we are pursuing new cutting-edge trade deals that raise the standards for fair competition even as they open new markets. For instance, the Korea-US Free Trade Agreement, or KORUS, will eliminate tariffs on 95 percent of U.S. consumer and industrial exports within five years. Its tariff reductions alone could increase exports of American goods by more than $10 billion and help South Korea’s economy grow by 6 percent. So, whether you are an American manufacturer of machinery or a Korean chemicals exporter, this deal lowers the barriers to reaching new customers.
But this trade deal isn’t simply about who pays what tariff at our borders. It is a deeper commitment to creating conditions that let both our nations prosper as our companies compete fairly. KORUS includes significant improvements on intellectual property, fair labor practices, environmental protection and regulatory due process.
And let me add that the benefits of KORUS extend beyond the economic bottom line. Because this agreement represents a powerful strategic bet. It signals that America and South Korea are partners for the long term—economically, diplomatically, people to people. So, for all these reasons, President Obama is pursuing congressional approval of KORUS, together with necessary Trade Adjustment Assistance, as soon as possible. He is also pursuing passage of the Colombia and Panamanian Free Trade Agreements as well.
Now, we have learned that, in our system, getting trade deals right is challenging, painstaking work. But it's essential. We consider KORUS a model agreement. Asian nations have signed over 100 bilateral trade deals in less than a decade, but many of those agreements fall short on key protections for businesses, workers, and consumers. There are a lot of bells and whistles, but many of the hard questions are glossed over or avoided.
Beyond that, there is now a danger of creating a hodgepodge of inconsistent and partial bilateral agreements which may lower tariffs, but which also create new inefficiencies and dizzying complexities. A small electronics shop, for example, in the Philippines might import alarm clocks from China under one free trade agreement, calculators from Malaysia under another, and so on—each with its own obscure rules and mountains of paperwork—until it no longer even makes sense to take advantage of the trade agreements at all. Instead, we should aim for true regional integration.
That is the spirit behind the Trans-Pacific Partnership, the so-called TPP, which we hope to outline by the time of APEC in November, because this agreement will bring together economies from across the Pacific—developed and developing alike—into a single trading community.
Our goal for TPP is to create not just more growth, but better growth. We believe the TPP needs to include strong protections for workers, the environment, intellectual property, and innovation. It should also promote the free flow of information technology and the spread of green technology, as well as the coherence of our regulatory system and the efficiency of supply chains.
We are working to ensure that the TPP is the first trade pact designed specifically to reduce barriers for small and medium-sized enterprises. After all, these are the companies that create most of the world’s jobs, but they often face significant challenges to engaging in international trade. So, the TPP aims to ensure fair competition, including competitive neutrality among the state-owned and private enterprises.
The idea is to create a new high standard for multilateral free trade, and to use the promise of access to new markets to encourage nations to raise their standards and join. We are taking concrete steps to promote regional integration and put ourselves on a path over time to bring about a genuine Free Trade Area of the Asia-Pacific.
There's a NY Times article about the speech here.
The italicized part deals with the relative virtues of bilateral vs. multilateral FTAs. Here's Larry's comment on that: "Mrs. Clinton is so far into the pot calling the kettle black territory that she could star as Mrs. Potts in a remake of Beauty and the Beast."
I suppose one way to look at the view put forward by Secretary Clinton is the following. In the recent past, we (the U.S.) pushed hard for many bilateral FTAs. We are trying to finish up that process now, and then we will turn to a more multilateral approach, in the form of the TPP. We think others in Asia should join us in this new approach.
Another view, of course, is that the TPP is only marginally better than bilateral FTAs in this regard, and that the better solution would be to focus on the WTO, where we could deal with issues such as subsidies and anti-dumping that can't be addressed effectively on a regional or bilateral basis. It could also be pointed out, as Larry does, that the U.S. pushed long and hard for bilateral FTAs.
In addition to the bilateral vs. multilateral issue, there's the point about what should be in trade agreements. Secretary Clinton says: "KORUS includes significant improvements on intellectual property, fair labor practices, environmental protection and regulatory due process"; "Asian nations have signed over 100 bilateral trade deals in less than a decade, but many of those agreements fall short on key protections for businesses, workers, and consumers"; "We believe the TPP needs to include strong protections for workers, the environment, intellectual property, and innovation. It should also promote the free flow of information technology and the spread of green technology, as well as the coherence of our regulatory system and the efficiency of supply chains." Given these statements, I think it's appropriate that the title of the TPP does not use the word "trade," but rather is called a "partnership." The extension of tariff/trade agreements beyond trade has reached the point that such agreements are as much "global governance" agreements as they are "trade agreements." The current U.S. view on this is clear, but I wish I had a better sense of other countries' views on what should be in these kinds of agreements.