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Assistant Secretary of Commerce Michael C. CamuÑez
Market Access and Compliance
Access the Western Hemisphere Conference: International Trade Conference
Tuesday, April 23, 2013
Minneapolis, Minnesota
As prepared for delivery.
INTRODUCTION
Good morning ladies and gentlemen. Thank you, Greg, for your warm introduction. And thank you, Congressman Paulsen, for your remarks and your continued leadership and commitment to trade as a driver of economic growth and job creation for Minnesota and the United States. Before I begin I want to take a moment to thank Ryan Kanne, Andrea Berton, and everyone from the Minneapolis U.S. Export Assistance Center including our entire Commercial Service team, as well as Sandra Renner and the members of the District Export Council (DEC), for putting together this wonderful conference. I also want to recognize the numerous foreign commercial service officers from the International Trade Administration who have traveled from throughout the Western Hemisphere to be here with us today.
Finally, I want to thank all of you: I understand we have more than two hundred companies, including numerous small businesses and literally hundreds of entrepreneurs from Minnesota and throughout the region attending the conference. You are the heart and soul of the American economy, and through your efforts you are putting Americans back to work, helping the United States maintain its economic leadership in the world.
As you’ve heard, I’m the Assistant Secretary of Commerce for Market Access in the International Trade Administration, and my main responsibility is to help manage our trade relationships globally to ensure that companies like yours are able to compete effectively in open, fair and transparent markets. I’ve been asked to provide a few remarks about opportunities and challenges for trade and commerce in the Western Hemisphere. That’s a pretty tall order, and there’s much to say. So as I reflected on my presentation, I thought it would be most useful to put this conference in the context of our broader trade agenda, then turn to explain why we see such promise in the Western Hemisphere specifically. I will then conclude by highlighting some of the key challenges we’re facing in the region, and how we’re going about addressing them. Over the course of the conference, you’ll have a chance to attend workshops with country experts that will help you explore opportunities for your business in specific markets in the Americas. I hope my presentation today will give you something of a big picture perspective on why our work in trade promotion and trade policy is relevant to you and your business.
BRIEF OVERVIEW OF THE PRESIDENT’S TRADE AGENDA
Let me begin, then, with a very brief overview of the Obama Administration’s trade policy agenda. From the earliest days, our administration has understood that exports and trade are a key component of our economic recovery and long-term prosperity. Why is that? Well consider that our economic growth comes in large part from demand for American goods and services. That demand fuels growth in the private sector, which drives job creation, and which in turn puts money in the hands of every day people to spend on things that generate more demand. It’s a virtuous cycle.
But with 95% of consumers and 80-90% of the growth of global income occurring outside of the United States in the coming years, the President correctly recognized that if we were going to grow our way out of a deep recession, we were going to have to dramatically improve our game in global markets. This is especially true because, at present, less than 1% of American companies export at all, and even then usually to just one country. Faced with these realities, President Obama launched the National Export Initiative in 2010, a whole-of-government effort designed to double U.S. exports abroad while supporting millions of new jobs here at home.
The President has put forth an ambitious trade agenda under the NEI, and there’s more to say about it than I have time. But let me touch quickly on a few highlights:
Our first priority is to open new markets for U.S. industry to sell their goods and services. We’re committed to negotiating state of the art free trade agreements (FTAs) to deepen our ties with economies critical to U.S. competitiveness. In addition to concluding and now implementing three new FTAs with Korea, Colombia and Panama, our administration is leading the way in advancing one of the most ambitious trade agreements to date through the Trans-Pacific Partnership (the TPP). The TPP is a 21st Century agreement that seeks to unify key emerging Asian markets with the growing Pacific markets of the Western Hemisphere, including Canada, Mexico, the U.S., Peru and Chile. We’ve also recently announced, and are now seeking Congressional approval to negotiate, a comprehensive Transatlantic Trade and Investment Partnership agreement with the European Union and its 27 member countries, which will strengthen one of the strongest and most successful economic relationships in the world.
Of course all of these agreements are meaningless if they are not enforced. That’s why the NEI also calls for enhanced efforts to enforce our agreements and the rules of the World Trade Organization (WTO) we have worked so hard to negotiate. We’ve launched a new Interagency Trade and Enforcement Center to hold our trading partners accountable to the obligations they’ve made, and we’ve also enhanced our monitoring and compliance efforts through the Commerce Department’s Trade Agreements Compliance Program, working proactively with companies as they encounter trade barriers globally.
Another key element of the NEI is enhancing our trade promotion efforts to help companies like yours learn about new markets and be well positioned to take full advantage of them. Leveraging our export assistance centers around the country and our commercial officers in embassies world-wide, we’re redoubling efforts to reach out to industry through conferences like this, and through a range of other trade promotion initiatives like Gold Key Services and Trade Missions that you will learn more about during this conference.
And finally, the President’s export strategy also calls for enhanced access to credit through our trade finance agencies like the Export-Import Bank, the Small Business Administration, and the Overseas Private Investment Corporation—all to ensure that you and your clients get better access to the financing you need to sell your products or services on a more competitive basis in foreign markets.
Each element of the National Export Initiative is designed to work together to help stimulate the U.S. economy by promoting export-led job growth. And I’m happy to report that so far the strategy is working well: In 2012, U.S. exports hit an all-time high of $2.2 trillion, supporting close to ten million U.S. jobs. Exports as a share of U.S. GDP are now almost 14%, also a record high. And despite some very strong headwinds that are putting significant downward pressure on global exports and trade volumes, including the continuing economic contraction in Europe, our largest trading partner, we expect to see exports play a strong role supporting U.S. economic growth and jobs going forward.
That’s certainly the case here in Minnesota. Recently released Commerce Department figures show that in 2012, Minnesota’s exports in goods alone totaled nearly $21 billion. The State of Minnesota recently announced that its exports of agricultural, mining and manufactured products reached over $5 billion in the last quarter of 2012 alone, the ninth consecutive quarterly record. And all this export activity translates into real jobs: export-supported jobs linked to manufacturing account for an estimated 5 percent of Minnesota's total private-sector employment. Nearly one-fifth of all manufacturing workers in Minnesota depend on exports for their jobs.
THE PROMISE OF THE WESTERN HEMISPHERE
This is all good news, of course, but the continued success of the NEI depends on business leaders like you to continue to seek new opportunities in new markets. In today’s global economy, if you’re not exporting, you’re likely falling behind. But picking your markets wisely is obviously important. I want to turn therefore to why we feel so bullish about the Western Hemisphere.
For starters, regardless of what you hear about China and the fast growing markets in Asia, we are seeing similar significant growth and economic development right here, closer to home. Mexico and Chile are now among the best performing economies in the OECD. Did you hear that Medellin, Colombia—once known as ground zero in the drug war—was recently named the most innovative city in the world, beating out stalwarts like Singapore, Beijing, and our own New York City and San Francisco, in a global survey by the Wall Street Journal and the Urban Land Institute. It’s a new day in the Western Hemisphere.
The World Bank reports that the middle class in Latin America is expanding dramatically, growing by 50 percent or almost 50 million people in the last decade. The Brazilian middle class alone contributed more than 40 percent of the overall increase in the region. Currently, the middle class comprises nearly a third of Brazil’s 190 million inhabitants. In the early ‘80s, it was only about 15 percent of the population. So it is no coincidence that we now have stationed the third largest Foreign Commercial Service staff in Brazil. And Mexico has the fourth largest CS presence globally.
Given the growth of the region, it should be no surprise to learn that 12 of the 20 FTAs we have negotiated to date are with trading partners in the Western Hemisphere. In fact, you can draw a line from Vancouver all the way down to Santiago, Chile, and you will see an almost uninterrupted network of free trade agreements linking the United States to its partners throughout the Americas. Not coincidentally, nearly half of all U.S. exports—a whopping 45% of our global exports—go to the region. Last year, that was nearly $700 billion. In fact, our two largest export markets in the world are Canada and Mexico, our NAFTA partners.
Since its entry into force almost twenty years ago, the North American Free Trade Agreement has created the largest free trade area in the world, linking 464 million people producing over $18 trillion worth of goods and services. Total trade with our NAFTA partners has more than tripled, and trade with Mexico alone has nearly quintupled. Did you know, for example, that we export more to Mexico alone than to Brazil, Russia, India and China combined? There is power in proximity, and we are seeking to leverage that proximity to the fullest.
And our success is not limited of course to North America. With the U.S.-Colombia FTA entering into force last year, the International Trade Commission has estimated that the Agreement will expand exports of U.S. goods alone by more than $1.1 billion and will increase U.S. GDP by some $2.5 billion. Similarly, in the four years since the U.S.-Peru free trade agreement entered into force, U.S. exports to Peru have increased 80 percent, from $5 billion to $9 billion. And just last year, bilateral trade between the United States and Chile reached $28 billion, a whopping increase of 337 percent over trade in 2004, when the U.S.-Chile FTA entered into effect.
I should note that trade is growing even in places where we do not have a free trade agreement in place. I’ve already touched on the extraordinary and well known growth in the Brazilian market, which is driving significant demand for U.S. goods and services across a wide range of sectors, and which you will learn much about at this conference. Brazil is our 7th largest export market for goods, and our total two-way trade exceeded $105 billion in last year alone.
These national trends are reflected here in Minnesota as well. The State Department of Employment and Economic Development recently reported that in the last quarter of 2012, while exports to Asia declined 11%, Minnesota’s exports to the Americas saw significant growth. Gains were the strongest in Canada and Mexico, and North America overall accounts for 37% of total Minnesota exports. Overall, exports to Latin America were up an impressive 19%, with exports to Brazil up 33%, Panama 65%, Colombia 16%, and even Argentina, a notoriously difficult market, was up 19%.
In short, ladies and gentlemen, the Western Hemisphere is open for business. With its growing middle class, stable economies that have in recent years embraced market-opening reforms, and a growing demand and preference for U.S. products and services, it is a region teeming with opportunity. It’s no coincidence that President Obama will be visiting Mexico and Central America in just a couple of weeks, highlighting our economic partnership with the region, and that our Acting Secretary of Commerce will be leading a multi-sector trade mission to Panama, Colombia and Brazil a few weeks after that.
New Opportunities, Old Challenges
The opportunities you’ll find in the Americas are real; they can help grow your business, and they can help put Americans back to work. But I would be remiss if I did not tell you that the region, like all parts of the world, is not without its challenges. And it’s important that you understand some of what you will encounter when you decide to export to these markets. Let me touch on just a few of these issues, and say a word about what we’re doing to address them.
I want to start by saying that the challenges you’ll face exporting to Latin America are not in most cases unique to the region. The simple fact is that while we’ve made significant strides to create a rules-based system of trade through both the World Trade Organization and through our bilateral free trade agreements, many countries, especially in challenging economic times, have resorted to a number of measures designed to protect domestic industries. In addition, since the vast majority of the countries in the Western Hemisphere are still developing nations, many suffer from the maladies associated with weak institutions, which can impede trade, undermine contract sanctity, and often be susceptible to inappropriate influences like corruption.
While it’s impossible in a format like this to paint with a broad brush, in general, I would characterize the principal challenges we face in the region as follows:
First, our companies often face significant challenges related to trade facilitation—that is, getting goods in and out of customs in an efficient manner. Whether it’s lengthy delays, excessive documentation, or failure to follow international standards when it comes to valuing and clearing goods, customs problems are perhaps one of the biggest complaints we hear about. That’s why the Obama Administration has paid substantive attention to improving cross border trade with both Canada and Mexico through significant border management initiatives. We’re working hard to take a “21st Century” approach to customs management, including advancing significant pre-clearance and pre-inspection initiatives with both countries through our Beyond the Border and 21st Century Border Management initiatives, respectively. And we’re also providing significant technical assistance and capacity building in Central America to our CAFTA partners, helping to improve trade facilitation as a strategy for increasing intra-regional trade.
A second major challenge concerns the weak enforcement of intellectual property rights. This is a hemisphere- and world-wide problem. And I should note it’s not limited to developing markets. Throughout the region and the world, we’ve engaged significantly in the promotion of IPR enforcement, raising the issue in key bilateral meetings with our regional trading partners, and promoting IPR-enhancing initiatives like the Anti-Counterfeiting Trade Agreement, a multinational treaty to establish international standards for intellectual property rights enforcement. We’ve also undertaken a number of efforts to improve the laws on the books and to train judges to better understand and enforce those laws in their respective legal systems. And, importantly, we’ve beefed up our efforts especially to help small businesses understand the importance of protecting their intellectual property rights, including educating them about various IPR regimes through our innovative “StopFakes.gov” website and outreach program.
A third major challenge concerns burdensome standards and testing requirements that are often imposed on U.S.exporters. Promoting greater transparency and alignment of standards testing and conformity assessment measures—that is, the process you must go through to demonstrate that your products meet the relevant product standards imposed by a given market—is a major focus of our efforts on behalf of American exporters. There is much to say about this complex topic, but for now let me just note that we are working very hard, bilaterally and through regional and international bodies, to promote more cooperation, adherence to international standards, and greater transparency to facilitate trade. These measures can be one of the most expensive, and invidious, means of restricting trade, and we encourage you to work with the commercial officers to understand the regulatory environment of each market you are considering.
Finally, corruption and a lack of transparency are significant market access challenges in Latin America and throughout the world. The sad reality is that corruption remains a top barrier to American exporters, who face significant risks under the U.S. Foreign Corrupt Practices Act. In order to level the playing field, and to raise the bar, rather than allow a race to the bottom when it comes to business ethics, the U.S. government has led a number of efforts to promote good governance and business ethics training, to promote accession to the OECD Anti-Bribery Convention and the UN Convention Against Corruption, and to launch and lead a number of sector-specific ethics initiatives, all with the aim to create a more transparent business climate.
As I noted, the challenges I’ve described are not unique to the region, and more importantly, you will not face them alone. We have international trade specialists and senior commercial officers in almost all of our embassies in the region whose job is to work directly with you to help you navigate these markets and find the opportunities and partners that are right for you.
And in Washington, our Commerce Department desk officers are working tirelessly every day to work with American industry, and with our colleagues throughout government, to ensure that American exporters are afforded the rights and protections they are entitled to. In fact, since the announcement of the NEI in 2010, the Trade Agreements Compliance Program has opened and pursued over 150 market access cases in the Western Hemisphere alone. We have registered a success in the majority of cases we have closed, which means we were able to remove those barriers that were impeding our companies’ ability to trade. I’m happy to tell this audience that over a third of the cases we have pursued have been on behalf of small- and medium-sized businesses. That’s because our mission is to be responsive to all American businesses, not just the ones who can afford consultants in Washington.
And when our diplomatic efforts are not enough, be confident that we will not hesitate to escalate our enforcement actions further in your defense.
For example, many of you are aware the we’ve seen a significant spike in protectionist measures in Argentina, including the imposition of trade distorting import licensing and import substitution measures that are patently inconsistent with Argentina’s WTO obligations. Although we tried to resolve these differences with Argentina through commercial diplomacy, little progress has been made. As a result, in December we formally initiated an enforcement action in Geneva, requesting that the WTO establish a dispute settlement panel to examine Argentina’s import restrictions on all U.S. goods imported into the country. That case is now proceeding, and we are confident we will prevail.
CONCLUSION
Ladies and gentlemen, lest I end my remarks focusing on problems, let me conclude where I began: the Western Hemisphere is open for business. It’s a region of enormous promise and growth, and its markets hold tremendous opportunity for Minnesota and American businesses. Nothing worth attaining is without risk, and without challenge. But through this conference, I’m confident you will find the resources you need to access new markets and to grow your business. As you do, please count on the Department of Commerce and our colleagues in government to be your partner. I like to say that our main job is to be the chief advocate for U.S. industry abroad. It’s an assignment we take great pride in. And we’re delighted to work with you, today and in the future.
I wish you a great conference, and the best success. Thank you for your kind attention, and for the privilege of addressing you today.
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