Speaking at the Economist Buttonwood Conference
October 30, 2013
It’s a pleasure to join you today to talk about the changing dynamics of trade and how President Obama’s trade policy fits into the broader economic strategy of the United States.
We gather at an uncertain moment in the global economy. Europe has stabilized, but most expect flat to slow growth for years to come.
Japan is trying to reboot its economy, but the Abe Government has only just begun to implement the hard economic reforms needed to break out of 20 years of malaise. It is unclear whether certain emerging economies will be able to sustain the high rates of growth they’ve enjoyed the last couple of decades.
In many respects, the United States is the nicest house on a relatively ugly block. We have dealt aggressively with problems in our financial sector, are seeing a recovering housing and jobs market, de-leveraging of household debt, and the discovery of new sources of energy creating the potential for a renaissance in American manufacturing while significantly lowering greenhouse gas emissions.
For the United States, our risk is that our political system fails to do what it needs to do – on fiscal issues, immigration, trade and other issues – to lock in this virtuous cycle. Let me focus today on trade.
In the United States, notwithstanding headwinds coming from the Eurozone crisis, our exports have been growing an average of nearly 12 percent a year since 2009, while the global economy has grown only at 3.2 percent a year and global trade has grown at 2.7 percent a year.
Exports have accounted for nearly one-third of our GDP growth during this period.
And as President Obama has made clear, increasing exports – as part of our broader effort to rebalance global growth – is critical to supporting jobs, promoting growth and supporting and strengthening the middle class in the United States.
But now, global trade is expected to grow more slowly in the future than it has in the past.
And what does this decline in trade mean for the global economy? And how should we address it?
One action we can take is to open markets further, creating new opportunities for trade and investment, and to reduce unnecessary costs and inefficiencies in the global trading system.
In that regard, President Obama is pursuing what is perhaps the most ambitious trade agenda in American history – to create new export opportunities for the United States in concrete ways and to ensure that American workers and firms are dealt into emerging global supply chains rather than being dealt out of them.
That’s why we’re pursuing the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership or (T-TIP), which together will allow us to conduct free trade with economies representing nearly two-thirds of global GDP.
And that’s why we’ve been driving sectoral agreements to liberalize trade in services among countries representing 70 percent of the global services market and in information technology products among countries representing 90 percent of that market.
It’s also why we’ve pressed for a binding agreement on trade facilitation at the WTO – which has the potential to reduce the costs of customs, clearance, logistics, border measures, and other inefficiencies by 10 percent for developed countries and nearly 14 percent for developing countries – estimated to increase global incomes by literally hundreds of billions of dollars.
These negotiations have even greater importance at the moment because their success or failure by the time of the WTO Ministerial in December could well determine whether the WTO is a viable forum for trade liberalization going forward.
In addition, we’ve engaged China in a Bilateral Investment Treaty (BIT) negotiation to put to the test whether China’s expressed commitment to reform will translate itself into actual liberalization. And we are working with India and Brazil, with Sub-Saharan Africa and the Middle East, to deepen those trade and investment ties as well.
There is a common thread woven throughout all of these initiatives. All of them are intended to raise the standards of international trade, introduce new disciplines to address emerging dynamics in the international trading system and ultimately strengthen the multilateral trading system.
Like those brokers who met long ago under the buttonwood tree, we have an opportunity to help define the new rules of the road. But we also face a stark choice: We can either set the pace in a race to the top or try to compete in a race to the bottom – a race we have no interest in winning.