Reforming trade

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I want everyone … to know that the United States is one of the most open economies in the world, and that’s not going to change. Our borders will remain open for the world’s products. But that commitment will be met by a renewed focus on doing more to ensure the competitiveness of U.S. companies in foreign markets.” –Gary Locke, U.S. Commerce Secretary

Trade is a sore spot for many in this country, and for some very good reasons – especially in terms of the U.S.’s ongoing trade deficit, which creates all kinds of fiscal havoc within our economy.

Yet trade is also vitally important to our economic health, for without foreign markets, our manufacturers would have only a very limited market for their goods – and that would, in turn, limit demand for freight services, thus walloping trucking right between the eyes.

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That’s why reforming U.S. trading practices is something much on the mind of U.S. Commerce Secretary Gary Locke of late. Whether you agree with his view of things or not, Locke is the man in charge of executing the trading policies devised by the Obama administration, so it’s well worth paying attention to what he says on the subject.

And though we’ve witnessed a bump in exports of late, the U.S. still suffers from a pretty significant trade imbalance. In September – the latest month for which statistics are available – the Commerce Department’s U.S. Bureau of Economic Analysis found that U.S. exports increased by 2.9% to $132.0 billion since August 2009, while imports increased 5.8% to $168.4 billion – a $36.5 billion trade imbalance that obviously hurts our nation’s bottom line

Yet Locke is a firm believer that we cannot abandon international trade because of this imbalance. Rather, he thinks what we need to do is make reforms on our side of the ledger to correct this imbalance back to the U.S.’s favor.

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“Our nation has tremendous potential to create and sell more products and services to foreign markets, [but] this is not as easy as it sounds,” he said in a speech before the National District Export Council Conference earlier this month. “In these difficult economic times, there are voices here at home and abroad joining the chorus of protectionism. History has already rendered its verdict on the utility of turning inward and closing off markets; these measures do not work and they reduce living standards for us all.”

Locke noted that exports are already a growing and substantial part of the U.S. economy, accounting for almost 13% of our nation’s gross domestic product [GDP] – almost three times as high as it was in the 1950s, with exports also accounting for over six million manufacturing jobs alone.

With that in mind, the Obama administration is planning to pursue what it calls “five key strategies” in the months and years ahead to help reform trading efforts here in the U.S. – resulting, hopefully in more business abroad for U.S. companies and, by extension, more freight to be hauled from U.S. factories to U.S. ports for shipment overseas. These five strategies are:

• Ramping up the Department of Commerce’s trade promotion activities across the globe;

• Reforming the business visa process in the U.S., so foreign buyers can visit the U.S. more easily to examine our wares;

• Reforming the U.S.’s export control system, which governs trade in defense and military items, as well as the dual-use products that are designed for civilian purposes but often have military applications;

• Ensuring U.S. companies receive the same rigorous intellectual property protections overseas that they would at home;

• The formation of the Trade Promotion Coordinating Committee (TPCC), which brings together 20 federal agencies and departments to develop a government-wide strategy for expanding trade and promoting American exports.

These are some pretty big and complex tasks for all sorts of government bureaucracies not known for their ability to eliminate red tape or be particularly nimble, yet it is the game plan Locke said he’s going to try and follow during his tenure as Commerce Secretary.

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“Right now, U.S. companies aren’t anywhere near maximizing their export potential; today, less than 1% of America’s 30 million companies export – a percentage that is significantly lower than all other developed countries. And of U.S. companies that do export, 58% export to only one country,” he explained in his speech.

“With our increasingly interconnected world—where 95% of consumers reside outside our borders—global markets can help revive the fortunes of U.S. companies and spur future economic growth. We can do a lot better,” he said.

But as the Commerce Department seeks to open up markets for American companies abroad, Locke said the U.S. must also acknowledge it has room to improve when it comes to increasing the secure flow of goods, services and people across our own borders. “That's why business visa reform is my second trade priority,” he stated. “The U.S. often makes it too difficult for foreign company executives to enter here to do business—a shortcoming that has had a tangible cost for American businesses by shutting out some of their best customers.”

For example, Locke noted that Boeing recently had to delay the delivery of a $250 million freighter because an inspector from the Chinese aviation authority didn't receive his visa on time. “Historically, processing for these types of visas could be done in a matter of weeks but recently the time has stretched to as much as four months in some cases,” he said. “I have also created a departmental task force that will keep national security paramount while working to further improve the business visa process.”

Yet another area where red tape is challenging American businesses – and American security – is the nation’s export control system, governing trade in defense and military items, as well as the dual-use products that are designed for civilian purposes but often have military applications.

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“Our current export control system was designed in the 1950s to prevent sensitive technologies from falling into the hands of adversarial nations that were relatively easy to identify,” Locke explained. “Today, our global economy is far larger and more integrated, and nations’ economic and security interests are more nuanced. But our export control system has not kept up. As a result, we now face a situation where U.S. companies are being shut out of promising markets and promising partnerships with foreign companies, even when they are close allies.”

He noted it’s reached a point where the undeniable appeal of U.S. technology is often outweighed by the time and effort foreign companies must endure to obtain it. “This is a serious problem that compromises U.S. security and damages our economic competitiveness,” Locke stressed – and it’s why the Obama administration began in August an attempt at a broad-based interagency review of the U.S. export controls system.

Locke said the Commerce Department's Bureau of Industry and Security—which has jurisdiction over dual use export controls—is immediately exploring two reforms: Eliminating dual-use export license requirements for allies and partner nations and implementing a fast-track procedure for the review of dual-use export licenses for other countries that do not pose a significant “military proliferation” concern.

“These two reforms could affect more than half of the 20,000 licenses Commerce issues each year,” he said. “But … we need to reallocate resources to focus more targeted controls on highly sensitive item—and to reduce controls elsewhere where they serve no useful security purpose and make no sense.”

Then there’s the intellectual property protection issue. “Despite America's remarkable dependence on innovation for future growth, the current system for protecting U.S. intellectual property (IP)—both domestically and internationally—is fraying at the seams,” Locke noted. “Every year, American companies in fields as diverse as energy, technology, entertainment and pharmaceuticals lose between $200-$250 billion to counterfeiting and piracy. That is simply unacceptable.”

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He believes there are a series of steps the Commerce Department can take to improve America’s IP regime, from reforming the U.S. patent office to helping shape upcoming congressional intellectual property legislation. “But, fundamentally, our efforts need to begin with better enforcement,” Locke stressed. “Enforcement of trade agreements is a key element in the plan to rebuild support for trade. We must ensure that U.S. stakeholders reap the full benefits of these agreements, and that our exporters know that we will protect their interests.”

Finally, he added that there is one final step that must be taken in order to increase the amount of goods and services that America sends to foreign markets: using every lever of the U.S. government to promote exports.

“Whether that involves our State Department writing a letter on behalf of an American company that wants to do business in Russia, or our Department of Energy helping to facilitate renewable energy partnerships between U.S. companies and the Chinese government, every federal department has a role to play in promoting American business,” he explained.

The new Trade Promotion Coordinating Committee (TPCC), which will coordinate the efforts of 20 federal agencies and departments to develop a government-wide strategy for expanding trade and promoting American exports, is seen as a critical part of the government effort to bolster trade abroad, said Locke.

“It will address issues such as: increasing exports for small and medium-size businesses; expanding access to emerging markets; capitalizing on promising new industries like clean energy; and improving our advocacy abroad to make sure our companies aren't subjected to unfair competitive practices,” he said.

Now, will any of these strategies work? That remains to be seen. But one thing is for sure – as trade goes, so goes freight. And it would surely be a better boon to truckers – and the nation’s economy – if more of the freight they carried were headed to ocean ports for export, rather than imports from ocean ports for U.S. distribution.

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