Level the Playing Field for Trade

While the United States receives substantial benefits from trade, there is more than a grain of truth in the observation that the international playing field is unfairly tilted against American workers. The U.S. market is largely open to imports from around the world, but other countries continue to levy steep tariffs on U.S. exports, and foreign governments have erected other kinds of barriers against U.S. goods and services.

Americans rightly sense that this status quo is unfair to U.S. workers, farmers, and businesses. The average tariff applied to U.S. manufactured goods arriving in overseas markets is 7.5%, and the figure for U.S. agricultural exports is 17%. These numbers often range much higher, particularly in emerging markets. No one wants to go into a basketball game down by a dozen points from the tip-off—but that's exactly what American exporters do every day. These barriers are particularly burdensome for America's small and medium-sized companies.

The U.S. Chamber believes that American workers, farmers, and companies must be allowed to operate on a level playing field when it comes to trade. Trade agreements should treat American manufacturers, service providers, farmers and ranchers the same as their foreign competitors. Indeed, America's elected leaders have a duty to look out for the trading interests of American citizens at least as carefully as those of our friends and allies overseas.

The good news is that America's trade agreements do a spectacular job creating a level playing field—and tremendous commercial gains are the proof in the pudding. According to the U.S. Department of Commerce, 40% of U.S. exports go to the 14 countries with which the United States has free trade agreements (FTAs) even though they represent just 7.5% of global GDP. By tearing down foreign barriers to U.S. products, these agreements have a proven ability to make big markets even out of small economies.

In the past decade, the United States has negotiated new FTAs with 14 countries around the globe: Australia, Bahrain, Chile, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Jordan, Morocco, Nicaragua, Oman, Peru, and Singapore. Agreements with Israel, Canada, and Mexico have been in force for more than 15 years.

To settle once and for all the debate over whether these FTAs have benefitted American workers and companies, the U.S. Chamber recently released a study entitled Opening Markets, Creating Jobs: Estimated U.S. Employment Effects of Trade with FTA Partners. The study examined U.S. FTAs implemented over the past 25 years with a total of 14 countries. It excluded three other countries where FTAs have only recently been implemented. The study employs a widely used general equilibrium economic model which is also used by the U.S. International Trade Commission, the World Trade Organization (WTO), and the World Bank.

The results of this comprehensive study are impressive: 17.7 million American jobs depend on trade with these 14 countries; of this total, 5.4 million U.S. jobs are supported by the increase in trade generated by the FTAs.

No other budget neutral initiative undertaken by the U.S. government has generated jobs on a scale comparable to these FTAs, with the exception of the multilateral trade liberalization begun in 1947. The study also shows that U.S. merchandise exports to our FTA partners grew nearly three times as rapidly as did our exports to the rest of the world from 1998 to 2008.

For those worried about the U.S. trade deficit, trade agreements are clearly the solution—not the problem. Taken as a group, the United States is now running a trade surplus in manufactured goods with its 17 FTA partner countries, according to the U.S. Department of Commerce (on top of the U.S. global trade surpluses in services and agricultural products).

Concerns about the inclusion of guarantees for worker rights and environmental protections have led to changes in how the United States approaches trade agreements. On May 10, 2007, Democratic and Republican leaders in Congress reached a bipartisan agreement on how to address these issues. Subsequent modifications to a pending trade agreement with Peru paved the way for its approval in late 2007 by an overwhelming bipartisan majority. The U.S. Chamber strongly supported this breakthrough and believes it can be leveraged going forward.

If we are to put fairness at the center of U.S. trade policy, additional high-standard trade agreements must be a priority. This means approving the pending trade accords with Colombia, Panama, and South Korea as well as concluding the long-running Doha Development Agenda negotiations. And it means negotiating more agreements, including the Trans-Pacific Partnership, to expand trade opportunities for American workers, farmers, and companies.

Chamber Recommendations

• In a world where foreign barriers to U.S. exports remain significant, the United States must pursue additional trade agreements to ensure a level playing field for American workers, farmers, and businesses.
• Near-term priorities include Congressional approval of the pending trade accords with Colombia, Panama, and South Korea and negotiation of the Trans-Pacific Partnership and an ambitious Doha Round agreement.
• The bipartisan trade deal reached on May 10, 2007, should be leveraged to ensure that trade agreements appropriately address concerns relating to labor and the environment.