New Year, New President, New Trade Agenda? John Murphy U.S. Chamber of Commerce

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1 New Year, New President, New Trade Agenda? John Murphy U.S. Chamber of Commerce

2 Who Said It? 2

3 We are absolutely going to keep trading. I am not an isolationist I want free trade, but it s got to be fair trade. It s got to be good deals for the United States The fact that I m negotiating trade will mean that we re going to make good trade deals. TRUMP

4 NAFTA has been devastating and a big mistake We should use the hammer of a potential opt-out as leverage to ensure that we actually get labor and environmental standards that are enforced. OBAMA

5 We need to crack down on currency manipulation which can be destructive for American workers. China, Japan and other Asian economies kept their goods artificially cheap for years by holding down the value of their currencies We need to expand our toolbox to include effective new remedies, such as duties or tariffs and other measures. CLINTON

6 The Opportunity and the Challenge of Trade 6

7 The Opportunity of Trade GROWTH: Exports rose by 50% in Led by growth in exports to Mexico and Canada, which topped $200B JOBS: 41 million American jobs depend on international trade One-third of U.S. jobs created in those years were in trade-intensive industries MANUFACTURING: 1/2 of the 12 million U.S. manufacturing jobs depend on exports AGRICULTURE: 1 in 3 acres on U.S. farms planted for export 7

8 Opportunity for California Trade supports 4.8 million California jobs Golden State exports top $287 billion Mexico, Canada, China, and Japan are top markets 72,000 small and midsized exporters Foreign firms employ 665,000 California workers directly, 2X as many indirectly 8

9 The Challenge of Trade U.S. market largely open to imports, but tariffs in developing countries much higher It s like going into a basketball game down by a dozen points from the tip-off Discriminatory regulations and non-tariff barriers can make it even worse 9

10 The Solution? New, Market-Opening Trade Agreements 10

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14 Others Moving Ahead No. of FTA Partner Countries Chile European Union Mexico United States 14

15 Trump s 7-Part Trade Plan 1) Withdraw from the Trans-Pacific Partnership 2) Appoint toughest, smartest trade negotiators 3) Crack down on violations of trade agreements 4) Renegotiate NAFTA or withdraw from it 5) Label China a currency manipulator 6) Challenge China subsidies, trade secret theft 7) Impose tariffs on imports from China if needed 15

16 Withdraw from the TPP The biggest betrayal in a long line of betrayals where politicians have sold out U.S. workers. But the circumstances that led us to it remain: 2/3 of world s middle class consumers in Asia They love made in USA products But trade barriers keep our goods out Intra-Asian trade pacts add to U.S. disadvantage 16

17 Manufacturing Concerns 17

18 Manufacturing Concerns 18

19 Renegotiate/Withdraw from NAFTA [NAFTA is] a disaster.... We will either renegotiate it, or we will break it. Because, you know, every agreement has an end Threat to impose a 20% (or 35%) tariff on imports from Mexico to balance deficit 19

20 The Facts on NAFTA JOBS: 14 million American jobs depend on trade with Canada and Mexico EXPORTS: $645 billion in U.S. sales to our No. 1 and 2 export markets MANUFACTURING: For manufactured goods, the U.S. ran a cumulative trade surplus with Canada and Mexico of more than $70 billion over the past eight years ( ). 20

21 Two Scenarios for NAFTA Renegotiation Quick and Light Canadian dairy Mexican yarn Rules of origin for autos Amendment to existing agreement Full Bore Managed trade targeting trade deficit Two bilateral trade agreements 21

22 Trump s China Pledges 1) Declare China a currency manipulator 2) Force China to uphold intellectual property laws and stop their unfair and unlawful practice of forcing U.S. companies to share proprietary technology with Chinese competitors as a condition of entry to China s market 3) End China s illegal export subsidies and lax labor and environmental standards 22

23 Other countries/issues Cuba Russia Iran Ex-Im Bank 23

24 Public Attitudes toward Trade 24

25 Older White Men Are Negative on FTAs Free trade agreements between the U.S. and other countries have been a for the United States Good thing Bad thing % % TOTAL Population White men Older, white men are the most opposed to FTAs Note: Whites include only those who are not Hispanic. Source: Pew Research Center Survey, March 17-27,

26 Reuters/Ipsos Poll (October): Voters Favor Clinton s Trade Policies Over Trump s 43% to 37% Poll taken in Michigan, Ohio, Pennsylvania The public agrees international trade deals can help people by lowering prices for goods They doubt Trump can deliver on promise to restore U.S. manufacturing jobs. 26

27 NBC/WSJ Poll (July): 55% Say Free Trade is Good for America vs 38% Saying it s Bad % net improvement in 8 months These bars show the net positive response Dec July

28 But the Public Mostly Doesn t Care About Trade 28

29 Trade Ranks at the Bottom of Voters Concerns Rating each a top priority for the president and Congress --Bush Obama % % % % % % % % % Defending against terrorism Strengthening nation s economy Reducing the budget deficit Dealing with immigration* Protecting the environment Dealing with moral breakdown in country Dealing with global warming Dealing with global trade issues *Before 2014, question asked about illegal immigration. + In 2016, question asked about global climate change. Source: Pew Research Center Survey, January 7-14, Trade is almost always last! 29

30 Most Americans Don t Care About FTAs Neither favor nor oppose FTAs Washington Post Wonk Blog 30

31 Final Thoughts A new dealmaker in chief Where you stand is where you sit Congress and Article I of the Constitution Voice of business 31

32 John Murphy Senior Vice President for International Policy U.S. Chamber of Commerce 32