US trade adviser points to benefits of foreign trade →
Topics of African development and United States foreign trade took center stage yesterday during U.S. Trade Representative Ron Kirk’s visit to the University.
President Barack Obama’s chief trade adviser and negotiator pointed to last week’s passage of bilateral trade agreements between the United States and South Korea, Colombia and Panama as opportunities for job creation and faster economic recovery.
“It’s a reality now that 95 percent of consumers live outside of the United States,” Kirk said. “We’ve got to go compete for all of these new customers whether they are in China, India, Asia or Africa.”
“Africa is growing, Africa is transforming as a continent and has huge challenges but again, has every bit as much potential”
Congress passed the three free trade agreements Wednesday, countering a highly protectionist attitude taken by the government since 2007. Kirk said the agreements mostly leveled the playing field as the United States had lower tariffs for imports compared to Panama, Colombia and Korea.
“They will create jobs, because agreements with Korea, Colombia and Panama, [independent] economists tell us, could [add] up to $12 billion to our GDP and create almost 70,000 jobs,” he said.
The United States has supported developing economies around the world and has rebuilt others by giving them relatively low tariffs, Kirk said. “Most of what we are doing is bringing their tariffs down.”
The ambassador said these tariffs on American goods — ranging from 16 percent to 100 percent — previously made it difficult for both small and large businesses to export because of low competition in the recipient countries, where local businesses had the upper hand.
“Most of what comes into the U.S. from Colombia and Panama comes in duty-free,” he said. “Ninety percent for Colombia and 98 percent for Panama.”
The U.S. International Trade Commission, which analyzed the negotiations in 2007, stated the impact on the growth of the American economy would be minimal because of the small market for American goods in the three countries in question.
The commission also reported the agreements would benefit mostly American farmers because of a demand for beef, dairy and pork, according to a New York Times article.
If predictions are correct, and farmers lose $5 billion of subsidies as part of the slashing of $1.2 trillion from future budgets, these agreements could restore some of farmers’ profits.
It is a common assumption among economists that free-trade agreements benefit both sides as markets favor more sales and lower tariffs — sometimes zero — but there is also the fear of unprotected businesses losing out to foreign competition.
“Anytime you decide you’re going to have a competition, there’s going to be winners and losers,” he said in regard to Korea. “The numbers that we give you, we believe … are conservative.”
He said it would be foolish to say no one is going to lose their job because of trade, and that is why the federal government has been funding a retraining program for foreign trade-displaced workers.
Kirk also discussed investment and foreign relations with sub-Saharan African states and the difficulties as well as opportunities involved.
He said the United States has begun moving away from a paternal relationship with the African continent, where only aid was distributed and trade only benefited one side.
“My job is to be as dispassionate as possible,” he said. “Africa is growing, Africa is transforming as a continent and has huge challenges but again, has every bit as much potential in terms of income growth [and] consumer growth.”
He spoke of the needs of businesses when going abroad — mainly the existence of concrete laws protecting business practices, as many African states lack them.
Another difficulty is the basic lack of infrastructure — roads, transport, etc.— which hinder business opportunities in some countries, he said.
“Once you invest capital, it’s a huge decision,” Kirk said. “You want to know that it is not going to be put in risk because of government corruption.”
He said Africa has been on a path of fostering this safety, and a necessary step is foreign investment. The United States will benefit from new markets, and African states benefit from innovation and development.
He said the United States has been working on moving the continent from an agrarian-based economical structure to a more developed world economic model. For example, a recent U.S.-Rwanda bilateral agreement could become a model for other African states in an attempt to diversify exports and open their trade borders.
Kirk mentioned Mauritius, Ghana and the East Africa states as the next targets for economic development.
Following his travels to Spain and other trade partners of the United States, Kirk said he was humbled at the presence of multilingual students.
"Go enroll in a language class," he said to the audience which was mostly made up of Rutgers Business School students and foreign-relations experts.
Alicia Quirolo, a Rutgers Business School first-year student, said the United States seemed to be phasing out domestic manufacturing due to a tendency of going abroad for cheaper production costs.
“My question is, why would you go globally if everyone is complaining that we aren’t creating enough jobs?” she said.