February 13, 2006
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Remarks of U.S. Treasury Assistant Secretary for International Affairs Clay Lowery before the National Center for the Asia-Pacific Economic Cooperation

Seattle, Wash. – Thank you for having me here today.  This is my first visit to Seattle since I was confirmed last fall as the Assistant Secretary for International Affairs at the Treasury Department.  In that job it is my responsibility to help represent the economic interests of the American people to the world.

 I especially appreciate the opportunity to speak at the National Center for APEC.  APEC is the cornerstone of American involvement in Asia.  The rest of the country is coming to realize what the Pacific coast has long known, our economic relationship with Asia is critical to our economic strength and prosperity.  As competition from Asia increases, it is all the more important that America implements the right policies here at home.  Turning to isolationism and retreating behind protectionist trade barriers is not the answer.

 In his State of the Union Address two weeks ago, President Bush set out a positive agenda for America in a competitive global economy.  I am here to echo that same message so that there will be no doubt that America can and will compete with confidence and extend our economic leadership in the world.

First, let's take stock of where we are.  The American economy is healthy and growing.  In the last two and a half years, the economy has created more than 4.7 million new jobs – more than Japan and the European Union combined.  The unemployment rate has fallen to 4.7 percent – lower than the average for the 1970s, 1980s, and 1990s.  And GDP growth was a solid 3.5 percent in 2005 while core inflation remains low. 

When you look at the underlying fundamentals of the economy, it's plain to see that this strength is deep and solid.  Productivity growth is strong, growing 3.2 percent since the end of 2000, which is faster than any five-year period in the 1970s, 1980s, or 1990s.  Inflation-adjusted hourly wages are growing – registering over 1.5 percent between September and December, a trend that is expected to continue.

Household net worth – that's assets minus debts – is at a record high, and not just because of housing.  Deposits – the money in checking accounts, savings accounts, and money market funds – are at a record high and are larger as a share of disposable income than at any time since 1993. Defaults on residential mortgage loans at commercial banks are at historic lows.  

In the State of the Union address the President laid out a broad agenda for maintaining this strength, including: reducing health care costs; improving education; reforming our legal system; breaking America's dependence on oil; reducing non-security, discretionary spending; and making the tax cuts permanent. 

To provide one example, a centerpiece of American competitiveness is our rapid development and adoption of technology to improve efficiency and create entirely new fields of human industry.  Here in the Pacific Northwest you know a bit about technological innovation.  To support the innovative heart of the American economy, the President has announced $5.9 billion in his 2007 Budget to increase investments in research and development, strengthen education, and encourage entrepreneurship.  These investments in things like basic research will help keep America on the technological cutting edge.

In addition, the President emphasized the importance of reforming our immigration system and opening markets for American trade.  Let me discuss each of these in more detail.

On trade, this Administration has pursued an aggressive bilateral and multilateral agenda for opening new markets to American goods and services.  The Treasury Department is a full participant in the Administration's trade agenda, focusing on services, especially financial services where we have the lead responsibility within the U.S. government. 

The first five years of the Bush Administration have seen a rapid expansion of America's trade liberalization efforts.  In 2001, the U.S. was party to only a handful of free trade agreements.  Today we have completed or are in serious negotiations for FTAs with over 30 countries, including several in the Asia-Pacific region.  We have signed FTAs with Australia and Singapore and are working toward an agreement with Thailand.  Washington is witnessing firsthand the benefits of free trade, with Singapore becoming one of the fastest growing export markets for the state's goods and services.  And just two weeks ago we announced that we are starting negotiations with South Korea, America's seventh largest trading partner. 

The fact is that these agreements are creating export opportunities for Americans and lowering the costs of imports for Americans here at home.  U.S. exports to FTA partners grew at an average annual rate of almost 21 percent between 2001 and 2005, while exports to non-FTA partners grew only 10 percent over that period. 

While we continue to pursue openings bilaterally and through regional agreements like the Central America Free Trade Agreement, we are also focused on making progress in the WTO's Doha Round of trade negotiations.  To put the importance of the Doha Round to the American economy into context, the University of Michigan recently did a study showing that if the Doha round is successful, there could be a dramatic impact on annual incomes here in the United States.  The study concluded that if we eliminate trade barriers all together that a family of four would see a $7,500 per year increase in their income.  If we were to just reduce barriers by one-third, then we would have a $2,500 annual income gain for an American family of four.

The reason for these benefits is that America can compete with anyone in the international economy, and we are especially competitive in services and manufacturing.  In services we have almost a $50 billion surplus.  In the Asia-Pacific region alone, sales of services by foreign affiliates of U.S. multinationals have more than doubled since 1996. 

At Treasury, we take the lead on promoting financial services in the Trade Agenda.  Financial services account for over 8 percent of U.S. GDP – more importantly, financial services have grown in importance by roughly 70 percent since 1980.  For this reason, Treasury continues to pursue an the lifting of sector caps to allow more competition from U.S. industry in places like China, India, Korea, and Thailand.

With a comparatively low average tariff on manufactured goods of about 4.5%, we have very little to give up and a great deal to gain from increased liberalization.  The United States continues to be the number one exporter of manufactured products in the world.  The state of Washington is the fifth largest merchandise exporter in the country and export-related jobs account for one in nine jobs in the private sector here. 

There is still a great deal to be done to complete the Doha Round, but this Administration is committed to success, because all the American worker needs to succeed is a level playing field.

In conclusion, there are a lot of reasons to be optimistic about the American economy.  The government is doing its part, making sure that the fundamentals for growth are in place and keeping the burden of taxation low so the rewards for risk taking remain high.  As the President has said, Americans should not fear the future, because we are shaping it. 

Thank you, I'd be happy to take a few questions.

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