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Trade

India’s Jump in Doing Business Report Illustrates Signs of Reform, Need for Further Trade and Investment Reforms

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According to the World Bank’s recent Doing Business report, India jumped 30 spots from last year, and now ranks 100 out of 190 countries. Manufacturers in the U.S. are pleased to see improvements to India’s business environment as a sign of progress, but their day-to-day experience in India shows there is still much work to be done to improve India’s trade and investment environment. Such work needs to cut through the red tape that often faces manufacturers in the United States trying to succeed in India.

The Doing Business report is based on quantitative indicators related to how easy or challenging it is for companies to start and operate a business in India. These include policies and practices related to areas such as starting a business, dealing with construction and other government permits, obtaining critical business inputs ranging from credits to electricity, protecting contracts and investors, paying taxes, and resolving insolvency.

To be clear, India’s jump in the rankings reflects improvements in various areas. Most of these steps primarily benefit domestic Indian entrepreneurs and businesses, but these moves did include some changes that have a direct impact on manufacturers in the United States. India’s biggest jumps this year fall in a few specific areas: “getting credit,” “resolving insolvency,” “protecting minority investors,” and “paying taxes.” These jumps can largely be traced to two high-level reforms over the last year: the passage of India’s Bankruptcy Law and ongoing efforts to reform India’s complicated tax system with the passage of the Goods and Services Tax (GST).

Both improvements have a broad enough impact on the commercial environment that they were listed among improvements in a recent letter to Ambassador Lighthizer from business groups such as the Alliance for Fair Trade with India (AFTI), stating that “U.S. businesses have seen small positive steps in the right direction, including foreign investment openings in a few sectors, fossil fuel and energy efficiency policy initiatives, efforts to address infrastructure project permitting and licensing challenges, and passage of legislation related to bankruptcy and tax reforms.”

While manufacturers welcome these changes, India must step up its efforts to accomplish Prime Minister Modi’s repeatedly stated goal of reaching the report’s top 50.  India still trails countries such as the Dominican Republic, Tunisia, and Guatemala in the current rankings.  Despite progress, India still ranks towards the bottom of the report in areas such as “starting a business” (156), “dealing with construction permits” (181), “registering property” (154), “trading across borders” (146), and “enforcing contracts” (164).  Moreover, India fell in the rankings for some of these areas, including cross-border trade, property registration and business start-up.  Many of these areas, particularly cross-border trade and enforcing contracts, rank among the most troublesome areas for manufacturers from the United States.

In addition to the focused business indicators listed in the report, manufacturers in the U.S. still face a wide array of longstanding and new trade barriers in India that make it extremely difficult to do business, and undermine India’s efforts to rebrand itself to attract trade and investment. These trade barriers prevent fair access to its markets and ultimately stunt innovation and economic opportunities for both U.S. and Indian manufacturers. Examples of issues include new price controls on innovative medical devices and agriculture products, a series of forced localization policies across high-value industries, and ineffective protection of patents, copyrights and trade secrets.

India’s efforts to climb the rankings of the Doing Business Report must be applauded – but it clearly still lags behind most large economies, and even other emerging economies such as China, in terms of its business climate. To boost FDI and truly position India as a leader in trade and innovation, Prime Minister Narendra Modi must take this jump in the rankings not as a victory lap, but as a reason to accelerate reforms and concrete actions to eliminate trade and investment barriers preventing U.S. manufacturers from investing and operating in India.

Why America and American Manufacturers Need a Pro-Investment and Pro-ISDS Enforcement Strategy

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Rules relating to investment overseas and the investor-state dispute settlement (ISDS) are back in the news. This morning, I had the opportunity to join several experts to explain some basics that seem to get lost in debate that seems to suggest that the sky will fall any day now:

1. Businesses invest at home and abroad to reach customers and participate in international projects. Most investment by U.S. companies is in fact domestic, helping companies reach customers here in the United States, the largest consumer market in the world. But 95 percent of the world’s consumers and more than 80 percent of global purchasing power is outside the United States. And that is why U.S. businesses invest not just here at home but in overseas markets to reach foreign customers. Indeed, investing close to your customers (as foreign companies do here in the United States) is often the best way to make a sale, including through activities to set up dedicated distribution networks and to tailor products to local consumer tastes.

In some areas, such as energy, natural resources or foreign infrastructure development, foreign investment is the primary way American manufacturers can participate and grow opportunities because that is where the resources and activities must take place.

The actual data collected by the Commerce Department’s Bureau of Economic Analysis confirms this basic, but often overlooked, fact: Year after year, decade after decade, the vast majority of sales by U.S. foreign affiliatesmore than 90 percentare made to foreign customers not returned to the United States.

2. The United States, its workers and businesses benefit enormously from U.S. investment overseas. U.S. companies that invest overseas are outsized participants in the U.S. economy and are stronger because of their access to foreign markets that help grow economies of scale and boost U.S. activity and wages here at home. The facts are clear. U.S. companies that invest overseas are America’s:

  • Largest exporters, exporting 47 percent of all U.S.-manufactured goods sold overseas ($660 billion in 2014);
  • Biggest producers, accounting for $1.363 trillion or nearly 65 percent of all U.S. private-sector value-added manufacturing output in 2014;
  • Most important innovators, expending nearly $269 billion on research and development in the United States in 2014 (of that, 68 percent (or $183 billion) was expended by manufacturers in the United States);
  • Largest investors in capital expansion, expending $713.5 billion or 24 percent of all investment in new property, plants and capital equipment in the United States in 2014; and
  • Highest-paying employers, paying U.S. manufacturing workers on average $96,030, or about 18 percent more than average U.S. manufacturing wages in 2014.

3. Having strong legal protections, backed up by ISDS, helps America win in a highly competitive global economy. For more than 30 years, U.S. administrations and Congress have strongly supported a pro-investment and pro-ISDS policy because it helps America, its businesses and its workers win. The investment rules—taken right out of the U.S. Constitution and other baseline U.S. laws for the protection of private property against discriminatory, unfair, expropriatory government action—set the basic rules to combat against foreign government market-distorting activities. For example, prohibitions on government forced localization measures and incentives (e.g., government mandates to buy local products or transfer technology in exchange for allowing an investment) help ensure that U.S. investment overseas can continue to support the growth of U.S. exports and jobs. And when governments violate these basic rules, ISDS is critical so that companies have access to a neutral venue to seek compensation.

4. The same anti-ISDS critiques have been leveled for decades, and the sky has not yet fallen. Those opposed to ISDS have been rehashing the same tired, false and discredited critiques for years, and they continue to be rejected by policymakers, including most recently in 2015 when a bipartisan majority strongly rejected Sen. Elizabeth Warren’s (D-MA) amendment to eliminate ISDS from Trade Promotion Authority; Consider the main critiques:

  • Types of cases: The vast majority of cases are about individual permit authorizations and the treatment of individual investors, not broad public interest regulation.
  • Types of claimants: Most claimants are individuals and small and medium businesses.
  • Impact on government regulation: ISDS panels can only order compensation, not a change in government policy. And not one case has ever found a violation of the investment rules through a nondiscriminatory, broadly applied public interest regulation.
  • Number of cases: Less than 20 cases have been filed against the United States in more than 20 years, even though the United States is the largest destination for foreign investment. Loud claims that the Korea–U.S. trade agreement would lead to hundreds of cases against the United States, for example, have continued to fall flat; not one case has been brought against the United States in the five years that agreement has been in force. Contrast that experience to the tens of thousands of cases filed in U.S. Federal Claims court every year on similar property claims.
  • Alternatives: Political risk insurance is a highly limited approach, far too expensive for small business and does not even begin to combat the broader investment rules that are vital to discipline foreign government market-distorting forced localization and other measures. When official government risk insurance is used, it would be the U.S. taxpayer, not the foreign government, bearing the cost of a foreign government seizure of America’s own property.
  • ISDS arbitrators: Arbitrators are chosen collectively by both sides in a dispute, are respected experts and held to strict ethical standards. If there is a bias, it is in favor of governments that win the vast majority of cases.

And as for letters, let us take a look at some from those who are experts in this field. Take a moment to look at this letter from academics whose actual expertise is in international law, arbitration and dispute settlement that strongly support the ISDS system. Or consider this statement of the International Bar Association, the world’s leading organization of international legal practitioners, bar associations and law societies, that felt the need to correct the record on ISDS because “erroneous information is subverting debate.”

As more than a hundred business groups representing millions of small, medium and large companies across every sector of the economy recently explained, investment rules and ISDS are very much in America’s interest as we all seek to grow manufacturing, well-paying jobs and U.S. competitiveness in the global economy.

Time to Move the MTB to Boost U.S. Jobs by Cutting Another Unnecessary Tax on Manufacturing in America

By | Economy, Shopfloor Economics, Shopfloor Main, Trade | No Comments

Manufacturers across the nation are seeking action this year to boost U.S. competitiveness and cut back on unnecessary taxes that have been holding back manufacturers in the United States. In addition to the very important tax reform effort that is underway right now, the House Ways and Means Trade Subcommittee will begin to review tomorrow another vehicle to eliminate out-of-date distortive taxes on manufacturers through the so-called Miscellaneous Tariff Bill (MTB).

For years, the National Association of Manufacturers (NAM) has been a leading advocate in support of congressional passage of the MTB because the United States’ own tariff code is imposing anti-competitive costs on manufacturers in the United States. Since the last MTB expired at the end of 2012, manufacturers have paid billions of dollars in tariffs on products not even made in the United States to the detriment of American competitiveness and well-paying American jobs. Consider that in some cases, manufacturers in the United States are paying import taxes on components not produced domestically, while foreign producers bring their final products in duty-free. These and other historical distortions in the U.S. tariff code must be corrected to create a level playing field for manufacturers right here at home.

In 2016, the House and Senate, with near-unanimous bipartisan support, created a transparent, objective, predictable and regularized process for congressional review and consideration of the MTB through the American Manufacturing Competitiveness Act of 2016 (AMCA). Through that process, thousands of petitions were reviewed over the past year by the independent U.S. International Trade Commission (ITC) and other parts of the U.S. government, and the ITC put together a final report for Congress with petitions that it deemed to meet the requirements of the AMCA. The more than 1,800 petitions to remove import tariffs on products included in the ITCs report would eliminate tariffs of more than $350 million in 2018 and more than $1 billion over the next three years.

Congress now has the opportunity to move forward on an MTB that would remove—for three years—anti-competitive border taxes on imports of products not produced or available in the United States. Consider the stories of two manufacturers:

  • Albaugh specializes in the production and packaging of post-patent crop protection products, and employs around 350 workers across the United States. Albaugh’s products are used throughout the United States by farmers who require access to competitively priced alternatives for their crop protection needs. In the past, the MTB benefited Albaugh by reducing the cost of raw materials not available domestically and enabling the company to maintain and grow jobs at its headquarters in Ankeny, Iowa, a production facility in St. Joseph, Missouri, and other locations throughout the country.
  • Glen Raven is one of the world’s leading manufacturers of performance fabrics used in the furniture, automotive, safety, marine and sunshade industries, with more than 2,000 employees in the United States. Since the raw materials required to manufacture many of these fabrics are not available in the United States, Glen Raven relies on the MTB to ensure that these materials can be sourced competitively. The expiration of the MTB in 2012 resulted in a significant increase in Glen Raven’s manufacturing costs, which made the company less competitive in the global marketplace.

Tomorrow, the House Ways and Means Trade Subcommittee will hear from three additional manufacturers—Gowan USA, Lasko Products LLC and W.L. Gore & Associates—about how the MTB will help them grow manufacturing in the United States. There are many more stories like this across America, including from many small and medium-sized manufacturers, in industries ranging from chemicals and textiles to electronics, agriculture and beyond, all of which will be able to improve their competitiveness and their ability to sustain and grow well-paying American jobs with MTB passage.

The NAM applauds the Ways and Means Trade Subcommittee for holding this hearing and looks forward to working closely with both the House and Senate to move forward MTB legislation as quickly as possible, so manufacturers can knock down another anti-competitive tax.

 

 

More Than 100 Groups Agree: Administration Has Opportunity to Boost Enforcement

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America exports a lot, particularly to our border neighbors, Canada and Mexico, which alone purchase more manufactured goods from the United States than the next 10 foreign countries combined. They purchase almost as much from the United States as we buy from them, even though together they are less than one-sixth of the size of the U.S. economy.

But beyond the cars and corn, the tractors and trailers and the steel and soybeans, America has also been exporting its most basic Constitutional values. Through the original NAFTA Chapter 11, the United States sought to guarantee many of the same basic private property protections that we honor in our own country—due process, equal protection and compensation when a government seizes or “takes” private property. Those core provisions of the U.S. Constitution and U.S. law are part of the original NAFTA and have helped protect U.S. property in both countries when their governments have treated American businesses unfairly.

Since these provisions are not fully part of Canadian or Mexican law, NAFTA also established a neutral enforcement mechanism, known as investor-state dispute settlement (ISDS), to ensure that individuals, nonprofits and businesses could all have the ability, as we have in the United States, to recover damages when those governments harm U.S. property. This enforcement mechanism is a neutral, internationally recognized arbitration found in more than 3,000 agreements worldwide and more than 50 other agreements signed by the United States.

Manufacturers, service providers, energy, technology and food and agricultural producers and their workers all have a stake in ensuring that these basic property protections and enforcement tools are not weakened in the upcoming NAFTA talks. To the contrary, the Trump administration has an important opportunity to improve the coverage of these rules so that all forms of U.S. property, including major resource and infrastructure contracts and intellectual property, are fully protected and that the ISDS enforcement tool is strengthened. For that reason, the NAM was joined by 112 groups representing millions of businesses across the manufacturing, services, technology, energy and food and agricultural sectors of the U.S. economy to urge the Trump administration to maintain and upgrade these basic provisions of the NAFTA.

Why does this matter for workers and businesses in the United States? Consider one early case already decided under NAFTA Chapter 11—Metalclad Corporation v. Canada. In 1993, California-based Metalclad Corporation invested more than $20 million to clean up and operate a waste facility that had more than 20,000 tons of hazardous waste contaminating local water supplies. Metalclad’s investment in Mexico included support from American workers and U.S.-produced materials.

Mexican federal and local officials supported Metalclad’s investment before the purchase and Metalclad received all the necessary Mexican federal authorizations and permits following government review and an environmental audit. Just before opening the facility, however, the local Mexican government blocked Metalclad from opening. Metalclad filed an ISDS case after which the local authority filed a so-called “ecological decree” to prevent the site from operating. An ISDS panel and later a Canadian court enforcing the award found that the Mexican government’s failure to allow Metalclad to operate the facility was in violation of one of the most basic property protections—that governments must compensate private property owners when they seize their property, as found in the Takings Clause in the Fifth Amendment to the Constitution. As a result of the ISDS claim, Metalclad was awarded compensation for a significant part of the investment that it had made.

There are many more instances of foreign governments that have wholly seized U.S. property and turned it over to local competitors or that have lured millions of dollars in infrastructure development, only to refuse to honor the contract to the detriment of U.S. businesses and their workers.

The Trump administration’s focus on ensuring fair treatment by foreign governments is a critical part of a robust U.S. trade agenda and maintaining and improving ISDS enforcement and the protection of U.S. property overseas is a critical tool in the toolbox. Businesses across the United States agree.

Manufacturers Work to Improve Climate for International Commerce

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Improving the international climate for trade and commerce is an immediate focus for world leaders, with major discussions at the recent Hamburg-hosted G20 summit and within the Trump administration. The National Association of Manufacturers (NAM) and its members strongly agree: with more than half of the U.S. manufacturing workforce dependent on customers outside the United States, boosting the global economy (and addressing market barriers) is a vital focal point for manufacturers big and small across the United States.

Given the outsized role of international commerce for manufacturing in the United States, I traveled to Europe last week to press both U.S. and international stakeholders for action on international commercial issues that make a difference for manufacturing growth and competitiveness. My meetings included senior U.S. government officials on the frontlines of the global economy, leaders of important global institutions, such as the World Trade Organization (WTO) and Organisation for Economic Co-operation and Development (OECD), and international business partners.

In Paris, I met with OECD Secretary-General Angel Gurria and his senior leadership to discuss the OECD’s work on a range of issues, such as international trade, investment, science and innovation, labor and health. I introduced the OECD to our new Engaging America’s Global Leadership (EAGL) coalition, which seeks to ensure that the OECD and other global institutions operate within their mandate, are transparent and accountable to their members and follow best practices in consultations with the private sector and other stakeholders and in the development of analyses and recommendations. Those productive discussions have already spurred follow-up opportunities to engage OECD officials on these issues in both Paris and Washington.

July 10, 2017
NAM Vice President of International Economic Affairs Linda Dempsey at OECD headquarters in Paris.
Photo by Julien Daniel/OECD

In Geneva, I met with senior WTO officials, introducing the new EAGL coalition and also discussing a number of other key manufacturing trade priorities in advance of the upcoming WTO Ministerial Conference in Buenos Aires.

In both cities, I met with senior officials at the U.S. Missions to the OECD, the United Nations and WTO who work tirelessly with these institutions to move forward American priorities and defend American interests. We discussed the important role these institutions can and should play in creating a more fair and open international economy in which manufacturing can thrive. I also had the opportunity to meet with NAM members and international business leaders to discuss common challenges and new opportunities to band together to improve the international commercial climate to grow manufacturing and good-paying jobs.

Since its founding, the NAM has been committed to open and fair trade and constructive engagement with global institutions that are pillars of the international trading system. That commitment has never been stronger. From our work here at home seeking a strong and pro-growth outcome to North American trade negotiations to our work across the globe, the NAM is at the frontlines on the core international issues that are critical to support a strong, growing and competitive manufacturing sector in the United States.

Timmons: Scott Garrett at the Ex-Im Bank Is a Bad Deal for America’s Manufacturers

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The U.S. Export-Import (Ex-Im) Bank has operated for decades with a mission to support U.S. jobs through exports. Back in April, President Donald Trump confirmed his support for the export credit agency. In 2015, a bipartisan supermajority in Congress voted to reauthorize the agency through 2019. Who would want to stand in opposition to this small federal agency with an outsized, tangible benefit for the U.S. economy? Unfortunately, a former congressman who has been nominated to lead the agency is just that person. Former Rep. Scott Garrett (R-NJ), the nominee to lead the Ex-Im Bank, has been a vocal and dogged opponent of the Ex-Im Bank.

National Association of Manufacturers President and CEO Jay Timmons, in an op-ed published today in The Wall Street Journal, outlined the negative impact for manufacturers if the Senate moves to confirm Garrett as the leader of the Ex-Im Bank.

As a congressman, Garrett built a record of votes and statements that sought to dismantle the Ex-Im Bank. He voted to close the agency at every opportunity and voted against a reauthorization bill in October 2015 that passed the House with overwhelming bipartisan support. Before the vote, he took to the House floor to mischaracterize the agency as a “fund for corporate welfare” and urge his colleagues to “keep the Export-Import Bank out of business.”

When he voted against the agency’s reauthorization again later in 2015, he issued a statement explaining that he opposed the bill because it would “resurrect the most shameless example of crony capitalism Washington has ever concocted—the Export-Import Bank.” Prior to the 2015 reauthorization, Garrett voted against the Ex-Im Bank reauthorization in 2012 that was strongly approved by both the House and Senate. Garrett’s opposition to the Ex-Im Bank has been consistent, vocal and aimed at undermining the agency’s credibility.


Ex-Im Bank Benefits U.S. Manufacturers, Workers and Taxpayers

  • American Workers and Their Families Benefit from the Ex-Im Bank: U.S. export sales supported by the Ex-Im Bank have directly supported 1.4 million jobs over the past seven years.
  • Small Businesses: In fiscal 2016, about 90 percent of Ex-Im’s transactions—more than 2,600 deals—directly supported small businesses. Tens of thousands of small business suppliers benefit from partnerships with large exporters that also utilize the Ex-Im Bank.
  • Taxpayers: The Ex-Im Bank has generated $7 billion for taxpayers in the past 20 years, mostly through fees collected from foreign customers. The agency is self-sustaining and covers its own operating costs. Eliminating the Ex-Im Bank would actually increase the U.S. deficit. The agency transferred $284 million in deficit-reducing receipts to the U.S. Treasury for fiscal 2016.

 

Garrett’s past statements are evidence of a fundamental misunderstanding of the Ex-Im Bank’s ability to level the playing field globally. In a competitive global landscape, the Ex-Im Bank is a much-needed counterweight to substantial foreign export financing. The agency recently reported that China continues to be the world’s largest provider of official export credit, providing more trade-related investment support than the rest of the world combined. Together, the BRICS countries (Brazil, Russia, India, China and South Africa) provided a combined total of more than $51 billion in medium- and long-term export credit in 2016—nearly half of the total official export credit provided worldwide. Last year, without a quorum for its board of directors, the Ex-Im Bank was able to authorize just $5 billion. While the agency’s board of directors has lacked the necessary quorum to approve certain deals, an estimated 40 deals worth more than $30 billion are stuck in the pipeline.

The Ex-Im Bank plays a targeted and critical role in securing and creating more American jobs. That is why the Ex-Im Bank needs a leader who will ensure the agency is able to function at its full potential and promote U.S. exports in the face of substantial competition from manufacturers overseas supported by very active export credit agencies. Manufacturers are losing out on opportunities every day that the vacancies on the Ex-Im Bank board of directors are left unfilled, but Garrett, who said “Congress should put the Export-Import Bank out of business” just two years ago, is simply not a credible leader for this agency.

Manufacturers Cheer Decision of Canada’s Highest Court to Fell Invalid Patent Criteria Harming Innovation

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Innovative manufacturers in the United States welcomed positive news out of Canada on the eve of national holidays in both countries: the Supreme Court of Canada struck down an intellectual property approach that had stymied innovation and investment. Such inventiveness, secured by intellectual property, remains fundamental to the competitiveness of modern manufacturing in the United States and the millions of American jobs it supports.

Canada’s troubling “promise doctrine” originated from the fallacy that patents that do not fulfill their “promise”—as arbitrarily construed by the courts, often years after the patent was filed—are invalid, even if they meet internationally accepted criteria for patentability. Canadian courts began freely applying the rule in 2005 and have since revoked 26 patents, intended to help millions suffering from cancer, osteoporosis, diabetic nerve pain and other serious conditions.

In a unanimous decision, Canada’s highest court concluded that the “application of the promise doctrine” fails to determine the utility of patents and is “incongruent” with both the words and the approach of Canada’s Patent Act. This decision affirms the need for Canada and other countries to align their intellectual property policies and practices with global norms.

At a time when Canada and the United States are preparing for modernizing negotiations within the North American Free Trade Agreement, developments like this resolve remaining barriers that encumber North American manufacturers.  The Supreme Court of Canada’s decision supports stronger bilateral ties, investment and innovation in Canada and good, high-paying jobs for innovative American manufacturers.

New State Department “Investment Climate Statements” Serve as Important Resource for Businesses and Roadmap for Governments to Grow

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The U.S. State Department just released its annual “investment climate statements” that examine trade, investment, rule of law and related issues for more than 170 foreign markets. As I explained at an event organized by the Center for Strategic & International Studies (CSIS), these statements provide invaluable information for U.S. manufacturers and other businesses that seek access to foreign markets through exports, investments and other partnerships.

International commerce and investment are critical to manufacturers in the United States. Exports support the jobs of more than half of America’s 12 million manufacturing workers, and foreign investment by U.S. companies spurs those exports.

Foreign investment and U.S. exports work hand-in-hand to benefit U.S. companies, consumers and workers. Indeed, U.S. companies that invest overseas are outsized participants in the U.S. economy and are stronger because of their access to foreign markets. In fact, the primary reason that companies invest abroad is to sell to foreign consumers and bolster their U.S. operations.

Based on the most recent data available from the U.S. Bureau of Economic Analysis, consider that U.S. companies that invest overseas are some of America’s:

  • Largest exporters, exporting 47 percent of all U.S.-manufactured goods sold overseas ($660 billion in 2014). More than 40 percent ($269 billion) of those manufactured exports go to the overseas operations of American companies to help promote U.S. products in foreign markets.
  • Biggest producers, accounting for nearly $1.4 trillion, or almost 65 percent, of all U.S. private-sector value-added manufacturing output in 2014.
  • Most important innovators, expending nearly $269 billion on research and development in the United States in 2014. Of that, 68 percent (or $183 billion) was spent by manufacturers.
  • Largest investors in capital expansion, investing $713.5 billion, or 24 percent, of all spending on new property, plants and capital equipment in the United States in 2014.
  • Most generous employers, paying U.S. manufacturing workers on average $96,030, or about 18 percent more than average U.S. manufacturing wages in 2014.

For manufacturers and other businesses seeking foreign customers, identifying the most promising foreign markets is a difficult, time-consuming process that requires extensive knowledge. The State Department “investment climate statements” provide a valuable resource to businesses, offering detailed information on many of the critical factors they need to understand, including:

  • Openness to trade and investment, market barriers and business requirements;
  • Rule of law, including transparency, impartial rulemaking, corruption and the legal system;
  • The protection of private property (foreign and domestic), including innovation and intellectual property, the sanctity of contracts and land rights;
  • Competition policy, including with respect to state-owned enterprises,
  • Political risk; and
  • Digital policy trends.

Manufacturers welcome this year’s analysis of digital issues, including regulations on cross border data flows and the localization of information and communications technology infrastructure. As manufacturers implement technology and data in overseas sales, production and product usage, these issues have become increasingly important.

These investment climate statements also aid foreign countries looking to bolster their commercial climate. Many of manufacturers’ strong concerns with barriers, distortions and weak standards that are limiting U.S. growth appear in these statements.

Given the significance of international commercial engagement to the U.S. economy, manufacturing sector and workforce, the National Association of Manufacturers advocates open markets overseas, robust standards of governance and the protection of property. This includes investment and intellectual property as well as strong enforcement mechanisms like neutral investment dispute settlement mechanisms to prevent foreign country mistreatment or theft of U.S. property.

To learn more, read about or listen to the discussion at the launch of these statements at the CSIS event.

Manufacturing, Trade Deficits and Opportunities for Growth

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As part of President Donald Trump’s March 31 executive order on trade, the Commerce Department and Office of the U.S. Trade Representative are examining the role trade deficits play in key trading relationships. The National Association of Manufacturers (NAM) provided this detailed submission last week, and I am testifying today about opportunities and challenges that trade presents for manufacturing in the United States.

For those seeking the Readers Digest version, consider the top four takeaways.

    1. Exports are critical to today’s manufacturing success. Indeed, U.S.-manufactured goods exports now represent more than half of U.S.-manufactured output, supporting more than 6 million manufacturing job across the countryjobs that pay substantially more than non-export-related jobs. The U.S. manufacturing sector must have opportunities to expand salesat home and abroadto continue to add jobs.
    2. Manufacturing is growing around the world, creating new middle-class consumers and new partners, but also new competitors. More than $11 trillion in manufactured goods are traded annually as markets have been opened and trading costs reduced. In some cases, imports compete directly with manufacturers in the United States, just as U.S. exports compete with manufacturing overseas and many manufacturers require inputs not domestically available. Unfortunately, however, some import competition is fueled by foreign market-distorting and discriminatory trade practices that create unfair advantages for foreign manufacturing production at the expense of manufacturers, workers and communities in the United States. Under these circumstances, the NAM has long supported robust U.S. government action to address the underlying causes of the distortions and full enforcement of trade agreements and trade rules.
    3. The trade deficit arises as a result of several factors. Overall domestic economic conditions and standards of living, domestic consumption and purchasing compared with savings rates, the price of goods in the market, exchange rates, domestic structural issues (e.g., taxation, regulation) and openness to international trade all impact the trade deficit. In the United States, trade deficits expand as the U.S. economy grows and fall during periods of economic weakness. At the same time, however, when the U.S. economy expands, more workers are employed and unemployment falls, we see that the trade deficit actually increases.
    4. As manufacturers see it, many indicators are relevant in assessing the strength and weaknesses of U.S. trading relationships with particular markets. These factors include the existence and implementation of trade agreements, the size of the trading relationship compared to the size of the foreign economy, the growth of exports over time, the U.S. share of the country’s worldwide imports, foreign direct investment, U.S. content in imports into the United States and overall tariff rates. The chart below shows that Canada and Mexico are outsized purchasers of U.S.-manufactured goods compared to other sources of imports and given the size of the countries’ economies.

 

 

Conclusion:

As the administration considers next steps, the NAM urges that it prioritize work to address existing distortions and barriers to improve U.S. competitiveness globally through (1) the negotiation of advanced trade agreements that open markets and set strong rules; (2) the modernization of U.S. trade tools to boost U.S. global competitiveness, from improving export financing options to eliminating self-inflicted barriers that impede U.S. manufacturing; and (3) the implementation of more robust trade enforcement consistent with the international rules system to ensure that trade agreement commitments are honored, our innovative technologies are not stolen and U.S. trade rules are effectively enforced. Where trade agreement rules are not keeping up with new challenges and distortions, manufacturers urge U.S. leadership and efforts to develop new internationally agreed-upon rules and frameworks to raise standards and promote a more open and competitive market-driven global economy.

Learn more about manufacturers’ priorities for trade policy here.