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New Trade Deals May Open Doors for S.C.

(Updated: 2014-04-22)

Approval of trade agreements that would create jobs in South Carolina by removing regulatory hurdles and lowering tariffs is linked to a political decision in Washington, but German trade executives and U.S. Secretary of Commerce Penny Pritzker are optimistic.

Negotiations on the Transatlantic Trade and Investment Partnership and Trans-Pacific Partnership are playing out alongside President Obama seeking fast-track trade authority that would limit congressional input and speed the approval process.

The Trans-Pacific Partnership is a proposed trade agreement under negotiation by Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.

The Transatlantic Trade and Investment Partnership being negotiated between the European Union and the United States is aimed at removing trade barriers in numerous economic sectors to make it easier to buy and sell goods and services between the U.S. and European Union.

Opponents include German farmers and American unions.

Pritzker in comments at BMW Manufacturing Co.’s latest expansion announcement said the U.S. and Germany are working to resolve differences in the trans-Atlantic talks. BMW A.G. CEO Norbert Reithofer also spotlighted the importance of free-trade agreements at the event.

A trade deal with the European Union is expected to increase S.C. exports to Europe by 187% and create 10,000 new jobs. Germany is second and England fifth among South Carolina’s global customers, having purchased a combined $5.1 billion in exports in 2012, according to the International Trade Association.

“This shows exactly what can be achieved when federal, state and local government and industry work together,” Reithofer said.

More than 1,200 international companies have facilities in South Carolina, including Adidas, Bosch, Michelin and Continental Tire.

Overall, EU countries purchased $7.4 billion of S.C. goods, about 29% of the state’s total exports, according to a study supporting the trade pact. If the agreement is fully implemented, South Carolina could see exports of motor vehicles climb by $27.3 billion, chemicals by $615 million, other machinery by $337 million, and metals and metal products by $327 million, the study report said.

Work on the pact began in July with a fourth round of talks launched in March.

Pritzker said 2013 was a fourth straight record year of U.S. exports at more than $2.3 trillion, including South Carolina’s record $225 billion.

“There has never been a better time to invest in America,” said Pritzker, who took over the agency last June.

The pluses for foreign investment in the U.S. include its strong rule of law, intellectual property protections, stable financial markets, low-cost and abundant energy, vibrant supply chains, world-class universities, strong consumer base and trade agreements that provide access to millions more consumers, Pritzker said.

“And, of course, the ingenuity and dedication of American workers,” Pritzker said. “All of these factors are driving investment to the United States, and creating a renaissance in American manufacturing.”

U.S. Department of Commerce data shows that globally, the United States is the largest recipient and source of foreign direct investment. Recent data shows majority-owned subsidiaries of multinational firms with U.S. operations employed more than 5.6 million workers in 2011, spent more than $45 billion in research and development in the U.S. and accounted for 20.5% of U.S. goods exported.

AFL-CIO President Richard Trumka has said both of the proposed Atlantic and Pacific trade deals are examples of failed policies based on the North American Free Trade Agreement two decades ago. He said NAFTA put America’s economic strategy in the hands of corporations that wanted to move jobs offshore to lower labor costs.

Thomas Zielke, president and CEO, Representative of German Industry and Trade, said concerns about the Pacific agreement are affecting the trans-Atlantic negotiations, with the fast track lurking as a possible kink.

In an interview after a forum held in Greenville by the German American Chamber of Commerce of the Southern United States, Zielke said “the problem seems to be right now as far as we have noticed that there is a connection between the Trans Pacific Partnership agreement and a potential Transatlantic Trade and Investment Partnership.” He said the connection is the fast tracking, or trade promotion authority for the president. Those who would like to have a trans-Atlantic partnership and don’t like to have a trans-Pacific partnership now have concerns issuing a trade promotion authority, “and that’s a problem, and this has to be solved,” Zielke said.

Fast-tracking authority for the president expired in 2007, following its renewal in 2002. It has allowed presidents to negotiate trade agreements while limiting congressional approval of proposed agreements to a yes-or-no vote, with no amendments. While Republican U.S. House leaders have been supportive, Senate Majority Leader Harry Reid, D-Nevada, is among many Democrats who oppose it.

Zielke said several members of Congress have said the fast track is not necessary.

Hiddo Houben, head of trade and agriculture section, delegation of the European Union to the United States, said after the forum that giving President Obama fast-tracking authority “does not define the speed of our negotiations. I think what our American counterparts have said is that they will need it at some point in the near future, both for TTIP but also for the negotiations with the TPP countries. I think their hope is the sooner they can bring this together the better. But there is no formal linkage in the sense that the absence of fast track would put a brake on negotiations.”

Republican U.S. Sen. Lindsey Graham said he supports the trade agreements as long as currency manipulation is identified as an unfair trade practice.

“A European trade agreement I think is far more likely to happen and would be clearly beneficial to us,” Graham said.

He said the European agreement “would be the best thing that could happen to European automobile manufacturers in the United States. BMW would be a huge beneficiary of a trade agreement between us and Europe,” Graham said after speaking at a Greenville GOP meeting.

“It would allow cars to leave America without tariffs being imposed.”

Graham said the biggest hurdle in the Transatlantic talks is with European farmers.

“The European farming community is heavily subsidized by their government and one of the things we would want to do is open up European markets to our farmers,” including those that deny agricultural products grown in America because of the presence of genetically modified organisms, such as those used in some soybeans, and the safety of American-grown meats products.

“If you could separate the farming from all the other stuff, I think you could pass something this year,” Graham said. “And it would be very good for South Carolina because we have a lot of European customers.”

Chances of approval? “I say it’s 50-50 and the hang-up is going to be farming,” Graham said.

Graham said his main concern with the Pacific trade talks is currency manipulation.

“China manipulates the value of its currency,” Graham said. “That gives up to a 40% discount on any product made in China. It’s one thing to compete against cheap labor and no environmental laws. One of the things I am insisting on is currency manipulation by government which can create an artificial discount on their products be a trade abuse.”

Graham said fast track will not be approved on the Pacific talks “until you deal with currency. I think if you get the agriculture piece taken out or solved it would go through the Senate and the House on the European trade agreement very quickly.”

SC Biz News

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