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As the new administration and 115th Congress get to work, the California Chamber of Commerce is communicating its international trade priorities and support for working together to secure a national free trade agenda. Once again this May, designated as World Trade Month, we have the opportunity to acknowledge the importance of global trade, and look back at the economic advancements we have made as a result.
International trade came under attack in the recent presidential election campaign and the questions continue. It is important for all to understand the significance that trade provides to the economy.
Trade a Priority
California’s economy is more diversified than ever before, and the state’s prosperity is tied to exports and imports of both goods and services by California-based companies, to exports and imports through California’s transportation gateways, and to inflows and outflows of human and capital resources.
Accordingly, promoting the ability of California companies to compete more effectively in foreign markets continues to be a high priority for the CalChamber, along with attracting foreign business to the state.
U.S. Department of Commerce reported that, in 2016, California exports amounted to $163.6 billion. This is a decrease from the 2015 total of $165.4 billion. California maintained its perennial position as a top exporting state. Exports from California accounted for 11% of total U.S. exports in 2016.
Trade agreements (the U.S. has 20) ensure that the United States may continue to gain access to world markets, which will result in an improved economy and additional employment of Americans.
The CalChamber urges support of these trade agreements that will continue to keep U.S. and California businesses competitive. Although the trend has been to regional trade agreements in recent times, the CalChamber will also be supportive of bilateral trade agreements.
2017 Touchstone Issues
World Trade Organization (WTO)
The WTO is the only global international organization dealing with the rules of trade between nations. It gives U.S. and California businesses improved access to foreign markets and better rules to ensure that competition with foreign businesses is conducted fairly.
It is hoped that substantive negotiating will continue in the Doha Round in 2017 leading up to the next gathering of trade ministers in Buenos Aires from December 11–14, 2017.
During the past decade, growth in U.S. exports to Asia has lagged behind overall export growth. The United States is gradually losing market share in trade with Asian countries, which have negotiated more than 160 trade agreements among themselves, while the United States has signed only three (with South Korea, Singapore and Australia).
A Regional Comprehensive Economic Partnership (RCEP) could become the sole foundation for economic integration in the region. Negotiations were launched in November 2012 and could conclude in 2017. RCEP includes more than 3 billion people (45% of the world’s population) and a combined gross domestic product of about $21.3 trillion, accounting for about 40% of world trade. It would be the biggest free trade agreement in the world, but without the United States or any membership from the Americas.
The CalChamber would certainly consider supporting new bilateral free trade agreements in the Pacific region; however, the larger Pacific picture needs to be assessed for trade, investment, geo-political and strategic implications.
The trans-Atlantic economic partnership represents the largest, most integrated and longest-standing regional economic relationship in the world. Either the European Union (EU) or the United States also is the largest trade and investment partner for almost all other countries.
While Europe and the United States are not set to continue negotiations in 2017, the CalChamber is supportive of Europe and the United States continuing trade talks. In the interim, it may be that a U.S.-United Kingdom Free Trade Agreement is negotiated. The UK must exit from the EU before it can negotiate new agreements. The CalChamber certainly would consider supporting such a new bilateral free trade agreement.
The CalChamber actively supported the creation of the North American Free Trade Agreement (NAFTA) among the United States, Canada and Mexico.
Mexico continues to be California’s No. 1 export market and Canada is No. 2.
The Trump administration will determine any actions regarding the future of NAFTA. Canada and Mexico have indicated they are willing to participate in an open dialogue. The business community must be considering how to best engage in case of such a process.
In addition, the United States has successful free trade agreements with the Dominican Republic/Central America nations, Chile, Colombia, Panama and Peru.
Export-Import Bank of the United States
The CalChamber supports the Export-Import Bank of the U.S. (Ex-Im Bank) designed to assist in financing the export of U.S. goods and services to international markets. Although an overwhelming majority in Congress voted to fully reauthorize the bank in December 2015, the chairman of the Senate Banking Committee stymied the bank’s full restoration by blocking action on nominees required to achieve a quorum for the Ex-Im Bank Board in 2016. In the absence of a quorum, the bank cannot approve transactions of more than $10 million.
It is hoped this issue will come to resolution in Congress in 2017 with new appointments and Senate confirmation.