Assistant Secretary of State Daniel R. Russel remarks on TPP to the National Bureau of Asian Research Roundtable
As prepared
Thank you, President Ellings, for the kind welcome, and for bringing together this distinguished group.
It’s good to be in Seattle, and with the National Bureau of Asia Research. Congratulations on NBR’s 50th anniversary. For half a century now, you have provided high quality, independent research on issues facing the U.S. and the world, from energy trade to security strategy and beyond. The strength of America’s academic community and think tanks is envied around the world. It’s particularly beneficial to have institutions like NBR around the country, so that the voices in our national foreign policy conversation reflect the diversity of views across our land. So thank you for all that you do.
Let me start by telling you about why I’m here in Seattle. It’s crunch time for the Trans-Pacific Partnership. Secretary Kerry has asked his team to get out around the country, talk to people who are interested in trade with Asia, address any concerns folks may have, and spread the word about TPP’s benefits. So, in addition to meeting with you, I’m talking with major exporters, including member companies of the Business Council for International Understanding, and meeting with local press. I’m also giving remarks later tonight at the University of Washington Jackson School to talk about the larger context of U.S. relations with Asia, beyond trade.
So here, I’ll summarize that context briefly and then focus on trade.
The Asia-Pacific region – and you know the U.S. is a Pacific power – is one of the world’s most dynamic regions. It contains the top four most populous countries, the three largest economies, many of the world’s fastest growing economies, and a rapidly growing middle class of over half-a-billion consumers. U.S. trade with the Asia-Pacific region was $2.9 trillion in 2013.
Nations across the region face choices: Are they going to move toward greater political freedom and respect for universal rights and values? Are they going to open their economies while protecting workers, investors, and the environment? Are they going to strengthen the international and regional system of rule of law to treat all countries fairly? And by doing that, avoid conflict that could lead to loss of life and crippling economic consequences for all of us?
We can’t take the answers to any of these questions for granted, and they’re all interconnected. Our ability to shape the answers depends on our economic, diplomatic, and military strength. So when we lead on trade and investment, it helps us across the board. Free trade agreements, like the ones we have with Australia, Singapore, and the Republic of Korea, benefit many American businesses and our relationships with those countries.
Trade is good for your local economy, as you know. Goods exports support about 402,000 jobs in this state – the third highest of any state, according to the Department of Commerce’s most recent estimate – so you’re very well-integrated into the global economy. Of your exports, thirty-six percent already go to Asia, including over $2.6 billion in exports of goods. And in a recent five-year stretch, jobs in Seattle based on the export of services, like software, grew 54%.
Concluding TPP is essential to President Obama’s top priority of creating good jobs in America. It also is the most important thing we can do for U.S. relations with Asia this year.
This agreement will include 11 other countries that already account for 33 percent of your state’s goods exports, worth $26 billion (average from 2012 to 2014). It will grow America’s overall exports by more than $123 billion by 2025, according to a study by the renowned independent Peterson Institute. And those exports will support many more high-paying jobs.
Just consider the barriers that our workers and businesses are currently facing in the Asia Pacific, the world’s fastest-growing region. American autoworkers are handicapped by tariffs that can reach 30 percent in Malaysia. American farmers are forced to contend with tariffs as high as 40 percent on poultry in Vietnam. Meanwhile, foreign competitors have struck trade deals that give their own exporters an advantage, getting their products to consumers in those same markets with significantly lower or even no tariffs.
TPP also gives us the opportunity to protect workers and the environment with the highest and most enforceable standards of any trade agreement ever. The TPP will include groundbreaking new commitments to protect our oceans, forests, and wildlife. And it will allow us to address specific concerns about labor conditions in certain TPP countries, bringing improvements on the ground to workers across the region.
In addition, TPP will allow us to tackle a number of issues that have never been addressed in trade pacts - for instance, it will help ensure that state-owned enterprises compete fairly with our private companies.
It also will ensure that Americans whose businesses and jobs depend, either directly or indirectly, on innovation, invention and creativity enjoy the benefits of that work. This includes 40 million workers across the country, and a lot of them are here in Seattle. We have focused a lot of attention on ensuring strong outcomes in the TPP that will promote the digital economy and ensure a free and open Internet. We also have developed strong and balanced intellectual property rules that protect and promote invention and the creation of new products and services, while enabling consumers to access the full benefits of scientific, technological, and medical innovation, as well as new media and the arts.
Our competitors’ growing number of FTAs in the region promote rules that reflect their values, vision of the future, and competitive strengths—not ours. This doesn’t promote sustainable, shared economic growth, intellectual property rights, or maintenance of a free and open Internet. These other rules don’t tackle the growing problem of unfair competition from state-owned enterprises.
In short: We need TPP to promote economic growth and support high-paying jobs, and to advance our values and show that our ongoing commitment to the region extends beyond security. TPP is important to the long-time partners I mentioned with whom we already have FTAs. It’s important to new partners like Vietnam and Malaysia as they seek to further reform and develop their economies. And it’s important to Japan as Prime Minister Abe works on structural reforms, the “third arrow” of his domestic economic recovery programs. While we have more work to do with Japan, to resolve differences in areas such as agriculture and autos, we’re confident we can get this done.
TPP is about giving Americans a fair shot in these markets. Because we know one thing beyond doubt: with a level playing field, when trade is fair, our workers; our businesses do very well. And the businesses and workers here in the Seattle-Tacoma area and in Washington State prove that each and every day.
As my friend and colleague Ambassador Mike Froman, our U.S. Trade Representative, has said, “the finish line for TPP negotiations is in sight.” Negotiators are meeting around the clock, and countries are moving on issues that seemed intractable months ago.
More good jobs and a stronger American middle class are on the table. So I hope we can count on your support, and the support of people around Seattle and across Washington for the Trade Promotion Authority we need to bring this agreement home, and for the TPP agreement itself.
We also see TPP as the best pathway to a larger Free Trade Area of the Asia-Pacific. But in the meantime, we’re continuing to move forward with partners outside the TPP. The biggest, of course, is China.
Exports from the Seattle-Tacoma area to China went up nearly $5 billion from 2009 to 2013 alone. And we’re working to help you increase that number.
Our diplomacy with China has allowed us to expand the areas where we work together, while managing our clear differences. And that diplomacy over many years, including bringing China into the WTO, has supported China’s economic rise, enabling trade and increased exports to China. In 2014 alone, we made important progress in at least four specific ways:
Let’s start with the Joint Commission on Commerce and Trade meetings in Chicago. There, Commerce Secretary Penny Pritzker and U.S. Trade Representative Mike Froman made great progress in getting China to open to imports of U.S. biotech corn and soy; medical devices and pharmaceuticals; and to give fair treatment to U.S. businesses facing the competition regulators.
Second, at the 2014 Strategic and Economic Dialogue, our biggest bilateral annual gathering, we intensified negotiations on a Bilateral Investment Treaty. The “negative” list is next, and we’re asking that it be very high quality – narrowly tailored and widely open to foreign investment, especially since our openness to Foreign Direct Investment (FDI) has allowed new Chinese FDI into the U.S. to surpass our FDI in China.
While we remain concerned about China’s recent tightening of its foreign investment climate and its seeming disregard of certain principles of a free and fair market, we strongly believe that a U.S.-China Bilateral Investment Treaty holds the promise of further opening China’s market to foreign investors and creating an improved investment environment for U.S. companies.
Third, during President Obama’s trip to Beijing, we reached a key agreement to expand visa validity for business visitors to ten years, a boon for our tourism industry and a win for our companies with interests in China. We also achieved an important bilateral understanding to help the WTO’s International Technology Agreement move forward. We subsequently suffered a setback and there’s still a lot of work to do, but we remain hopeful.
Fourth, our landmark climate progress, also during the trip, is important for long-term public health, and economic health, and it supports the green economy.
As you can see, we have a very full economic docket with China, and as I’ll detail in my remarks this evening, a much broader agenda in our bilateral relationship. Together the United States and China have launched a range of new initiatives to boost clean energy research, make carbon capture and storage a reality, link up our cities as they pursue low-carbon solutions, and promote green trade between our countries.
All of you, and the entire Seattle area, have many important roles to play in America’s economic relationship with Asia. Seattle’s impact reaches well beyond the quantity of your trading and investments – many of your companies are known and lauded for the quality of your relationships, the ethical standards you adhere to, and work to instill throughout your supply chains. It’s not just protecting workers, it’s providing them with skills training while protecting the environment and countering corruption.
And later tonight, I’ll speak to Seattle’s role beyond economics – as a center of academic research, a welcoming host of students from the region, and a home to vibrant Asian diaspora communities. With your continued help, the U.S. and Asia will continue to grow and prosper together.
Thank you. Let’s open it up for discussion.
Senator Warren raises some important questions about an element of the Trans-Pacific Partnership (TPP) called Investor-State Dispute settlement, or ISDS.
There are good answers.
The purpose of investment provisions in our trade agreements is to provide American individuals and businesses who do business abroad with the same protections we provide to domestic and foreign investors alike in the United States.
ISDS is an arbitration procedure – similar to procedures used every day by businesses, governments, and private citizens across the globe – that allows for an impartial, law-based approach to resolve conflicts and has been important to encouraging development, rule of law, and good governance around the world. ISDS does not undermine U.S. sovereignty, change U.S. law, nor grant any new substantive rights to multinational companies.
ISDS has come under criticism because of some legitimate complaints about poorly written agreements. The U.S. shares some of those concerns, and agrees with the need for new, higher standards, stronger safeguards and better transparency provisions. Through TPP and other agreements, that is exactly what we are putting in place.
It is an often repeated, but inaccurate, claim that ISDS gives companies the right to weaken labor or environmental standards, for example, suggesting that a trade agreement could result in the United States having to lower its minimum wage.
The reality is that ISDS does not and cannot require countries to change any law or regulation. Looking more broadly, TPP will result in higher levels of labor and environmental protections in most TPP countries than they have today. If TPP is passed by Congress, it will also create strong, enforceable new labor protections that would allow the United States to take action – on its own, or on the basis of a petition from labor unions or other interested parties – against TPP governments that don't honor their labor commitments. The same is true for enforcing environmental commitments.
Similarly, the investment provisions under TPP are designed to protect American investors abroad from discrimination and denial of justice.
Under our Constitution, the Government has wide powers to regulate on behalf of the public interest even if that impacts private property. But when government takes its citizen’s property from them – be it a person's home or their business – the government is required to provide compensation. This is a core principle reflected in the U.S. Constitution and recognized under international law and the legal systems of many countries.
Unfortunately, foreign courts have not always respected this principle, and U.S. investors often face a heightened risk of bias or discrimination when abroad. That’s why governments have looked to international arbitration to resolve such disputes for centuries. Earlier in our history, the United States used gunboat diplomacy, sending our military to defend our economic interests abroad. The decision was made by our predecessors that it was better to rely on neutral arbitration instead.
Over the last 50 years, 180 countries have entered into more than 3,000 agreements that provide investment protections, the vast majority of which have some form of neutral arbitration. European countries are party to more than 1400 of those agreements. The U.S. is party to about 50.
Those thousands of agreements contain a wide range of standards, some that strongly protect a government’s right to regulate, others that do not. The U.S. has been at the leading edge of updating, upgrading and clarifying these standards; protecting the right to regulate; and drawing lessons from previous agreements to ensure that our agreements have the highest possible standards. TPP incorporates and builds on those efforts and goes beyond them by:
There have only been 13 cases brought to judgment against the United States in the three decades since we’ve been party to these agreements. By contrast, during the same period of time in our domestic system, individual and companies have brought hundreds of thousands of challenges against Federal, state, and local governments in U.S. courts under U.S. law.
We have never lost an ISDS case because of the strong safeguards in the U.S. approach.
And because we have continued to raise standards through each agreement, in recent years we have seen a drop in ISDS claims, despite increased levels of investment.
The truth is that it is difficult for a claimant to win under our agreements and, if they have a legitimate claim, they tend to bring it under our domestic court system.
Senator Warren alludes to a number of specific cases, most of which are not under U.S. agreements and based on different standards, but each one of which is instructive:
Senator Warren also questions the integrity of the arbitrators who decide cases, suggesting that they are biased against governments. In fact, ISDS panels more frequently side with respondent governments. The U.S. government, for example, has won every single case concluded against it.
The arbitration rules used under TPP require the independence of arbitrators and provide for challenge and disqualification in the event of conflict of interest or bias. They also provide a central role for the government being sued to determine which arbitrators hear the case.
We share a number of the theoretical concerns Senator Warren raises. But we disagree with her suggestion that we leave it to the free market to put in place basic rule of law and protections. That hasn't worked in the past and government has a role to play.
We can’t change the standards in the more than 3,000 agreements among other countries. Most of those agreements will continue to exist, with or without TPP. But through TPP, we can set a new, higher set of standards, stronger safeguards and better transparency provisions.
That's exactly what we're doing.
Learn more about ISDS and it's role in our trade agreements here.
Below are copies of letters sent by a number of Congressmen to USTR Ambassador Michael Forman and from the Governor of Virgina to Froman, Ag Secretary Thomas Vilsak and Sec of Commerce Penny Pritzker on the issue.
Amb Froman TPP-Tobacco 2015 FINAL.PDF
Branding is essential for the economy and provides a fundamental service to the consumer, differentiating competing products from one another. This differentiation has several benefits; it makes producers accountable for their own goods, it ensures that consumers can find the quality products they seek, it helps protect consumers choose the products they trust and it helps distinguish legal from black market goods. Customers will go to great lengths to access brands they like and trust.
Unfortunately, brands are under attack. Legislation recently passed in Ireland and the UK that will eliminate trademarks – vital to brand integrity – on tobacco packaging. Proponents of the effort cite similar legislation in other countries and a perceived drop in smoking rates. However, the facts are not on their side, and such action does an enormous disservice to consumers who value choices and choosing the brands they trust.
While we welcome efforts to reduce smoking, eliminating one of the tools consumers search for when looking for a brand they trust is the wrong approach. Two years ago, Australia enacted a plain packaging law for cigarettes that for the first time denied manufacturers of a legal product the ability to distinguish their product from those of their competitors through trade dress. The unintended consequence of that policy decision has been to drive consumers not away from smoking but into the unregulated black market for cigarettes, which makes it easier for criminal enterprises – which thrive on the black market – to enter the legitimate supple chain.
Three studies make the case that plain packaging is not meeting the public health objectives of the law and is having an impact on the black market:
First, a study by the London Economics group (“An Analysis of Smoking Prevalence in Australia”) analyzed the impact of plain packaging on smoking prevalence among Australians, and found that “the data do not demonstrate that there has been a change in smoking prevalence following the introduction of plain packaging and larger health warnings despite an increase in the noticeability of the new health warnings.”
A second study, by KPMG (“Illicit Tobacco in Australia, 2013 Full Year Report”), shows significant increase of illicit branded manufactured cigarettes following the implementation of Australia’s plain packaging laws.
And the KPMG report from last year (“Illicit Tobacco in Australia, 2014 Full Year Report”) found that since the enactment of plain packaging, the decrease in the consumption of legal cigarettes has been counterbalanced by an increase in consumption of illegal cigarettes. Perversely, the only place an Australian smoker can go today to buy a branded cigarette is to the black market. It’s illogical.
As the KPMG reports remind us, legal cigarette volumes have been steadily declining for many years in Australia, but this historic rate of decline has eased following plain packaging implementation. The increase in illegal tobacco has been greater than the decline of legal tobacco, leading to an overall increase in the consumption of tobacco in Australia.
The lesson here is that two wrongs never make a right. Australia’s efforts to reduce smoking, while understandable, have been ill-served by the choice of policy tools that deny consumers access to a legal product, remove the important consumer protection given by branding, and drive consumers to the unsecure black market.
Plain packaging has not only demonstrably failed to work in Australia, but it has arguably put Australia in violation of international trade rules intended to protect the rights of brand owners in the global marketplace. Currently, the Australian measure is being challenged by five of its trading partners at the World Trade Organization (WTO), with 35 more countries weighing in as interested parties. The measures recently adopted in the UK and Ireland will likely face similar challenges in the courts. Lawmakers need to take a long look at the cautionary tale of Australia’s plain packaging fiasco and not fall victim to a similar situation. New Zealand, for example, has chosen to wait until the WTO issues its ruling on whether or not plain packaging violates international trade law, rather than recklessly push forward with an initiative that may soon be found in violation.
Brands matter, and consumers demand them. While today’s debate is about tobacco “plain packaging” there have been similar calls for plain packaging of spirits and wine. No doubt there will be other candidates down the road.
That’s one of the reasons why more than 145 prominent global business organizations joined the U.S. Chamber of Commerce in signing a joint statement in opposition to trademark destruction through plain packaging.
There are better ways for governments to educate consumers about the ramifications of smoking than by denying them appropriate choices and trusted brands. Consumers deserve better".
by Geoff Popham, Business Development Manager, Burnard International Limited - Geoff@burnard.co.nz
Congestion in Los Angeles-Long Beach has reached a crisis stage with 20 container ships stuck at anchor Tuesday 3rd Feb in the largest U.S. port complex — and no relief in sight.
The Marine Exchange of Southern California reported that the vessels at anchor increased by four since Monday. Shipping lines say vessels in recent weeks have been sitting at anchor for seven to 14 days, and when they proceed to berth, it takes another six to eight days to work the ships. Vessels in the trans-Pacific have been thrown so far off schedule that at least one line has no vessels available to carry containers from Asia because all of its ships are stuck on the West Coast.
Meanwhile, contract negotiations between the International Longshore and Warehouse Union and the Pacific Maritime Association appear to be going nowhere. Significant progress was made when the PMA on Jan. 26 confirmed that a tentative agreement was reached that would allow ILWU mechanics to inspect all chassis before they leave the marine terminals.
However, with hopes raised that a settlement could be forthcoming in a matter of weeks, ILWU negotiators reportedly stunned employers by returning to the bargaining table the next day with a dozen new demands, some of which are considered to be highly controversial. A teleconference between the parties is scheduled for today, with media to be present.
We suggest our clients, both importers and exporters – discuss with suppliers and customers, ways and means to add at least 10 - 14 days to current lead time expectations. We hope the parties will soon reach agreement.
https://www.youtube.com/watch?v=7JePgLGRE5o&feature=youtu.be
Congratulations to Mark Gilbert who was today sworn in by Vice President Joe Biden as Ambassador-Designate to New Zealand & Samoa. The ceremony took place in The Benjamin Franklin State Dining Room at the Department of State’s headquarters in Washington D.C.
Defence Minister Gerry Brownlee travels today to the United States and Canada for calls at the United Nations in New York, attendance at the Halifax International Security Forum, and a bilateral visit to Washington, including a meeting with US Secretary of Defense Chuck Hagel.
“The United Nations Secretariat is responsible for the day-to-day operations of 16 current peacekeeping deployments, and I’m glad to be visiting it so soon after our recent election to the United Nations Security Council,” Mr Brownlee says.
After New York, Minister Brownlee travels to Halifax, Nova Scotia, where he will meet with Canadian Minister of National Defence Robert Nicholson and other Ministers while attending the Halifax International Security Forum.
The Halifax Forum brings together key decision-makers from governments, military, business and academia to discuss emerging global threats. This year’s discussions will focus on the growing tension in the Middle East, increasing competition for resources and cyber security.
In Washington Mr Brownlee will undertake a range of calls, including on Secretary Hagel.
Mr Brownlee says Secretary Panetta’s visit to Wellington in 2012, followed by his predecessor Jonathan Coleman’s visit to Washington in 2013 has set a pattern for regular Ministerial-level contact.
“I am very pleased to be able to meet with Secretary Hagel so soon after taking up the Defence role.
“I expect to have a wide ranging discussion with the Secretary, including the United States’ leadership role in the coalition to counter the Islamic State of Iraq and the Levant (ISIL), and our current exploration of a potential New Zealand contribution.
“Canada and the United States are key defence partners for New Zealand. I’m looking forward to meeting my counterparts to exchange views on global security issues, as well as discussing how we can enhance our defence relationships.”
Since the last TPP Leaders meeting a year ago, the 12 TPP Ministers and our negotiating teams have made significant progress in setting the stage to finalize an historic, ambitious, comprehensive, balanced, and high-standard TPP agreement in accordance with the instructions you gave us in Bali last year. Over the past several months, we have concentrated on working together to resolve the remaining issues between us, and, as a result of this work, the number of outstanding issues is now limited, and the pace of our progress has accelerated. With the end coming into focus, Ministers are strongly committed to moving the negotiations forward to conclusion. Our determination is based on a recognition of Leaders’ common vision and their joint commitment to a next-generation, transformative agreement that further increases the trade and investment among us, and sets high-standard rules to address the issues that our businesses, workers, and farmers face in the 21st-century global economy. We also are working to achieve the Leaders’ objective of ensuring that the TPP promotes innovation, enhances our competitiveness, spurs economic growth and prosperity, supports job creation in our countries and ensures that the benefits of the agreement are broadly shared among our citizens.
Ministers have been actively engaging, and we have developed a joint work plan to accelerate the process and agree on mutually acceptable outcomes on the remaining challenges. Key among these is identifying the pathway to conclusion of ambitious packages of commitments that will open our markets to each other, including for goods, services, investment, financial services, temporary entry of businesses persons, and government procurement. We also are continuing to seek solutions on the remaining issues in the text of the agreement, including related to intellectual property, State-owned enterprises, environment, and investment. Ministers made further progress in narrowing the gaps between us on these issues in Beijing, and our discussions will guide the work of our negotiating teams in the weeks ahead. However, sensitive and challenging issues remain that will require our continued involvement.
As we work to find solutions to the remaining issues, we will continue to seek the detailed input of stakeholders as their perspectives have been invaluable to our efforts to understand the wide-ranging views and perspectives on many issues under negotiation. Ministers will continue to work to craft an agreement that carefully balances the range of interests for each country in order to achieve an agreement that provides broadly shared benefits for all our citizens.
We have reviewed our progress toward achieving the objectives that Leaders articulated for TPP, which will ensure the greatest benefit from the agreement, distinguish TPP from other trade agreements, and serve to boost the competitiveness of our economies regionally and globally.
Comprehensive Market Access
Ministers and the 12 TPP negotiating teams continue to focus on achieving our goal of an ambitious, high-standard market access package that provides comprehensive, commercially meaningful and duty-free access to each other’s goods markets and simultaneously lifts restrictions on services, investment, financial services, temporary entry of business persons, and government procurement.
Regional Agreement
Since the TPP Leaders last met, we have significantly advanced our work on promoting integrated regional trade that will make trade between us more seamless, supporting jobs by making it much easier for our workers and businesses, both large and small, to take advantage of the agreement. Exporters, importers and investors are seeking fairness and predictability so by setting common high-standard, transparent, and balanced rules across the region, we are promoting trade and investment among us.
New Trade Issues
To help sustain the future dynamism and competitiveness of our economies, we have made significant progress toward developing common approaches to new issues that have emerged in the global economy since the last generation of trade agreements. In developing rules on these issues, we have approached them in a serious and careful manner. We are close to agreement in these new areas.
Cross-Cutting Trade Issues
The 12 teams are close to finalizing our work on cross-cutting issues that we believe are important to fully achieving the goals Leaders have set for TPP, and maximizing the potential benefits for our citizens from all the provisions of the agreement.
Living Agreement
We have continued to engage with economies that have expressed interest in joining TPP in the future. Reflecting Leaders’ commitment to develop TPP as a potential platform that can expand participation to other economies across the region that are prepared to take on its high-standard commitments, we are close to agreement on the structure and process that will make the TPP a living agreement. We also have advanced work across the agreement on how to ensure that TPP can continue to evolve as appropriate in response to future developments in trade, investment, technology, or other emerging issues and challenges, or areas of common interest.
Next Steps
Given the significant progress on TPP since Leaders last met, and further acceleration of the pace of the negotiation in the run-up to this meeting in Beijing, Ministers have committed to redoubling our efforts to get the agreement over the finish line, recognizing that substance will drive the precise timing of conclusion. Concluding a complex and ambitious agreement like TPP among countries that are as economically, developmentally, and geographically diverse as those in the TPP is challenging. However, all 12 countries are committed to making completion of the negotiation a priority, and will dedicate the resources needed in order to do so, recognizing the important contribution TPP will make to our economic growth and development and to our competitiveness regionally and globally. To do so, we will have to find compromises and to work pragmatically, flexibly, and creatively to find solutions that can address each of our needs while remaining steadfast to the high-standard and ambitious outcome that Leaders have identified as their shared goal.
We, the Ministers and Heads of Delegation for Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam have completed our three-day ministerial meeting to lay the groundwork for the conclusion of the Trans-Pacific Partnership Agreement negotiations. Our meeting followed a week of officials’ level discussions in Canberra, from 19-24 October 2014.
We are pleased to report that, over the past weeks, we have made significant progress on both component parts of the TPP Agreement: the market access negotiations and negotiations on the trade and investment rules, which will define, shape and integrate the TPP region once the agreement comes into force.
Over the course of our weekend meeting, we have spent a considerable portion of our time in one-on-one discussions. That has allowed us to make further progress in the negotiations on market access for goods, services and investment. We met in a plenary format to make decisions on a range of issues that will help set the stage to bring the TPP negotiations to finalization.
We consider that the shape of an ambitious, comprehensive, high standard and balanced deal is crystallizing. We will continue to focus our efforts, and those of our negotiating teams, to consult widely at home and work intensely with each other to resolve outstanding issues in order to provide significant economic and strategic benefits for each of us.
We now pass the baton back to Chief Negotiators to carry out instructions we have given.
The Strategic Importance of TPP
Washington, D.C.
September 18, 2014
*As Delivered*
“The stakes for U.S. trade policy have always reached beyond the economic realm. As nuclear strategist and Nobel Prize winning economist Thomas Schelling once noted, “Trade is what most of international relations are about. For that reason trade policy is national security policy.”
“What’s remarkable about Schelling’s observation is that it was made during an era when economic power was viewed largely as an ancillary power to military power. During the Cold War, and for much of the 20th century, economic policy – including trade policy – was seen largely as an enabler: The role of a strong economy was to support a strong military.
“Military power still has deep economic roots, and as history has shown, when those roots dry up, it is not long before our military forces begin to wither as well. But the world has changed dramatically since Schelling’s time, and the sum of those changes has brought economic and strategic aspects of trade into even closer alignment.
“In the 21st century, the oldest and strongest strategic argument for trade – its contribution to the U.S. economy – has only grown stronger. Increasingly, though, economic clout is a key yardstick by which power is measured and a principal means by which influence is exercised. Today, market changes are watched just as closely as military maneuvers, and decisions in boardrooms can matter as much as those made on battlefields.
“Strengthening the U.S. economy is not simply a means of enabling military might, but rather a key strategic goal in itself. As such, it’s critical that we continue to evaluate trade agreements first and foremost on their economic merits. Those agreements must support jobs, spur economic growth, and strengthen the middle class.
“For the United States, the economic merits of trade have never been clearer than they are now. Over the past five years, the increase in U.S. exports has generated nearly one-third of our economic growth, and over the past four years, this surge has supported 1.6 million new jobs. Last year, U.S. exports hit an all-time high, $2.3 trillion dollars of U.S. goods and services, with record-breaking performances across the whole economy, from agriculture to manufacturing to services.
“Building on these successes, President Obama’s trade agenda aims to make the United States the world’s production platform of choice – the top destination for investment. To paraphrase Chairman Wyden, we want to make it here, grow it here, add value to it here and sell it everywhere – sell it all over the world.
“We already have many of the pieces in place: We are a $17 trillion economy, we have strong rule of law, a skilled and productive workforce, an entrepreneurial culture, and now new sources of abundant and affordable energy.
“Layered on top of this is a trade agenda that would give American businesses and workers unfettered access to two-thirds of the global economy, boosting investment and manufacturing policies that have already begun to bring manufacturing jobs back to our shores.
“The economic case for trade is the longest pole in the strategic tent, but the tent extends well beyond economics. U.S. trade policy is a central part of what may be the most consequential strategic project of our time: revitalizing the post-World War II international economic order.
“That order, as John [Hamre, President of CSIS] just said, has ushered in prosperity and peace and developed that is unparalleled in history, not only for the United States, but for every nation that has been willing to embrace the pillars of openness and fairness. In recent years, however, a series of seismic shocks – globalization, technological change, and the rise of emerging markets – have shaken the foundation of this order.
“We’re now engaged in a major effort to ensure that as the current order evolves, it continues to reflect our interests and our values, and that the United States continues to play a leading role in it. And trade is one of our most promising tools for that project. Now I could talk here today about T-TIP, TiSA, or ITA, or EGA or TFA, but I know you’ve gathered here to talk about TPP, the Trans-Pacific Partnership, and so I’ll focus on that as the perfect example of how the economic and strategic logic of U.S. trade policy are mutually reinforcing.
“As you all know, TPP is an ambitious and comprehensive agreement that the United States and 11 other Asia-Pacific countries are trying to complete. Economically, TPP is an opportunity to bind together a group that represents 40 percent of global GDP.
“In today’s global economy, our workers and our firms are already competing against others who do not share our high standards in labor rights, environmental protections, intellectual property rights, a free and open internet, and other issues.
“By setting high standards, TPP will help level the playing field for American workers and businesses, who are among the most productive in the world. We already know that when the game is fair, that we can compete and win. And having already lowered most of our barriers, we stand to gain disproportionately from encouraging others to do the same.
“Those standards that we are seeking include are the highest labor and environmental standards of any trade agreement – standards that will be fully enforceable. They include advancements in intellectual property rights protection, both to spur innovation and ensure access to it. This agreement will include the first-ever disciplines on state-owned enterprises, which will ensure that when SOEs compete against private firms, they do so on a commercial basis. And this agreement will break new ground by translating trade principles from the physical economy into the digital economy to ensure that there is a free and open Internet – which is so critical for small and medium-sized businesses being able to access the global market.
“These standards reflect both our values and our interests. There are alternative models bring promoted as well. Ones that are based more on mercantilist policies; ones that do not focus on labor and environmental standards; ones that do not focus on protecting intellectual property rights or leveling the playing field between State Owned Enterprises and private firms or maintaining a free and open Internet. These models do not reflect our interests and our values.
“So we want to see a race to the top, not a race to the bottom that we cannot win and should not try to run.
“But looking beyond just the trade elements, TPP is a central component of America’s rebalance to Asia.
“At a time when there are unresolved territorial and maritime disputes, TPP can reinforce our presence in the region and our interest in establishing methods of cooperation and mechanisms for resolving frictions.
“At a time when there are crises on multiple fronts, TPP can demonstrate that the United States is and always will be a Pacific power and be a concrete manifestation of our enduring commitment to the region.
“At a time when there is uncertainty about the direction of the global trading system, TPP can play a central role in setting rules of the road for a critical region in flux.
“The stakes for setting new rules of the road for the global trading system have never been clearer, and yet it has become increasingly difficult to do just that. One barrier to progress has been the emergence of emerging economies that have been unwilling to date to assume enhanced responsibilities commensurate with their increased role in the global economy.
“At the WTO, for example, where recently we’ve seen a handful of countries block the implementation of the Trade Facilitation Agreement, which would have brought significant benefits to developing countries and developed countries alike by making border and customs procedures more efficient.
“In the face of these challenges, we must keep moving forward and working with others who share our commitment to setting higher standards.
“Motivated by these stakes, both economic and strategic, we’ve made substantial progress in the TPP negotiations to date. We can see the light at the end of the tunnel, but it will take a final push, a collective effort, and a willingness to stretch to achieve an agreement that is consistent with our high ambitions.
“Central to that collective effort and the future of TPP are our ongoing negotiations with Japan.
“Japan asked to join TPP three years into the negotiations, after much consultation, based on its own assessment of its strategic and economic interests. Japan did so with a clear commitment to meet the same level of ambition as the rest of the TPP partners, and it on that basis that President Obama and the other TPP Leaders welcomed Japan’s participation.
“But Japan’s entry into TPP was about more than just a commitment to its partners. It was about a bold and compelling vision laid out by Prime Minister Abe to end Japan’s prolonged period of stagnation by using structural reforms, as well as fiscal and monetary policy, to contribute to economic revitalization.
“Because Japan’s success is so important, we are all watching its economy very carefully. The record is uncertain. We’ve seen growth, and we’ve seen contraction. Right now, in the final weeks of the third quarter, both internal and domestic demand are weak. Real incomes and consumer spending are down. And as Christine Lagarde at the IMF recently said, all of this puts a premium on Japan delivering on the third arrow of structural reform.
“In London, the Prime Minister said, “The Japan that I am pursuing is a Japan that leads to being wide open to the entire world.”
“He asked, “How will we achieve growth? We will open up the country and open up Japan's markets. This is a philosophy that has coursed through my veins consistently ever since I entered politics.”
“This vision matches TPP both in its ambition and its objectives – to support growth and prosperity by unlocking new opportunities for business and workers as well as new benefits for consumers, to tap new sources of domestic demand, to implement reforms in key markets, and to spur productivity.
“It’s a vision that the United States has wholeheartedly supported not only because Japan is one of our closest allies, but also because its success as the world’s third largest economy is vitally important to the global economy. Ending two decades of stagnation and returning Japan to a path of sustainable growth, based on domestic demand, is in everyone’s interests.
“As Prime Minister Abe made clear, TPP has a key role to play in putting Japan on that path.
“When talking about TPP, he said, “What is necessary for Japan's revival is a powerful catalyst that will restyle the old Japan and then make the ‘new’ Japan even stronger.”
“But for TPP to succeed in being that catalyst, it needs be as bold as the Prime Minister’s vision. It needs to be an ambitious, comprehensive and high-standard agreement.
“We’re now at a critical juncture in this negotiation. We are working hard with Japan to achieve our shared objectives. Now is the time for that bold vision to be translated into concrete progress at the negotiating table. We know this is tough, but as the Prime Minister said, “there is no alternative.”
“Undertaking this kind of structural reform is difficult. We know. We did it in autos, we did in in the financial sector, and we’ve done it in health care. But it can be done with political will. Quoting the Prime Minister one more time, “Achieving this will require robust political power that takes on vested interests.”
“We have worked well and hard with Japan in TPP, hand-in-hand, to promote strong rules that reflect our shared interests. We look forward to doing the same to achieve the high level of ambition in terms of opening markets which reflects not only the commitment to all TPP members, but the vision that Prime Minister Abe and the Japanese people have for their own country.
“Now is the time. From the United States’ perspective, there is no premium in delay. Others are certainly not standing on the sidelines.
“The European Union is negotiating FTAs with Japan and Vietnam and finalizing a deal with Canada.
“China is negotiating an FTA with Korea and Australia and, of course, RCEP.
“Australia recently concluded deals with Japan and Korea.
“Right now, there are 500 million middle class consumers in the Asia-Pacific region. That number is expected to grow to 2.7 billion by 2030. They are going to want more protein, a higher nutrition, better and safer food. They’re going to need everything from machinery to and consumer goods. And they’re going to want a wide choice in services, from entertainment to health care. We want to be part of their future. The Made-In-America brand is a strong one. And exporting more Made-in-America products drives the creation of good jobs here at home.
“The economic costs of failing to compete are clear. But consider also the strategic costs.
“The United States would forfeit its seat at the center of the global economy. It would be left to be shaped by globalization, rather than be in a position to shape it.
“We’d watch standards deteriorate rather than improve, and that just cannot be in the interest of American workers and American firms.
“And we’d see our partnerships deprived of the strength that comes from enhanced economic engagements in a world that is increasingly unpredictable.
“As President Eisenhower warned Congress six decades ago, “If we fail in our trade policy, we may fail in all. Our domestic employment, our standard of living, our security, and the solidarity of the free world – all are involved.”
“The stakes of our trade policy, economic and strategic, are even greater in this century than they were during the last.
“Thank you very much.”
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