Business Roundtable

Competing Abroad to Succeed at Home

December 8, 2010

Fast Facts

• More than 38 million U.S. jobs depend on trade
• Over 63 million Americans work for a U.S.-based multinational—either directly (22 million) or through their supply chains
• U.S.-based multinational companies account for nearly half of our country’s GDP
• An average large U.S. company purchases $3.27 billion worth of products and services from small businesses, or 24 cents per dollar spent on inputs
• U.S. workers at worldwide American companies make, on average, 20%, or $10,000, more every year than their private-sector counterparts
• 95% of the world’s customers—with over 75% of the world’s purchasing power—are outside the United States

The Issue

International trade and investment agreements are essential to expanding our economic growth and job creation. They open markets for American companies and workers and create rules to ensure fair trade. Strong and quick enforcement of rules and laws is the key to ensuring that we capture the benefit of expanding trade and investment.

U.S.-based multinational companies underpin U.S. economic growth and job creation. They account for nearly half of U.S. GDP, directly employ 22 million American workers and help support another 41 million American workers through their supply chains and the spending of this combined 63 million-strong workforce. U.S. multinationals are an integral part of the lifeblood of our economy, and sustained economic growth and job creation at home depend on these companies being competitive in international markets through both their exports and foreign investments.

Equally important, our multinational companies play a key role in the competitiveness of the vast majority of small businesses, serving not only as critical channels for them to access world markets, but also as customers; multinationals purchase a total of $1.52 trillion worth of products and services from small companies, or 24 cents per dollar spent on inputs. This partnership is vital for economic growth and job creation.

Today, more than 38 million U.S. jobs depend on trade; compare that to 1992, a year prior to the implementation of a long string of multilateral and bilateral trade-liberalizing agreements, when net total trade-related employment in the United States was only 14 million jobs. That is a growth of 24 million new jobs for American workers in less than two decades. Clearly, trade has been an important engine of job creation. Research conducted by the Tuck School of Business at Dartmouth shows that the jobs created in the United States by multinationals through trade and investments abroad are generally high-paying and require knowledge creation and capital investment.

To ensure American multinational companies can continue to create high-paying, investment- and export-oriented jobs, we must renew our commitment to negotiate bilateral, regional and multilateral agreements to open markets for American companies and workers, and reject the false notion that trade is more beneficial to our trading partners than it is to Americans.

At the same time, all American companies and workers need domestic policies that will help them take advantage of the National Export Initiative (NEI). Specifically, American workers need programs to develop and maintain the skills needed for higher-skilled service and manufacturing jobs that increasingly characterize the U.S. economy in the 21st century. They need support when their livelihoods are threatened for whatever reason—whether it’s due to increasing productivity, technological change, or domestic or international competition.

Among the wide range of domestic competitiveness policies that need immediate attention are: building a competitive workforce; strengthening American leadership in research and development and strong intellectual property protection; meeting energy and environmental challenges; and making U.S. tax policies more competitive. With 95 percent of the world’s consumers living outside our borders, U.S. businesses must increasingly look to foreign markets if we are to expand sales, grow at home and create new jobs. Yet, the United States runs the risk of falling behind in the race for exports and new jobs—standing still while foreign nations surge ahead by creating a network of Free Trade Agreements (FTAs) that exclude the United States.

According to the World Trade Organization (WTO), an estimated 400 FTAs are scheduled to be implemented by the end of 2010, more than half of which have happened since 2002. The share of world trade now covered by preferential agreements is estimated to be around 50 percent. In Asia, which now has the world’s fastest-growing economies, there were only three FTAs in 2000; today, more than 50 have been concluded, with close to 80 more in the pipeline.

As is the case with corporate tax policy, the United States risks falling behind. The United States has only one new FTA negotiation underway, while other countries are moving forward aggressively to negotiate preferential treatment for their companies, workers and farmers. The European Union, which provides the closest comparison to the United States, has 16 negotiations underway with 46 countries; Japan has seven negotiations with 38 countries; China has 11 negotiations with 18 countries; South Korea has 15 negotiations with 25 countries; and the Association of Southeast Asian Nations has three negotiations with 29 countries.

We must, at all costs, resist protectionism and isolationism, which give our foreign competitors an enormous advantage, threatening U.S. exports and the 38 million U.S. jobs that depend on them. Certainly, strong enforcement of existing agreements is essential, but we need to secure new agreements to help American companies and their workers overcome the competitive advantages our foreign competitors have created for themselves.

The Solution

The National Export Initiative (NEI) provides a strong foundation for action to improve export opportunities for all U.S. companies, maintain competitiveness abroad, and spur economic growth and job creation at home. To make sure the NEI’s new export promotion programs succeed, the United States needs to:

• Aggressively pursue trade and investment agreements. We need strong bipartisan leadership to keep us from falling farther behind our major foreign competitors as they expand their networks of FTAs and international investment agreements. U.S. competitiveness in world markets depends on the ability of our companies and workers to export and to invest in markets around the world. The outstanding issues in the pending FTAs with Korea, Colombia and Panama should be resolved and the agreements sent to Congress as quickly as possible. New bilateral and regional trade and investment agreements should also be pursued along with new efforts to conclude an ambitious and balanced Doha Round. These initiatives are essential to opening new markets for American companies and workers and to maintaining a level and fair trading and investing field for them.
• Aggressively enforce U.S. rights under international agreements. Strong and effective enforcement of existing agreements and U.S. trade laws is critical to ensure that American companies, workers, farmers and consumers are treated fairly and obtain the maximum benefits from our trade and investment agreements.
• Support U.S. competitiveness. In order to capitalize on the NEI and take advantage of current and future FTA, we must enhance the competitiveness of our workforce; continue to foster best-in-class research and development; strengthen intellectual property protection; increase our energy security while addressing environmental concerns; and ensure the U.S. tax system advances the competitiveness of U.S. companies in world markets.
• Develop New Trade Promotion/Fast-Track Authority. Finally, to keep pace with our foreign competitors’ aggressive negotiating strategy to open markets for their companies and workers, the time has come to begin developing new trade promotion/fast-track authority.