III CEO Summit of the Americas
An Address to the AmCham Peru
Remarks by Thomas J. Donohue, President and CEO, U.S. Chamber of Commerce
April 11, 2018
Lima, Peru
Introduction
Good evening, ladies and gentlemen.
I’d like to thank AmCham Peru for inviting me to speak to you all tonight. Under the leadership of its president, Mariela Garcia, and its CEO, Aldo DiFillipi, AmCham Peru has been a great partner to the U.S. Chamber of Commerce. We appreciate your friendship and hospitality.
I also want to recognize the other AmChams from across the region who are here tonight representing our Association of American Chambers of Commerce of Latin America and the Caribbean, or AACCLA.
Tonight feels like a gathering of old friends. Five years ago, I had the pleasure of being in this beautiful city to help start a hemispheric business dialogue, and I’m pleased to be back in Lima for this year’s CEO Summit of the Americas.
During our time here, we’ll sit down with heads of state and ministers, as well as key business leaders from across the hemisphere. I’m especially looking forward to meeting with President Vizcarra. I will commend Peru for an orderly transition under difficult circumstances. Your institutions work. And your leadership endures—regionally and around the world. The American business community looks forward to working closely with the president and his new administration to continue to advance the U.S.-Peru relationship. It embodies the kind of partnership the U.S. private sector aspires to have with all of our global partners, especially those in this region.
This evening I want to discuss some of the ways we can all work toward a stronger, more competitive, and more closely integrated Western Hemisphere. The countries that make up this vibrant part of the world have much to gain by working together to seize shared opportunities and meet common challenges.
But I also want to talk a little about the priorities within our government. Because, as everyone knows, many of the policy decisions coming out of Washington today not only impact the U.S. economy and its businesses and workers, but indeed those across this hemisphere and around the world.
The U.S. Chamber engages vigorously with our leaders and policymakers to strengthen growth and prosperity at homeandto ensure our country remains a positive force in the global economy.
U.S. Priorities
Since the Trump administration and pro-business majorities in both houses of our Congress came into power a little over a year ago, the U.S. Chamber has been proud to help them achieve some historic pro-growth policy victories.
We overhauled our tax code for the first time in 30 years, finally addressing the competitive disadvantage that U.S. companies have endured for too long. Tax rates have been lowered for all businesses, the bias against capital investment has ended, and the punitive practice of double-taxation on overseas earnings has been eliminated. Altogether, the benefits of these reforms have already begun to materialize in our economy—and businesses are passing along their tax savings to their employees, their consumers and their investors in a variety of ways.
In addition to tax reform, we’re in the midst of the most dramatic rollback of regulations in a generation. The heavy regulatory burden is finally being lifted off the backs of U.S. businesses. As a result, we’re seeing historic levels of business optimism and renewed confidence to hire, invest, and grow.
Stronger growth in the U.S.—the world’s largest and most diverse economy—bodes well for this region and the global economy. But the reverse is also true. So it’s understandable that our global partners are concerned about some of the policies and proposals coming out of Washington—especially on immigration and trade.
The U.S. Chamber has concerns with some of these policies too—not only because they have the potential to undermine growth, but because they could diminish our engagement and influence in the world. That’s not how we built the largest and most resilient economy in history—and it’s not how we’ll maintain it.
Immigration
On immigration, the simple fact is that we are a nation of immigrants. The United States was built by the energy, grit, and determination of people from around the world seeking opportunities for themselves and their families.
The Chamber has helped lead the fight to protect the status of more than one million people who are at risk of deportation. It makes no sense to send one million talented workers back to their home countries when we don’t have enough labor to get the job done in our own. This includes the young men and women who were brought to our country as children through no fault of their own—known as “the Dreamers”—as well as hundreds of thousands of individuals who are working in the U.S. under temporary protected status.
Moreover, as the debate has unfolded in Congress, we have been fighting back against proposals that would further reduce legal immigration. This is an emotional issue that is often fueled by overheated rhetoric. But the U.S. Chamber is urging our leaders to carefully consider the facts.
With U.S. unemployment hovering around 4%, and as 10,000 older Americans retire every day, there are growing gaps in our workforce. Immigrants of all skill levels can help fill them.
The bottom line is that legal immigration supports economic growth and greater economic prosperity for everyone—including U.S. workers.
Trade
Now I’ll turn to the subject that I know is everyone’s minds—U.S. trade policy.
Many have been confounded by some of our government’s recent trade actions. While the U.S. Chamber shares the Trump administration’s goal of trade agreements that are fair and enforceable, we haven’t always agreed on how to achieve that goal—or on what constitutes “fairness.” Trade is not a zero-sum game in which one partner has to lose in order for the other to “win.” Trade agreements must be mutually beneficial, otherwise no one would bother doing them!
NAFTA
So with this in mind, let’s talk about the deal that’s on the top of everyone’s mind in this room: NAFTA. And it should matter to all of you, because as I’ll talk about in a minute, NAFTA’s outcome will have critical implications for U.S. trade policy across the hemisphere.
The Chamber has supported efforts to modernize the deal because it’s absolutely the right thing to do.
While the agreement was state-of-the-art for its time, it’s a quarter-century old! The internet, now a fundamental engine of our global economy, was barely a glint in our collective eye in 1993 when the deal was negotiated. Cross-border flows of data on which industry now wholly depends were virtually non-existent with the digital economy in its infancy. There was no such thing as the WTO Trade Facilitation Agreement, so rules governing customs and flows of commerce were arcane by comparison to today’s.
For these reasons and many more, there’s tremendous economic value that stands to be unleashed through modernization of this deal.
Clearly, updating this agreement makes too much sense for us not to get it done, so let’s talk about where we are in that process.
Negotiators from the U.S. Canada and Mexico deserve a lot of credit for working diligently for the past eight months to advance the agreeement’s 30 chapters; no small feat!
But a key message I bring to you today is that if we’re going to get a deal done this year, we’re now officially in crunch time.
You may have read that negotiators had even hoped to be able to announce an agreement in principle here in Lima, and that’s because we’re running up a firm deadline on the U.S. legislative calendar. Trade Promotion Authority, our legislation that governs approval of trade deals, stipulates a rigorous review process that will span months between the time the deal is negotiated and when it can be put to vote in the U.S. Congress. So if we’re going to reach a deal this year, this is when the true horse-trading will begin.
Many of you in the room are experienced negotiators yourselves, so you get it – the first 95% of a negotiation is about the technical details – and some amount of posturing for political purposes – and the true deal making gets done at the 11th hour. I’m cautiously optimistic that we’re at that point, but there are hurdles we need to overcome first:
As many of you know, there several problematic U.S. proposals that have stalled progress toward a deal.
One is known as the “sunset clause,” and the first thing they should do is change the name.
In the proposal’s current form, it calls for an automatic termination date after five years unless the three parties agree to continue it. I don’t need to tell any of you as investors that this is untenable to anyone who intends to achieve return on his investment; the conversation should start at 20 years in order to provide the certainty in ROI that we all require.
But there’s certainly merit in the concept of periodic review of our trade agreements, and it was such a mechanism that helped the U.S. and South Korea broker a deal on KORUS – it’s an idea that should be explored as a landing zone for NAFTA.
The next controversial U.S. proposal on the table has to do with investment protection, and it’s known as ISDS.
This gives companies from all countries certainty that their investments abroad won’t be subject to unfair treatment by foreign courts. This is a core component of literally dozens of U.S. trade deals because investment abroad, rather than being a subsidy to U.S. companies, is a fundamental necessity to the thousands of our firms who generate high-paying jobs in the U.S. because of their investment abroad. And when very little in life can be considered a “slam dunk,” so far ISDS challenges have been for the U.S. – we’re undefeated at 13 and 0!
Next, the U.S. has put forward a proposal introducing severe restrictions on Mexican and Canadian access to U.S. government procurement. While touted as a way to supposedly promote improved reciprocity, the U.S. proposals are likely to have the opposite impact.
U.S. companies have far more at stake in North American government procurement than our Canadian and Mexican partners. Hundreds of American firms in financial services, IT, education and beyond have literally billions of dollars in government contracts in Canada in Mexico. On the other hand, do you know how many of the top 100 foreign contracts with the U.S. government are of Canadian or Mexican origin? Only one!
So it’s time for U.S. negotiators to stop trying to solve a problem that doesn’t exist and ensure that U.S. companies aren’t disproportionately disadvantaged by this proposal.
Finally, the U.S. has advanced a proposal on rules of origin for auto production that mandates increases in North American content.
I touch on this area last because it’s the controversial proposal that’s shown the most promise for a potential breakthrough. Negotiators are creatively looking at ways to introduce areas like vehicle design and research and development into the content equation in a way that potentially limits disruption to production.
And there’s the key. Whatever solution they come to cannot disrupt the fully integrated North American supply chains that have made our continent’s auto sector the most competitive in the world.
So, what’s clear is that, to get to a deal, we need to get these four proposals resolved favorably because, in their current form, they’re unacceptable not just to business, but to Canada, Mexico, and trade leadership in the U.S. Congress.
And I truly think we will get past these issues and to a deal that brings greater benefit to all North American stakeholders, because failure is truly not an option.
That’s because NAFTA implications transcend North America and they transcend just trade.
As we heard at the recent meeting of AACCLA leaders in Miami that many of you attended, our regional partners view NAFTA as a bellwether for the fate of other agreements. Let’s not forget that all U.S. FTAs are slated to be reviewed, presumably once NAFTA 2.0 is complete. And twelve of our 20 FTA partners are in the Americas. Nearly half of all U.S. goods exports are bound for this region.
A successful conclusion to NAFTA 2.0 would reduce uncertainty and reassure our partners of our nation’s unwavering economic commitment to the Americas.
And it’s this point I truly want to emphasize. Because at the end of the day, at their most fundamental level, trade agreements are about more than commercial deals and economies. They help promote peace and stability, they enhance national security – including ours – and they provide an environment for increased cooperation between governments in areas such as the fight against transnational crime, international terrorism, and a host of other threats to the rules-based economic system that forward-thinking leaders have advanced for the past 70 years.
So let’s get this deal done, and let’s do it in a manner that brings economic benefit and enhanced collaboration on security and beyond to the whole hemisphere.
The U.S. Chamber will keep fighting for that outcome, here and in Washington, and for as long as it takes.
Chinese Tariffs
In the case of China, the Chamber shares many of our administration’s concerns with Beijing’s problematic industrial policies and unfair trade practices. But global steel and aluminum tariffs—the opening shot in the escalating fight—do little to address the real issue of Chinese overcapacity. Instead, they risk alienating some of our strongest global allies.
We’re glad that hemispheric partners including Argentina, Brazil, Canada, and Mexico have received temporary exemptions.
As for the hundreds of billions worth of additional tariff threats being traded back and forth between Washington and Beijing—there’s a better solution. The U.S. should work with our partners here and around the world to confront China’s trade practices. We should work together to forge new trade agreements that guard against the Chinese model of state capitalism.
That’s what we sought to do with the Trans-Pacific Partnership, and the Chamber still believes that’s the best path forward. By rejoining this group, we’ll achieve three objectives critical to our economic and national security.
First, we’ll prevent China from driving a wedge between us and our 11 key trading partners that remain party to the agreement.
Second, we’ll ensure our long-standing commitment to, and presence in, an Asian marketplace that will account for 2/3 of the world’s middle class consumers by the year 2030.
Third, our presence in the region will enable us to support and monitor any agreements that we may make with the Chinese that will reduce or eliminate the need for tariffs under consideration by the U.S. government.
Together with the countries of TPP and beyond, we can form a united front to maximize our leverage and send the clear message that China’s actions pose a threat and won’t be tolerated.
Opportunities for Regional Cooperation
That’s a snapshot of our priorities in Washington—let me briefly turn to some regional priorities and what we hope to advance in Lima this week.
Enhancing regional trade and cooperation is one of the key objectives of the Summit of Americas. And it presents rare opportunities for government leaders to candidly and constructively express their priorities and concerns. I’m sure that many of the 30-plus heads of state who will find themselves in an intimate setting with Vice President Pence in the coming days will seize that opportunity!
But this CEO Summit, bringing together leaders from the private sector, is also a crucial forum for advancing shared goals. Business leaders have the ideas and the experience to help generate sustained economic growth, prosperity, and greater competitiveness in the Americas.
As I mentioned at the beginning of my remarks, the Americas Business Dialogue, or the ABD, was launched right here in Lima five years ago. The ABD is a collaboration between the Inter-American Development Bank, the U.S. Chamber, and our hemispheric trade association partners, including Peru’s CONFIEP. The dialogue has emerged as the leading mechanism for discussing shared interests and common challenges and making recommendations to our government leaders.
In 2018, the business communities of the Americas have advanced 42 recommendations for our government leaders to strengthen our hemisphere through policies to boost trade and investment, drive growth in the digital economy, strengthen our workforce, and expand our energy base.
These are all major areas of cooperation that we will continue to focus on as regional partners.
Rule of Law
But this year our recommendations extend beyond some of the traditional policy areas and address another crucial priority: an alarming erosion of the rule of law.
How can we hope to have good policy without good governance? And how can we attract the investment, drive the growth, and create the prosperity we all want when the rule of law is in question? That’s what I want to spend my few remaining minutes discussing.
It’s no secret that the region has faced a defining corruption crisis in the wake of the Odebrecht scandal. But if there’s a silver lining, it’s that the sheer size and audacity of the scandal makes it impossible for our region to continue to turn a blind eye to a decades-long problem.
Indeed, I believe in every crisis there lies an opportunity, and Peru boldly seized that opportunity when it decided to make “Democratic Governance Against Corruption” the theme of this year’s Summit. It’s certainly timely. 350 million citizens across the Americas will have the opportunity to choose new leaders this year—we urge them to choose transparency and integrity.
In addition, we are confronted with a governing crisis in Venezuela that has spiraled into an economic and humanitarian catastrophe. Seven of our 42 recommendations underscore the commitment of the hemispheric business community to eradicate corruption and enhance transparency. They cover a range of ideas, including corporate codes of conduct, regional implementation of Good Regulatory Practices, cybersecurity and anti-money laundering systems, and more
All of these recommendations are actionable and can be implemented in a timely manner. And they reflect the reality that the public and private sectors have a shared responsibility to address this challenge.
I’m proud to say that U.S. companies have been at the forefront of these efforts. Many have established comprehensive corporate codes of conduct that include periodic compliance reviews.
For the past five years, the U.S. Chamber has also sought to shine a light on corruption and ensure integrity in business dealings through our Global Coalition for the Rule of Law.
Free enterprise thrives when the rule of law is preserved and constitutional protections for all citizens and businesses are honored. This requires transparency, predictability, stability, accountability, and due process. When those factors are present, investment flows in, economies grow, jobs are created, and prosperity follows. So any effort to strengthen the competitiveness of this region must also include a firm commitment to the rule of law.
Conclusion
As I look back over the past five years since so many of us gathered here in Lima to start a new private sector-led dialogue, the growing spirit of collaboration among this hemisphere’s leaders is evident.
But looking ahead to the future, there is more work to be done to strengthen the competitiveness of this region and spread prosperity throughout the Americas.
Global competition is getting stronger by the day. There are challenges to overcome on trade, on human talent, and on transparency and corruption. In many of our societies, prosperity is not shared broadly enough. Too many still lack opportunities to climb the economic ladder and make a better life for themselves and their families.
We have the ability to change that if we work together—and we must.
The destinies of the nations of the Americas are intertwined. Now is the time to realize our potential, to work collaboratively to solve problems, to strengthen trade and investment for our mutual benefit, to provide new opportunities for our peoples, and to raise their standards of living.
It will require hard work, tough choices, and new ways of doing things. It will require strong and sustained private sector leadership to win the policies and reforms needed to bolster economic growth.
But it will be worth the effort—because strengthening ties in the Americas represents one of the best economic opportunities for every one of our nations.
The CEO Summit provides the perfect setting to take the next step in this process, so I look forward to working with the regional heads of state, their governments and all of the business leaders in this room to achieve real progress here in Lima.
Thank you very much.
