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

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

Who Said It? 2

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 2016 3

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 2008 4

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 2016 5

The Opportunity and the Challenge of Trade 6

The Opportunity of Trade GROWTH: Exports rose by 50% in 2009-2014 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

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

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

The Solution? New, Market-Opening Trade Agreements 10

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Others Moving Ahead 70 60 50 40 60 No. of FTA Partner Countries 58 50 30 20 20 10 0 Chile European Union Mexico United States 14

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

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

Manufacturing Concerns 17

Manufacturing Concerns 18

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

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 (2008-1015). 20

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

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

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

Public Attitudes toward Trade 24

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 51 39 White men 40 52 18-29 56 35 30-49 41 51 50-64 34 63 65+ 33 55 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, 2016. 25

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

NBC/WSJ Poll (July): 55% Say Free Trade is Good for America vs 38% Saying it s Bad 30 25 7% net improvement in 8 months 20 15 10 5 0 These bars show the net positive response Dec. 2015 July 2016 27

But the Public Mostly Doesn t Care About Trade 28

Trade Ranks at the Bottom of Voters Concerns Rating each a top priority for the president and Congress --Bush-- -------------------------------------------Obama--------------------------------------------- 2007 2009 2010 2011 2012 2013 2014 2015 2016 % % % % % % % % % Defending against terrorism 80 76 80 73 69 71 73 76 75 Strengthening nation s economy 68 85 83 87 86 86 80 75 75 Reducing the budget deficit 53 53 60 64 69 72 63 64 56 Dealing with immigration* 55 41 40 46 39 39 40 52 51 Protecting the environment 57 41 44 40 43 52 49 51 47 Dealing with moral breakdown in country 47 45 45 43 44 40 39 48 - Dealing with global warming + 38 30 28 26 25 28 29 38 38 Dealing with global trade issues 34 31 32 34 38 31 28 30 31 *Before 2014, question asked about illegal immigration. + In 2016, question asked about global climate change. Source: Pew Research Center Survey, January 7-14, 2016. Trade is almost always last! 29

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

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

John Murphy Senior Vice President for International Policy U.S. Chamber of Commerce jmurphy@uschamber.com 32