Keeping International Trade in Front of California Businesses

As the Biden administration and 118th Congress are about to begin work in January 2023, post the mid-term election, the California Chamber of Commerce is communicating its international trade priorities and support for working together to secure a national free trade agenda. International trade has been stifled over the last several years due to the ongoing COVID-19 pandemic, protectionist policies, global shipping crisis, the war in Ukraine and now inflationary pressures. It is as important as ever for all to understand the significance that trade provides to our economy.

Trade a California Priority

Although trade is a nationally determined policy issue, its impact on California is immense. California’s economy is more diversified than ever, and the state’s prosperity is tied to exports and imports of goods and services by California-based companies, to exports and imports through California’s transportation gateways, and to inflows and outflows of human and capital resources.

California exports to approximately 226 foreign markets. Promoting the ability of California companies to compete more effectively in foreign markets continues to be a high priority for the CalChamber, along with attracting foreign business to the state.

As reported by the U.S. Department of Commerce, California maintained its perennial position as a top exporting state in 2021. California exports amounted to $175.12 billion, accounting for almost 10% of total U.S. exports. California’s top export destinations are Mexico, Canada, China, Japan and South Korea.

Given the importance of exports to the state’s economy, the CalChamber supports expansion of international trade and investment, fair and equitable market access for California products abroad, and elimination of disincentives that impede the international competitiveness of California business. Our goals in the coming year include the following:

• Trade be seen as a priority.
• Revamp World Trade Organization to support efforts to ensure our trading partners adhere to fair and transparent trade practices, while being held accountable when they violate international rules. 
• Focus on lower tariffs & non-tariff barriers to support expansion of American exports. Raising tariffs can result in higher prices to the consumer for the specific product protected and in limited choices of products for consumers. Further, it can cause a net loss of jobs in related industries, retaliation by U.S. and California trading partners, and violates the spirit of our trade agreements.
• Renew Trade Promotion Authority to enable US to easily pursue new trade deals.
• Advance bilateral, regional, and multilateral trade agreements which are critical to consumers, workers, businesses, farmers, and ranchers.

Issue Areas

The Americas

In June 2022, Los Angeles hosted the Ninth Summit of the Americas for 23 Western Hemisphere leaders, after being postponed due to the pandemic. There were a few absent from the gathering, including the presidents of Mexico, El Salvador, Honduras and Guatemala who opted to not attend due to the White House not inviting Cuba, Nicaragua and Venezuela to participate.

The theme of the summit was “building a sustainable, resilient and equitable future” and allowed attendees to discuss common policy issues, affirm shared values and commit to concerted actions at the national and regional levels to address continuing and new challenges facing the Americas.

This was the first time the U.S. has hosted the meeting since the inaugural summit held in Miami in 1994. The summit, which takes place every three years, is the only one of its kind that brings together leaders from all countries in North, Central and South America and the Caribbean.

At the Ninth Summit of the Americas, President Biden announced his “new and ambitious economic agenda” called the Americas Partnership for Economic Prosperity which will aim to mobilize new investment into the region, fortify supply chains, promote decarbonization and biodiversity, facilitate inclusive trade and update the “social contract” between governments and their people.

Trans-Pacific Relations

The Indo-Pacific region represents nearly half of the Earth’s population, one-third of global gross domestic product (GDP) and roughly 50% of international trade. The large and growing markets of the Indo-Pacific already are key destinations for U.S. manufactured goods, agricultural products, and services suppliers.

Despite the Indo-Pacific region’s growth, over the last decade, growth in U.S. exports to Asia has trailed overall U.S. export growth. The United States is gradually losing market share in trade with Asian countries.

Meanwhile, Indo-Pacific countries have signed more than 150 bilateral or regional trade agreements, while the United States has just four trade deals in the Indo-Pacific region — with Australia, Singapore, South Korea and Japan.

President Biden launched the Indo-Pacific Economic Framework (IPEF) negotiations with 12 other countries in May 2022. The IPEF is not a traditional trade agreement in that it seeks to improve trade relations by reducing “behind-the-border” trade barriers; leaves enforceability intentionally vague; and does not guarantee that the agreement won’t be voided if a new administration takes over in 2024.

The official statement states this framework is intended to advance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness and aims to contribute to cooperation, stability, prosperity, development, and peace within the region.

The first IPEF ministerial took place in September 2022 with a goal of finishing negotiations within the next 18 to 24 months, coinciding with the U.S. hosting of the annual Asia-Pacific Economic Cooperation (APEC) Leaders’ Summit at the end of 2023.  

The U.S. is the 2023 host for the Asia-Pacific Economic Cooperation (APEC). California will host two of these APEC 2023 meetings, one in Palm Springs, and the other the APEC Leaders’ Summit which, as recently announced, will take place in San Francisco in the Fall 2023.

The APEC forum was created in 1989 to serve as a multilateral platform where Asian and Pacific economies can solve economic problems and cooperate in developing key economic sectors. The 21 APEC economies are home to 2.9 billion people and represent approximately 60% of world GDP, and 48% of world trade as of 2018.

Following the U.S. withdrawal from the Trans-Pacific Partnership (TPP), a highlighted focus on the Indo-Pacific region is welcomed, as this is a key area in geopolitical, strategic, and commercial terms.

The end of 2022 sees a renewed push for the Biden Administration to consider re-entering the now Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP), arguing that a revamped agreement would fit current political realities and that the new IPEF does not do enough to combat China’s influence in the region. Re-engagement in the TPP/CPTPP could be beneficial for California, which in 2021 exported $72.39 billion to the CPTPP member countries.

Trans-Atlantic Relations

California is a top exporting state to Europe. EU countries purchase roughly 15% of all California exports. For California companies, the single market presents a stable market with huge opportunity.

Although the Biden Administration has shelved the notion of free trade agreements, a U.S.-EU Trade and Technology Council has been established to advance trans-Atlantic cooperation and democratic approaches to trade, technology, and security.

The U.S.-United Kingdom investment relationship is the largest in the world creating about a million jobs in each country. The UK is the second largest source of foreign direct investment into California with wages totaling $9.36 billion in 2021.

Although the United States does not currently have plans to continue negotiations with either the EU or the United Kingdom, the CalChamber is supportive of the United States continuing trade talks with both economies. In fact, the United Kingdom is pursuing a state-by-state approach to building closer trade ties with the United States while the Biden administration has shown little interest in negotiating new free trade agreements.

U.S. Strategy Toward Sub-Sahara Africa

Sub-Saharan Africa will be 25% of the world’s population by 2050.  Sub-Saharan Africa is home to the world’s second largest rainforest and 30% of the world’s critical minerals.  California exported $705 billion to the region in 2021.

In August 2022, the Biden Administration announced the new U.S. Strategy Toward Sub-Saharan Africa to reframe the importance of the region to the U.S.’ national security interests. The strategy aims to advance U.S. priorities together with regional partners over the next five years outlining four objectives: foster openness and open societies; deliver democratic and security dividends; advance pandemic recovery and economic opportunity; and support conservation, climate adaptation and a just energy transition. 

The Biden Administration hosted 50 delegations, representing 49 countries and the African Union in December 2022 in Washington, DC to demonstrate the U.S.’ enduring commitment to the region, with goals that include building on shared values and foster new economic engagement.

The California Chamber of Commerce believes that it is in the mutual economic interest of the United States and sub-Saharan Africa to promote stable and sustainable economic growth and development in sub-Saharan Africa and that this growth depends in large measure upon the development of a receptive environment for trade and investment.

Fostering Understanding of International Trade

To help create an international atmosphere among CalChamber members, the CalChamber serves as a clearinghouse for exchanging information on international trade, and promotes international trade and investment opportunities for California businesses through a variety of services.  www.calchamber.com/international.