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Note: John Murphy will appear as a witness at the United States International Trade Commission hearing on Tuesday. Go here to read more about the effects on trade, jobs, small business, manufacturing, agriculture and services.
What is the record of America’s free-trade agreements (FTAs)? This question is the subject of a hearing at the U.S. International Trade Commission (USITC). The hearing kicks off an investigation into the economic impact of these agreements mandated by the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, which renewed Trade Promotion Authority.
The Chamber has been a vocal champion of the benefits of America’s FTAs, which today cover our trade with 20 countries around the globe. We’ve examined these issues at length in Chamber-published reports, including The Open Door of Trade: The Impressive Benefits of America’s Free Trade Agreements (March 2015), NAFTA Triumphant: Assessing Two Decades of Gains in Trade, Growth and Jobs (updated October 2015), and Opening Markets, Creating Jobs: Estimated U.S. Employment Effects of Trade with FTA Partners (March 2010).
The rationale for these agreements is simple. While the United States receives substantial benefits from trade, the international playing field is sometimes tilted unfairly against American workers. The U.S. market is largely open to imports from around the world, but many other countries continue to raise steep tariffs and other barriers against U.S. exports.
U.S. goods arriving in foreign markets face an average tariff of 5.9%, according to a report from the World Economic Forum (WEF). That’s more than four times the U.S. level, but tariffs slapped on key U.S. manufactured and agricultural exports often average in the double digits in key emerging markets.
One of the WEF’s rankings gauges the level of tariffs that a country’s exporters face. Leading the pack as the country whose exporters face the lowest tariffs globally is Chile, with its extensive global network of FTAs. By contrast, while the United States scored well in a number of areas, it ranked a disastrous 130th out of 138 economies in terms of the “tariffs faced” by our exports overseas.
In other words, American exporters face higher tariffs abroad than nearly all our trade competitors. Nontariff barriers add substantially to these challenges.
Compounding the problem is the reality that so many other countries have negotiated FTAs with one another. According to information from the World Trade Organization (WTO), 406 bilateral or plurilateral FTAs are in force around the globe today, and another 100 are in the works. This means U.S. exporters are often among a minority paying tariffs to sell their wares in key 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.
None of this diminishes the benefits of imports. Access to imports boosts the purchasing power of the average American household by about $10,000 annually. Companies’ imports of intermediate goods, raw materials, and capital goods account for more than 60% of all U.S. goods imports — lowering costs for businesses and helping them hone their competitive edge.
The U.S. Chamber believes that trade policy must take into account the needs of Americans as both consumers and producers. Fairness should be our watchword: American workers, farmers and companies must be allowed to operate on a level playing field when it comes to trade.
This is the principal rationale for FTAs — to generate economic growth, new exports and good jobs through the mutual elimination of trade barriers and do so in a way that is fundamentally fair.