Thank you, Dean, for that kind introduction. And for the opportunity to discuss the Trump Administration’s trade policy and how it fits into our long-term goals for the country.
The Federalist Society has always advocated for informed debate and a commitment to our constitutional government. The overall goal of our administration fits perfectly within the Federalists’ Charter. Only by maintaining a strong and viable economy can Americans live freely under the rule of law, with guaranteed individual liberties, and a separation of powers.
Today, thanks to policies focused on rebuilding American industry, American jobs, American communities, and American prosperity, we are turning the tide toward a far more prosperous and hopeful future. But you’d never know it by listening to liberal politicians hell-bent on impeaching the most successful President since Ronald Reagan; nor to the left-wing media’s desperate efforts to frighten Americans into a recession.
In fact, the U.S. has the strongest economy of any major economy in the world. Our unemployment rate of 3.5 percent is the lowest it’s been since 1969.
Since the election of President Trump, the United States has added 6.4 million new jobs; including 500,000 in the manufacturing sector alone; and 136,000 new jobs in the month of September itself. Income and wages are up. Poverty is at the lowest level in almost two decades. The number of Americans needing federal food assistance has fallen by more than 10 million, from 44.2 million in 2016 to 33.7 million this year. Retail sales are up by 4.6 percent over the past 12 months. And, interestingly, the U.S. import price index fell by 2 percent over the past year, despite the fears that people had about the impact of tariffs.
Last Friday, the President announced phase-one agreement in principal with China. This would phase in $40 to $50 billion of agricultural purchases over a two-year period, more than twice our prior annual peak sales. It would also address some of the issues regarding intellectual property. The remaining structural issues and their enforcement remain to be negotiated. In return, the U.S. has agreed not to raise tariffs from 25 percent to 30 percent on October 15th. And, as a sign of good faith, the Chinese recently made substantial purchases of agriculture, especially soybeans and pork.
I believe that China came to the negotiations mainly because we imposed substantial tariffs on them, but also because of the personal relationship between President Trump and President Xi. Now, they naturally retaliated to the tariffs we put on. But because they sell us more than four times as many goods as we sell them, the given amount of tariff action means that they will run out of bullets before we do. And also, their economy is only 60 percent the size of ours, therefore a given amount of tariffed product hurts them far more than us.
Fear of tariffs also caused the EU recently to agree to buy more ag products from us; and to begin negotiations on other topics. And it is the reason why Japan agreed to buy more meat, and why the Koreans renegotiated KORUS.
The tariffs are now having a direct impact on Chinese producers and — perhaps more importantly — are accelerating the hollowing-out of Chinese supply chains. China already was suffering some manufacturing emigration because of rising costs. Companies have begun to move operations elsewhere in Southeast Asia, to Africa, and to North America. That will be hard to stop.
China’s problem with Hong Kong also hinders its economy, and may further accelerate an exodus of foreign producers. Last week, the Commerce Department added 28 Chinese governmental and commercial organizations to the Entity List. That list restricts the export of items used to target Uighers and other ethnic minorities. We have also responded to China’s Belt-and-Road Initiative with our new Indo-Pacific Strategy.
Last week, I was in New Delhi, Bengaluru, Singapore, Canberra, and Sydney to discuss with the Prime Ministers and other ministers of the three countries our engagement with them and with others in the Indo-Pacific Region. In November, I will be in Bangkok, Jakarta, Hanoi, and possibly other cities in the region.
Through the Belt-and-Road Initiative, China has invested in 117 nations, and those nations account for two-thirds of the world’s population. Their state-owned enterprises use Chinese materials and Chinese nationals to build projects with very little local content and, if defaults occur, they foreclose on those assets rather than renegotiating the loans.
For example, in Sri Lanka, China has already foreclosed the Chinese-built port in Hambantota. It has also taken control of natural resources such as cobalt mining in the Congo, and hydrocarbons in Venezuela. Belt and Road is also effectively a jobs program for China that eases some of the impact of tariffs on their domestic employment.
By electing President Trump in 2016, the American people instead demanded free fair and reciprocal trade. The Section 232 tariffs imposed by the Department of Commerce are part of that strategy.
Prior to the imposition of the 232 tariffs in March of 2018, both the U.S. aluminum and steel industries were on the verge of collapsing. Now, utilization rates have improved noticeably, and $13 billion of vital expenditures have been committed to expanded and modernized capacity, including $1.3 billion from an Indian steel company.
Now that our corporate tax system and regulatory environment are so business-friendly, foreign companies are more eager than ever before to invest in our market. We have the largest foreign direct investment stock of any nation, totaling $4.3 trillion.
To foster rapid growth in FDI, I and other Commerce executives constantly speak to business leaders around the world. And every June, we host the SelectUSA conference here in Washington, a three-day summit promoting foreign direct investment. Last year, this event attracted 3,100 participants.
We have also created a ReSelect USA initiative to encourage American companies to re-select the United States as their domestic and export manufacturing hub.
And last, but not least, the Trump Administration aggressively pursues bilateral trade deals. We have signed an initial trade agreement with Japan that opens that market to U.S. farmers, and should generate $7 billion in sales. That’s about 40 percent of the ag trade we lost to Chinese retaliation.
The Japanese trade pact also will facilitate $40 billion in bilateral trade between the U.S. and Japan in digital services. This is close to 90 percent of what we would have achieved from the Trans Pacific Partnership, yet without the harmful TPP concessions that the U.S. would have made to other countries besides Japan.
And this is the third major trade deal announced by President Trump in less than three years, a remarkable achievement, since trade agreements normally take many years — often more than a decade — to execute. For the record, the other two agreements are the Korea Free Trade Agreement and the U.S. Mexico Canada Agreement, which is pending congressional approval.
Let me conclude by talking about the situation in Turkey. Yesterday, President Trump announced two actions against Turkey that involve the Department of Commerce. We are raising their steel tariffs back up to 50 percent, from the current level of 25 percent.
Turkey is the 8th largest steel producer in the world, and steel was about its largest export to the United States before the tariffs. Its exports of steel to the U.S. surged 303 percent — from 10,000 metric tons per month to 42,000 per month — when we dropped the tariffs originally back to the 25 percent.
The President also directed the Department to cease work on the plan we had been developing with the Turkish government to expand our bilateral trade from the current $20 billion annual total to $100 billion over the next few years. Already, 1,700 U.S. businesses operate in Turkey.
In September, I had traveled to Istanbul and Ankara vetting the detailed plan with leading Turkish businesses and government officials. The three major business associations there all endorsed it, and one of them hosted a large celebratory dinner at Cipriani on 42nd Street in New York City during the UN General Assembly week in September.
If achieved, the plan would increase Turkish GDP by 4 percent; and provide more than 150,000 direct jobs. The plan always was contingent on resolving the military differences between our two countries. These now include the incursion into Syria.
It would be an excellent time for Turkey to break into global supply chains in a big way, as many companies are reassessing their earlier decisions to concentrate so much on China. But there will be a cost to the Turkish economy if present military practices continue. Turkey will bear the costs of the war, and forego the potential trade benefits.
In conclusion, the Trump Administration is focusing more intently on trade than any prior administration. There are some short-term costs associated with this shift, but there are much greater long-term potential and probable gains. Millions of Americans have demanded that we put their interests first. That is what we are doing, and that is what we will continue to do.
Thank you, and I appreciate the Federalist Society’s discussions about these issues. They are critical to the health and preservation of our democracy.