U.S. Secretary of Commerce Penny Pritzker recently released a report highlighting the potential benefits of the Trans-Pacific Partnership for Arizona businesses and communities. The TPP is expected to boost local economic growth and increase Arizona exports to some of the world’s fastest growing markets. Doug Bruhnke, CEO and founder of Global Chamber, an organization with the mission to grow business while collaborating to support trade, will talk more about the impact of the TPP on Arizona.
TED SIMONS: Coming Up next on "Arizona Horizon," how will a new trans-Pacific trade partnership impact the state? Also tonight, hear about two programs aimed at boosting biz in Tempe, and we'll talk about the 30 million word gap and early education. Those stories next on "Arizona Horizon.
VIDEO: "Arizona Horizon" is made possible by contributions from the Friends of Eight, members of your Arizona PBS station. Thank you.
TED SIMONS: Good evening, and welcome to "Arizona Horizon," I'm Ted Simons. The U.S. Commerce Department recently released a report that shows how Arizona could benefit from the trans-pacific partnership trade agreement. Here to talk about it is Doug Bruhnke the CEO and founder of Scottsdale-based Global Chamber, an organization designed to grow business while collaborating to support trade. Good to have you here, thanks for joining us.
DOUG BRUHNKE: Thank you, Ted.
TED SIMONS: Give me a better definition, Trans Pacific Partnership.
DOUG BRUHNKE: That's a mouthful, probably better said TPP. They have built off the trade agreements in the past and built an agreement that says we're going do a lot more trade with each other. It's partly our relationship with China. China is not one of the 12. Given what China is doing it's a little bit of a play against China and four of these 12 countries, including the U.S., Mexico and Asia.
TED SIMONS: A little counter balance there.
DOUG BRUHNKE: Pacific Rim, Latin America. You've got North America, as well.
TED SIMONS: I heard it described and NAFTA on steroids. Is that an apt description?
DOUG BRUHNKE: Well, it's a significant portion of the world's commerce. $2 billion a day is done across borders around the world. This is quite a chunk of it between just these 12 countries.
TED SIMONS: This change as far as tariffs are concerned, as far as American made products, Arizona made products, what's different?
DOUG BRUHNKE: Well the good news is there's something in it for everyone but particularly business. American businesses and Arizona businesses, because one of the key things it does lower tariffs and reduces regulation. Those countries, 60% of Arizona exports are to these countries. It's going to make it a lot easier to go. For instance into Malaysia there's a 40% tariff on poultry today. Into Vietnam there's a 27% tariff on auto parts. Both of those go to zero. Those companies in Arizona that are exporting, instead of a 40% tariff making it more expensive to sell in Malaysia, suddenly that 40% disappears and they become competitive overnight.
TED SIMONS: Conversely, cheaper goods more available in America?
DOUG BRUHNKE: It works the other way, too. The tariffs on that side of it are almost always higher than the U.S. Preferentially, these countries, the Arizona companies are going to get a great benefit.
TED SIMONS: We should say 60% of Arizona exports to these partners, that equates to $13 billion a year, something like that along?
DOUG BRUHNKE: 13 billion is a chunk of change. Arizona is about half as good as most states on average, we're a little bit behind on exporting. This should give the state and exporters a boost.
TED SIMONS: This agreement, this packet is not without its critics. They are there and loud, and they are saying it may be nice in the short term but there are long term concerns, especially involving the U.S. trade deficit and some other things we can get to. But this isn't a panacea is it?
DOUG BRUHNKE: Well, it's got a lot of things that you don't even hear that you even more positive. I'll give you one example. Most of the effort has been around the tariffs or most of the communication has been around tariffs. But it works positively toward Arizona and the U.S. in terms of foreign direct investment. Audi was putting an automotive plant in North America and choosing between the U.S. and northern Mexico. They chose northern Mexico. What they said in the decompress is TPP was in place, because of the ability to come into the U.S. with less regulation, and because the E.U. and Mexico had an agreement already in that time, and the U.S. and the E.U. did not, suddenly they would have chosen the U.S. with TPP. The positive news about this is that there's a foreign direct investment, companies coming and investing in Arizona potential, that most people haven't heard about yet but it's a great positive.
TED SIMONS: Does That investment outweigh the potential for lost jobs? That's another major factor we're hearing a lot of criticism, American jobs could be adios with an agreement like this.
DOUG BRUHNKE: One of the things about trade agreements is it increases trade everywhere. The global chamber we're a part of, that's what we're about, let's increase trade. The good news, it lowers the barriers on all sides and trade increases. The other parts that are positive are relative to the environment and worker rights, the agreement actually has stipulations in there that require some of these countries to improve both their environmental regulations and the way they treat workers. So it has a little bit of positive for everybody. The negative, though, and I know you've asked me that a couple times and I've probably never gone there, the biggest negative is change. What happens when this happens, you've got agriculture and manufacturing and other industries, there will be a shift. There will be some going out, there will be some coming in. But as you probably know there's a lot of repatriation of manufacturing going on right now. This is going to accelerate that.
TED SIMONS: It's going to help in Arizona? Multinationals will be helped whether they have any presence in Arizona or not. But the mom and pops, the start-ups, smaller businesses in Arizona and other states, will they be helped or trampled underfoot?
DOUG BRUHNKE: It's actually -- I don't know the data in terms of specifically exactly how it'll work. But I know the people we work with are really pleased, the small businesses. I think I've seen 87% of exporters in Arizona are small businesses. Those are the people that are going to really benefit. The big multinationals undoubtedly will benefit as well, they will be doing direct investment and be able to export. The vast majority, mainly small businesses, this is going give them a head start. There's not nearly enough exporters in Arizona, or not nearly enough companies in Arizona exporting. This will be an opportunity for them to take the leap.
TED SIMONS: And I questioned earlier what changes. You're saying that changes. Others are saying maybe some jobs could be lost in the process, but you're saying not necessarily?
DOUG BRUHNKE: There will be shifts. Some states' products will shift out and some will shift in. That's what's scary. Change is difficult, right? We saw that with NAFTA and the vast majority of opinions around NAFTA in aggregate was it was a good thing, but things shifted. One of the things countries and states need to realize, those shifts cause training requirements for people. That's why education in Arizona is so critical. In anything is going to be shifting out workers might need retraining and so that goes back to why education is so critically important. Also the jobs might go higher end so we need higher tech jobs in Arizona, which means the education system has to be able to bring those people in. That all goes together. Lower the tariffs, improve the education and Arizona improves.
TED SIMONS: What's the status of this deal now, where are we with this?
DOUG BRUHNKE: It's been agreed to by the 12 countries and now each of the 12 needs to approve it. President Obama was encouraging the Canadians to get it ratified as soon as possible. He's undoubtedly been saying the same thing about the U.S. It gets passed and by next year some real changes.
TED SIMONS: Good information, good to have you here.
DOUG BRUHNKE: My pleasure, thank you.
Doug Bruhnke :CEO and founder of Global Chamber