Trade agreements can be controversial but export growth may be the best route to new jobs.
At a recent high-profile trade conference, I tried to count the number of times people said that “one job in every three” is dependent on trade or that Washington is the “most trade dependent state” in the United States. I lost count somewhere around 15. There is a lot of preaching to the choir at such events, this one sponsored by the resurgent Washington Council on International Trade.
And it is an accurate view of our economy. Take one major industry, aerospace. More than 80 percent of Boeing airplanes are exported so eight of every 10 of the 80,000-plus Boeing workers here owe their jobs to trade. There are more than 80,000 other direct jobs in aerospace throughout the state, so eight of every 10 of them are trade dependent. If you add in the multiplier for these primary jobs, conservatively about 1.8 additional jobs for every aerospace job, then you have almost 250,000 jobs in the state dependent on trade in aerospace alone.
Despite the choir at the conference, trade has become a somewhat contentious issue in the Puget Sound region.
As four of our state congressmen had begun a panel discussion, a young woman burst into the room at the Westin Hotel and began to berate Congressman Jim McDermott for his vote in favor of trade agreements with South Korea and Panama, saying the trade pacts take jobs away from workers. Others on the panel were Congressmen Rick Larsen, Dave Reichert, and Adam Smith, who supported those agreements and one with Colombia, which McDermott opposed.
The congressmen sat quietly as the woman was slowly removed from the room by security guards. But she might have been surprised by the largely sympathetic reaction. Larsen said, “There is a cost to trade and we need to do a better job of dealing with the downside of trade policy.” Smith said, “The economy is not working for a lot of people. Trade has to be part of a broader economic agenda.”
One issue that received a lot of attention was a trade initiative called the Trans-Pacific Partnership or TPP. The partnership would reduce tariffs and other trade barriers. It was promoted by President Barack Obama at the recent Asia Pacific Economic Cooperation leaders’ meeting in Hawaii. The partnership would link the U.S. with Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam to start, with other Pacific Rim nations joining later. Japan has indicated that it wants to be part of the TPP already. Rep. Jim McDermott, speaking in support said, “Asia is where the action will be . . . and we are central to it.”
The WCIT is encouraging the negotiation of the agreement. The Asia-Pacific region is the largest market in the world for U.S. exports and receives two-thirds of U.S. agricultural exports. While the current proposed TPP would only encompass nine of the Asia-Pacific region countries, one of the potential benefits of this negotiating effort is that it would serve as a framework for adding other Asia-Pacific countries eventually. In 2009, nearly 65 percent of Washington exports went to Asia-Pacific countries, according to WCIT.
Two parts of the conference stand out for me.
One was Jon Allen of Canada. The Assistant Deputy Minister for the Americas pointed out something often lost in all the talk about Asia and the growing strength of China in the world economy. Our largest trading partner remains Canada.
Allen said two-way trade between Canada and the U.S. is about $1.8 billion a day or $1.25 million a minute. It accounts for 175,000 jobs and just the increase in trade with Canada last year was more than total trade with Brazil, India, or Russia. Much of the trade is through “making things together,” Allen said, citing Canada’s role in the auto industry, aerospace, and other manufacturing fields.
Like trade in general, there are some issues with Canada — and Washington has some issues with British Columbia. For example, British Columbia has developed its ports at Vancouver and Prince Rupert, creating competition for Puget Sound ports. Seattle and Tacoma are now in danger of becoming the middle stop for ships crossing the Pacific — not an enviable position. “You want to be either the first port of call or the last port,” said Tay Yoshitani, head of the Port of Seattle. The middle stop is the one most likely to be dropped, he said, pointing to his experience at the Port of Baltimore, which became a middle stop on Atlantic routes and soon withered away as a port.
The other highlight of the conference was the Washington Council on International Trade itself. The meeting was a kind of coming-out party for the organization. For many years, WCIT was a key player in trade policy, but in recent years it all but disappeared. About five months ago, Eric Schinfeld and the Metropolitan Chamber of Commerce got together and revived the organization, providing again a voice for the region on trade policy.
“The trade policies that we discussed are some of the best chances we have to increase jobs and economic prosperity in Washington state,” Schinfeld said, “but we must all work together to advocate for these mutually beneficial priorities in order to ensure their successful passage. The Washington Council on International Trade strives to be the axis around which the state business community can engage, energize and focus our collective efforts in this regard.”
The priorities outlined by WCIT show the wide range of trade issues important to the region. They include:
- Complete Russia’s WTO accession, and secure congressional approval of permanent normal trade relations with Russia. Russia is the 10th largest market in the world, but ranks 37th among U.S. trade partners. Normal relations with Russia could be good for Washington exports from apples to airplanes.
- Address the Harbor Maintenance Tax. It's a federal tax imposed on shippers based on the value of the goods being shipped through ports. The tax is intended to be used for maintenance dredging of federal navigational channels. Port officials said they estimate shippers save $150 per container by shipping through British Columbia and avoiding the tax.
- Support congressional passage of the affordable footwear act and the U.S. outdoor act. Sen. Maria Cantwell, who also spoke at the conference, is a co-sponsor of these proposals along with Sen. Patty Murray. Cantwell said the two laws would end high tariffs on “recreational performance outerwear.” These tariffs were originally implemented to protect domestic industries that no longer exist, she said, which means the only impact of the tariffs is to make these products more expensive for U.S. consumers.
- Reform travel visas. Speakers at the conference said applications can take as long as 145 days in Brazil and 120 days in China. As a result, the U.S. welcomed the same number of travelers in 2010 as it did in 2000, according to WCIT. Tourism is big in Washington State, employing 143,800 people and generating $1 billion in state and local tax revenues.
- Support a reasonable approach to increased U.S. competitiveness in trade with China. China is Washington state’s top trading partner and the destination of nearly 20 percent of Washington’s exports in 2010. In fact, Washington has a trade surplus with China, exporting $10.3 billion in 2010 while importing only $9.8 billion in goods and services from China.
Despite the occasional controversy over trade, the biggest economic issue we face these days is the lack of jobs. With few jobs being created in the domestic economy, one path to higher employment is through exports. As several speakers at the conference said, 95 percent of the market for goods and services is outside the U.S.
Aerospace and agriculture are the usual examples of our exporting. But there are also smaller companies and organizations involved in trade. Wood Stone Corporation in Bellingham has a sizable export market for its pizza ovens and other products. Since 1990 the company has sold over 9,000 ovens in 75-plus countries around the world. SightLife, an eye bank, provides cornea tissue for transplant and offers sustainable eye bank development programs to restore sight around the world.
The Seattle Times reported recently on the high number of foreign students at the University of Washington this year. It may seem hard to grasp, but the education those students receive is an export.
“It is a product, bought by someone from another country,” said Schinfeld, “and the fact that they have to come here to pick it up is just a detail.”
WCIT and the Trade Development Alliance of Greater Seattle together form a strong one-two punch on trade. WCIT becomes the voice of trade policy in the region, speaking out on these issues. The Trade Development Alliance continues its role of being the connector.
