The US government can enhance competitivenessand drive domestic economic growth by focusing on trade, taxes and travel in Asia Pacific, says Steven Okun
The US is rebalancing its foreign policy towards Asia. And as it does so, trade, taxes and travel are critical issues for American business operating here. From a public affairs perspective these “Three Ts” will be fundamental in opening new markets and increasing competitiveness.
By focusing its attention on these interconnected issues, the US government will also enhance and advance the rebalance towards Asia Pacific.
Through the rebalancing of US interests to focus on Asia, President Barack Obama has three focal points: military, political and economic. It is in the third leg of the stool, the economic one, where US business and government are partnering to the benefit of both US companies in Asia – and the US domestic economy.
This fundamental and ongoing rebalance will create new economic channels and give businesses exposure to high-growth industries. Energy and infrastructure, logistics, healthcare and retail are all poised for expansion given the region’s favorable demographics. Meanwhile the developing markets in Asia also stand to benefit from the best-practices which are being introduced by international companies.
For both policymakers and US business, the fundamental point to focus on is that securing greater access to Asian markets will deliver economic growth back home.
Driving the TPP agenda
The push on trade centres on the Trans-Pacific Partnership (TPP). The TPP is widely referred to as a true 21st century trade agreement. It does not just address issues of what happens at the border, such as the tariffs and what goods are allowed into a country, or what happens when goods cross the border, such as customs duties.
Instead the TPP goes much further in actually addressing behind the border issues. What businesses need most today are not only access to a market, but a level playing field once it is operating inside that market. Transparency in the licensing and regulatory process and competition with state owned enterprises are two areas which the TPP addresses.
Even as negotiations continue on the TPP, its impact is already being felt in a positive way. One example comes from Taiwan. Taiwanese officials are keen to join the TPP, and agencies have reached out to the American Chamber of Commerce in Taipei to find how the country can engage in a process liberalisation and reform to position it to be able to meet the standards of the TPP.
Regulators have taken positive steps, for example in meeting with the AmCham Taiwan private equity committee, which aims for greater transparency in the regulatory process. Over the last two years the committee has met regularly with government officials in Taipei showcase how transparency in the area of deal review is a prerequisite to promoting investment. Deal makers in the private equity industry need clarity: simply adopting the maxim that “the rules do not matter, so long as we know the rules and how they will be applied”.
Progress had been slow. However the PE committee has recently been informed that its requests for greater transparency will be met as part of the necessary steps to qualify for the TPP. This is a significant milestone and highlights both the power of the TPP and the power of opening up markets and instituting transparent rules within them.
With the TPP as the foundation, US businesses will continue discussions with regulators across the region to build on this momentum and reach new milestones, and will continue our dialogue with our representatives in Washington to ensure that positive elements that enhance Americans’ ability to conduct business are included in trade regulation.
Likewise, unequal tax treatment hinders American businesses abroad. APCAC, the umbrella group representing all US chambers regionally, has cited several studies which show a direct correlation between US citizens working overseas and US exports. But US tax law puts American citizens at a disadvantage to their counterparts from nearly every other country in the world.
Currently the US taxes its citizens on worldwide income while other nations do not tax expatriates on the income they receive abroad. By taxing US citizens on income which is already taxed by government in the country where they work, our government is putting citizens at a distinct disadvantage when competing for jobs.
Empowering business ambassadors
US citizens living and working abroad are some of the best ambassadors for the US. The US tax code should provide a level playing field when it comes to taxes for both US citizens and US corporations.
Adopting a territorial tax system in line with the rest of the world is one of the key APCAC tenets as this will put the US on-balance with other countries, promote exports and create more investment and jobs for US companies and US citizens.
In addition to trade and taxes, the ability for American businessmen and women to freely move across markets in Asia will maximize US commercial opportunities. This is the third T – “Travel”.
By granting the Asia Pacific Economic Cooperation (APEC) Business Travel Card (ABTC) – a document issued to business travelers which waives the need to wait in immigration queues in APEC markets – regulators can improve the competitiveness of US business in the region.
In November 2011, President Obama signed bipartisan legislation that would allow US citizens to apply for the APEC card; however, the approval has been stalled in the regulatory process. The rules were sent to the Office of Management and Budget at the White House for review in September 2013, and remain stuck there.
Members of APCAC understand that the issuance of the ABTC will not result in visa-free travel within APEC for US citizens, but it will permit us to use the ABTC lane at airports, which in and of itself will bring great business to US citizens. Even a small step forward on this issue will be a positive one.
It’s extremely important that our voices are heard when it comes to trade, taxes and travel in order to enact positive change as Asia’s economic markets develop. US businesses will continue to focus on the three Ts in 2014 and beyond. We have seen progress and soon we look forward to celebrating significant successes when the TPP is signed and the ABTC is issued.
Steven Okun, Director of Public Affairs at KKR, served as Chairman of APCAC from 2011-2014. He delivered a speech on the theme of this article to the spring meeting in Manila in March. APCAC comprises 27 member AmChams in 19 economies across the Asia-Pacific region.