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Level the Playing Field for Trade
Tuesday, August 15, 2017 - 7:45pm
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. U.S. goods arriving in foreign markets face an average tariff of 5.9%, according to the World Economic Forum’s latest Global Enabling Trade Report. That’s more than four times the U.S. level, but key U.S. manufactured and agricultural exports often face tariffs in the double digits in emerging markets.
One of the report’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 trade agreements.
While the report shows that the United States did well in a number of areas, it ranked a disastrous 130th out of 138 economies in terms of the “tariffs faced” by U.S. exports overseas. In other words, American exporters face higher tariffs abroad than nearly all our trade competitors. It is also worth noting that tariffs are just part of the problem, as they are often found alongside a wide variety of nontariff barriers that shut U.S. goods and services out of foreign markets.
One major reason American exporters are often at a disadvantage in key foreign markets is that so many other countries have negotiated preferential trade agreements that exclude the United States. According to the World Trade Organization (WTO), nearly 300 bilateral or regional trade agreements are in force around the globe today, but the United States has trade agreements with just 20 countries. 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 is exactly what American exporters do every day. Nor is the situation getting easier: More than 100 trade agreements are currently under negotiation among our trading partners.
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 data from the U.S. Department of Commerce, nearly half of U.S. exports go to countries with which the United States has free-trade agreements (FTAs) even though they represent about 6% of the world’s population. By tearing down foreign barriers to U.S. products, these agreements have a proven ability to make big markets even out of small economies.
Indeed, U.S. exports to new trade agreement partner countries have grown roughly three times as rapidly on average in the five-year period following the agreement’s entry-into-force as the global rate of growth for U.S. exports. In some instances, the results are truly remarkable: U.S. exports to Chile and Morocco quadrupled in the five years after U.S. trade agreements with those countries entered into force.
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 with a total of 14 countries. It employed 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 trade balance is a poor measure of the success or failure of any particular trade policy, but activists often point to the trade balance as a principal reason why the United States should not negotiate additional trade agreements. However, with regard to manufactured goods, the United States ran a cumulative trade surplus with its trade agreement partner countries of more than $271 billion over the past eight years (2009-2015), according to data from the U.S. Department of Commerce. Overall, the United States had a modest trade surplus with its 20 trade agreement partners as a group throughout the 2012-2015 period (2016 services trade data pending).
Together, these facts reveal that the U.S. trade deficit arises from trade in manufactured goods with countries where the United States has no trade agreement in place. It’s wrong to say trade agreements are contributing to the deficit.
In sum, the benefits of America’s trade agreements are often hidden in plain sight. If we are to put fairness at the center of U.S. trade policy, additional high-standard trade agreements must be a priority. Seizing these opportunities will bring real benefits for American workers, farmers, and companies.