Statement by United States Ambassador Michael Punke
Deputy U.S. Trade Representative and U.S. Permanent Representative to the World Trade Organization
December 20, 2012
Mr. Chairman, Ambassadors, and distinguished representatives,
We would like to start by expressing our deep appreciation for the high level of engagement that we have seen in this trade policy review. We very much appreciate the thoughtful comments provided by the Chair, discussant and Members at Tuesday’s meeting. It would be impossible today to respond to each and every point that was raised but I can assure you that we were listening very attentively and have taken careful note of everything that was said.
You have already seen our responses to all of the written questions that were received by the two week deadline as well as responses to some of the questions that were received after that. Today we are circulating further responses to questions received after the deadline and we will respond to the rest as soon as possible. As of this morning, the total number of written questions we received stands at 1,599.
In the remainder of our comments today we would like to pick up on a number of key themes and issues that have been raised.
To begin with, at the broadest level, we appreciate the wide recognition of the openness of the U.S. economy to trade and investment. While we acknowledge specific concerns, it is important to place these concerns in their broader context. In a similar vein, we would like to extend our thanks to Michael Stone, our discussant, for his kind recognition of the leadership role that we have been playing in the fight against protectionism. The United States is committed to continuing this fight, as the alternative would be a self-defeating spiral of actions that would damage our shared efforts at economic recovery and growth.
We would also like to express our appreciation for the kind words from many Members about our work on Aid for Trade and trade related capacity building. This will continue to be a high priority for the United States.
Promoting the Multilateral Trading System
A number of Members have commented on the importance of the United States remaining committed to the multilateral trading system. Let there be no doubt. The United States played a leading role in creating this system as well as building upon it and sustaining it. While the system is far from perfect, we remain fully committed to supporting it and making it even better.
We were struck by a few comments suggesting that the United States has increased its emphasis on bilateral, regional, and plurilateral negotiations at the expense of multilateral efforts. The facts don’t support this concern. We have always taken a very pragmatic approach to trade liberalization, pursuing it with willing partners at the multilateral, plurilateral and bilateral levels. If the level of activity at the multilateral level has fallen off, it is not for lack of interest on our part but rather, as our Ministers recognized at MC8, that Doha is at an impasse. Yet despite the fact that we, as a group, are still grappling with the issues at the core of the impasse, the United States has been at the leading edge of every effort to make progress. Our contribution has been not just in the form of showing up at meetings, but in helping to shape the creative thought that will be necessary to make real progress. This has involved not just pressing issues of particular interest to us but also listening and engaging in good faith on issues of interest to others. We have also been playing a leadership role in reinvigorating the regular work of the WTO standing bodies which is critical to the well-being of the trading system.
We believe that Bali will be an important milestone and that we collectively need to use it to show that the WTO is still an organization that can deliver results through negotiation. However, we do not view the prospect of some success at Bali as the end of the road for the issues that brought us together at Doha. Rather, we see it as an essential means of creating the confidence that is needed to tackle the harder issues.
The interests that led us to play a leadership role in launching the DDA remain and are as strong as ever. We continue to be fully committed to opening markets and addressing distortions to trade in agriculture, industrial products and services, as well as updating the WTO rule book. For those of you who have expressed interest in addressing concerns about U.S. measures in the agriculture area, peak tariffs in general or other matters covered by the Doha agenda, let’s join together in figuring out how to put Doha back on track. However, I will not hide from you our frustration with those who seem to think the only thing they need to do to advance Doha is to string together a long list of adjectives saying how committed they are to conclude it, or who focus exclusively on what others should do. The negotiations became deadlocked over very important and difficult issues, centering on the respective obligations of Members – particularly the major players. The only way to move forward is to address those issues and that is a collective responsibility. We don’t need more slogans. We need new ideas and hard work.
It is important as we look ahead that we do so with a clear understanding of what has stood in the way of progress up until now. In this connection, I was struck by China’s suggestion that perhaps with the electoral season over, things will be easier. While I cannot speak for other Members undergoing leadership transitions, I can be very clear that in our case the issues blocking progress in Doha have never had anything to do with electoral politics in Washington, and everything to do with substance in Geneva.
There was a lot of discussion on Tuesday about the importance of leadership. The United States has always embraced, and continues to embrace, the importance of playing a leadership role in the WTO in all its forms. One aspect of leadership is a willingness to confront difficult questions and grapple with the uncomfortable and unpopular aftermath. The United States will continue to lead, and to challenge, but all major players must embrace a shared responsibility if this institution is to succeed in the future.
The U.S. Economy
A number of Members have raised issues or asked questions relating to the steps that the United States has taken to deal with the financial crisis and otherwise to put our economic house in order.
A number of Members have made comments on or expressed interest in the actions that the Federal Reserve has taken to promote economic recovery – quantitative easing in particular. Quantitative Easing is an accepted form of monetary policy when conventional monetary policy is not available, i.e. when interest rates are at or near 0%. These actions are necessary to foster a stronger economic recovery in the context of price stability. This policy not only helps to strengthen the U.S. economic recovery, but by boosting U.S. spending and growth, it has the effect of helping to support the global economy as well. There is no qualitative difference between a conventional monetary policy and quantitative easing in terms of its effect, or lack thereof, on emerging markets. To condemn Quantitative Easing is to condemn accommodative monetary policy generally.
In a recent speech, Chairman Bernanke of the Federal Reserve remarked that evidence does not support the view that accommodative monetary policy by advanced economies has led to disruptive capital inflows into emerging market economies. “Recent research, including studies from the IMF, does not support the view that advanced-economy monetary policies are the dominant factor behind emerging market capital flows. Consistent with these findings, these capital flows have diminished in the past couple of years, even as monetary policies in advanced economies have continued to ease, and longer-term interest rates in those economies have continued to decline.”
More importantly, Bernanke stated that the benefits from this policy in the global economy should also be recognized. “The slowing of growth in the emerging market economies this year in large part reflects their decelerating exports to the United States, Europe, and other advanced economies. Therefore, monetary easing that supports the recovery in the advanced economies should stimulate trade and boost growth in emerging market economies as well. In principle depreciation of the dollar and other advanced economy currencies could reduce (although not eliminate) the positive effect on trade and growth in emerging markets. However, since mid-2008, in fact, before the intensification of the financial crisis triggered wide swings in the dollar, the real multilateral value of the dollar has changed little, and it has fallen just a bit against the currencies of the emerging market economies.”
We would note that, according to the IMF, the U.S. dollar is overvalued by between 0 and 10 percent on a real effective basis.
We also recognize the importance of international cooperation in promoting economic recovery and have been participating very actively in such efforts, particularly in the G20.
Among other things, G-20 economies have committed to putting their public finances on sustainable paths. The Obama Administration is committed to a deficit reduction plan that would support the recovery in the near term, while restoring fiscal sustainability including reducing the debt to GDP ratio through a balanced approach to medium-term deficit reduction.
The G-20 has agreed that rebalancing is at the core of the group’s agenda and that deficit countries need to save more and surplus countries need to boost domestic demand growth. The United States is doing its part. The United States has reduced its current account deficit from 6.5 percent of GDP in the fourth quarter of 2005 to 3.0 percent of GDP in the second quarter of 2012. The household saving rate has risen and the government deficit has narrowed from 10.1 percent of GDP in fiscal year 2009 to 7.0 percent in fiscal year 2012. Current account surplus economies need to do their part to foster global rebalancing by accelerating the pace of domestic demand growth in their economies.
A number of Members have expressed interest in learning more about the Troubled Asset Recovery Program, known as TARP for short. Treasury’s authority to invest money through TARP ended on October 3, 2010, in accordance with the Emergency Economic Stabilization Act of 2008 (EESA), the legislation that created TARP. As of November 30, 2012, Treasury has recovered almost 90 percent of the funds invested through the various TARP programs. Several programs have already been completely closed, and more are in their wind-down phases. EESA did not set a date by which the programs will be fully shut down, however, the government is focused on winding down TARP programs as quickly as possible, while ensuring financial stability and maximizing returns to the taxpayer.
A number of Members have referred to Paragraph 35 of the Secretariat’s report that speaks to a Congressional Research Service (CRS) report and its comments on U.S. investment policies. Contrary to the impression that some might have drawn from that citation, the CRS report discusses a number of federal-level measures that “have an impact on foreign investment in the United States,” including measures that do not restrict foreign investment. Indeed, the report notes that “there are not across-the-board, blanket restrictions on foreign investment in the United States.” The United States maintains an open investment regime, with very few limitations on foreign investment. Detailed information about specific measures that impact foreign investment in the United States is widely and publicly available, including in the CRS report cited in the Secretariat’s Report.
With respect to the Committee on Foreign Investment in the United States, known as CFIUS, the vast majority of foreign direct investment does not raise national security concerns. Foreign investors are not required to notify CFIUS of their transactions, but instead decide themselves whether to file if they believe national security considerations might arise. However, while the process is essentially voluntary and the vast majority of CFIUS cases are the result of voluntary notices, CFIUS has the authority to initiate a review of any transaction that may raise national security concerns.
We welcome the interest expressed by Members in the SelectUSA Initiative. SelectUSA works with firms – both foreign and domestic – as well as U.S. economic development organizations to provide information, guidance, and counseling on the U.S. economic climate and federal rules and regulations impacting business investment in the United States. Housed in the Department of Commerce, SelectUSA is a part of the U.S. and Foreign Commercial Service (USFCS), which is located at U.S. embassies and consulates in over 70 worldwide markets and has a robust field operation through U.S. Export Assistance Centers across the United States. By coordinating resources across the federal government, SelectUSA provides both information assistance and ombudsman services to the global investment community.
We note the high level of interest expressed my Members in learning more about the President’s National Export Initiative. The President launched the NEI during his State of the Union address on January 27, 2010 and established a national goal of doubling U.S. exports by the end of 2014. The NEI has five main components. First, the Administration seeks to improve advocacy and trade promotion efforts on behalf of U.S. exporters. Second, the Administration seeks to increase access to export financing. Third, agencies will reinforce their efforts to remove barriers to trade. Fourth, the United States will robustly enforce trade rules, ensuring America’s trade partners live up to their obligations. Fifth, the Administration will pursue policies at the global level to promote strong, sustainable, and balanced growth so that the world economy grows.
Turning to U.S. performance in meeting its notification requirements, we would note that the Secretariat’s report is a snapshot in time. In this case, the report only includes notifications received up until June 30. In some cases this resulted in the report indicating we had not made a notification that was not due until some months later, and which we did submit in a timely fashion. Admittedly, a few of our notifications were late. But we have now made those notifications so we are fully up to date. The United States has always placed a high priority on meeting its notification requirements and we will continue to do so. We encourage others to do the same.
We’ve taken careful note of comments made by Members on pending regulatory actions. The United States maintains a very open and transparent regulatory process which we are quite proud of. All stakeholders, domestic and foreign, are afforded the opportunity to provide input. So, while we are not in a position to speculate on the final shape of these regulatory actions, we can assure those of you who have participated in the process that your views will be carefully considered as decisions are taken.
In closing, I would like to reiterate our appreciation for the interest that you have shown in the United States through your participation in this trade policy review. We are very conscious of the fact that this interest stems from the fact that we are in an interconnected world where what one does affects the other. We hope that through exercises such as this we can understand each other better and build upon this understanding to improve the multilateral trading system for the betterment of all of us.