It's been a busy year for the international trade community. Recently, free trade agreements have successfully been forged with Panama, Colombia, and South Korea, which is a particularly big deal for Washington state. South Korea is our fourth largest trading partner, and Colombia and Panama are two of our fastest-growing partners. These FTAs have the potential to help create over 10,000 jobs across Washington, in industries as diverse as agriculture, IT, aerospace, and professional services.
The slog to the finish line has been a long one. Despite the major economic benefits, it took Congress four years and countless efforts from the trade community to finally pass these agreements. It would be understandable for folks to want to rest on their laurels for a while.
That, however, would be a mistake. The national trade agenda has never looked busier — opportunities abound to significantly increase our international competitiveness. So, rather than staring longingly at our past glories, it’s onward and upward for the trade community. Here’s a quick cross-section of some policies that may come up for consideration over the next year, and why Washingtonians should care.
The two biggest impact trade issues in the news today are the Trans-Pacific Partnership (TPP) and Russia’s WTO accession, each of which would make a significant impact on our state’s economy. TPP is an Asia-Pacific regional trade agreement, currently being negotiated among the United States and eight other partners — Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam. The broad outlines of TPP were recently announced at November’s APEC Summit in Hawaii.
The Asia-Pacific region is the largest market in the world for Washington exports: 64 percent of all state exports went to Asia-Pacific countries in 2009. And Washington’s major retailers and manufacturers source a significant portion of their global supply chain from the Asia-Pacific region, from apparel to airplane parts. 2012 will be the year to watch TPP; particularly whether the agreement can be successfully negotiated if countries like Japan and Canada want to join mid-party.
Meanwhile, Russia was finally offered WTO membership at the end of last year, after the longest accession negotiation in WTO history (they originally applied in 1993). As it turns out, Washington is one of the top 10 states in terms of Russian exports; the country is one of our state’s fastest growing markets. Lower tariffs, increased protections, and expanded market access would add to this momentum. Airplane tariffs, for example, would be cut in half under this agreement.
In order for the United States to take full advantage of this move, Congress will have to establish “permanent normal trade relations” status with Russia. The vote on the trade status could take place in early 2012, but its success will depend on assurances that Russia will honor important international trade laws, like the protection of intellectual property (sort of a big deal for Washington's tech-heavy economy).
Also pressing is our need to increase national competitiveness with China, and the potential for liberalizing trade with the EU. Still, these are free trade issues, which can turn some folks off. So how about we focus on more universally supported initiatives, like improving the competitiveness of our state’s major ports.
That’s where the Harbor Maintenance Tax “land border loophole” comes into play. The Harbor Maintenance Tax (HMT) is a federal tax imposed on shippers based on the value of the goods being shipped through ports. However, the tax is not assessed on importers who route cargo through non-U.S. ports and then move their cargo into U.S. markets by land. This “land border loophole” makes it cheaper for international importers to divert cargo from Washington to British Columbia — costing revenue and jobs for our state. Our business community and elected officials are working hard to find a solution that addresses the issue, which has become even more pressing now that the Federal Maritime Commission is conducting a formal inquiry into the issue.
On the other hand, maybe your bag is international tourism (which is considered a service export and, therefore, a trade issue). Then you can join the trade and tourism communities in supporting reforms to the travel visa process. Currently all visa applications from some of the world’s fastest growing markets — such as China, India, and Brazil — can take as long as six months. As a result, the United States welcomed the same number of travelers in 2010 as it did in 2000; missing out on the potential for $606 billion in spending and 467,000 related jobs, according to a recent U.S. Travel Association study.
The Washington tourism industry, which already employs 143,800 people and generates $1 billion in state and local tax revenues, would benefit significantly — especially due to its geographic location and existing relationships with Asia and South America — if it were easier for travelers from Brazil, India and China to visit here. These visa barriers also significantly impede the success of many other businesses in Washington; international customers have a difficult time traveling to our state to do business, and foreign employees of locally-based companies cannot visit their Washington offices without significant delays.
What’s my point? Simple: the passage of the free trade agreements with South Korea, Colombia, and Panama does not mean that it’s time to pat ourselves on the back and go home. Rather, those of us with a vested interest in growing jobs and shared prosperity in Washington need to continue to work together with our elected officials to move the trade agenda forward. This includes issues we can agree on across political and ideological spectrums. The Washington Council on International Trade will be leading the charge. We encourage you to join us.