The Comeback (12 page)

When it comes to the Constitution, we don’t need new policy suggestions for innovation; rather we need a recognition that it is because of the Constitution that we have the structure and incentive in this country to innovate. Although the founders could not foresee the world we live in today, they knew enough to know the
tools we would need to thrive as an innovative nation, which are the same tools they used. The First Amendment and copyright law derive from our unique history, from our grounding in English law and our start as rabble-rousing revolutionaries spreading our subversive messages. It is our job to protect these twin tools of innovation in our own time, to oppose legislative attempts that give an industry or company unfair advantage, and to make sure our judicial branch upholds the original intent of the Constitution.

The ongoing conflict between copyright laws and our First Amendment will continue to wage. It is a testament to the system of innovation our founders created over 200 years ago, which they inherited from even older generations. Freedom of speech and copyright laws are both necessary for innovation. Both are necessary for the “fire of genius.” And both should be embraced by society.

Bloomberg
, June 14, 2010

Canadian lawmakers today approved a free trade agreement with Colombia, a move that may give its agricultural producers an advantage over U.S. competitors in the Latin American country . . . “In adopting this free trade agreement, Canada will be in a very strong competitive position vis-à-vis our other competition around the world and this will mean a great deal to our agricultural sector,” Canadian Trade Minister Peter Van Loan told reporters earlier today.

Colombian Trade Minister Luis Guillermo Plata said in an April 28 interview that Canadian exporters may gain as U.S. lawmakers delay approval of their free-trade agreement . . . “Many of the things that we buy from the U.S. we could buy from Canada and we could buy tariff-free,” Plata, 42, said in the interview . . .

Prime Minister Stephen Harper’s governing Conservatives have made strengthening ties with Latin America a priority in an effort to broaden markets for Canadian commodities and reduce the country’s dependence on the U.S. economy.
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The Wall Street Journal
, Sept. 17, 2010:

BRUSSELS—European governments Thursday approved a free trade agreement with South Korea, the world’s 12th-largest economy. With bilateral trade at $74.3 billion last year, it is one of the biggest free trade deals ever between two economies . . . Starting [July 1, 2011], tariffs will be phased out on 96% of European and 99% of South Korean goods within three years. All levies on industrial goods will be eliminated within five years.

The deal is a coup for EU trade negotiators. The EU started talks with South Korea in 2007, the same year as the U.S. Fearing a protectionist backlash, however, the administration of U.S. President Barack Obama hasn’t yet presented the U.S.–South Korea free trade agreement to Congress . . . According to EU estimates, the deal will generate an additional $25 billion of additional exports for EU producers. It will likely be in the high-technology industrial sectors where Europe is strong. Top EU exports to South Korea in 2009 were nuclear machinery and parts, $8.6 billion, electronics, $3.4 billion, and cars and trucks, $2 billion.

“The European Union is the world’s No. 1 economic bloc and South Korea’s second-largest trading partner,” South Korea’s Ministry of Foreign Affairs and Trade said in a statement. “The pact will bring about economic benefit more than a free trade pact signed with the U.S.”
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In March 2010, President Obama announced plans to double U.S. exports in five years. “Those who once would oppose any trade agreement now understand that there are new markets and new sectors out there that we need to break into if we want our workers to get ahead,” he said.
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The president made a direct call on Congress to pass the pending free-trade agreements with Panama, Colombia, and South Korea, which have been stalled in Congress since Democrats took control in 2006.

In July 2010, President Obama announced the creation of an export-promotion council, chaired by Boeing Chief Executive James McNerney and Xerox CEO Ursula Burns. “Ninety-five percent of the world’s customers and fastest-growing markets are beyond our borders. So if we want to find new growth streams, if we want to find new markets and new opportunity, we’ve got to compete for those new customers,” the president said.
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In September 2010, the president’s export-promotion council released a report recommending that the federal government expand its trade promotion efforts and finish work on the pending free-trade agreements. “The more American companies export, the more they produce. And the more they produce, the more people they hire, and that means more jobs—good jobs that often pay as much as 15 percent more than average.”
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Although the agreements were entered into by President Bush years earlier, President Obama has been consistent in indicating he wanted them passed. Unfortunately, in doing nothing to move them, so has Congress. Almost a year after the president announced his export initiative, the free-trade agreements are still pending. Meanwhile, as the above news stories make abundantly clear, the rest of the world is not waiting on the United States to get its act together in opening new markets for American goods.

Free trade is the conduit through which the world’s citizens are able to improve their standard of living. Free trade lowers the costs of goods for everyone and opens markets where none before existed. In today’s increasingly connected world, there is no justifiable reason a consumer can’t get a product from anywhere in the world with the click of a mouse.

As it relates to innovation, free trade vastly expands the market opportunities for U.S. tech companies, adding to economic growth and jobs. At home, Americans get lower-cost consumer technologies that enable them to innovate and create new businesses, Web sites, and content. When the cost of doing business is lower, the cost of starting a business is lower.

According to the Commerce Department’s Bureau of Economic Analysis, royalty and licensing fees paid to America’s innovators from overseas is on pace to reach $100 billion in 2010. Between 2003 and 2008, royalty and licensing fees paid to Americans doubled from $48 billion to $93 billion annually.
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Also, exports in other intellectual property–intensive industries nearly doubled over the same period. Income from exports of IT-related services, such as research and development and computer and database services, rose from $17.7 billion to just under $30 billion. Exports of medicines and pharmaceuticals rose from just over $20 billion to just over $40 billion.

But as long as these trade agreements remain stalled, U.S. firms trying to sell to potential markets like Colombia face higher tariffs than our competition. In September, Colombia announced that its 2010 exports will reach $40 billion and that it expects sales to double in the next four years.
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In addition to Canada, Colombia is also pursuing a trade deal with another U.S. competitor, Japan.

Moreover, Colombia’s domestic consumer electronics market was estimated to be worth $3.3 billion in 2008, and it is expected to reach $5.1 billion by 2013.
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These aren’t insignificant numbers. They reflect a growing economy in an economically strategic part of the world. Yet the U.S. is willfully cutting itself off from entering this new market.

The rest of the world wants American dollars. They want us to buy their goods. But they will also not pass on the opportunity to form a free-trade bloc with other nations to get a competitive advantage over the United States. The EU is doing this right now, as are several East Asian nations. Americans now face two powerful spheres of free trade, one in the EU and the other in Asia. Our shift toward protectionism and toward walls around our country will lead to devastating consequences for our economy.

Inaction on trade deals is already costing American jobs. According to C. Fred Bergsten, director of the Peterson Institute for International Economics, every $1 billion in addition exports produces about 7,000 new jobs. Writing in the
Washington Post
, Bergsten notes that passing the Colombian and South Korean agreements could save around 300,000 American jobs.
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The Wall Street Journal
story quoted earlier mentions that the EU–South Korean free-trade agreement will generate $25 billion in additional exports for EU producers. Talk about outsourcing. Keeping with Bergsten’s formula, the EU should expect to generate roughly 175,000 jobs with its South Korean trade deal alone.

Meanwhile, a U.S Chamber of Commerce report found that the United States’ existing free-trade agreements with fourteen countries in 2008 generated $304.5 billion in output (or 2.1 percent of U.S. GDP), expanded total U.S. exports of goods and services to the world by $462.7 billion, and supported 5.4 million U.S. jobs.
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The Chamber of Commerce also looked at what effect the failure to implement the pending free-trade agreements has had on the U.S. economy. It found:

Specifically, failure to implement the U.S. FTAs while our trading partners go forward with their FTAs would lead to a decline of $40.2 billion in U.S. exports of goods and services and U.S. national output failing to grow by $44.8 billion. We estimate that the total net negative impact on U.S. employment from these trade and output losses could total 383,400.
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Now take the 1994 North American Free Trade Agreement (NAFTA). In a humorous but telling flip-flop, during the 2008 Democratic primary debate, candidate Barack Obama spoke out consistently against NAFTA, even attacking his opponent, then-Senator Hillary Clinton, for her supposed support of the trade agreement. But then word leaked that one of Obama’s campaign advisors had spoken to Canadian officials to reassure them that Obama’s anti-NAFTA talk “should be viewed as more about political positioning than a clear articulation of policy plans.”
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Candidate Obama had to do some fancy campaign footwork to reassure his protectionist base that he opposed NAFTA. But nearly three years later, the Obama Administration hasn’t touched NAFTA. So perhaps the campaign advisor’s uncouth comment to the Canadians had been correct after all. Regardless, it’s no secret why the Obama Administration has no interest in “renegotiating” NAFTA, or any such other nonsense:

U.S. goods and services trade with Canada and Mexico totaled $1.1 trillion in 2008.

Exports totaled $482 billion; imports totaled $596 billion.

U.S. exports to Canada and Mexico in 2009 were $333.7 billion, up 135 percent from 1993 (the year prior to NAFTA).

It seems that President Obama has learned a thing or two since he was candidate Obama. Taking cheap shots at one of the greatest trade agreements in the nation’s history is easy on the campaign trail and helps please the base, but when confronted with the undeniable benefits of the agreement, it’s a little harder to keep campaign promises.