This week, the International Trade Commission (ITC) will begin a three-day-long hearing focusing on the economic impact of the Trans-Pacific Partnership (TPP). The TPP is the most complex free trade agreement the United States has negotiated since the Uruguay Round Agreements establishing the World Trade Organization. Once implemented, the TPP will provide an enormous boost to manufacturers’ business opportunities in the Asia-Pacific. Read More
Tonight’s debate took on a very different format, and a very different tone from the first debate. It was much more combative with the candidates painting very different pictures of their vision for economic recovery and manufacturing growth.
Both President Obama and Governor Romney spoke early and often in support of growing manufacturing jobs in the United States. While it’s good to hear the support, it is incredibly important to implement policies that will not just lead to recovery, but to sustained growth. The candidates spent much of the night discussing the elements that make it 20 percent more expensive to manufacture in the United States—taxes, regulation, energy and trade.
Time and again, the conversation returned to job creation—fundamentally the most significant issue in this election. Manufacturers couldn’t agree more, but we’d like to remind the candidates that it’s also essential that we fill the 600,000 job openings in the manufacturing sector that remain unfilled today because employers can’t find workers with skills that match the jobs.
Energy policy is an immediate pathway to jobs. President Obama spoke about increased oil production and a desire for an “all-of-the-above” energy strategy, but yet again, this debate came and went without the President mentioning the Keystone XL pipeline. Governor Romney had it absolutely right when he told the audience at Hofstra University that we need to “take advantage of energy resources we have and we’ll see manufacturing jobs come back.” Governor Romney advocated in favor of the Keystone XL pipeline again and also spoke of shale gas, a game-changer that would create 1 million manufacturing jobs. The President also supported shale gas efforts, but his endorsement of more federal regulation on shale will handcuff the growth opportunity that it represents.
Special attention was paid to trade tonight—a critical aspect of our economy for manufacturing growth. President Obama deserves credit for signing the Colombia, South Korea and Panama free trade agreements and increasing exports. But manufacturers need more—the United States has a trade surplus with nations with whom we have free trade agreements. Governor Romney is right in the need for expanded trade that will open up markets for manufacturers in the United States and level the playing field around the world.
As the debate repeatedly returned to jobs, tax policy and its impact on economic growth was a focal point. Tonight the candidates doubled down on their position—Governor Romney in his support for bringing down rates across-the-board and President Obama in his support for an increase in the top individual rate. Unfortunately, if the two-thirds of manufacturers who file at the individual rate are hit with the looming tax hike, they will see a continuation of the tough times they’ve experienced over the past four years. With energy and health care costs increasing and the fiscal abyss approaching, manufacturers are getting squeezed on both ends. That’s not a recipe for economic growth.
Getting the nation on track again and putting our fiscal house in order requires addressing the factors that make it 20 percent more expensive to manufacture in the United States. The moment that we put in effect the pro-growth policies that manufacturers are calling for is the moment our true recovery can begin.
The Bureau of Economic Analysis and the Census Bureau reported that the U.S. trade deficit narrowed in June for the third month in a row. The trade balance improved from -$48.0 billion in May to -$42.9 billion in June. The gain was due to higher goods exports and lower goods imports.
The service sector trade balance edged slightly lower for the month. About 40 percent of the improvement in the trade balance was attributable to lower petroleum costs, thereby reducing the value of our energy imports.
Goods exports increased from $130.9 billion to $132.8 billion, an all-time high. Areas for growth for exports included consumer goods (up $865 million), automotive vehicles and parts (up $695 million), industrial supplies and materials (up $563 million), and non-automotive capital goods (up $168 million) sectors. One are of weakness was exports of foods, feeds and beverages (down $792 million, with the largest decline in soybeans).
Meanwhile, goods imports declined from $193.9 billion to $190.3 billion. The largest decreases were seen in the industrial supplies and materials (down $2.3 billion) and non-automotive capital goods (down $1.3 billion) sectors. Imports were also lower in the consumer goods (down $569 million) and foods, feeds and beverages (down $159 million) sectors. Automotive imports were up $608 million. Read More
This is my final blog, as I am retiring from the NAM as of 5pm today. I want to thank everyone for viewing the blog posts I have done over the years, and I hope you have found them useful.
I wanted to conclude by ending on good news, but also issuing a caution. The good news is that once again, for the month of April 2012, manufacturers continued to run a trade surplus with our Free Trade Agreement – FTA – partners (including Korea). The Commerce Department’s data showed a $14 billion surplus for the year to date (January-April) – that is an annual rate of $42 billion. This year marks the fifth year in a row of a manufactured goods surplus with FTA partners, cumulating to nearly $100 billion.
Our FTA partners account for a little under 13 percent of global GDP outside the United States. Yet they account for over half of our manufactured goods exports. But note that leaves about 87 percent of the global GDP outside the United States as countries not yet having an FTA with the United States – countries that maintain trade barriers to our exports that could disappear if we had FTAs with them. During the five-year period when we were running a manufactured goods surplus with FTA partners, with these other countries we ran an amazing $2.1 trillion cumulated manufactured goods deficit.
Since the United States has lower tariffs and trade barriers than just about every other country, the fact is that virtually every FTA we can negotiate is a plus for the United States – lowering the other country’s barriers much more than ours. Read More
The Senate Finance Committee is holding a hearing this morningto examine “Russia’s WTO Accession: Administration’s Views on the Implications for the United States.” The hearing panel includes U.S. Trade Representative Ron Kirk, Secretary of Agriculture Tom Vilsack and Deputy Secretary of State William Burns.
In his testimony, Mr. Kirk emphasized that the Russia will become a member of the WTO no later than August 22. Further, he said
“Since we concluded the 18-years long multilateral negotiations on Russia’s WTO accession package last year, the President and members of the Administration have repeatedly urged Congress to terminate application of the Jackson-Vanik amendment and authorize the President to provide Permanent Normal Trade Relations (PNTR) to Russia before it joins the WTO later this summer.” Read More
Today USTR released the Interim Report to Leaders from the Co-Chairs from the EU-U.S. High Level Working Group on Jobs and Growth. Manufacturers welcome this step forward and the findings in the report which reflects many of the recommendations laid out by the National Association of Manufacturers earlier this year. This is an important step on the way to initiating the negotiation of a free trade agreement between the EU and United States.
The United States and the EU already have the world’s largest commercial relationship but major opportunities for increased trade and cooperation remains. U.S. and EU leaders established the High Level Working Group on Jobs and Growth in November 2011 to identify policies and measures that would lead to increased trade, investment, job growth and enhanced competitiveness.
U.S. and EU companies already enjoy low tariffs across the Atlantic, but the NAM supports total elimination of tariffs, and even more importantly, seeks continued progress towards eliminating non-tariff barriers (NTBs). Most NTBs come in the form of different standards, regulations, certification procedures, and conformity assessment procedures. Read More
Yesterday we learned that Mexico has been invited to join the Trans-Pacific Partnership (TPP) talks, and now today Canada has also been formally invited to join. Other members of the TPP group include the United States, Australia, New Zealand, Peru, Chile, Singapore, Malaysia, Vietnam and Brunei.
Much like the inclusion of Mexico this is welcome news for manufacturers. Canada is our largest trading partner totaling $596.2 billion in goods last year.
This expanded agreement would be the largest trade pact for the U.S. by joining the NAFTA partners with the current partipants in the TPP. This is an important step forward for the TPP and most importantly – manufacturing jobs. Exports are essential to manufacturing in the U.S. and we need to continue to find ways to lower barriers to reach new markets throughout the world.
The next round of negotiations for the TPP takes place in a few weeks in San Diego. It is our hope that the negotiators will make additional progress in moving us closer to the TPP becoming reality.
On the memorable day that the U.S.– Colombia Trade Promotion Agreement has at long last gone into effect – eight years after its negotiation started, it is useful to recall how beneficial Free Trade Agreements (FTAs) are, and have been, for America’s manufacturers. Far from being the drag on the U.S. economy claimed by many detractors of our trade agreements, these agreements have been a boon for manufacturers in the U.S. and factory workers – as well as for farmers and service providers.
Accounting for just 12.5 percent of Gross Global Product outside the United States, America’s FTA partners (counting Korea, the agreement with which went into effect last year) have accounted for a remarkable 52 percent of the growth of U.S. manufactured goods exports so far this year.
Exports to them are growing faster than to non-FTA partners. Through March, U.S. manufactured goods exports to FTA partners were 13 percent larger than for the same period of 2011. Our manufactured goods exports to non-FTA partners during the same time grew 10 percent – meaning that exports to FTA partners grew one-third faster!
And, confounding trade critics, manufactured goods trade with FTA partners has been in surplus for several years – meaning we sell them more manufactured goods than they sell us. According to the U.S. Department of Commerce’s International Trade Administration FTA report, counting Korea our manufactured goods surplus with FTA partners was $7.5 billion in 2010, $29 billion in 2011, and so far in 2012 was at an annual rate of $47 billion. In the coming months, the new Colombian agreement will add even more to that figure.
Counting the newly-implemented Colombian agreement, the proportion of Gross Global Product outside the United States accounted for by our FTA partners rises from 12.5 percent to 13.1 percent – but that leaves 86.9 percent of World GDP outside the United States as markets without FTAs with us, markets with trade barriers limiting our exports. It is high time to open those markets so more American workers can be employed producing high-quality U.S. products to be sold around the world.
Frank Vargo is vice president for international economic affairs, National Association of Manufacturers.
Today, after a five year wait, manufacturers in the United States can finally realize the benefits of the Korea-U.S. Free Trade Agreement (KORUS). Starting today Korea’s tariffs on over 9,000 U.S. products disappear – covering over 80 percent of all of Korea’s tariffs on U.S. products. The remaining 20 percent will be eliminated in stages over the next few years.
This is a big deal. Korea is the fourth largest market in the world outside the United States, counting the European Union as a single market, and it imports nearly $300 billion of manufactured goods annually. Manufacturers in the U.S. have only 11 percent of that market, but are now poised to make gains.
As KORUS takes Korea’s average 8 percent import duties to zero for manufacturers in the U.S., they are getting an advantage over many of our competitors, and are regaining a level playing field with our European Union competitors, whose free trade agreement with Korea went into effect last year.
The NAM advocated strongly with the Administration and Congress to win passage and implementation of KORUS, and we are very pleased that manufacturers in the United States at long last are obtaining the open access to this market that we have sought.
Large and small firms stand to benefit. In fact, 90 percent of the companies in the U.S. now exporting to Korea are small or medium-sized firms — 18,000 of them, and almost all of them will benefit. This is truly a great day for American exporters.
Korean firms also will gain by U.S. duties being eliminated, but U.S. tariffs on Korean products were already low – averaging only 1.5 percent. Additionally, it is likely that many Korean gains in the U.S. market will come by displacing imports from other countries, as is also likely to be the case for American exports to Korea.
KORUS will benefit the economies of both countries and is truly win-win. Five years in the waiting, but the day is here at last. Now we need to move on to open more markets.
Frank Vargo is vice president of international economic affairs, National Association of Manufacturers.
The National Association of Manufacturers is pleased by the news today that finally, the U.S.-Korea trade agreement will take effect on March 15, 2012. The United States has exchanged diplomatic notes with Korea in which each side confirmed that it had completed applicable legal requirements and procedures for the agreement’s entry into force.
According to the U.S. Government, on March 15, almost 80 percent of U.S. exports of industrial products to Korea will become duty-free, including aerospace equipment, agricultural equipment, auto parts, building products, chemicals, consumer goods, electrical equipment, environmental goods, all footwear and travel goods, paper products, scientific equipment and shipping and transportation equipment.
This matters because Korea offers U.S. manufacturers a growing opportunity for exports within a dynamic and expanding market. Korea is our seventh-largest trading partner and is a crucial export destination for U.S. manufacturing. Korea is one of the fastest-growing industrial economies in Asia, and its GDP has grown by 67 percent since 2000, according to the International Monetary Fund (IMF).
Small and medium-sized manufacturers will strongly benefit from the U.S.-Korea agreement: nearly 19,000 small and medium-sized companies export goods to Korea, representing 90 percent of total U.S. exporters. Manufactured goods are the vast majority of U.S. exports to Korea. In 2010, the U.S. exported $31.6 billion worth of manufactured goods to Korea, and Korea was our fastest-growing export destination in the world, with a 37 percent increase over 2009 exports. Manufactured goods make up over 75 percent of total U.S. merchandise exports to Korea. Read More