US Chamber of Commerce: It’s Now or Never to Pass These Free Trade Agreements
Free trade agreements with Panama, Columbia and Korea are before Congress this week and both sides of the aisle are dueling it out as to why (or why not) these agreements would be spark (or kill) US job creation.
On Friday, the House Foreign Affairs Committee will be holding a hearing on this very issue. One of those testifying before the committee is Myron Brilliant, senior vice president for International Affairs at the U.S. Chamber. I asked him what he thinks about these agreements and if they are needed to help revive the US economy.
LL: How many jobs can be created with these free trade agreements?
MB: According to one reputable study, the U.S.-Korea FTA alone has the potential to create more than a quarter million American jobs. What’s as important to consider is the jobs at risk if Washington does not to act on the agreements. A U.S. Chamber study said that nearly 400,000 America jobs and $40 billion in lost export sales are at risk if we don’t act on the agreement and this is why: by standing still and failing to act on these deals, we’re falling behind.
Other nations are racing to implement their own trade agreements with Korea, Colombia, and Panama, threatening to put American workers at a competitive disadvantage. In the first month after the entry-into-force of the European Union-Korea Free Trade Agreement on July 1, EU exports to Korea had risen 36% from their level a year earlier. Meanwhile, U.S. exports to Korea increased by just 3% percent in the same period, and U.S. market share in Korea is in decline.
U.S. farmers have already lost more than $1 billion in sales to Colombia in the two years since that country implemented a trade deal with Argentina and Brazil. The entry-into-force of the Colombia-Canada Free Trade Agreement on August 15 has only put U.S. workers and farmers at a greater disadvantage.
LL: More trade with Panama would benefit the ports. Have you quantified what a boom it would be for the port industry?
MB: On the Panama agreement, the $5.25 billion expansion of the Panama Canal is now moving ahead and presents significant opportunities for U.S. companies to provide goods and services to the government of Panama as it embarks on one of the world’s largest public works projects since the Three Gorges Dam in China.
If approved, the agreement will grant U.S. firms ready access to the Panamanian market and the chance to compete in selling everything from heavy equipment to engineering services in a market that has reached annual growth rates above 8% in recent years. Further, the agreement will bolster the rule of law, investor protections, internationally recognized workers’ rights, and transparency and accountability in business and government. The agreement’s strong intellectual property rules and related enforcement provisions will help protect and promote America’s dynamic innovation-based industries and creative artists.
LL: These FTA have been stuck for years in the White House. Speaker John Boehner (R-OH) has questioned why the President hasn't moved to fast track these regional trade pacts. Why now? Because job creation is literally at a standstill?
MB: These agreements have languished in legislative purgatory for five years for a variety of reasons. While this is disappointing and has put American businesses at a competitive disadvantage in these growing markets, now is the time to look forward. We need a renewed sense of focus and clarity because it’s now or never: our last, best chance to approve these job-creating agreements has arrived.
LL: What do you say to critics who say this will negatively impact job creation?
MB: Sometimes I’m left scratching my head in bewilderment at those who oppose these agreements. Right now there is nearly unanimous agreement, from the White House, businesses community, both parties on Capitol Hill, and even a number of labor unions, for one or all of these job-creating deals.
LL: How much will these FTAs benefit small businesses?
MB: There’s a common misconception that trade is important only to big companies. Often overlooked is how critical these agreements are to small medium-size businesses. More than 97% of the quarter million U.S. companies that export are small and medium-sized enterprises (SMEs), and they account for nearly a third of U.S. merchandise exports, according to the U.S. Department of Commerce.
In fact, the number of SMEs that export has more than doubled over the past 15 years. Looking specifically at exports to these three countries, nearly 30,000 U.S. small and mid-sized companies export to South Korea, Colombia, and Panama, and they account for roughly one-third of U.S. exports to these countries.
Take the largest deal, Korea, for example. U.S. small and medium enterprises play an important role in exporting goods and services to Korea, and these firms accounted for 89% of all U.S. companies exporting in Korea in 2007 and $10.8 billion of total U.S. exports to Korea that year. These exports in every category are expected to grow significantly once the agreement is passed.
Or look at the smallest of the deals, with Panama. It is also an important market for U.S. small business. More than 7,500 U.S. companies export their products to Panama. Of this total, more than 6,000, or 83%, are small and medium-sized enterprises. These SMEs exported $1.1 billion worth of merchandise to Panama in 2009. This represented one-third of all U.S. merchandise exports to the country.
LL: Which industries will see the most boost from these agreements?
MB: These deals will benefit a broad cross-section of American business sectors, from manufacturing to agriculture. For example, U.S. exports to Colombia have more than tripled since 2003, exceeding $11 billion last year.
A wide range of industries — including food and other agricultural products, chemicals, computers and electronic products, electrical equipment and appliances, and motor vehicles to name just a few — have seen exports grow into the hundreds of millions of dollars each year. This has happened despite the fact that the U.S. market is wide open and Colombia’s isn’t. To illustrate, Colombia collects $100 in tariffs on U.S. exports for every $1 the United States collects in tariffs on Colombian goods.
This agreement will remedy the unfairness of today’s U.S.-Colombia trade relationship by sweeping away most of Colombia’s tariffs immediately, ushering in a mutually beneficial, reciprocal partnership.
The day the agreement enters into force, four-fifths of U.S. consumer and industrial products and more than half of current U.S. farm exports to Colombia will enter duty-free. Remaining tariffs will be phased out, most in just a few years. Here’s a chart that looks at how specific industries will benefit from the Colombia FTA:
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A Senior Talent Producer at CNBC, and author of "Thriving in the New Economy:Lessons from Today's Top Business Minds."