America exports a lot, particularly to our border neighbors, Canada and Mexico, which alone purchase more manufactured goods from the United States than the next 10 foreign countries combined. They purchase almost as much from the United States as we buy from them, even though together they are less than one-sixth of the size of the U.S. economy.
But beyond the cars and corn, the tractors and trailers and the steel and soybeans, America has also been exporting its most basic Constitutional values. Through the original NAFTA Chapter 11, the United States sought to guarantee many of the same basic private property protections that we honor in our own country—due process, equal protection and compensation when a government seizes or “takes” private property. Those core provisions of the U.S. Constitution and U.S. law are part of the original NAFTA and have helped protect U.S. property in both countries when their governments have treated American businesses unfairly.
Since these provisions are not fully part of Canadian or Mexican law, NAFTA also established a neutral enforcement mechanism, known as investor-state dispute settlement (ISDS), to ensure that individuals, nonprofits and businesses could all have the ability, as we have in the United States, to recover damages when those governments harm U.S. property. This enforcement mechanism is a neutral, internationally recognized arbitration found in more than 3,000 agreements worldwide and more than 50 other agreements signed by the United States.
Manufacturers, service providers, energy, technology and food and agricultural producers and their workers all have a stake in ensuring that these basic property protections and enforcement tools are not weakened in the upcoming NAFTA talks. To the contrary, the Trump administration has an important opportunity to improve the coverage of these rules so that all forms of U.S. property, including major resource and infrastructure contracts and intellectual property, are fully protected and that the ISDS enforcement tool is strengthened. For that reason, the NAM was joined by 112 groups representing millions of businesses across the manufacturing, services, technology, energy and food and agricultural sectors of the U.S. economy to urge the Trump administration to maintain and upgrade these basic provisions of the NAFTA.
Why does this matter for workers and businesses in the United States? Consider one early case already decided under NAFTA Chapter 11—Metalclad Corporation v. Canada. In 1993, California-based Metalclad Corporation invested more than $20 million to clean up and operate a waste facility that had more than 20,000 tons of hazardous waste contaminating local water supplies. Metalclad’s investment in Mexico included support from American workers and U.S.-produced materials.
Mexican federal and local officials supported Metalclad’s investment before the purchase and Metalclad received all the necessary Mexican federal authorizations and permits following government review and an environmental audit. Just before opening the facility, however, the local Mexican government blocked Metalclad from opening. Metalclad filed an ISDS case after which the local authority filed a so-called “ecological decree” to prevent the site from operating. An ISDS panel and later a Canadian court enforcing the award found that the Mexican government’s failure to allow Metalclad to operate the facility was in violation of one of the most basic property protections—that governments must compensate private property owners when they seize their property, as found in the Takings Clause in the Fifth Amendment to the Constitution. As a result of the ISDS claim, Metalclad was awarded compensation for a significant part of the investment that it had made.
There are many more instances of foreign governments that have wholly seized U.S. property and turned it over to local competitors or that have lured millions of dollars in infrastructure development, only to refuse to honor the contract to the detriment of U.S. businesses and their workers.
The Trump administration’s focus on ensuring fair treatment by foreign governments is a critical part of a robust U.S. trade agenda and maintaining and improving ISDS enforcement and the protection of U.S. property overseas is a critical tool in the toolbox. Businesses across the United States agree.
Improving the international climate for trade and commerce is an immediate focus for world leaders, with major discussions at the recent Hamburg-hosted G20 summit and within the Trump administration. The National Association of Manufacturers (NAM) and its members strongly agree: with more than half of the U.S. manufacturing workforce dependent on customers outside the United States, boosting the global economy (and addressing market barriers) is a vital focal point for manufacturers big and small across the United States.
Given the outsized role of international commerce for manufacturing in the United States, I traveled to Europe last week to press both U.S. and international stakeholders for action on international commercial issues that make a difference for manufacturing growth and competitiveness. My meetings included senior U.S. government officials on the frontlines of the global economy, leaders of important global institutions, such as the World Trade Organization (WTO) and Organisation for Economic Co-operation and Development (OECD), and international business partners.
In Paris, I met with OECD Secretary-General Angel Gurria and his senior leadership to discuss the OECD’s work on a range of issues, such as international trade, investment, science and innovation, labor and health. I introduced the OECD to our new Engaging America’s Global Leadership (EAGL) coalition, which seeks to ensure that the OECD and other global institutions operate within their mandate, are transparent and accountable to their members and follow best practices in consultations with the private sector and other stakeholders and in the development of analyses and recommendations. Those productive discussions have already spurred follow-up opportunities to engage OECD officials on these issues in both Paris and Washington.
In Geneva, I met with senior WTO officials, introducing the new EAGL coalition and also discussing a number of other key manufacturing trade priorities in advance of the upcoming WTO Ministerial Conference in Buenos Aires.
In both cities, I met with senior officials at the U.S. Missions to the OECD, the United Nations and WTO who work tirelessly with these institutions to move forward American priorities and defend American interests. We discussed the important role these institutions can and should play in creating a more fair and open international economy in which manufacturing can thrive. I also had the opportunity to meet with NAM members and international business leaders to discuss common challenges and new opportunities to band together to improve the international commercial climate to grow manufacturing and good-paying jobs.
Since its founding, the NAM has been committed to open and fair trade and constructive engagement with global institutions that are pillars of the international trading system. That commitment has never been stronger. From our work here at home seeking a strong and pro-growth outcome to North American trade negotiations to our work across the globe, the NAM is at the frontlines on the core international issues that are critical to support a strong, growing and competitive manufacturing sector in the United States.
The U.S. Export-Import (Ex-Im) Bank has operated for decades with a mission to support U.S. jobs through exports. Back in April, President Donald Trump confirmed his support for the export credit agency. In 2015, a bipartisan supermajority in Congress voted to reauthorize the agency through 2019. Who would want to stand in opposition to this small federal agency with an outsized, tangible benefit for the U.S. economy? Unfortunately, a former congressman who has been nominated to lead the agency is just that person. Former Rep. Scott Garrett (R-NJ), the nominee to lead the Ex-Im Bank, has been a vocal and dogged opponent of the Ex-Im Bank.
National Association of Manufacturers President and CEO Jay Timmons, in an op-ed published today in The Wall Street Journal, outlined the negative impact for manufacturers if the Senate moves to confirm Garrett as the leader of the Ex-Im Bank.
As a congressman, Garrett built a record of votes and statements that sought to dismantle the Ex-Im Bank. He voted to close the agency at every opportunity and voted against a reauthorization bill in October 2015 that passed the House with overwhelming bipartisan support. Before the vote, he took to the House floor to mischaracterize the agency as a “fund for corporate welfare” and urge his colleagues to “keep the Export-Import Bank out of business.”
When he voted against the agency’s reauthorization again later in 2015, he issued a statement explaining that he opposed the bill because it would “resurrect the most shameless example of crony capitalism Washington has ever concocted—the Export-Import Bank.” Prior to the 2015 reauthorization, Garrett voted against the Ex-Im Bank reauthorization in 2012 that was strongly approved by both the House and Senate. Garrett’s opposition to the Ex-Im Bank has been consistent, vocal and aimed at undermining the agency’s credibility.
Ex-Im Bank Benefits U.S. Manufacturers, Workers and Taxpayers
- American Workers and Their Families Benefit from the Ex-Im Bank: U.S. export sales supported by the Ex-Im Bank have directly supported 1.4 million jobs over the past seven years.
- Small Businesses: In fiscal 2016, about 90 percent of Ex-Im’s transactions—more than 2,600 deals—directly supported small businesses. Tens of thousands of small business suppliers benefit from partnerships with large exporters that also utilize the Ex-Im Bank.
- Taxpayers: The Ex-Im Bank has generated $7 billion for taxpayers in the past 20 years, mostly through fees collected from foreign customers. The agency is self-sustaining and covers its own operating costs. Eliminating the Ex-Im Bank would actually increase the U.S. deficit. The agency transferred $284 million in deficit-reducing receipts to the U.S. Treasury for fiscal 2016.
Garrett’s past statements are evidence of a fundamental misunderstanding of the Ex-Im Bank’s ability to level the playing field globally. In a competitive global landscape, the Ex-Im Bank is a much-needed counterweight to substantial foreign export financing. The agency recently reported that China continues to be the world’s largest provider of official export credit, providing more trade-related investment support than the rest of the world combined. Together, the BRICS countries (Brazil, Russia, India, China and South Africa) provided a combined total of more than $51 billion in medium- and long-term export credit in 2016—nearly half of the total official export credit provided worldwide. Last year, without a quorum for its board of directors, the Ex-Im Bank was able to authorize just $5 billion. While the agency’s board of directors has lacked the necessary quorum to approve certain deals, an estimated 40 deals worth more than $30 billion are stuck in the pipeline.
The Ex-Im Bank plays a targeted and critical role in securing and creating more American jobs. That is why the Ex-Im Bank needs a leader who will ensure the agency is able to function at its full potential and promote U.S. exports in the face of substantial competition from manufacturers overseas supported by very active export credit agencies. Manufacturers are losing out on opportunities every day that the vacancies on the Ex-Im Bank board of directors are left unfilled, but Garrett, who said “Congress should put the Export-Import Bank out of business” just two years ago, is simply not a credible leader for this agency.
Innovative manufacturers in the United States welcomed positive news out of Canada on the eve of national holidays in both countries: the Supreme Court of Canada struck down an intellectual property approach that had stymied innovation and investment. Such inventiveness, secured by intellectual property, remains fundamental to the competitiveness of modern manufacturing in the United States and the millions of American jobs it supports.
Canada’s troubling “promise doctrine” originated from the fallacy that patents that do not fulfill their “promise”—as arbitrarily construed by the courts, often years after the patent was filed—are invalid, even if they meet internationally accepted criteria for patentability. Canadian courts began freely applying the rule in 2005 and have since revoked 26 patents, intended to help millions suffering from cancer, osteoporosis, diabetic nerve pain and other serious conditions.
In a unanimous decision, Canada’s highest court concluded that the “application of the promise doctrine” fails to determine the utility of patents and is “incongruent” with both the words and the approach of Canada’s Patent Act. This decision affirms the need for Canada and other countries to align their intellectual property policies and practices with global norms.
At a time when Canada and the United States are preparing for modernizing negotiations within the North American Free Trade Agreement, developments like this resolve remaining barriers that encumber North American manufacturers. The Supreme Court of Canada’s decision supports stronger bilateral ties, investment and innovation in Canada and good, high-paying jobs for innovative American manufacturers.
The U.S. State Department just released its annual “investment climate statements” that examine trade, investment, rule of law and related issues for more than 170 foreign markets. As I explained at an event organized by the Center for Strategic & International Studies (CSIS), these statements provide invaluable information for U.S. manufacturers and other businesses that seek access to foreign markets through exports, investments and other partnerships.
International commerce and investment are critical to manufacturers in the United States. Exports support the jobs of more than half of America’s 12 million manufacturing workers, and foreign investment by U.S. companies spurs those exports.
Foreign investment and U.S. exports work hand-in-hand to benefit U.S. companies, consumers and workers. Indeed, U.S. companies that invest overseas are outsized participants in the U.S. economy and are stronger because of their access to foreign markets. In fact, the primary reason that companies invest abroad is to sell to foreign consumers and bolster their U.S. operations.
Based on the most recent data available from the U.S. Bureau of Economic Analysis, consider that U.S. companies that invest overseas are some of America’s:
- Largest exporters, exporting 47 percent of all U.S.-manufactured goods sold overseas ($660 billion in 2014). More than 40 percent ($269 billion) of those manufactured exports go to the overseas operations of American companies to help promote U.S. products in foreign markets.
- Biggest producers, accounting for nearly $1.4 trillion, or almost 65 percent, of all U.S. private-sector value-added manufacturing output in 2014.
- Most important innovators, expending nearly $269 billion on research and development in the United States in 2014. Of that, 68 percent (or $183 billion) was spent by manufacturers.
- Largest investors in capital expansion, investing $713.5 billion, or 24 percent, of all spending on new property, plants and capital equipment in the United States in 2014.
- Most generous employers, paying U.S. manufacturing workers on average $96,030, or about 18 percent more than average U.S. manufacturing wages in 2014.
For manufacturers and other businesses seeking foreign customers, identifying the most promising foreign markets is a difficult, time-consuming process that requires extensive knowledge. The State Department “investment climate statements” provide a valuable resource to businesses, offering detailed information on many of the critical factors they need to understand, including:
- Openness to trade and investment, market barriers and business requirements;
- Rule of law, including transparency, impartial rulemaking, corruption and the legal system;
- The protection of private property (foreign and domestic), including innovation and intellectual property, the sanctity of contracts and land rights;
- Competition policy, including with respect to state-owned enterprises,
- Political risk; and
- Digital policy trends.
Manufacturers welcome this year’s analysis of digital issues, including regulations on cross border data flows and the localization of information and communications technology infrastructure. As manufacturers implement technology and data in overseas sales, production and product usage, these issues have become increasingly important.
These investment climate statements also aid foreign countries looking to bolster their commercial climate. Many of manufacturers’ strong concerns with barriers, distortions and weak standards that are limiting U.S. growth appear in these statements.
Given the significance of international commercial engagement to the U.S. economy, manufacturing sector and workforce, the National Association of Manufacturers advocates open markets overseas, robust standards of governance and the protection of property. This includes investment and intellectual property as well as strong enforcement mechanisms like neutral investment dispute settlement mechanisms to prevent foreign country mistreatment or theft of U.S. property.
As part of President Donald Trump’s March 31 executive order on trade, the Commerce Department and Office of the U.S. Trade Representative are examining the role trade deficits play in key trading relationships. The National Association of Manufacturers (NAM) provided this detailed submission last week, and I am testifying today about opportunities and challenges that trade presents for manufacturing in the United States.
For those seeking the Reader’s Digest version, consider the top four takeaways.
- Exports are critical to today’s manufacturing success. Indeed, U.S.-manufactured goods exports now represent more than half of U.S.-manufactured output, supporting more than 6 million manufacturing job across the country—jobs that pay substantially more than non-export-related jobs. The U.S. manufacturing sector must have opportunities to expand sales—at home and abroad—to continue to add jobs.
- Manufacturing is growing around the world, creating new middle-class consumers and new partners, but also new competitors. More than $11 trillion in manufactured goods are traded annually as markets have been opened and trading costs reduced. In some cases, imports compete directly with manufacturers in the United States, just as U.S. exports compete with manufacturing overseas and many manufacturers require inputs not domestically available. Unfortunately, however, some import competition is fueled by foreign market-distorting and discriminatory trade practices that create unfair advantages for foreign manufacturing production at the expense of manufacturers, workers and communities in the United States. Under these circumstances, the NAM has long supported robust U.S. government action to address the underlying causes of the distortions and full enforcement of trade agreements and trade rules.
- The trade deficit arises as a result of several factors. Overall domestic economic conditions and standards of living, domestic consumption and purchasing compared with savings rates, the price of goods in the market, exchange rates, domestic structural issues (e.g., taxation, regulation) and openness to international trade all impact the trade deficit. In the United States, trade deficits expand as the U.S. economy grows and fall during periods of economic weakness. At the same time, however, when the U.S. economy expands, more workers are employed and unemployment falls, we see that the trade deficit actually increases.
- As manufacturers see it, many indicators are relevant in assessing the strength and weaknesses of U.S. trading relationships with particular markets. These factors include the existence and implementation of trade agreements, the size of the trading relationship compared to the size of the foreign economy, the growth of exports over time, the U.S. share of the country’s worldwide imports, foreign direct investment, U.S. content in imports into the United States and overall tariff rates. The chart below shows that Canada and Mexico are outsized purchasers of U.S.-manufactured goods compared to other sources of imports and given the size of the countries’ economies.
As the administration considers next steps, the NAM urges that it prioritize work to address existing distortions and barriers to improve U.S. competitiveness globally through (1) the negotiation of advanced trade agreements that open markets and set strong rules; (2) the modernization of U.S. trade tools to boost U.S. global competitiveness, from improving export financing options to eliminating self-inflicted barriers that impede U.S. manufacturing; and (3) the implementation of more robust trade enforcement consistent with the international rules system to ensure that trade agreement commitments are honored, our innovative technologies are not stolen and U.S. trade rules are effectively enforced. Where trade agreement rules are not keeping up with new challenges and distortions, manufacturers urge U.S. leadership and efforts to develop new internationally agreed-upon rules and frameworks to raise standards and promote a more open and competitive market-driven global economy.
Learn more about manufacturers’ priorities for trade policy here.
Manufacturers in the United States produce great products desired across the globe each and every day. But our single greatest export remains America’s values—values which include free enterprise, competitiveness, individual liberty and equal opportunity as well as a willingness to lead by example.
That has never been clearer to me than it was during my recent trip to Cuba when I took eight manufacturers there to engage in discussions with government officials and engage in a dialogue with the Cuban people.
Times have changed. The tense days of Kennedy, Castro and the Cuban missile crisis are behind us. I witnessed a nation in transition, whose citizens want to adapt their economy and expand their opportunities.
The decision to normalize diplomatic relations with that isolated island was controversial in some quarters, but a recent national survey found that nearly three-quarters of U.S. adults favor ending the U.S. trade embargo against Cuba. They also favor lifting the restrictions on travel to the island. Based on what I saw during my visit, clearly the time is right for positive interactions between the United States and Cuba.
Economic engagement will benefit both countries. But in the case of Cuba, it will launch its citizens on a trajectory of greater prosperity, opportunity and freedom.
To get there, we need to do more.
Just 90 miles from the United States, Cuba is well-positioned to become a market for U.S. goods and services. With normalized trade, American exports of goods to Cuba could reach an estimated $4 billion per year.
While the United States has eased some of the restrictions on travel, trade and investment, lifting them completely is up to Congress.
The U.S. government has made allowances for some exports to Cuba and issued changes to facilitate authorized travel to the island. There remains, however, a long road ahead for both countries to expand trade and investment opportunities.
Manufacturers are committed to sharing with the Cuban people American values that will enrich the lives of all. Congress needs to listen and to take action by repealing the trade embargo and lifting restrictions on travel once and for all.
The Cuban government should reciprocate by allowing U.S. companies to trade directly with the emerging Cuban private sector and by continuing market-oriented reforms that facilitate foreign investment.
I encourage you to communicate with your representatives in Washington. Expanded economic engagement means new opportunities for us and greater prosperity and freedom for Cubans. It is time to demonstrate our American values in action.
On April 26, National Association of Manufacturers Vice President of International Economic Affairs Linda Dempsey participated on a Farm Foundation panel on the “Future of the North American Free Trade Agreement” at the National Press Club in Washington, D.C. Dempsey was joined by Bob Stallman, former president of the American Farm Bureau Federation, and Melissa San Miguel, senior director of global strategies at the Grocery Manufacturers Association.
In her remarks, Dempsey explained the importance of the existing North American market for manufacturers in the United States and how millions of manufacturing workers and thousands of manufacturing firms depend on exports to Canada and Mexico. Dempsey also outlined a number of key principles that are critical for manufacturers in renegotiated agreement, including strong rules that reflect U.S. principles, law and values; strong intellectual property and digital economy rules; updated provisions that promote growth and competitiveness; the need to help, not hurt, America’s industries and workers; and the importance of concluding any NAFTA renegotiations in a timely manner.
Today, Jay Timmons, president and CEO at the National Association of Manufacturers (NAM), and Terry Scuoler, CEO at EEF, the UK-based manufacturers’ organisation, signed a Memorandum of Understanding that seeks to promote greater collaboration and partnerships between the two organizations and to promote the NAM and EEF’s respective missions to strengthen and grow manufacturing in the United States and the United Kingdom. The agreement sets forth a number of activities, ranging from information exchanges on policy, economics, business trends and government regulations to potential joint work on international trade, skills development and other issues.