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American Shipper

U.S. cabinet secretaries pitch FTAs and Cuba trade

Agriculture Secretary Vilsack ties new trade opportunities to infrastructure.

   The United States needs to take advantage of opportunities to open up markets through multi-lateral trade deals and expand exports to Cuba, but can only do so if U.S. infrastructure is modernized so cargo can be efficiently shipped by the optimal mode, two Obama administration cabinet members said in separate appearances last week.
   Concluding a Trans-Pacific Partnership agreement with 11 other Pacific Rim nations, as well as a trade and investment pact with the European Union, would level the playing field for American companies and promote important business values, Commerce Secretary Penny Pritzker and Agriculture Secretary Tom Vilsack said.
   Foreign companies face an average tariff of 1.5 percent in the United States, while import tariffs in other countries can range from 30 percent to 100 percent and put U.S. products at a disadvantage they said. In addition to opening markets for 70 percent of the global Gross Domestic Product, the deals would raise standards for labor, the environment, protection of intellectual property and state-owned enterprises.
   The TPP would open up an estimated $123 billion a year in new trading activity with Asia, where the emerging middle class is expected to jump from 525 million to 2.7 billion people in 15 years, Vilsack said in a speech at the Louis Dreyfus Commodities grain elevator at the Port of Houston on Thursday.
   The trade deal currently being negotiated also has national security implications. “If we don’t get this TPP agreement through the process we will cede that area and that opportunity to China. China won’t be as concerned about labor. They won’t be concerned about the environment. They’ll be concerned just about cheaply moving goods. We need to make sure we have a balancing effect in those countries and that requires us to be connected in trade,” Vilsack said, according to an audio recording of his remarks provided by the Agriculture Department.
   Vilsack said the trade deals hinge on Congress passing Trade Promotion Authority so foreign governments take U.S. negotiating positions seriously, knowing that Congress cannot make any amendments to the final agreement and must simply vote whether to ratify the treaty.
   Trade Promotion Authority expired in 2007 and President Obama urged Congress in last week’s State of the Union address to give him that power. Political observers say there is a good chance Congress, despite its many divisions, will move to approve the trade tool.
   The cabinet secretaries said Cuba is a promising new market for U.S. exporters, but opportunities will remain limited until Congress removes the existing statutory embargo. In December, President Obama announced plans to normalize relations with Cuba, including easing a limited number of trade and travel rules.
   Cuba represents a nice new market for American farmers, Vilsack said. 
   “When you’ve got a market 98 miles off your shore with a $1.7 billion potential – a market where the country absolutely depends on imports of food – it’s a market that ought to be dominated by the U.S. And unfortunately, until recently, we’ve made it very difficult to do business, certainly in the agriculture sphere. Those restrictions are being removed. So I fully anticipate with the rules that have been recently announced that we’re going to see a larger opportunity in the ag space. . . . And we’re going to show the Cuban people through the enormous diversity, quality and affordability of what we can provide that our system is a better system overall,” said the former Iowa governor.
   Pritzker, in a taped interview with Al Jazeera America’s “Real Money” program from the World Economic Forum that aired Monday, said agricultural trade with Cuba has been hamstrung for almost 60 years. “Last year we had $3 billion worth of licenses to the Department of Commerce for agriculture products to be sold to Cuba. Only about 10 percent of that ever happened because it’s so hard to actually pay for the goods,” she said.
   New banking rules and other changes will make that trade easier, the Commerce Secretary added.
   The new rules will make it easier to sell electronic equipment and consumer goods to Cuba, she said.
   “Only 5 percent of Cubans have access to broadband. The new regs will allow access to telecommunications infrastructure to be put in place, as well as the sale of personal computers, software, mobile phones and televisions. So this is going to create much greater information sharing, which has a positive influence” on exposing Cuban society to American values, she said.
   The new allowance for Cuban-Americans to send $8,000 per year in remittances to family members will enable more of this spending to take place, Pritzker noted.
   Pritzker said she plans to travel to Cuba later this year with a group of American CEOs to get a better understanding of the opportunities there.
   But the U.S. can only grow trade to the extent allowed by the condition of its highways, ports, railroads, inland waterways and airports, Vilsack said.
   The nation needs a five-year surface transportation spending plan, similar in length to the Farm Bill, to make the necessary infrastructure investments and provides states and business with the certainty to make their own investments in new capacity, he said.
   “Farmers in this country know what the rules are going to be for the next five years, they can make decisions about expansion because they know what the safety net is going to be, they know what the programs are going to be. We need that same kind of commitment on the transportation side,” Vilsack said. “If we did, we’d be more efficient getting goods to market. We’d be more competitive.”
   Congress is expected to debate a long-term reauthorization of surface transportation programs this session, after passing multiple short term extensions in recent years. The two-year MAP-21 legislation expired last summer and was extended for nine months until the end of May. Congress will have to find money in the budget to keep the programs at their current level because the Highway Trust Fund is no longer self-sustainable. The HTF is primarily funded through gasoline and diesel fuel taxes, but is losing ground relative to construction needs because of inflation and more fuel-efficient vehicles. The gas tax has not been adjusted since 1993 and a longer bill hinges on finding new sources of revenue for the HTF, which so far has proven politically impossible for lawmakers.
   The U.S. freight transportation system gives U.S. companies, especially exporters, an advantage in doing business around the world because products can be shipped to market quickly and inexpensively. But Vilsack said the U.S. lead is slipping away as other countries invest in better ports, rail systems and airports.
   “The result is that the competitive advantage we have will dissipate. And once we lose it we’ll have a very difficult time getting it back,” he said.

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