Open World Markets to American Products and Services

The United States is the world’s largest economy and the world’s largest exporter. Exports account for more than 10 percent of our nation’s gross domestic product and a quarter of economic growth. More than ever before, America’s prosperity and security depends on active engagement with the global economy.

For 60 years, the United States has advocated expanding global trade – and for good reason. Academic research has repeatedly demonstrated that countries that have more open economies and engage in international trade enjoy higher growth rates and faster reductions in poverty than more closed economies. More than 12 million American jobs depend directly on exports and those jobs pay an estimated 13 to 18 percent more than the national average. Our nation’s GDP is an estimated $1 trillion greater annually as a result of decades of trade and investment liberalization.

To preserve America’s leadership position and promote continued economic growth, Congress must ratify the bilateral free trade agreements with Colombia, Panama, and South Korea and renew the President’s trade promotion authority ("TPA"), on which continued engagement by the United States in the Doha Round and other trade negotiations depends. Our major competitors – including the European Union, China, and Japan – continue to negotiate with Latin American countries, Korea, and other nations to gain advantages for their workers and businesses. The United States cannot afford to delay implementation of already negotiated free trade agreements, or to deny the President the authority to pursue further trade-related benefits to American workers and businesses.

Ratification of the recently signed FTA with South Korea is especially critical for the financial services industry for economic and geopolitical reasons. The agreement – the world’s largest bilateral accord to date and the most significant trade achievement since the North American Free Trade Agreement in 1994 – would eliminate within 3 years nearly 95 percent of existing tariffs and other barriers, providing U.S. manufacturers and financial services companies virtually unfettered access to the world’s tenth largest economy and its 48 million consumers. As a result, trade flows with our 7th largest trading partner would increase by an estimated $20 billion each year. Citing such significant benefits, The New York Times concluded in a July 11th editorial: "A pact that draws the two countries closer is well worth supporting."

Further progress in reducing global trade barriers is especially important with regard to trade in services, in which the United States enjoys a significant comparative advantage. Greater participation in foreign markets by U.S. financial services firms would not only boost financial services exports and employment but, by promoting the growth of overseas economies, would also help expand overseas markets for other American products and services.

Keep America Attractive to (and Open to) Foreign Investment

Today, more than ever, the U.S. economy depends on foreign investment. U.S. subsidiaries of foreign-based companies employ more than 5 million Americans throughout all fifty states – roughly one out of every twenty jobs in this country – paying compensation totaling $320 billion annually. Foreign companies also account for roughly 20 percent of all U.S. exports, 15 percent of private sector research and development, 10 percent of private-sector capital investments, and 12 percent of corporate taxes collected. Ninety four percent of foreign investment comes from OECD countries, and ninety eight percent is from private sector firms – only two percent of foreign assets are owned by companies controlled by foreign governments.

Open, stable, and predictable markets are a prerequisite for attracting global capital. While the United States has been the favored destination for foreign investment, it is prudent to be mindful that markets in Europe and Asia are increasingly competitive. The introduction of a single currency in Europe has eliminated currency conversion costs and exchange rate risk, making Europe much more attractive. And with the Chinese and Indian economies growing at 9 and 6 percent respectively, those economies are already attracting enormous amounts of investment capital.

Global capital is very sensitive to changes in the political climate. Poorly considered economic, trade, tax, or regulatory policies risk a "chilling effect" on the inflow of foreign investment, with results that might well include higher interest rates, lower equity prices, and slower economic growth. Finally, it should be recalled that the United States is the world’s largest investor, with over $10 trillion in assets overseas. Erecting unreasonable barriers to participation in U.S. markets would likely invite retaliation by other countries, at great cost to U.S. interests.