Douglas B. Baker

5th Annual Gulf Coast States World Trade Conference
(program information)

Address by the keynote luncheon speaker

Douglas B. Baker
Deputy Assistant Secretary for Services,
Tourism and Finance
U.S. Department of Commerce

May 26, 2005
World Trade Center of New Orleans

Introduction

Thank you for the invitation to join you today. I am pleased to be in New Orleans during World Trade Month.

We used to showcase trade for a week in May; we now dedicate a month to getting the word out about the importance of international trade. This is time well spent.

While the evidence is compelling, we need to be reminded how trade expands our economy, supports millions of good jobs, and benefits American families and consumers.

It was recently said that promoting free trade is a little like exercise: it's not always easy to do, but it's when you stop doing it that you pay the biggest price. If we don't remain vigilant the naysayers may gain the upper hand.

In pursuing free trade, we make advances and face setbacks, but sitting out is not an option.

As citizens of Gulf States, you know very well that our national destiny is bound to free trade. New Orleans, and our gulf states, are an important gateway to the rest of the world.

Your economies are inescapably tied to markets around the world. You prosper when Americans can buy the best things that are made around the world and our trading partners can buy America's best.

The Dominican Republic and Central American Free Trade Agreement builds upon that very principle.

CAFTA

Last year, 212 thousand tons of imports from the CAFTA countries entered the United States through the port of New Orleans. We sent the CAFTA countries even more: Exports to the CAFTA countries passing through New Orleans added up to 238 thousand tons. Exports from these five Gulf States to the CAFTA countries last year exceeded 5.2 billion dollars.

Bear in mind that every ton of that cargo sends economic ripples out across the Gulf States. Impact studies tie 1,800 direct jobs to every thousand tons of cargo currently traded with the CAFTA region.

Just imagine how busy your ports can become as your economy grows in tandem with economic growth from the CAFTA countries after the agreement is passed.

Trade opens the door to prosperity for emerging economies. The higher living standards and expanding prosperity CAFTA will foster, will translate into greater opportunities for the people in Central America and in the Gulf States.

Preserving opportunity for American small business owners and entrepreneurs requires open markets for U.S. goods and services. CAFTA is a critical step forward. We can build a stronger, and more secure, and more integrated hemisphere by embracing CAFTA.

CAFTA can transform our region. It's important for economic reasons, strategic reasons, and it will help to promote and sustain democracy within the region.

We already have free trade with Central America. But it's one-way free trade. Eighty percent of the imports from Central America already come into the U.S. duty free.

CAFTA levels the relationship, giving American companies broader access to this valuable market. It would create the second-largest U.S. export market in Latin America.

The CAFTA market is already a larger export market than India, Russia, and Indonesia combined. We already trade more with Central America and the Dominican Republic than we do with Australia ... and more than we trade with Brazil.

Trade's Role in a Rapidly Changing World

The world has changed dramatically since the WTO Uruguay Round trade talks went into effect in 1995. The number of people participating in the global marketplace has ballooned from one billion to over six billion, as highlighted by the emergence of China and India.

Technological change has wired the world and made us more interdependent, reducing barriers to the mobility of capital, production, information and ideas.

Commerce itself has changed, with global purchasing and supply chain management transforming the marketplace.

We also face new security threats in a post-9/11 world that complicate the movement of people, goods and services.

These forces of change have caused dislocations, job losses, and stiff competition.

Countries such as India, China, Russia, and Malaysia are our new competitors in a world where intellectual capital, the Internet, and a 24/7 business world are the norm. Thomas Friedman's new book, "The World is Flat" discusses these fundamental changes.

Many instinctively blame trade for the pain caused by these changes. Trade and openness create change, and change causes anxiety.

However, much of the job losses result from technology advances, productivity improvements, and the business cycle. But it's easier to point to foreign competition - the "made in China" label on your shirt or appliance as the culprit.

In light of the fundamental changes brought on by globalization, we need to talk about trade in new ways. While the benefits of trade are huge, they are widely distributed over our large economy (GDP is $11.7 trillion) and may often times be overlooked.

We must remember that free trade brings good things to everyday life: from buying fresh vegetables at Safeway twelve months a year, to low prices found everyday at Wal-Mart.

Free trade cuts the hidden taxes on imports that cost working families in America as much as $2,000 a year, hitting poor families the hardest.

The Contribution of Trade to Economic Growth

Trade plays a positive role in the U.S. and global economy. Trade creates better jobs and economic growth here at home.

Trade lowers prices for consumers, results in higher employment and wage levels, greater competition, rising productivity, and rising living standards for developed and developing countries.

Today, America has only five percent of the world's population. That means 95 percent of our potential customers are in other countries. We must remain engaged.

When we open markets, our businesses become more competitive. Free, fair and open trade ensures our businesses are competitive in international markets that are essential to future growth.

For example:

Since 1960, global output has more than quadrupled. Global trade has increased 9-fold. Experience shows that to increase production and incomes, we must increase trade.
In the U.S. between 1971 and 2001, trade and returns on international investment have risen from 13 percent of the value of the U.S. economy to nearly 30 percent.
In 2004, U.S. goods and services exports grew by $110 billion to a record total of $1.15 trillion. Over the last 20 years, trade has grown to account for one-quarter of the U.S. economy.
Trade supports millions of jobs in every state. More than 12 million jobs are supported by exports - 3 million more jobs that were supported by trade in 1990. Jobs linked to exports pay 10-15% higher than the average wage.
Trade is especially important for the 25 million-plus small companies that are the backbone of the U.S. economy. Small businesses create three of every four new jobs and generate more than half the nation's gross domestic product.
Free trade helps small business achieve greater access to international markets. While small-medium-enterprises (SMEs) represent 97% of all U.S. exporters, they represent only 30% of U.S. export sales.
Two-thirds of all SME exporters posted sales to only one foreign market in 1998. New free trade agreements will facilitate exporting, enabling America's small business to take full advantage of new market opportunities.

Port Security

Let me now turn to talk about port security -- trade and port security run hand-in-hand.

Approximately 95% of overseas trade enters the United States through its seaports, accounting for two billion tons and almost $800 billion of domestic and international freight each year.
Our coastal waterways support approximately 110,000 commercial fishing vessels contributing $110 billion to state economies each year, while U.S. coastlines host some 181 million tourists each year and support over 28 million jobs.

Underscoring the priority that must be placed on securing the maritime domain, in December 2004 President Bush signed a maritime security policy directive outlining his vision for a fully coordinated U.S. Government effort to protect U.S. interests in the maritime domain.

This document, the Maritime Security Policy Presidential Directive, reiterates the President's commitment to maritime security and aims to integrate and align all U.S. Government maritime security programs and initiatives into a comprehensive and cohesive national effort.

The Presidential Directive led to the development and creation of a National Strategy for Maritime Security along with eight supporting plans, each of which deals with a different aspect of the Strategy.

The Department of Commerce is actively involved in this process. I represent the Department at the Maritime Security Policy Coordinating Committee, and members of my staff participate in other working groups that are developing the plans supporting the National Strategy.

Our efforts have been focused on ensuring that industry's perspectives were included in the planning process for the Strategy and each of the implementing plans. Several outreach sessions were conducted with industry representatives in order to solicit feedback and hear first-hand their thoughts on the draft Strategy and plans.

We have repeatedly sought to include outreach to industry as a priority in each of the appropriate plans and to keep the implementation costs of the proposed security measures, as well as their economic and commercial impacts, in mind when drafting the plans.

The Strategy will be submitted for Presidential signature later this year.

Conclusion

America is the world's most dynamic economy largely because we are the country most deeply committed to the principles of free and fair trade.

We have never accepted limits on our commerce.

Free-market forces govern our economy. No country is more open. No country stands to gain more from a global trading system that drops barriers to competition. In a fair contest, America will always come out on top.

Trade helps grow our economy, supports high-paying jobs, and lowers prices for consumers and working families. For over 50 years, Republican and Democratic Administrations alike have sought to level the playing field by opening markets to trade.

At its core, trade is about openness and free choice. Trade encourages security and builds prosperity. Societies that freely trade have higher income levels and increased opportunity, which in turn create hope in the future.

Trade is also a moral imperative. When we trade, we meet new people, spreading our ideas and our ideals. Knowledge is power and by communicating we share knowledge, promote democracy and free thinking, and break down walls that divide.

This country has been through a lot over the last four years and we're poised to do amazing things in the years ahead thanks to people like you.

Trade is vitally important to our future economic strength. Likewise, CAFTA is important to our trade agenda.

Trade, and specifically, CAFTA is good for our gulf states. It will be good for Central America. And it will be great news for American workers in the 21st Century economy.

Thank you.

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