June 4, 2010

To:  U.S. Chamber Board of Directors

From:  Tom Donohue

Subject:  President's Update-May 2010

Over the past month, both domestic and international issues dominated the Chamber's agenda and activities.  This reflects our expanding role as a global organization that is working to open markets for U.S. companies around the world, while at the same time vigorously representing Main Street businesses here at home.

         If nothing else, this mix of responsibilities keeps things interesting!

         Let me turn first to the international scene.

Sending a Message to China

Chairman Bob Milligan and I have just returned from Beijing and Shanghai, where we had the opportunity to meet with senior government leaders, including the presumptive future President of China, Vice President Xi Jinping.  We also met with our affiliated Amchams in both cities and attended the Expo in Shanghai, where the Chamber is a major sponsor of the USA Pavilion.

Because bilateral government talks were underway during our visit, we also had an opportunity to consult with U.S. officials who were in China, including Secretary of State Hillary Clinton, Treasury Secretary Tom Geithner, and Commerce Secretary Gary Locke.

We had a very clear set of messages for Chinese leaders, which we conveyed in our meetings and in a speech I gave at the Amcham in Shanghai.

First, we underscored that the Chamber has been and will continue to be a leader in the advancement of one of the most critical commercial and strategic relationships of the 21st century.  We are working hard to educate our own policymakers and public on the fundamental importance of U.S.-China relations and how both countries benefit immensely from the commerce between us.  We will continue to oppose protectionism in all its forms at home and abroad, and believe the U.S. market should remain open to Chinese products, investments, ideas and talent.

Yet while most of our member companies find their current activities in China positive and profitable, many are worried about the future.  There are growing concerns about whether China is backtracking on the progress it has made to open its markets and economy to fair competition.  These concerns have risen to the highest level that we have seen in 10 years.

We told China's leaders that the international business community is troubled by many elements of its so-called indigenous innovation strategy-including the use of discriminatory government procurement lists, standards setting and tax measures, and compulsory certification rules which seem designed to force technology transfer and restrict foreign competition.

Some positive steps were taken to adjust procurement policies during our visit, and we expressed our appreciation for that-yet the Chamber is still strongly encouraging the China not to publish a government procurement list that discriminates in favor of domestic products and not to carry this program forward.

Bob and I also discussed continuing investment and operating restrictions in sectors ranging from financial services, insurance, telecommunications, distribution and logistics, direct-to-consumers services, and express delivery services.  Currency remains a political stumbling block as well.  Positive movement on currency is needed, though it would not likely affect the U.S.-China trade balance in a significant way.  And, while there has been a significant commitment to strengthen IP laws and enforcement, the theft of intellectual property and violation of patents remains a very serious challenge.

In clear terms, we told the leaders that U.S. companies have worked very hard to keep the protectionist forces in Congress at bay.  Without discernible progress, China should not count on the same level of enthusiasm going forward.  Because of the Chamber's credibility with the Chinese, I believe our messages will have a strong impact.

For further details about the trip and the Chamber's approach to China, please contact Jeremie Waterman, Senior Director, Greater China, at (202) 463-5480.
 
Sending a Message to Washington

China is not the only nation that needs to adjust some of its international trade and investment policies.  We've got a lot to do right here at home.  May was World Trade Month, and the Chamber used the observance to launch a major program of speeches, media activities, education, and advocacy to alert our government and the unions to the reality that their actions to stall the U.S. trade agenda are killing jobs and business opportunities for Americans.

In a speech at the National Press Club on May 14, I delivered the Chamber's annual "State of World Trade," address, which was coupled with the release of a detailed report as well as significant new research that proves, once and for all, that our nation's free trade agreements have created millions of American jobs.  A few days later, International Affairs Senior Vice President Myron Brilliant hosted the Chamber's annual "Next Steps for the World Trade Agenda" conference featuring U.S. Trade Representative Ron Kirk.  The event drew an impressive audience of 350 business representatives, diplomats, and journalists.

Despite the benefits, while there are 262 free trade agreements in place across the globe, the United States has just 11 agreements covering 17 countries.  We are party to only one of more than 100 negotiations of bilateral and regional trade agreements taking place around the world.

Congress and the administration have refused to enact already negotiated pacts with Panama, Colombia, and South Korea, which is a slap in the face to three U.S. friends and allies.  To underscore the importance of concluding these agreements, the Chamber recently hosted senior officials from these countries for an event in our headquarters.
 
What Americans need to understand about these agreements is that the rest of the world is not waiting around for us.  The EU and Canada, for example, are moving ahead with their own agreements with Colombia and Panama, and the EU and South Korea negotiated one last November.  We're talking about more than missed opportunities here.  Americans will actually lose at least 350,000 existing jobs if our government fails to act.

We were pleased when President Obama used his State of the Union address in January to echo our call to double U.S. exports in five years as part of our plan to create 20 millions of jobs over 10 years.  Unfortunately there has been little action since then.  We need some political courage from the administration and Congress to stand up to the unions who inexplicably and inexcusably oppose the expansion of trade-thereby putting the jobs of their own members and others at risk.

We should also tap the enormous potential of travel and tourism to create jobs and improve our trade position.  On May 17, I addressed the U.S. Travel Association's international conference in Orlando and outlined a comprehensive agenda for strengthening an industry that already accounts for $240 billion in revenues and 2.4 million American jobs.  By attracting and welcoming more foreign travelers to our country, we can create even more jobs and significantly boost exports, since expenditures by foreign tourists here count as exports.

For further information, as well as copies of our trade and tourism speeches and reports, please call John Murphy, Vice President, International Affairs, at (202) 463-5645.

A Message of Support for Mexico

On May 19 the Chamber was honored to welcome Mexican President Felipe Calderón to our headquarters for a private meeting and a speech during his state visit to Washington.  We marked the occasion by launching a new CEO-level Leadership Initiative that will seek to strengthen the U.S.-Mexico commercial and strategic partnership and take it to the next level.  The project will focus on boosting global competitiveness in both countries; leveraging our energy resources while protecting the environment; and making our shared border a model for the world by balancing the needs of travel, commerce, and security.

Despite the global financial crisis and the tragic drug-related violence in Mexico, two-way trade between us surpassed $300 billion last year.  Mexico is second only to Canada as a market for our exports.  U.S. companies have invested nearly $100 billion in Mexico-twice the amount our companies have invested in China.  Beyond our mutually-beneficial trade, economic and social progress in Mexico is vital to the security and stability of our own country.  President Calderón is an honorable and courageous leader who faces challenges that make our problems here seem small by comparison.  The Chamber stands behind his efforts, and we are urging all Americans to do the same.

For questions about our Mexico initiative and our broad array of international activities, please contact Senior Vice President for International Affairs Myron Brilliant at (202) 463-5489.
 
Domestic Updates

      Let me turn now to a few brief updates on some important domestic matters.

Financial Regulatory Reform-On May 20, the Senate passed the "Restoring American Financial Stability Act of 2010."  While we succeeded in convincing Senators to make some improvements, the overall bill is a big disappointment.  It fails to achieve meaningful financial regulatory reform.  As a result, businesses will have less access to capital, less ability to manage risk, and less capability to create jobs.

With bills now passed in both the Senate and the House, a conference committee is being named that will be working all this month to reconcile differences.  The Chamber and our Center for Capital Markets Competitiveness (CCMC) will be very engaged throughout the process to protect the gains we have made and seek further improvements.

For example, we managed to stop over a dozen amendments that would have made the bill far worse-including Senator Specter's proposal to create an expansive new "aiding and abetting" liability scheme to benefit the trial bar, as well as an amendment by Senator Whitehouse that would have destroyed our national credit markets by calling on the states to each set different credit rates and terms.

We also managed to pass several amendments to improve the Senate bill including, removing the $50 billion dollar "bailout tax", preserving federal preemption in the consumer title of the bill, as well as two important small business amendments-the first exempting all non-financial small businesses from direct regulation by the consumer regulator, and the second, requiring the new consumer regulator to have an independent panel review each proposed rule to determine the potential impact on small businesses.  

The White House and consumer groups are trying to kill these amendments in conference, and we will fight to keep them in the bill.  Once final legislation is enacted, the Chamber will move the fight to the regulatory agencies and possibly the courts.  We will also continue to advocate genuine reforms that ensure that small and large businesses have access to capital so that they can grow and create jobs. 

For the latest developments on this critical legislation, please contact CCMC President David Hirschmann at (202) 463-5609.

Business Faces "Sudden" Tax Fight-Congress and the administration are desperate to tap sources of tax revenue wherever and whenever they can find it.  Knowing this, the Chamber has been on high alert for proposals to pass business tax hikes in order to pay for additional domestic spending or tax relief.

Late last month, the alarm bell went off.  As part of the effort to extend unemployment benefits as well as renew important expired business tax provisions (such as the Research and Experimentation Tax Credit), the business community was suddenly confronted by a laundry list of permanent tax increases purportedly designed to "pay for" the temporary extension of tax provisions we have long supported.  A bill containing these onerous provisions narrowly passed the House last week.

Embedded in this legislation are draconian tax increases on small business, American worldwide companies, and investment partnerships.  These tax increases will hinder job creation, decrease the competitiveness of American businesses, and deter economic growth.  Ultimately, we had no choice but to oppose this legislation as drafted and quickly galvanized a broad coalition of business and industry groups to fight this approach.  We will do our best to stop these tax hikes in the Senate.

This will be the first of many tax battles the Chamber will face and lead in the coming months and years.  Business unity is not easy to achieve when it comes to tax policy, but achieve it we must because you can count on lawmakers and the administration to come back to the well again and again and again.

For specific details on the tax hikes contained in the current bill as well as the Chamber's strategy, please call Executive Vice President Bruce Josten at (202) 463-5310.

Energy Security Risk Index-In an effort to concretely answer the question, "is our energy security getting better or worse?," the Chamber's Institute for 21st Century Energy has unveiled a first-of-its-kind Energy Security Risk Index.

The index provides the first quantifiable measurement of energy security based on 37 individual metrics in four primary areas-geopolitical, economic, reliability and environment.  The Index tracks energy security risk beginning in 1970 and projects future risk until 2030.  Each year the Index is assigned a composite score, which will be updated annually as new data becomes available.
 
We found that energy risk rose throughout the 1970s and reached a high point of 100 in 1980.  Energy risk generally fell in the 1990s and rose during the last decade. While the risk index score is down to 83.7 in 2009 due to a slower global economy, that is still too high.  And, it is projected to increase to 1980 levels in the future unless action is taken to improve energy security.  
With all eyes on the tragic situation in the Gulf of Mexico, it is vitally important that our nation take responsible, common sense actions to ensure that we have a secure, affordable, and diverse supply of energy.  While there is much we must learn from the Gulf spill, we cannot turn our backs on the need for both alternative and traditional energy to secure our country, grow our economy, and create jobs.

The Index of Energy Security Risk received widespread national news coverage and will become a credible tool that will drive discussion, debate, and hopefully, sound energy policy.  For further information, please contact Energy Institute President Karen Harbert at (202) 463-5636.

Fighting the DISCLOSE Act-As expected, the House Administration Committee has approved a bill I told you about last month, the so-called DISCLOSE Act.  This is a blatant and transparent political effort to silence the Chamber and help Congressional and Senate Democrats shore up their flagging support in time for the November elections.

Spearheaded by Democratic Congressional Campaign Committee Chairman, Rep. Chris Van Hollen, and the immediate past chairman of the Democratic Senatorial Campaign Committee, Senator Chuck Schumer, the bill aims to stop the Chamber from engaging in issue advocacy related to Congressional elections through forced disclosure of our members and their dues.  Some members, such as government contractors, would be prevented from supporting these activities altogether.

The Chamber has organized a letter signed by 188 other national and state trade associations representing the entire range of American businesses to oppose the "DISCLOSE Act.  The bill is unconstitutional and un-American, and we will fight with everything we've got to defeat it in Congress and if necessary, in the courts. 

Please don't hesitate to contact me at (202) 463-5300 if you ever have any questions.  In my absence, feel free to call David Chavern, the Chamber's COO, at (202) 463-3101.

Until next month...