Posted on 04/22/2007 8:31:38 AM PDT by 1rudeboy
U.S. trade policy and the impact of globalization on America are regularly the subjects of contentious debate both on Capitol Hill and in the media, and 2007 promises more of the same. The free trade argument is played out between those that fear the perceived negative effects of freer trade on their own narrow interests and those that embrace the economic and strategic benefits that open market policies will bring to the economy as a whole. Consequently, in today's policy world, free trade legislation passes on the margin, where every vote is critical. The loss of even a few proponents of freer trade policies could result in a costly shift away from the open market policies that have helped to bolster America's economic growth.
With free trade agreements (FTAs) with Peru, Colombia, Panama, and South Korea needing congressional approval; Trade Adjustment Assistance up for renewal; the struggle to advance multilateral trade talks in the World Trade Organization (WTO); and, critically, the need to extend the President's trade promotion authority (TPA) this summer, policymakers have ample opportunity to implement a more protectionist policy stance or to stay the course and continue to allow America to reap the benefits of open market policies.
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The Tangible Benefits of Trade
The gains from freer trade are substantial. Today, the $12 trillion U.S. economy is bolstered by free trade, a pillar of America's vitality. In 2005, U.S. exports to the rest of the world totaled $1.2 trillion and supported one in five U.S. manufacturing jobs. Jobs directly linked to the export of goods pay 13 percent to 18 percent more than other U.S. jobs.[1] Moreover, agricultural exports hit a record high in 2005 and now account for 926,000 jobs.[2]
In Colorado, international trade supports one of every 20 private-sector jobs and more than 16 percent of manufacturing jobs. International trade supports an estimated 6.1 percent of Ohio's total private-sector employment and more than 20 percent of all manufacturing jobs. In South Carolina, trade supports one of every 10 private-sector jobs and more than 23 percent of manufacturing jobs.[3] State by state across America, international trade promotes opportunity.
The service sector accounts for roughly 79 percent of the U.S. economy and 30 percent of the value of American exports.[4] Service industries account for eight out of every 10 jobs in the U.S. and provide more jobs than the rest of the economy combined. Over the past 20 years, service industries have contributed about 40 million new jobs across America.[5]
As today's global economy offers unparalleled opportunities for the U.S., continuing to expand trade by lowering barriers to goods and services is in America's economic interest. Freer trade policies have created a level of competition in today's open market that engenders innovation and leads to better products, higher-paying jobs, new markets, and increased savings and investment. Small business, a critical component of the U.S. economy, creates two out of every three new jobs and accounts for about one-quarter of America's exports.
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U.S. Free Trade Agreements
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As of April 2007, the U.S. has 10 FTAs with 16 countries: Israel; Canada and Mexico (NAFTA); Jordan; Singapore; Chile; Australia; Bahrain; Oman; Morocco; and the Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua (DR–CAFTA[12]).
While some countries are still working to implement more recent trade agreement legislation, the U.S. has already seen impressive results. The FTAs account for more than $900 billion in two-way trade, which is about 36 percent of the total of U.S. trade with the world. U.S. exports to FTA partner countries are growing twice as fast as U.S. exports to countries that do not share FTAs with the U.S.[13]
The oft-demonized NAFTA has in fact generated significant gains for the U.S. since its inception. Canada and Mexico are America's first and second largest trade partners, accounting for about 36 percent of all U.S. export growth in 2005.[14] Between 1993 and 2005, U.S. manufacturing and agriculture exports to Canada and Mexico grew by 133 percent and 55 percent, respectively. Each day, NAFTA countries conduct roughly $2.2 billion in trilateral trade.[15] This trade supports U.S. jobs, bolsters productivity, and promotes investment.
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Free Trade Is Fair Trade
An artificial distinction has been drawn between "free trade" and "fair trade." The idea that free trade is fair only if countries share identical labor costs and economic regulations or if domestic producers are compensated for market losses to more competitive foreign producers is false. The economic benefits of free trade derive partly from the fact that trading partners are different, allowing any country embracing world markets a chance to be competitive. Free trade is fair when countries with different advantages are allowed to trade with a minimum of restriction and capitalize on those differences.
Low wage costs, access to cheap capital, education levels, and other fundamental variables all play a role in determining the comparative advantages that one country has over another in the global marketplace. To "fairly" equalize those differences— provided those differences are based on a country's economic and demographic reality—only negates or reduces a country's ability to benefit from participating in the global trade system.
Such "fairness" also prevents countries from realizing the tangible gains from freer trade: a more competitive economic environment and better, more efficient domestic resource allocation. These positive effects drive greater long-term economic potential, create economic opportunity, better promote a cleaner environment, and improve living standards at home.
Free trade allows a county to compete in the global market according to its fundamental economic strengths and to reap the productivity and efficiency gains that promote long-run wealth and prosperity. In reality, there is no distinction between free trade and truly fair trade.
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Conclusion
Armed with the facts, Congress should bolster itself against "free trade fatigue" and protectionist sentiment and revitalize the drive to promote economic growth and prosperity by eliminating international trade barriers. Renewing the President's trade promotion authority to facilitate the completion of new bilateral free trade agreements, reforming and reducing the scope of the U.S. farm bill to promote a successful conclusion to the WTO Doha Development Round, and generally guarding against populist, protectionist trade policy changes would go far toward expanding economic opportunity in the U.S. and around the world.
Daniella Markheim is Jay Van Andel Senior Trade Policy Analyst in the Center for International Trade and Economics at The Heritage Foundation.
[1]Office of the U.S. Trade Representative, 2006 Trade Policy Agenda and 2005 Annual Report, March 2006, at (January 24, 2007).
[2]Ibid.
[3]U.S. Department of Commerce, International Trade Administration, "Exports, Jobs, and Foreign Investment," at
(April 1, 2007).
[4]U.S. Department of Commerce, Bureau of Economic Analysis, "International Economic Accounts," at (January 24, 2007).
[5]Office of the U.S. Trade Representative, "Free Trade in Services: Opening Dynamic New Markets, Supporting Good Jobs," May 31, 2005, at (March 30, 2007).
[12]Dominican Republic–Central America Free Trade Agreement.
[13]Office of the U.S. Trade Representative, 2006 Trade Policy Agenda and 2005 Annual Report, p. 3.
[14]U.S. Department of Commerce, "International Economic Accounts."
[15]Office of the U.S. Trade Representative, "NAFTA: A Strong Record of Success," March 2006, at (January 24, 2007).
Good post. Where is Willie Green, so we can fight this out with him.
Willie Green’s job was off-shored. Turns out that it was discovered that his duties here were more cheaply and efficiently performed at DU and DailyKos.
I’d prefer FAIR Trade to Free Trade. There’s nothing fair about what we’ve got now.
[this person] started out deploring the violence of Virginia Tech as yet another example of the pervasive violence of our society: the violence of Iraq, the violence of Darfur, the violence of . . . er, hang on, give him a minute. Ah, yes, outsourcing: ''the violence of men and women who . . . suddenly have the rug pulled out from under them because their job has moved to another country."No cheating.
Our $13 trillion economy and 4.4% unemployment rate shows that trade is just killing us. LOL!
You know they very publicly issue both sets of numbers, don't you?
I noticed there wasn't one word about importing oil.
You don't think we should import oil? That would crimp our economy.
Isn't the call for eliminating the dependency on foreign oil a call for a "protectionist" act?
You can call for eliminating dependency on foreign goods, just don't do it by making them expensive. Do it by making American goods more affordable.
Why is it freetraders are such hypocrites when it comes to dependency on foreign oil?...
I think we should get our oil cheap, cheap is better than expensive. Boosting our domestic production will make all oil cheaper.
If running a continual trade imbalance is such a bad thing for America, why do we have a $13 trillion economy and a 4.4% unemployment rate?
It ain't gonna happen. Why would record profiting oil companies want to "boost" production to make oil cheaper?
If we open up ANWR, oil companies won't drill? That's funny.
Maybe they’ll decide they’ve earned enough money?
Let's see here . . . thumbing through notebook . . . inflation, demand, supply, regulation, taxes . . . .
As compared to you? LOL!
Your mock laughter fails to conceal your gullability.
Worth may be folded into demand, if you think about it . . . if you choose not to, then gasoline is worth more today than when leaded regular was selling for 25 cents because of “urban sprawl,” and related factors such as improved road networks, less emphasis on public transportation, the decline of “nuclear” communities, as well as rising incomes, etc. We are simply more “mobile.”
I’d be interested in hearing your answer to the question in #34, if you have an opinion.
I'd feel better if it worked for Americans too.
I believe the author spoke toward your concern in the second sentence.
Maybe it's a guy thing. Guys like Rudy and me work with what we can see; that's why we make the money that pays the bills and the ladies in our families deal with the feelings. Rudy and I know where we can find a market price for something because the price is something that everyone can see. Afterwords, you and the rest can go ahead and really really feeel whether things are worth a lot more or not really worth anything at all.
Don't get me wrong, I understand we need both. Prices exist so I can make sure we have food and clothing so we can survive. Afterwards you can talk about how much something is worth say, spiritually or something.
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