Thank
you, Philippe, and thanks to Le Centre International for organizing this
timely forum. I am pleased to be here to discuss a multitude of
opportunities for new business development right in our neighborhood.
In
this instance, however, I am not referring just to St. Martinville or Lake
Charles or even our neighboring states of Texas, Arkansas, or Mississippi.
Instead, I am referring to our closest international neighbors: Canada,
Mexico, and the Central American countries of Guatemala, Honduras, El
Salvador, Costa Rica, and Nicaragua, plus the Dominican Republic in the
Caribbean.
One
year ago, those five Central American countries, the Dominican Republic,
and the United States signed a comprehensive free trade agreement, often
referred to as CAFTA. The agreement negotiated by the Bush administration
with those countries has been submitted to the U.S. Congress for approval.
On June 30 it was approved by the Senate and is awaiting a final vote in
the House. I will discuss CAFTA and its main provisions shortly.
First,
though, let's take a quick look at the United States' trade growth with
each of these international neighbors - Canada, Mexico, and Central
America - whose principal cities are located only 1,000-1,500 miles from
Louisiana, which places them within just three hours' direct flying time.
Canada
has long been the United States' top export market worldwide and Mexico
has moved up to the number two position. It may surprise you to learn that
despite their relatively small size, the six CAFTA economies together
represent an important export market for U.S. goods and services. In fact,
in 2004 the CAFTA region, at $16 billion, ranked as the U.S.'s 12th
largest export market, which was a greater volume of U.S. export sales
than to vastly more populated and industrialized Russia, India, and
Indonesia combined.
As
for Louisiana exports to those countries, Mexico is now the state's third
largest market, with $1.9 billion of sales in 2004 (after Japan and
China), while Canada is fourth with $1.4 billion, and the CAFTA region
ranks a close fifth with $1.2 billion. It also may surprise you to know
that Louisiana's exports to the CAFTA countries in 2004 were equal to the
state's exports to Germany, the United Kingdom, France, and Italy
combined. In comparison with other U.S. states, Louisiana ranked first in
agricultural exports and fourth in total merchandise exports to the CAFTA
countries last year.
Broken
down by industry, the top Louisiana exports to the CAFTA market in 2004
were agricultural products, processed foods, petroleum and coal,
chemicals, paper, machinery, and transportation equipment.
The
prospects for further growth of Louisiana's exports to the CAFTA region
are excellent. In fact, I believe Louisiana is better positioned than any
state in the country to take advantage of CAFTA's benefits. I also firmly
believe that the potential benefits of CAFTA to the Louisiana economy are
the greatest of any of the seven free trade agreements that the U.S. has
signed since NAFTA - the North American Free Trade Agreement with Canada
and Mexico - went into force in 1994.
With
respect to NAFTA, let's take a look at the results to date for the U.S.
and Louisiana and see how we have fared in our trade with Canada and
Mexico under this historic agreement. Since it took effect, U.S. exports
to the NAFTA market have doubled from $142 billion in 1993 to $300 billion
in 2004, while Louisiana's exports to Canada and Mexico have more than
tripled during that period, going from $946 million to $3.3 billion. The
state's export sales to Mexico alone have almost quadrupled, rising from
$501 million in 1993 to $1.9 billion in 2004. And as a share of its total
worldwide exports, Louisiana's sales to the NAFTA region have jumped from
6% in 1993 to 17% in 2004.
Now
let's turn to CAFTA, where accelerated trade results are also expected if
this agreement is approved. CAFTA was signed by the six countries and the
United States one year ago, and all the respective legislatures must
approve it to take effect; Guatemala, Honduras, and the Dominican Republic
have already done so. In the United States, both Houses of Congress must
approve CAFTA in an up-or-down vote with no amendments. The Senate did so
on June 30 by a vote of 54 to 45, and now it has moved to the House of
Representatives, where it is expected to be voted on soon.
The
basic objective of CAFTA is to eliminate tariffs and other trade barriers
and expand regional opportunities for the manufacturers, workers,
consumers, farmers, ranchers, and service providers of the participating
countries. At the moment the playing field is not level, however. The
CAFTA countries already enjoy duty-free access into the United States for
80% of their exports (99% for agricultural products) under the Caribbean
Basin Initiative and other unilateral preference programs, while U.S.
goods exported to the CAFTA countries face significant tariffs and other
barriers.
The
CAFTA agreement will rectify this imbalance and open up the CAFTA markets
to U.S. goods, services, and farm products. In fact, the tariffs on more
than 80% of U.S. exports of consumer and industrial products and 50% of
our agricultural products exported to the CAFTA countries will be
duty-free immediately upon implementation of the agreement, with most
remaining duties phased out over 10 years (up to 15-20 years on certain
agricultural products).
The
best prospects for Louisiana exports to the CAFTA market include
chemicals, plastics, paper, industrial machinery, transportation
equipment, processed food, rice, cotton, soybeans, meat, and poultry
products.
As
noted earlier, I believe Louisiana stands to benefit from CAFTA more than
any state in the country because of our geographic proximity to the region
and also because of Louisiana's magnificent deepwater port system. This
system is the world's largest port complex in terms of total waterborne
commerce and is connected to over 30 Midwestern states. The Mississippi River is
truly the Avenue of the Americas, an awesome water highway leading
straight south to Mexico, Central America, and South America.
International
trade and transportation have been the lifeblood of Louisiana for nearly
300 years. Trade helps grow our economy, supports well-paid jobs, and
lowers prices for consumers. Over 3,000 companies in Louisiana are
currently engaged in exporting, most of them small and medium-size
enterprises. Dr. Tim Ryan, now Chancellor of the University of New
Orleans, estimated in a 2001 study for the Ports Association of Louisiana,
that Louisiana's maritime industry accounts for over 240,000 jobs, or
about one in eight in the state, and has an economic impact exceeding $29
billion.
In
a separate study for the Port of New Orleans in 2004, LSU economist Jim
Richardson projected that the passage of CAFTA will generate new business
sales for Louisiana of up to $338 million and up to 2,700 new jobs.
One
need only look around this state to see the wide range of opportunities
for our manufacturers, our farmers, our other businesses, our banks and
other providers of international trade services, our ports, our
universities, our medical centers, our tourism industry, and many other
sectors of the Louisiana economy.
At
the same time, we understand the concerns of the domestic sugar industry
and their fear that this agreement and the small increases in imported
sugar granted to the CAFTA countries will lead to more free trade
agreements that include sugar. However, the Bush administration has made
it clear that this agreement stands on its own and is not a template for
future U.S. free trade agreements with other countries.
Under the terms of
CAFTA an additional 109,000 metric tons of sugar from the CAFTA countries
would be allowed into the U.S. market of 10 million tons in the first year
of the agreement (about 1% of domestic consumption), which would grow
slowly to 153,000 tons over 15 years (1.7% of consumption). Most analysts
predict that CAFTA will have little impact on the sugar industry given
these relatively small amounts of additional imported sugar and other
safeguards for sugar that are built into the agreement and the U.S. sugar
program in prior legislation.
On
balance, we believe that CAFTA offers a multitude of benefits and
opportunities for the United States and Louisiana to establish new
business alliances with our longstanding friends and neighbors in Central
America and the Dominican Republic. This bold initiative by the President
deserves approval by Congress. We therefore urge the Louisiana members of
the House of Representatives to vote in favor of its passage.
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