Kantor: U.S. Trade Reform Critical To Economic Recovery, Protection of Environment

Mickey Kantor

In his remarks at the 2009 VerdeXchange Green Marketmakers Conference in Los Angeles, Former U.S. Trade Representative and Commerce Secretary Mickey Kantor advocated policy changes at the federal and international level to better focus on trade as the driver of long term economic and environmental sustainability. Secretary Kantor was joined on the plenary panel entitled “Are California’s Climate Change Initiatives a Roadmap for the New U.S. Administration and Congress?” by former U.S. Commerce Secretary Norm Mineta, Rep. Earl Blumenauer (D-Oregon), and California Assembly Speaker Emeritus Robert Hertzberg. Also in attendance at the conference, in addition to private and public cleantech executives, were 11 foreign consulate representatives.

Mickey Kantor: In the past, trade, sustainability, and the environment ran on separate tracks in the economy. Early on, we thought we could deal with them separately and independently and still accomplish our agenda. We realized that in an interdependent world we couldn’t do that. We were pursuing truly brain-dead politics and policy. Thankfully we have all come to that realization after about 15 years of fighting.

In October of 1992, in a speech at North Carolina State, Bill Clinton suggested for the first time in history that we put environmental considerations and standards into trade agreements. A lot of our friends around the world thought we were a bit daft. They said we shouldn’t do it. No one has ever done that. It sounded like protectionism to them. Frankly, after 16 years and an awful lot of discussion, we are there—with our Japanese friends, our Europeans friends, and with people all over the world.

$11 trillion in goods, services, and capital flow around the earth in trade every year. The majority of our Fortune 500 receives more revenue from outside the United States than from inside the United States. Trade has grown twice as fast as our global economy in the last 15 years. This is astonishing: Since the 1960s, our world economy has grown four times. That has taken a lot of people out of poverty. Trade has grown 12 times.

In doing that, we have forgotten sustainability for too many years. We cannot have effective global growth, build the jobs that we need, live in the societies that we want, and protect our earth unless we use what we have done in trade and international interdependence to make the kind of progress we want to make, not only internationally, but also nationally and even locally.

Just remember that California is probably the sixth largest trading nation on the face of the earth. The ports of L.A. or Long Beach create more employment than any entity in all of Southern California. They are the biggest employers, direct and indirect, of any area in Southern California. They provide two to three million jobs all over the United States. We ship to every state in the union. The ports are an enormous economic vehicle. Under Mayor Villaraigosa and David Freeman, the ports have done a terrific job with the Clean Air Action plan, trying to deal with the ships, trucks, and trains to clean up the ports and make sure that we are sustainably growing jobs, growing our economy, and maintaining the vital role those ports play.

At the same time, there was great cynicism 15 years ago when we started those discussions about putting environmental consideration in trade agreements. There was not just skepticism; there was cynicism. It was not thought to be part of trade. Trade is subject to tariffs and subsidies—protecting intellectual property and protecting investments. We have information technology agreements, a telecom agreement, and financial services agreement—everything but protecting the environment and labor...

Short term obstacles for the economy confront us right now: We have fewer dollars for new technology, for capital expenditures, for loans, and for creating jobs. But we cannot forget that we can grow green. These are not contradictory notions. The president made a tremendous start this morning by beginning to allow California to control its tailpipe emissions along with 14 other states. It’s an enormous step forward. It’s also an enormous step forward to provide money to convert two million homes to solar or renewable energy. It’s an enormous step forward to do something about the electric grid. It’s an enormous step forward to put smart meters on every house that we can in the United States. We are making progress.

In the area of trade I would suggest four or five things to really make a difference over the next number of years: It is not helpful that we still have tariffs on the international transfer of clean energy technology. We ought to get rid of all tariffs all over the world on the transfer of clean energy technology, whether it is from or to the United States, whether it is from or to Japan, whether it is from or to China.

We should eliminate other barriers as well. We ought to set up special trade zones both here and around the world to provide benefits to companies who are developing green technologies by simplifying their import or export procedures. They should have enhanced protection for intellectual property and we should give them tax incentives.

Third, we ought to set up with the Quad what I would call the largest think tank research and development organizations in the world. The Quad is a trade term for Europe, the U.S., Canada, and Japan in combination with China. We need scientists in all of those countries to build trust and work together on new fuels, carbon sequestration, and to work out nuclear safety programs, both in terms of waste disposal and of dealing with terrorism. We need to make agreements with oil exporters for rules against cartels as well. This international research institution would be funded with about $10 billion a year, which would be quite cheap with all the countries involved.

We need a new Kyoto. We need it desperately. We need it to have teeth. The World Trade Organization, which many of you look at with some skepticism, has the only mechanism in any international agreement in the world that works. We should have tied Kyoto to the WTO so anyone who violates the obligations and responsibilities under Kyoto would face trade sanctions under the WTO. That would work. Nothing gets the attention of any nation more than when you start to say, “you can’t ship your goods or services into another nation because you violated your obligations and responsibilities.”

Last, we ought to restrict imports from countries and industries that don’t enforce to protect their environment in industries ranging from chemicals, metals, papers, concrete, and other areas.

If we just started with those five things, we would make an enormous impact. When you combine them with what President Obama is doing and what Governor Schwarzenegger is doing here in California, we actually can live up to our responsibilities, make huge progress, and protect this earth for my grandchildren and their children...With all of your brainpower and your impact, we can make a difference.

Exclusive VerdeXchange News Interview

VerdeX: You spoke at the VerdeXchange Green Marketmakers Conference about the importance of international trade. What does the future hold for international trade?

Kantor: If we are going to recover, it is going to be led by increased trade. The more interdependent that we become as a world, the more it is going to require trade to bring us out of these crises. To the degree we restrict trade, we make it more difficult to solve the problem.

Everyone is affected. But most poignantly, those who are the poorest and the least developed are most affected. We worry about the U.S. economy, as we should. We look at Europe and see that they are in worse shape than the United States. Japan’s growth dropped by 12.3 percent in the last quarter. Even China’s growth is down from 11.4 percent to 6.8 percent growth. China needs 8 percent growth just to create enough jobs each year to maintain a stable workforce. The poor get hurt the worst, and they have been forgotten in all of our concern about how we are going to do to dig our way out of it.

My experience tells me that only the U.S. can lead the world out of this kind of financial crisis. Only the U.S. has a large enough gross domestic product and consumer society to create enough trade to help the Europeans, the Japanese, the Chinese, the Brazilians, the Indians, the South Africans, and others around the world, to deal with this.

I hope that the April G-20 Conference will yield a coordinated approach. That would make a huge difference at this point with everything from mark-to-market accounting, short selling, buying toxic assets, increased stimulus, to setting up so-called “bad banks” to hold these assets.

VerdeX: What are the central challenges for leadership and the prospects for California quickly recovering from the current global economic crisis?

Kantor: I am always buoyed by the creativity, innovation, and entrepreneurship here in California. Californians are a special breed of people. There is a self-selection here. People came here in droves after the Second World War because they saw opportunity. It attracted—and continues to attract—a certain kind of person who is unafraid, believes in a meritocracy, is willing to take a chance, and is even willing to fail in order to pursue their dream—much more than another other state in the country and maybe more than any other place in the world. That attracts me to California.

But what worries me about California is what worries everyone. The infrastructure needs updating; the educational system is a real challenge. We’ve done well with energy use per capita in California but we need to do better. We face a $42 billion deficit over a two-year period. What is going to have to happen is that those with resources are going to have to pay more in California. There is no other way out of it. That also means we have to grow our way out. We have to promote business and build public-private partnerships. There is no other answer, other than those who have done the best and who have taken advantage of this great state are going to have to pay more. I say that because people have to quit complaining. We are the lowest taxed people of any developed country in the world. We have the lowest tax, not the highest. It’s time for those of us who have been fortunate and luckier than we have any right to expect to pay more to bring us out of this situation. Californians will respond to that.