Trade Agreements: Path to Prosperity

 

 Mergen_Ashley

 

By Ashley E. Mergen
Senior Manager, International IP Policy
Global Intellectual Property Center | U.S. Chamber of Commerce

 

With the all the hysteria flying left and right in this election cycle, it’s no wonder folks are second-guessing why the U.S. even pursues free trade agreements. But the overheated rhetoric of presidential campaigns is obfuscating what really is at stake- American competitiveness.

The United States is already among the most open markets in the world – and has been since the end of World War II. That openness has honed the edge of American competitiveness and helped stem the price inflation that fuels inequality. Trade agreements are a tool to ensure that U.S. products and services have the same fair and non-discriminatory access to international markets.

As the leader of the free world, the U.S. has worked to shape the rules of the road in the international economy. Free trade agreements are one of the most effective mechanisms for doing so. The alternative to U.S. free trade agreements is a global economy shaped by others who don’t have America’s interests at heart.  The world is not sitting still: The World Trade Organization counts 419 trade agreements in force around the world, while the United States is party to only 20.

It’s true that 21st century trade deals like the Trans-Pacific Partnership (TPP) Agreement and Transatlantic Trade and Investment Partnership (TTIP) are growing even more complex, especially as they tackle emerging and critical issues like intellectual property rights in digital trade or biopharmaceuticals.

But knowledge-intensive trade isn’t limited to big corporations or scientists curing cancer. It is also providing a significant platform for entrepreneurial women to connect with previously untapped markets.Take Lolita Healy, who after obtaining her first copyright at the age of 12 built a multi-million dollar empire painting designs on glassware, eventually selling 14 million products around the world. Lolita is just one example of the 40 million Americans who are employed by the creative and knowledge-intensive industries. The U.S. Department of Commerce has found that they represent over a quarter of all jobs in the economy, driving 60% of total U.S. exports.

The best part is, there are Lolita’s everywhere- from Michigan to Malaysia or Pennsylvania to Peru. This year’s International IP Index from the U.S. Chamber of Commerce estimated that economies which espouse meaningful and robust IP rights also enjoy more access to venture capital, more foreign direct investment, more R&D expenditure, more growth in high-value jobs, the list goes on…

Trade agreements like the TPP and TTIP continue this path to prosperity by ensuring innovation — the very cornerstone of the business community — remains protected as we expand markets abroad. So before you buy into the hype, take a look behind the curtain and see how trade really puts our innovators front and center on the world’s stage.

Small and Medium-Sized Companies in the Focus of Exporting News

Small and medium-sized exporting companies had several reasons for good spirit in the last couple of weeks – especially Trans-Pacific Partnership and Export-Import Bank supporters.

The final agreement on Trans-Pacific Partnership (TPP) got a substantial coverage across the news, as it is the largest regional trade accord in history. As covered a few weeks ago, it encompasses USA together with 11 Pacific Rim nations and addresses many complex issues – from reducing tariffs and quotas, to imposing rigorous environmental, labor and intellectual property standards on partners, easing cross-border data flows, establishing an investor-state dispute settlement mechanism, to free trade in services, and imposing competitive neutrality on state-operated businesses.

There is one particularly important area, which deserves a separate attention – focus of TPP on small and medium-sized enterprises (SMEs).

Last week, National Small Business Association hosted a webinar where Andrew Quin, Deputy Assistant U.S. Trade Representative for Southeast Asia and the Pacific, among other described new chapter of the TPP deal focused on SMEs. The chapter aims to tide together all different elements that benefit SMEs and he highlighted 2 major areas:

  1. Creation of dedicated website for SME exporters by every member country. The websites should pull out all provisions which are particularly relevant to SMEs such as customs, taxation or intellectual property protection topics to make it better understandable and easier to follow in day-to-day exporting trade deals.
  1. Creation of SME committee to continue consultations with SMEs and collect feedback on what works, if benefits are being generated, and on how to continue maximizing benefits to SMEs. The committee will consist of government representatives, however promises to take inputs from SMEs on private sector provisions.

All of the above claims to suggest that TPP is more beneficial to SMEs than any previous trade agreement. Mr. Quin also reassured that TPP will not have any impact on Minority-Owned Small Businesses set aside programs (including the one WOSB program for women).

Another topic that came out after few weeks is the reauthorization of Export-Import Bank (EXIM). As Mr. Quin stated, it is a separate initiative but important piece to allow a full benefit of TPP. EXIM is providing loans, guarantees, and insurance to U.S. exporters and has made SMEs exports the top category supported last year (source) when $10.7 billion of total $27.5 billion worth of U.S. exports went to U.S. small businesses.

EXIM

Many SMEs publicly supported EXIM reauthorization, and they all have now a hope that it might be successful after all. A rare procedural move brought EXIM to the House floor and got a surprising support in the 313-118 vote to renew, including from 127 Republicans.

However, now the supporters will have to secure passage in the Senate but they seem to have a chance through its attachment to another vehicle, such as legislation to renew highway funding (source).

Overall, current news seem to suggest that it is a good time to be an exporter and according to the latest annual report Profile of U.S. Importing and Exporting Companies released by Census Bureau, many SMEs have already realized that as they accounted for 98 percent of the number of U.S. exporters in 2013 and $471 billion in known value of goods exports.

The Trans-Pacific Partnership Trade Deal

TPPOctober 5, 2015 will be remembered as a day when the United States and other 11 Pacific Rim nations reached final agreement on the largest regional trade accord in history – the conclusion of the Trans-Pacific Partnership (TPP.) The countries form a group with an annual gross domestic product of nearly $28 trillion that represents roughly 40 percent of global G.D.P. and one-third of world trade, which reflects enormity of the deal.

TPP addresses many complex issues from reducing tariffs and quotas, to imposing rigorous Environmental, Labor and Intellectual Property Standards on partners, easing cross-border data flows, establishing an investor-state dispute settlement mechanism, to free trade in services, and imposing competitive neutrality on state-operated businesses.

Together with the U.S. members are Australia, Canada, Japan, Malaysia, Mexico, Peru, Vietnam, Chile, Brunei, Singapore, and New Zealand. Geography would suggest for China to be member as well but though it has expressed interest in talks, it is not among founding countries (causing different speculations and interpretations).

The deal now needs the approval of lawmakers in member countries, including the U.S. Congress where it is expected to be under thorough scrutiny. Public debate is also weighting all pros and cons. Supporters say it will unlock opportunities for exporters but opponents see the partnership as a continuous way of sending manufacturing jobs to low-wage nations.

Similarly to congressional battle in 1993 for NAFTA partnership passage (234 to 200 votes in the House, and 61 to 38 in the Senate), president Obama is expected to face challenges while making it one of his final goals in the office. Similar difficulties are expected in Canada while the process should be straightforward in Japan or Singapore.

TPP is written to ease adoption by additional Asian nations (South Korea is already pressing for swift acceptance), and to provide a potential template to other initiatives underway, like the Transatlantic Trade and Investment Partnership (source NY Times).

Tune to our special webinar with International Trade Administration on December 17 to find out more about the TPP and how it is targeting small businesses.

For additional information on TPP, continue here.