Representatives from the Asia Pacific Council of American Chambers of Commerce (APCAC) recently gathered in Washington to discuss economic issues impacting the 14,000 American businesses operating throughout the Asia-Pacific region. We came from such diverse countries as Malaysia, Singapore, Japan, Mongolia, Vietnam, Australia and the Philippines and met with over 60 members of Congress from both sides of the aisle as well as many senior Obama administration officials from Treasury, State, USTR, Commerce and Homeland Security.
Our message was this – enormous economic opportunities exist for U.S. companies in the Asia-Pacific but gridlock in Washington is holding us back.
The Asia-Pacific region represents nearly 40 percent of the world’s GDP and will be home to two-thirds of the global middle class by 2030. Unfortunately, lack of action on key trade and tax issues is having a direct and chilling impact on the ability of U.S. economic interests to compete there. We often witness our foreign competitors fill the void left by the lack of U.S. economic engagement in the region. For example, in 2012, the European Union and Singapore concluded negotiations for an expansive Free Trade Agreement which many see as laying the groundwork for expanded engagement with the Asia-Pacific as a whole. Recently, China, the largest economy in the region, concluded bilateral free trade agreements with both Australia and Switzerland. These agreements mean the U.S. is already at a disadvantage.
The current fight over U.S. Export-Import Bank reauthorization is another prime example of how inaction in Washington is impeding the ability of U.S. businesses to compete overseas. Ex-Im plays a critical role in promoting U.S. exports at no cost to the government and enables U.S. exporters to compete on a more level playing field with their foreign competitors. Many of our member companies rely on financing from the bank to complete deals in places like Mongolia. As a rapidly developing country, Mongolia is currently building hospitals from the ground-up. They want the best technology in the world for these facilities; and as such, they want to buy from U.S. companies. Ex-Im has helped finance many of these deals. If it is not reauthorized, foreign competition will take over these opportunities, and U.S. companies will be left out in the cold. We were clear in our message to lawmakers – Ex-Im should be reauthorized.
We also discussed the enormous opportunity of the Trans-Pacific Partnership (TPP). TPP is a massive free-trade proposal that would encompass 12 Asia-Pacific countries. Successful conclusion of the agreement will bring down foreign barriers to U.S. products thereby stimulating exports and boosting overall economic growth in the U.S. In our meetings, we heard concerns expressed on issues ranging from the transparency of the negotiation process to the White House’s commitment to trade. APCAC urged the Administration to work with Congress to pass Trade Promotion Authority (TPA) reauthorization legislation as expeditiously as possible. Without this important tool, the U.S. risks our TPP negotiating partners not bringing their best and final offers to the table knowing any agreement concluded with the USTR could potentially be subject to amendment by Congress.
And we discussed Sec. 911 of the current tax code, often referred to as the foreign earned income exclusion, as well as challenges associated with the Foreign Account Tax Compliance Act (FATCA). Efforts by some in Congress to terminate Sec. 911 will directly impact Americans working overseas and their effectiveness in promoting U.S. businesses and products. As for FATCA, the law, which was passed in 2010 and went into effect on July 1, requires foreign banks, under the threat of severe financial and legal penalties, to turnover additional information about U.S. owned financial accounts to the IRS. APCAC supports efforts to combat money laundering and tax evasion, but FATCA has led to a host of unintended consequences. For example many foreign banks are refusing to lend to Americans while others are simply dropping U.S. accounts altogether. This deters foreign direct investment and leaves American citizens and companies unable to obtain basic banking services or appropriate financing in the countries where they do business.
The Asia Pacific region is eager for stronger U.S. engagement; however, their booming economies and growing middle class are not going to wait forever. With President Obama set to travel to Australia for the G20 Leaders Summit this fall, he should work with Congress to capitalize on the vast economic opportunities through trade in the Asia Pacific region and level the playing field for American workers operating overseas.
Drysdale lives in Manila, Philippines and serves as chairman of the Asia Pacific Council of Chambers of Commerce. He is chairman and CEO of the Marsman-Drysdale Group, a diversified Philippine-based holding and management company with interests in the agribusiness, food processing, communications, tourism, and healthcare industries.