-how, and be ree rom requirements to trans er technology.

Compete without burdens to international competitiveness, such as mounting employee health care costs. Conduct business without the risk o double taxation by the country o transaction and the country o residence. Compete without disincentives or exports or investments, such as unilateral sanctions and export controls that do not

e ectively advance national security interests. Rely on a sound U.S. research and development base and an educated work orce.

Policymakers have a variety o tools available to help establish these conditions or success:

Multilateral trade negotiations Regional and bilateral trade negotiations Regulatory mechanisms Bilateral investment treaties Tax treaties Pre erence programs Domestic social and regulatory policy

U.S. policymakers must look comprehensively at the available tools to ensure they are creating the necessary conditions or U.S.international economic success.



42/90


Export-Import Bank o the United StatesReauthorize the Export-Import Bank So it Can Continue to Help to Turn Export Opportunitiesinto Real American Sales and Jobs

The Export-Import Bank (Ex-Im Bank) o the United States is the ofcial export credit agency o the United States. Ex-Im Bank enables U.S. companieslarge and smallto compete in world markets or exports that help to maintain and create U.S. jobs.

Ex-Im Bank was established in 1934 during the depths o the Great Depression. Its goal was to create and sustain American jobs through exports.

Ex-Im Bank provides a wide range o products and services to help American companies and workers:

Working capital guarantees or pre-export nancingExport credit insuranceLoan guarantees and direct loans or nancing the purchase o American exports

This support o American companies and workers and their exports comes at no cost to the American taxpayer. Ex-ImBank is sel -sustaining. Its products, services and operations are paid by buyers and borrowers, not rom unds providedby the American taxpayer. Since 1992, Ex-Im Bank has returned more than $4.5 billion to the American taxpayer.

Ex-Im Bank has been a success.

With 75 years o experience, Ex-Im Bank has supported more than $400 billion in U.S. exports produced by American workers

Ex-Im Bank is open or business in 175 countries. In the last ve years, Ex-Im Bank completed nearly 11,000 nancialtransactions totaling $65.5 billion.

In Fiscal Year 2010, Ex-Im Bank nanced a record $25.5 billion in U.S. exports, up rom 70 percent two years ago. Thisnancing supported an estimated $33 billion in exports and 227,000 American jobs.

On average, 85 percent o Ex-Im Bank transactions directly bene t U.S. small and medium-sized businesses.

Ex-Im Bank helps American companies and workers keep pace with their oreign competitors.

Without access to competitive export nancing, American companies and workers will not be able to win sales in todayshighly competitive world market and will not be able to meet the National Export Initiative goal o doubling Americanexports over the next ve years.

Ex-Im Bank is expanding its operations and developing new competitive programs like its recent decision to match

Chinas cheaper nancing terms to get the Pakistan government to buy 150 General Electric locomotives.

Ex-Im Banks ability to be competitive is, however, hampered by its lack o resources compared with major U.S. competitors.

In 2009, Ex-Im Bank was able to provide $21 billion in loans and guarantees, while Export Development Canadahad resources to nance $80 billion and Japans export credit agencies nanced $130 billion.

Ex-Im Bank is capped at supporting a total nancing port olio o $100 billion, which is less than Japans agenciessupport every year.


43/90


Trade Promotion AuthorityThe Congressional-Executive Partnership Must Be Renewed

The Presidential Trade Promotion Authority (TPA), which expired in 2007, gave U.S. trade negotiators credibility at the negotiatin

table and ensured congressional and public participation in shaping the U.S. trade policy agenda.

TPA helped the United States negotiate meaning ul and comprehensive bilateral and multilateral agreements by givingU.S. negotiators credibility. Because our trading partners know that Congress will not reopen care ully negotiatedagreements by amending a nal agreement, they are more likely to grant substantial concessions that bene t U.S.business, armers and consumers.

A well-cra ted TPA will help Congress maintain an active and central role in trade negotiations by allowing Congress tocra t U.S. negotiating objectives and requiring meaning ul consultations among the President, Congress and the publicbe ore and during negotiations.

Between 1994 and 2002, when the President did not have this authority, the United States ell dangerously behind innegotiating FTAs and investment agreements, causing U.S. businesses and armers to lose market share in A rica, Asia aLatin America. A ter TPA was renewed in 2002, the United States was able to resume a leadership role in global trade aninvestment policy by negotiating new market-opening agreements.

TPA expired in 2007 and history repeated itsel the United States again ell behind oreign competitors negotiatingpre erential bilateral and regional trade agreements or their companies and workers. The need or TPA is greater todaythan ever be ore. The un nished Doha Round, the new Trans-Paci c Partnership negotiations and the need or other newagreements to give our companies and workers a competitive advantage in ast-growing markets will require continuedpresidential negotiating authority. In addition, continued U.S. leadership in global trade policy necessitates a strong

partnership between Congress and the executive branch on trade and investment policy.

TPA has been a success.

TPA has been a vital tool or U.S. negotiators since 1974. Presidents Nixon, Ford, Carter, Reagan, Bush and Clinton had type o authority to negotiate trade deals with our global trading partners. Using TPA-type authority, U.S. negotiators weable to negotiate the trade agreements that shaped our modern trading system, including the Tokyo Round o multilateraltrade agreements, the U.S.-Canada FTA, the U.S.-Israel FTA, NAFTA and the Uruguay Round o multilateral agreements

ormed the WTO.

A ter TPA was re-enacted in 2002, the United States returned to the o ensive: FTAs with Australia, Bahrain, Central AmChile, Morocco, Oman, Peru and Singapore were negotiated and approved by Congress; and agreements with Colombia,Panama and Korea have been completed and are awaiting congressional approval. Without renewal o TPA, the UnitedStates ability to engage in the international economic arena will be undermined and oreign competitors will be able tonegotiate pre erential agreements that reward their companies and workers at the expense o ours.



44/90


TPA will enable the United States to keep pace with international competitors.

Every major trading nation in the world is actively negotiating FTAs to ensure that their businesses and workers cancompete success ully in a global economy and to secure strategic commercial, oreign policy and natural resourceadvantages. China, the European Union, India, Japan and other leading trading powers are all actively negotiating a

network o ambitious agreements, with or without us.

I the United States leaves the eld to others, U.S. businesses and their workers will be competing at a disadvantage.For instance, prior to negotiation and implementation o the U.S.-Chile FTA, U.S. exporters aced an across-the-board 11percent tari , while Canadian exportersby virtue o the Canada-Chile FTAcould sell to Chile duty- ree. The U.S-ChileFTA now ensures that U.S. exports enjoy the best possible terms o trade.

Failure to renew TPA denies U.S. trade negotiators a vital tool and risks letting America all

trade handbook

Documents