The U.S. should continue negotiating free trade pacts with other countries, but it also needs to change its approval system to get the deals done more quickly, Caterpillar Inc.’s chairman and CEO said in Atlanta.
The lag time between the president’s signing of an agreement and the congressional vote to approve it – sometimes measured in years – can tip the scales in favor of foreign companies whose governments are more nimble in opening to foreign markets, Douglas Oberhelman said at a World Affairs Council of Atlanta dinner event Oct. 31.
He gave the example of Colombia, a fast-growing market where Caterpillar sells large mining equipment.
While an FTA with the country languished in Congress from 2006-12, Japan began talks Colombia on a similar deal that would have eliminated tariffs on products imported by Caterpillar’s main competitor, Komatsu.
“We immediately would’ve been less competitive by more than 10 percent because we let those two do a deal without us. This is what happens to us if we’re not careful,” Mr. Oblerhelman said.
Pushing for FTAs is good, but what has been ignored is the renewal of TPA – Trade Promotion Authority – which gives the president the power to fast-track agreements and send them to Congress for an up-or-down vote within 90 days.
“Without that, we can’t get the other ones done, and nobody talks about that,” he said.
Precluding filibusters and amendents, TPA eliminates legislators’ ability to hold pacts hostage after they’re signed, which is all the more important as Congress becomes more polarized, Mr. Oberhelman said.
The last four U.S. free-trade agreements – with Colombia, Panama, Peru and South Korea – were signed while President George W. Bush still had trade promotion authority, which wasn’t renewed by Congress after it expired in July 2007. None of the pacts were approved until years later under President Obama.
Now, much larger and potentially sticky deals are on the horizon. The Trans-Pacific Partnership, or TPP, aims to create an bloc linking Asia and the Western Hemisphere. The U.S.-led initiative is seen as part of its “pivot to Asia” and as a counterweight to China‘s growing clout in the region, although the U.S. has said the agreement is open to any partner willing to abide by the pact’s “high standards.” So far, 12 countries have joined.
The Transatlantic Trade and Investment Partnership, known as TTIP, would reduce tariffs and reduce trade barriers between the U.S. and the European Union by eliminating redundant regulations on products like food, financial services, drugs and cars.
Partners on the Pacific pact are hoping to wrap up negotiations by the end of this year, while talks on the transatlantic deal started in July and are projected even by the most optimistic estimates to last through 2014.
Mr. Oberhelman predicted the TPP would be easier to sign, but he wasn’t optimistic about ratification.
“My worry is that we sit back and watch all those 12 nations in TPP – the Asian group – sign deals with themselves and leave us out,” he said.
The European deal would be more dicey, as TTIP will face challenges from special interests on both sides of the Atlantic, he said.
He admonished the World Affairs Council of Atlanta, which is hosting a TTIP event in November, to also discuss the prospect of trade promotion authority.
Mr. Oberhelman’s comments on trade came within a broader discussion about America’s industrial competitiveness.
While praising Georgia‘s as a business-friendly state – he was here to officially open Caterpillar’s $200 million factory in Athens – Mr. Oberhelman lamented America’s lagging infrastructure investment, complex tax system, rigid immigration laws and failing education system.
“(Developing countries) are doing the things we used to do to make themselves competitive, while our infrastructure crumbles, and that’s going to come back to bite us in the not-too-distant future,” Mr. Oberhelman said, noting that technology in Long Beach is 20 years behind the gleaming facilities he has seen in Shanghai and Rotterdam.
He said East Coast ports like Savannah and Charleston must invest to prepare for the cost advantages of mega-ships traversing the Panama Canal after its expansion is complete in 2015.
He noted that Caterpillar would use both ports to export small excavators and bulldozers made in Athens to markets throughout the Americas and Europe. Overall, the company has exported $80 billion worth of product from the U.S. in the last five years, including $23 billion in 2012.
The U.S. must prepare for a new era in which emerging markets are making up the majority of global growth, he said, drilling home a point often cited by United Parcel Service Inc.: 95 percent of the world’s consumers live outside the U.S.
He added that although the so-called BRICs and other emerging countries are laden with red tape and other hurdles, it’s worth navigating the nuances in the long run.
“We’ve got to learn to adapt to this changing globalized world where we are a player among many,” Mr. Oberhelman said.
He noted that he was headed to Washington on Nov. 1 for a Commerce Department panel on exports and trade.