First as a candidate and then in the early days of his administration, President Donald Trump has promised to make big changes to U.S. trade policy to help bring more jobs back to the United States.
One of his first actions as president was to pull the U.S. out of the Trans-Pacific Partnership trade agreement.
How will Trump’s trade policies really affect the U.S. economy?
John Murphy, senior vice president for international policy for the U.S. Chamber of Commerce, can provide some insight. Since joining the chamber in 1999, Murphy has led its campaigns to get congressional support of trade agreements with a dozen nations, including Colombia, Panama and South Korea.
Murphy will be a keynote speaker at the Wisconsin International Trade Conference on Thursday, May 11, at the Wisconsin Center in downtown Milwaukee. The conference is presented by the Metropolitan Milwaukee Association of Commerce’s World Trade Association.
In advance of the conference, BizTimes Milwaukee editor Andrew Weiland spoke with Murphy about pressing U.S. trade policy issues. Following are excerpts from that interview.
BizTimes: It seems to be an interesting time to be discussing trade as the new presidential administration is determined to make major changes in U.S. trade policy. Do you have any general thoughts about the Trump administration’s approach?
Murphy: “It’s common in any presidential contest for a lot of wild and woolly things to be said about trade. I remember Barack Obama threatening to withdraw from (the North American Free Trade Agreement) in 2008. But the world looks different once you are sitting in the Oval Office. I think the business community appreciates that the Trump administration is committed to expanding American exports, committed to getting rid of the foreign market access borders that often shut out American goods and services, and having stronger enforcement of our trade agreements. But the devil’s in the details. How are we going to move forward on some of the signature issues, like renegotiating NAFTA? That’s an area where we are really at the beginning of the journey.”
BizTimes: You mentioned NAFTA, so let’s get into that. What can we expect to come out of a renegotiation of the NAFTA deal?
Murphy: “This is an area where I think members of Congress, the business community and the agriculture community are looking for further details. We’ve been reassured by Commerce Secretary Wilbur Ross that their goal is to expand American exports, not to throw up new trade barriers. And I think that they’ve heard from many stakeholders in recent weeks about the value of our trade ties to Canada and Mexico. These are our top two export markets in the world by a large margin. There are 14 million American jobs that depend on trade with Canada and Mexico, $3.5 billion of trade a day. Secretary Ross recently made the comment that we want to preserve all of that trade but we want to examine what are the barriers that persist that sometimes make it difficult for American exporters to compete?”
BizTimes: How cooperative will our NAFTA trade partners be with a renegotiation?
Murphy: “If you look at the agreement calmly and in the light of day, you see an agreement that is 23 years old that was negotiated, to give one example, before the Internet existed. That’s one example of something that could be added and is not particularly controversial. The Mexicans, they also have cards to play. For many American agricultural products Mexico is the largest market in the world, like corn, for instance. And that’s why you hear folks like Sen. (Chuck) Grassley of Iowa expressing great concern about NAFTA renegotiation because the Mexicans could rather easily start to purchase a lot more corn and wheat and other agricultural commodities from South America. It’s going to be a give and take. I think the American farmers and ranchers who have really benefitted a great deal from NAFTA are aware of this and are making their voices heard, which I think is positive.”
BizTimes: Do you have any concern when the president talks tough about companies moving jobs outside of the country, threatening them with tariffs?
Murphy: “You catch more flies with honey than with vinegar. The way to get more investment in the United States is through measures to create a more welcoming investment environment. This administration is already taking a number of steps, whether it is halting the regulatory overreach that we’ve seen in recent years, the promise of tax reform, which is going to be a difficult fight in Congress, but there’s a lot of excitement about what that can mean. We’ve seen an energy revolution in North America. Energy costs for American businesses today are much lower than they are for their international competitors. These are all factors that are making businesses more keen to invest and do business here. And if we can see more focus on those kinds of policies, that’s what’s going to foster job creation here in the U.S. That’s what’s really front of mind for most business executives today.”
BizTimes: One of President Trump’s first actions was to cancel the United States’ participation in the TPP trade deal. Was that a good move?
Murphy: “The question remains, what’s the strategy for tackling the issues that the TPP was designed to address? The factors that led the TPP to be negotiated remain. And they include the fact that by 2030, two-thirds of the world’s middle class consumers will be in Asia. They have an appetite for American products. However, many of those markets have high barriers that shut out U.S. goods and services. An agreement like the TPP is a way to get past those barriers. So if it’s not going to be the TPP, what is the strategy? The administration has said it is interested in pursuing some bilateral trade agreements. I think they are going to feel a lot of pressure to devise a strategy to address a lot of the problems that the TPP was designed to address.”
BizTimes: Trump has raised a lot of concerns about China as well. He has talked about currency manipulation. Americans have been concerned for years about intellectual property theft and the number of jobs that have been moved to China. But American consumers have benefitted from being able to buy low cost goods made in China. What strategy should the U.S. have in dealing with China as a trade partner?
Murphy: “I think this is an area that the administration wants some more tools in the toolbox for addressing some of the challenges there. China has been one of the fastest growing markets for U.S. exports. But there are increasingly concerns in a number of sectors. China in recent years has been moving away from the market liberalization that we had been seeing 10 or 20 years ago. We see more efforts by the Chinese government to create national champions, to strengthen their state-owned enterprises, and often this comes at the expense of foreign enterprises. They create incentives and industrial policies that favor the domestic firms and put foreign competitors at a disadvantage. And so many sectors are effectively closed for a U.S. company’s participation. Their ability to invest and do business there is in question in a variety of sectors. Whereas the U.S. economy, when it comes to investment, is pretty much wide open with just two or three exceptions. I think this is an administration that is going to be asking, ‘What are the tools in the toolbox we could use to get a little leverage to try and seek a more level playing field with China?’”
BizTimes: What about the Trump administration’s approach on immigration? It’s been very controversial. He has obviously talked a lot about illegal immigrants from Mexico. Of course, he wants to build a border wall. He also wants to impose a temporary travel ban from some Middle Eastern nations. What impact does this approach have, if any, on international trade?
Murphy: “I think it’s worthwhile for any administration to think about its soft power and not just the hard power of military force. There’s a great line by (Defense Secretary Jim) Mattis, who testified on the budget for the State Department, saying if we cut the budget of the State Department, (he was) going to have to buy more ammunition. I think this is the kind of thing that new administrations come to appreciate over time. Diplomacy, development programs, the influence American business has around the world, the fact that hundreds of thousands of foreign students come and study in our universities. This is all critical to our influence around the world. I worked for many years in Latin America, and it’s really striking the degree to which you find leaders in government or the private sector who studied at American universities. That absolutely has an influence. I think the policies you are talking about, they need to be framed in a way that takes the importance of these channels of influence into consideration.”