BUSINESS ROUNDTABLE RELEASES
REGAINING THE INITIATIVE:A BLUEPRINT FOR U.S. TRADE AND INVESTMENT

SPEAKER:

JAMES W. OWENS
CHAIR, INTERNATIONAL ENGAGEMENT INTITIATIVE
BUSINESS ROUNDTABLE
CHAIRMAN AND CEO
CATERPILLAR, INC.

JIM OWENS:

Okay, we can be about as formal or informal as you’d like, but you have a packet from Business Roundtable and you have the “Regaining the Initiative: A Blueprint for U.S. Trade and Investment” – the full paper, the full 60-paper paper. So you’ve got the summary of finance and you’ve got the blueprint and a press release, and we thank you very much for taking the time to be with us.

I think this is, perhaps, one of the more important updates and bodies of work that Business Roundtable has done in a long time. True, we’ve done a lot of other important work, but this one comes at a very critical time for, I think, the U.S. and the global economy. I think you are all aware of the fact that the G-20 has actually made a number of statements about the importance of trade in avoiding protectionism at a time when the global economy is struggling to deal with the deepest recession we’ve had, certainly since the Great Depression, and one that is indeed very serious.

And keeping trade flows down, depending on whose measures you might want to look at, between nine and 11 percent, the worst drop in trade since World War II. Our economy in the United States, about 30 percent of the GDP last year involved dealing imports or exports, and I think most of the American public misses that point. And one in five jobs in the United States are trade-related, import and export.

So what we’ve done here – and it’s very important – we had a pretty broad cross-section of companies provide input to this trade paper and this update. Collectively, Business Roundtable represents about 10 million employees and $5 trillion in annual revenues. And one of the hallmarks of Business Roundtable is that we have been strong champions of free and open trade, and we really like to focus on competitiveness.

And I think for our country to be a great country, most of us recognize that we have to have the best ideas. We have to be the most competitive in terms of the products and services that we offer, and the vast majority of the membership strongly believes that we can lead and compete.

So this paper really deals with four kinds of fundamental concepts, if you will: first and foremost, rejecting protectionism and isolation. We think that would be the wrong thing for our country, the wrong thing for our companies and certainly the wrong thing for the global economy.

We’d like to really push pursuing the unfinished business that’s already on the table. I mean, we spend a lot of time negotiating FTAs with Panama, Colombia and South Korea, and with the Doha Round we were close to getting an agreement. It might not have been perfect if we’d gotten it, but it would have been at least a step in the progressive trade-liberation direction that we champion, if we’d been able to get a Doha agreement.

It’s kind of stalled out several times around now. We think that a multilateral agenda is probably the most critical, even though the FTA is – or, in terms of incremental and right message from the United States – highly admirable, and we’d certainly want to encourage those.

We also champion, in this writing, creating new approaches to make trade and investment agreements work better for the United States. They need to be enforced. We think there’s an opportunity to look at FTAs that deal only with services, for example, that might be easier to achieve. We think there are bilateral-investment agreements that we’ve been working on with, for example, China and India, that might protect U.S. investors in those countries that are highly meretricious and could be pursued and are will expand our global engagement in a very constructive way.

Unfortunately, the trade agenda slipped into partisanship a decade or so back, which I think was a tragic mistake for the country, and most of the business community feels this way. We would like to see trade become a bipartisan, thoughtful consideration, as opposed to something that gets demagogued. And quite frankly, I think thoughtful people that understand facts and data and who really give consideration to our role in the world economy in the decades to come will recognize that we have to become a great trading nation.

We need to focus on what it takes to be competitive in export markets. We need to focus on what it takes to attract foreign direct investment into our country, what it takes to have U.S.-based multinationals be leaders on the global stage. I think that’s a fair question as we think about some of the tax considerations that are before the House now. Do we want to have U.S.-based multinational companies that are leaders in the world? And that’s kind of a yes-or-no question.
And if the answer’s no, I guess that we can tax them any way we want. If the answer is yes, then we have to begin to think about what would be – how can we get an appropriate amount of tax from them, fairly, but leave them position to compete effectively in the world market, and for us as a country to attract investments or headquarters of multinational companies that are resident here?

So, you know, we need the press to help us elevate the debate here. And I think we’re well off the mark. We’ve got a debate that’s running around on anecdotal plant closings, and every plant closing gets blamed on NAFTA, or something.

And we in the business community, I think, have a responsibility to elevate the discussion, and I think even the press have an opportunity to help us do that, and it should be in your interest too, to elevate our discussion here and thoughtfully come up with an answer to the question, how does the United States want to be engaged in the world? How do we want to be viewed, and do we want to be a great trading nation? And think about policies that are geared to help us be more competitive from a U.S. base. That’s the solution. And I think there are a lot of good ideas in here.

Another key area – and again, we’re – we just had a meeting with our new Ambassador Kirk, USTR this morning. We would like to work with him and the Administration and the Congress and the business community, to collectively get this thing back on a bipartisan footing and to think about what’s good for America.
A good example is trade-adjustment assistance in the past. I think those programs have, generally speaking, been confusing, and not worked well. They positioned trade “as the reason for job loss,” when I think most of the people would know the vast majority of job loss is due to competitive conditions, productivity gains, and a host of other things. You know, in fact, if a plant closes in Ohio and moves into Mississippi, NAFTA usually gets blamed. We shouldn’t let that happen. We should be thoughtful about what it takes to compete here.

One of the things that we felt, and we concluded in the paper, is we need to be focused on helping Americans who are out of a job find a better job, which means retooling their skills. Part of our income-distribution problem is people aren’t positioned to fill the kinds of jobs that need filling. We forget quickly that we were at near full employment less than a year ago, and we need to position American workers to fill new roles. The way to make more money is not to do the same thing over and over and over but to grow.

American companies – good ones – are training and developing people as they work through their career and giving them opportunities to grow and learn, and we need to be thinking about when people become unemployed, for whatever reason, how we can creatively leverage our community-college system and our training programs that companies offer to help people get the right kind of skills to get reemployed.

If we think about the gains associated with trade in general, we in the business community believe we can take some of those gains and devote it to helping individuals get re-skilled and retooled to get a good job. And that would be geometrically better than putting up protectionist-oriented barriers, which would be a negative for our own economy and its long-term health, as well as a negative for the global economy.

So I think I’ll just stop there. I mean, I’d be happy to take any questions. I think the papers are extremely well-done. Great staff support here at Business Roundtable, active engagement from a good cross-section of companies and our Washington office teams that have worked on this paper. It’s thoughtful, it’s comprehensive, touches everything related to helping our nation be positioning itself to be competitive in the global economy. So any questions?

JANE SASSEEN:

Can I ask about – you mentioned your – you met with Ambassador Kirk this morning, and he’s giving a speech –I think actually right now, outlining for the first time a little more publicly the administration’s positions. There’s obviously been a lot of questions about where they were going to come out. What’s your sense at this point as to where they lie in the balance between some of the questions about NAFTA and/or how protectionist they were and what not. What’s your evaluation of where they’re coming out?

MR. OWENS:

Well, I’d say, generally speaking, that I’ve been very encouraged by the pronouncements that came out of the G-20, and I think we have to reinforce that now with actions, not only here but around the world. As you know, a good number of G-20 countries introduced some form of protectionism after the first pronouncement. So we all – all of the G-20 needs to work very hard to reassure the world that we’re not going to turn in. I think our “Buy America” provisions were a very substantial negative. Even though it didn’t turn out to be much, and the Senate version certainly diluted a little bit of the strong measures the House had, it’s still there.

The United States has been, if you will, the moral leader and crusader for open markets, trade liberalization, competitiveness in the world economy since World War II. And it has served the world extraordinarily well. Hundreds of millions of people have been lifted out of abject poverty, and we’ve been sort of the moral champion of that. It was a little embarrassing to be in China for the China Development Forum and have the Chinese kind of lecture me about how we need to work together to try to keep markets open and to keep trade flows going because it’s good for all of us – which, of course, I happen to agree with, but I think the Administration realizes, if we’re going to be a leader in the world, we do have a lot of strengths.

I think the American public – and this really gets back to the business community and the politicians – I think we need to work better together to help the public understand how important having a competitive manufacturing industry and a competitive economy that can actually compete in the world market is, and to think constructively about that. That’s the only way we’re going to be a great country in 20 or 30 years.
You can’t build a wall to greatness; I jokingly said, “If you want to protect me, I can sell you lower-quality tractors at a higher price.” I don’t think that’s what the country wants or should expect. And the companies in Business Roundtable, I think we’re all saying we can compete in the world market. We can compete with the best companies in the world, and we ought to have to. And you, the public, ought to expect us to, because we’re going to give you better products and services as a result of that.

And we ought to be thinking about our export strategies. You know, we as a country, because we’ve been a big market, have given scant thought to it. Most of the other leading players in the global economic stage think a lot about it. How do we stimulate companies to invest here and export from here? I mean, that’s, at best, an afterthought in our country. Most people think we don’t make anything anymore.

Well, how do they get that impression? Because the toys they buy and the clothing they buy and the undergarments and whatever are almost all made around the world. But they tend to be very low-tech, very high-labor intensive products. I mean, last year, we exported $16 billion worth of very sophisticated construction and mining equipment from the United States. Most of our suppliers probably don’t understand that 65 percent of what we made in Illinois got exported with small-company fabrications and castings and electronics and seats and everything else, part and parcel of it.

Roughly 55 percent of our product is purchased from suppliers, most of who are small and don’t realize they’re engaged in international trade. Our fault. We’re trying to do a better job of educating them about the fact that they, too, are involved in global trade, and it’s a good business. And if you looked at the FTAs, for example, the U.S. has a positive manufacturers-type trade-export balance with all of them. We can compete.

MS. SASSEEN:

So are you going to stick with some of the signals that the Administration is sending about the FTAs with Colombia, and what do you make of that?

MR. OWENS:

Well, we in the business community were quite concerned about some of the rhetoric in the campaign, particularly the primaries, that was very protectionist. And I think as the Administration begins to think about the world and the leadership role that the United States has in the world and the need to avoid protectionism, the President’s been very clear about the need to avoid any backsliding on trade or protectionism since he’s been President. We’ve been very encouraged by that.

I think, as you know, we’re kind of the bicycle theory of life: If you’re not peddling and trying to move forward, you fall over. So I hope, and the Administration I’m sure is beginning to think about and work on, how do we get the agenda moving forward? And I’m sure our new ambassador is going to be thinking about, how do we stay engaged and how do we move the ball forward? He’s very new in his job. I was very encouraged with our meeting this morning, and I think Ambassador Kirk’s going to –

MS. SASSEEN:

What was encouraging about it? Can you be specific?

MR. OWENS:

Well, encouraging in the sense that he believes that international engagement is the right thing, and he looks forward to working with us. And we talked about things we need to do to make this more of a bipartisan agenda, as opposed to a Republican or Democratic issue. And I think we want to explore creative ways to work together. He’s been supportive of trade in his past positions, certainly on NAFTA when he was the Dallas mayor. And I think he sees a lot of merit in it, and he knows, too, that from his experience at mayor, every time a plant gets closed, NAFTA gets to be the one that gets blamed, regardless.

So he’s looking for ways that we can better communicate this. I think we have got to start at the public. I’ve talked to a number of congressmen who have said to me, “You know, Jim, I understand. I agree with you on trade. But my constituents are all against it.” Well, that’s pretty sad. How do we as a business community and we as a political leadership, thoughtful leadership, reach out to the public and help them better understand the global economics and the importance of the global economy and global engagement to our country? Forget the companies, our country.

MARTIN VAUGHAN:

Mr. Owens, is that an effort that needs to happen before the Administration moves forward on new free trade agreements, you know, bilateral or – in other words, does the education effort have to precede the Administration –

MR. OWENS:

Well, maybe, but my hope is – and I think there’s reasonable hope that this might come to be – that they can be part of the education process, that they can give it leadership with our support. A lot of the political constituency of the President, particularly organized labor as a movement, is pretty vehemently anti-trade, as near as I can discern. So as Nixon went to China and President Clinton reached across party lines to pursue trade liberalization…I think President Obama may be positioned to do the same.

MR. VAUGHAN:

On your point about services-only agreements and moving forward with maybe some of those, I mean, under the Bush administration, the focus was always trying to get these gold-standard bilateral agreements that included market access, services, agriculture, commitments on intellectual property. And now you all are taking about sort of a, kind of less ambitious, maybe we focus on services only, maybe we don’t need to worry about saying the ones we’re taking. I mean, is that an acknowledgement that you’ve kind of pushed as far as you can go on the larger, more ambitious-type agreements?

MR. OWENS:

Well, I would say we support and champion the larger, more ambitious agenda that President Bush perhaps pursued, but unsuccessfully, but we recognize that if you can’t eat the elephant in one bite, maybe you ought to start taking little chunks out. And I think moving progressively forward and recognizing how important it is not to have any backsliding, particularly in light of the global recession, is very, very important at this point in time.

You know, I think President Obama and his key economic advisors, people like Larry Summers and Tim Geithner understand that trade is very important to our country and that the international economy is very important. They went to the G-20 championing stimulus programs around the world because they recognized that quite frankly, I’m sitting at Caterpillar, and I look at – you know, the Chinese have a stimulus plan, the Brazilians have one, the Europeans have one. I’d like to participate in all of those, and a lot of those will stimulate jobs here in America if we keep the doors open. And you know, we have to keep our doors open too, as a reciprocal thing. So I think we would accept and, I think, encourage, at this point, incremental forward movement and I think the Administration has an opportunity to do that.

And maybe it has, in some respects we need to move this off of – and by the way, I supported moving this to a bilateral – we get it off this Republican-Democratic thing four or five years ago, not just yesterday. I didn’t wait until we have a Democratic Administration to say it needs to be bipartisan. It needed to be bipartisan always, and I’ve been a strong champion of that for a long time, as has Business Roundtable.

And we need to work hard at that. We talked briefly about the Panama agreement today. Panama’s a very important country, but in terms of global macroeconomic things, it’s not going to move the needle. But the reality is, it would send a very important signal that we’re in business. That we want to do business, that yes, we have concerns about labor and environmental issues; you know, all those things have been on the table and discussed with Panama, with Colombia.

These are both, by the way, countries that can largely export their commodities here, and things they make, duty-free. And the free FTAs will give us an opportunity to export to those countries duty-free. And Colombia, for example, is a pretty big market for a lot of kinds of things that U.S. manufactures and exports. So if you get through the political teeth-gnashing that has politicized certain things and you got down to the hard facts and data, these would be things that the United States would want to pass. Because they’re going to create jobs and employment and a stronger economy here and around the world.

So again, a comprehensive, multilateral Doha Round would be our preferred path, but taking small FTA agreements and passing them, if we have to one at a time, is an incremental step in the right direction, sends the right message to the world and says that we’re open for business, and I think would be very beneficial.

RYAN DONMOYER:

I’m going to follow up on the question about the signals. We know the multinational community is anxious about the unspecified proposals on tax deferral, and we know the treasury secretary came out with his report last week that declined to label China as a currency manipulator. When you look at the big picture here, are you afraid that your talks and arguments about competitiveness are not necessarily being taken to heart?

MR. OWENS:

Well, for example, I mean, we were a strong champion of recognizing China with most-favored nation status a while back and getting them in the WTO. They’ve come a long way. By the way a rarely reported fact: China’s the third-largest market for U.S. exports and the fastest growing. It seems to be a little-known fact. I think China wants to step in and be a better world citizen. They’ve talked about their stimulus plan keeping the doors open, and I hope they follow through with increasing their imports, because they even recognize they’ve got the balance the trade problem.

Secretary Paulson worked very hard to convince the Chinese that they needed to allow their currency to appreciate because of the competitiveness of their economy and the imbalance of trade, and oh, by the way, it did appreciate, I mean, 15 to 18 percent, in about an 18-month period of time. So they have – they’ve made some steps in that direction. We need to continue to encourage the Asians, and particularly, the Japanese have been pretty good masters of keeping their currency relatively undervalued with huge purchases of U.S. treasuries and relatively low domestic consumption and a big focus on manufacturing exports. That’s been going on for 30 years.

So we need – and our paper calls for it – we need to be sure that there are market-based, competitive exchange rates, and people don’t manipulate their currencies for advantage, and we need to be on watch and in dialogue with treasuries around the world about that issue on an ongoing basis, no question.
But I think the Chinese have come a ways, and they have opened their market to imports, and they have encouraged foreign direct investment, and foreign direct investment is being fairly treated, by and large, within the country.

They are increasingly stepping up their intellectual property protections. They’re not perfect; nobody is. But I think they aspire to be a fair player in the global economic equation. And we ought to be nurturing and encouraging that. And I think Secretary Paulson was very constructive, and I think he worked hard to try to help the Congress bring them along with what he was about in that space – not perfect, could have been better communications probably, but at least the dynamic started in the right direction and it was something we could build on and continue to work with.

And, yeah, I was encouraged with Secretary Geithner’s comments. I think China’s got – you know, they don’t have the freely exchangeable in-and-out-type exchange rate and so it’s more managed on the market base. You know, at this point in time, it’s a little hard for us to be out lecturing the world about the virtues of our Wall Street dynamics and free capital flows and exchange rates and how efficient markets are. I got a couple of lectures about that in my two weeks at the China forum and being in and out talking to a number of Chinese officials.

So they’re a little leery, particularly about the global banking system. But I think they did take – we need to recognize and I think the secretary did recognize, he took some positive steps over the last 12 to 18 months. And the best way to bring about the right solution is through constructive work and rapport and we need to continue to build on that as opposed to confrontational, in-the-press dialogue.

MR. DONMOYER:

But, from the Obama administration’s standpoint – especially with the tax deferral issue – I would imagine that that’s also…

MR. OWENS:

Yeah, the tax deferral issue, there’s going to be a lot of work on that this year. And, of course, you know that Business Roundtable is against this and the vested interest of most of our members would be against it…but let’s take off that hat for a minute and put on, again, from the press standpoint. I’d encourage you to think about this in the context of competitiveness.

If we had the highest corporate tax rate in the world and we wiped out deferral, how would U.S.-based multinational companies compete in the world market over time? I think that’s a question you should ask yourself.

If there’s even a huge incentive for U.S. multinationals to be acquired by foreign buyers if there’s a big tax arbitrage opportunity – have you investigated that? It isn’t going to work to just get rid of the deferral. I think we need to take a step back and I think the President is amenable to thinking about this. Take two steps back.
Think about how much tax revenue should we fairly expect to get from the corporate – let’s say the business sector. I’d like to broaden this a little bit – and look at all businesses in the United States and then think about, “How can we get that amount of tax and preserve their ability to compete in the global market?” I think that would be a pretty good way to think through this and, hopefully, my role on the advisory board. I can encourage some of this thinking. Because I’m certainly prepared to pay personally and corporately my share fair share of tax. But don’t position me where I can’t compete in the world market. That would not be helpful to our country long term, or to its economic health.

So we need to get off of the, you know, let’s whip up on the multinationals because they’re off-shoring jobs. That is not what this is about. In fact, you know, every country in the world, virtually – and, again, I’d encourage the press to examine this – most every major trading country in the world has a tax system that’s territorial; you pay the tax in the country you earn the money. If U.S. multinationals were in that position then all of the profits that we have overseas would flow back to the United States, maybe to be reinvested all over the world. But we wouldn’t have to set up operations all over the world to manage the money outside the U.S. So we could avoid paying maybe a 15 percent delta on tax that maybe impairs our ability to compete.

How can we design a sensible system? The Germans, the Japanese, everybody else has got to get tax revenue from their corporations, too, but they have kind of figured out how to do this. You can tax all companies in the United States at whatever rate you want on the profits that they earn here. That’s a level playing field.
My argument is, give me a level playing field; I can play. But if you tilt the field you’re going to throw people out of the game. Let’s don’t throw our own multinational companies out of the game. I would submit – and I am sure I have a vested interest, but I won’t always – as an American citizen, I would suggest that we want to have at least our fair share of leading-edge multinational companies headquartered here.

Look at what they bring in the way of all of the workforce that manages the businesses globally that are based here if you’re headquartered here. And what would we lose if we lost that? Look at all of the research and engineering in product technology that might flow from here. Look what we would lose if we lost that.

I don’t think is getting a good airing and, again, this is an education of the public. And what I hear sometimes from organized labor is we’re encouraging off-shoring of jobs. Well, 95 percent of the world’ population lives outside the United States. We’ve got to compete for that opportunity to serve them. If you don’t invest anywhere outside the U.S. – by the way, in almost every country we’ve chosen to make the manufacturing investment in, we’ve exported more to it, almost every case because it gives us a foundation and a presence and allows us to leverage the things we do well here.

ICHARD RUBIN:

On trade, about how you’re trying to educate your suppliers and domestic companies you work with on how they’re tied to global trade, are you trying to make a similar effort on deferral to tell domestic companies that don’t deal with that how they benefit from it?

MR. OWENS:

That’s right. All of my suppliers in the United States are better off because we’re competitive in the world marketplace. Again, I would just like to see the United States at least very thoughtfully examine going to a territorial tax system that’s the same tax system that virtually every other major industrialized country uses.
That’s not a beggar-thy-neighbor policy; it wouldn’t be perceived as one. It would be perceived as harmonization with the international norm and it would allow U.S.-based multinationals to bring all of the money that they earn abroad back and manage it from here even as they invest in the world. It’s fair because every – we want to attract foreign direct investment in this country. I would think the Americans would like to have Japanese and Koreans and Europeans and Chinese investing in manufacturing presence here to be close to customers and serving them better and creating jobs here.

And we should tax them, by the way, at the same rate we tax American corporations. That’s a level playing field. We can play on those, just don’t tilt it.

MR. MARTIN VAUGHAN:

When you say, you know, we need to take a look at what the burden is on U.S. companies and determine what the fair taxes are that they should pay, are you open then to the suggestion that there should be some changes, even if it’s down to repealing deferral, to the way that the system works now, that U.S. companies might pay a little more on an overseas income than they do now?

MR. OWENS:

Well, I think, for example, if I make an investment in China and it’s profitable, then I need to pay the same tax as all of the companies who are investing in China – both Chinese domestic companies and international companies. If, for example, the U.S. decides that on that manufacturing investment in China I should pay, let’s say, 38 percent instead of 25 percent that the Chinese may charge, then I’m going to be disadvantaged in my ability to compete there against Germans, Japanese, Koreans.

Let me ask you, Martin, does that make sense?

MR. VAUGHAN:

So the system –

MR. OWENS:

Can I compete? Can I stay there under that circumstance?

MR. VAUGHAN:

But the system as it’s set up now, you’re saying, essentially gives you that same rate?

MR. OWENS:

Well, now, because the money is deferred until I bring it back to the United States, I don’t think that’s the right way to run the railroad, by the way. I think the right way to run, the best way to tax American corporations would be territorial. We should pay the U.S. corporate tax rate on everything we sell and all of the profit we make in the United States. When we have investment in sales and revenues outside the United States, we should pay tax in whatever country we operate in: their tax rate.

We should be able to bring all of the excess profits back – we don’t need to invest in that country – to our home base, which would help U.S. investors, the white-collar workforce that might manage the money and decide where to deploy it to next, et cetera, et cetera and allow us to be competitive.

If we want to get more from the corporate sector, we should raise the tax rate domestically on all players. That would mean the Toyotas and the Sonys and everybody else who manufactures and makes profit in America, pays the same tax rate as U.S. competitive firms; that’s a level playing field. We can all compete on that basis.

MR. VAUGHAN:

So are you saying that you’d be willing to pay either to sort of give up the push for a lower U.S. corporate rate or even bring that up a little bit in exchange for switching from worldwide to territorial? What do you trade away to get territoriality?

MR. OWENS:

I would hope we would simplify, we would tax all business – corporate, S corps, et cetera – at a similar rate, so we don’t force different types of structures, and that we tax everybody who does business in the United States at essentially the same rate – foreign direct investment and U.S. corporations.

And we set it at an appropriate rate to get the revenues we want to run the government. Clearly we’ve got to have enough revenue to balance our budget over time. We can’t be just deficit spenders. So, yeah, I think that’s a fair tradeoff. I’m looking for a level playing field more than anything else.

MR. McKINNON:

Is this an area where you think Business Roundtable is going to take an official position or is this reflective of…

MR. OWENS:

I think, absolutely, Business Roundtable is going to take an official position and Business Roundtable …

(Laughter.)

MS. BRIGITTE SCHMIDT GWYN:

No, I think right now we are very focused on the current debate with regards to deferral. With regards to looking forward, you know, I think that’s something that we’re going to be discussing once we get past where we are right now. And getting back to deferral, we are looking at – I mean, obviously there was the $210 billion number included in the President’s budget. There’s no details around that.

So we will, once we see what is included in the next iteration by Treasury, then we’ll be able to react to that and we want to look at it and figure out how we work together to make certain we find a path forward that accomplishes the goals of creating a competitive environment in the U.S. for business to invest here and, at the same time, provide a level playing field so that companies can compete around the world.

MR. OWENS:

But we’re going to take a position as a roundtable.

MR. JOHN McKINNON:

And when you discuss a territorial system, would that imply something like a value-added system, or would it literally just be an income system?

MR. OWENS:

Well, we would pay taxes the same way as every other company operating in that country would pay. So if it were invested in the United Kingdom, we would pay the same rate as every other British company. I would like to see our trade negotiators negotiate trade agreements that allow U.S. investment around the world and get treated on the same basis as domestic investors.

And I think we, the United States, should welcome foreign direct investment, recruit and encourage it the same as other good countries do, and given them a level playing field also. I don’t think Toyota – which employs a lot of Americans, by the way – should pay a higher tax than General Motors or Ford or a lower tax, for that matter. They should pay the same. And we ought to encourage foreign companies to invest in our country and employ Americans.

MR. VAUGHAN:

Will improving our health care system and helping to take that burden of health care for employers make U.S. companies more competitive?

MR. OWENS:

Of course it will. I mean, our health care system today – the unfortunate reality is we’re spending more per capita and we’re not getting as much as many countries. So I think we have to take a pretty deep dive here in looking at our health care system and making it globally competitive and ought to be thinking about that.

How do we make our health care system serve our public in the best-quality care at the lowest possible cost? Right now we’re spending substantially more per capita for health care and getting less. But I think most companies believe that we do have a role. And we’re comfortable providing some health insurance for employees. It’s different than in other parts of the world. And, for that, you pay a little lower tax rate here, perhaps. But it’s part of attracting, retaining and developing employees.

We need to find some way to have universal coverage. There are lots of issues around that. Many people, for some reason or another, are in this country and don’t feel they can sign up. Maybe they’re here illegally.

So there’s a – who is uninsured now and why are they uninsured? We have to think through all of those equations and how we’re going to cover everybody? I think our humanitarian nature in this country is we want to be sure everybody is covered, particularly every child. And then, okay, what do we got to work through to get that done?

We want to make our health care system much more cost effective. And we want to focus on outcomes. And we do a lot of things now that drive high cost and no better outcome. There’s a lot of people who are a lot smarter than I am thinking about this. And I don’t purport to be an expert on this.

MR. JOHN CASTELLANI:

We’d be happy to share – we’ve got our four pillars of what Business Roundtable companies want to see in health care reform, but, as Jim says, it fundamentally affects our ability to compete because we do pay such a higher premium for not a good result. And that’s an important part of it.

MR. VAUGHAN:

What I’m wondering, if I could follow up on that, is that’s going to require revenue. It’s going to require a lot of revenue, as the President made clear in his budget. And so, you know, there’s been discussion of, what do you do with business tax rates?

MR. OWENS:

Well, Business Roundtable has got some good opinions on it, but, from my perspective, too – and I think a lot of companies – our concern is, if we throw it over to single payer and we turn it all over to the government, is that likely going to be a better system for the country? And are we going to have better outcome?
If you look at the socialized medicine system in Canada or the U.K., you find a lot of people coming here to get health care because they’re allocating it; they don’t have enough capacity. There are a lot of issues with that system also. I think creatively we need to be looking for, how do we create for our citizenry the best health and human welfare system we can come up and do it most cost effectively.

Now, we have massive challenges here. Probably the biggest one that’s beginning to surface and come to the light of day is obesity. And it’s driving a huge amount of cost and who’s going to pay for it and how can we educate our citizens? How do we get wellness programs?

We as a – you know, a lot of corporations in America today are focused on wellness. We’re working like beavers to educate our – we force them to fill out a health care or a health-status survey in order to get a lower insurance rate so that we can intercede where we can to help them quit smoking, go on diets to avoid diabetes and other things that are going to drive horrific costs. And it’s good for the employee.

We need a fresh look at the whole system, I think. The Business Roundtable has got ideas on it. I know a lot of Business Roundtable members are working on this individually and there are some great ideas out there. Let’s get to trade for a minute. Anything else on trade?

MR. McKINNON:

I came in late so I don’t know if this was asked already, but what are the likely next steps for the administration to take on trade?

MR. OWENS:

Well, I think that’s one of the things that they’re assessing and we just had a brief meeting this morning with a new Ambassador Kirk at USTR. He just came back from being with the President at the Latin American meeting. I think he’s looking at Panama as a possibility as a positive step forward and maybe we can really show we’re open for business.

There are still some issues to work through, but I thought he spoke quite positively about developing a trade agenda that we can move forward with this morning and as we mentioned earlier, I think that President Obama has an opportunity – maybe like President Nixon had with the opening of China – to move the trade agenda back to a bipartisan agenda. What is right for the country and how do we help our public understand?

We need the business community to step out and speak more forcefully about trade and the benefits of international engagement, how important it is to our country for its long-term health and leadership position. And we need our political leaders to not just go with the public opinion and, quite frankly, both parties have demagogued trade as the reason for all of our ills and not championed trade as a part of the solution to help this economy be healthier and better for all of our citizens.

So I think President Obama understands the importance of international engagement and I think he’s going to be looking for opportunities. And I was encouraged that Ambassador Kirk was very positive in his thinking about – and he’s brand new at the job, but very positive in his thinking about how to move this agenda forward.

MR. McKINNON:

And do you think that…

MR. OWENS:

We’ll start with small steps.

MR. McKINNON:

Right. After the education process is underway then you move to getting fast track back or…

MR. OWENS:

Well, I don’t know if they’ve got that far yet. I would – we would certainly champion fast track as something the President will need in order to effectively move the trade agenda forward because I think countries are going to be reticent to support in deeply engaged trade negotiations with us if they think once we get done with negotiating the trade agreement, we throw it over the fence and the House rewrites all of the things that they agreed to – because there are obviously trade-offs in these.

So we’re going to have to empower Ambassador Kirk and the President to sign off on agreements that are reached. So Business Roundtable has long since always championed fast-track authority for the President of the United States to negotiate for the country. And we certainly would want President Obama to have that opportunity. I don’t think they’re going to ask for that tomorrow; I think we should all take encouragement if we can start to move the ball forward to Panama tomorrow and we move the dialogue over.

And I think Ambassador Kirk has got to work with the Congress. He’s already started that process. He’s been a mayor; he understands the popular sentiment that’s against trade. And he understands intellectually that trade is good. These are all encouraging signs, I would think.

So in his new capacity I think he’s going to work very hard to develop a working rapport with the Congress that allows us to move the ball forward. But it won’t happen if we just hope the House of Representatives is going to come around and become free traders. That isn’t going to happen.

But a combination of the business community and the Administration and a lot of thoughtful leaders – I think we need to bring the press along, popular press in the country. The business press is kind of generally supportive, but we need to get more thoughtful consideration for the benefits of global engagement and how important it is for our country.

I mean, we cannot be the leading force of isolationism and nationalism here. If that happens, I think the biggest risk to the global economy today, quite frankly, is a turn inward. And if we want to take one year, the most serious recession we’ve had since World War II or since the Great Depression and turn it into a multiyear deep recession crisis that probably sends unemployment rates around the industrial world over 15 percent, all we have to do is just turn isolationist, protectionist, nationalistic. And that’s about what’s going to happen.

That’s a very serious – that’s one of the highest risks, at least, that our economics team would put on global economic recovery.

MR. MCKINNON:

And the U.S. is a big source of that risk.

MR. OWENS:

Well, we’re part of that risk. I mean, I think the OECD said 17 out of the 20 countries in the G-20 took some protectionist measure after the first pronouncement that they weren’t going to do any protectionist steps. That’s discouraging.

But we kind of are the beacon. We, the United States, are the beacon in this equation. We have been the champion, the leader of gradual trade liberalization, modernization and global engagement since World War II. It has served our citizenry extremely well and has lifted several hundred million people out of poverty all around the world.

And, yet, we demagogue it. It’s kind of hard to figure in a way. We let it become partisan. And there’s plenty of room for blame to go around on that score. It needs to get back to being a bipartisan consensus that it’s good. And thoughtful people need to be digging in to how can we enhance the competitiveness of our country and get a level playing field for U.S. companies to compete on and encourage U.S. multinationals to be leaders in the world for all of the right reasons.

Thank you all very much. I appreciate your time and being here.

END