The Case for the TPP: Opportunity for America

Sep 13, 2016 - 9:00am

Senior Vice President for International Policy

What is the Trans-Pacific Partnership (TPP) all about? With debate over this 12-nation trade agreement now underway, the Chamber is publishing this series making the case for the TPP’s approval.

The imperative of reinvigorating economic growth is a point of rare consensus across the U.S. political spectrum. Joblessness has declined from the double-digit levels of the 2008-2009 recession as a painfully slow recovery has taken hold. While the unemployment rate has fallen, participation in the workforce is near its lowest level in decades, reflecting a significant level of discouragement. Anxiety about job security persists for the simple reason that a good job has always been at the heart of the American Dream

And yet, agreement has also emerged among America’s job creators that world trade can play an important role in restoring U.S. economic growth. About one-third of the U.S. jobs created in 2009-2014 were in industries that depend on trade. Today, more than 41 million American jobs depend on trade.

Indeed, outside our borders are markets that represent 80% of the world’s purchasing power, 92% of its economic growth, and 95% of its consumers. The resulting opportunities are immense.

Many Americans are already seizing them. The U.S. Department of Commerce estimates that exports of manufactured goods directly support approximately 6 million U.S. factory jobs—roughly half of all manufacturing employment. Manufacturing jobs tied to trade pay wages that are typically 18% higher than those that aren’t, and it’s similar for jobs in services.

6 million

Number of U.S. factory jobs supported by manufactured goods exports.
Commerce Department

The same is true for America’s farmers and ranchers. One in three acres on America’s farms is planted for exports. For many crops, such as wheat or almonds, more than half is sold abroad. U.S. agriculture is so productive there’s no way Americans could consume this bounty alone.

Nor is trade important only to big companies. Often overlooked in the U.S. trade debate is the fact that 98% of the nearly 300,000 American companies that export are small and medium-size businesses. These firms account for one-third of U.S. merchandise exports, according to the U.S. Department of Commerce. The number of small and mid-sized companies that export has risen by about threefold over the past two decades.

Despite trade’s substantial benefits, there is more than a grain of truth in the observation that the international playing field is at times skewed against American workers. The U.S. market is largely open to imports from around the world, with some notable exceptions (e.g., apparel, footwear products, sugar, and domestic shipping face substantial tariffs and other restrictions). However, it is much more common for other countries to levy high tariffs on U.S. exports. Further, foreign governments have erected other kinds of barriers against U.S. goods and services that both block access and distort competition.

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), 423 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.

$10,000

Amount U.S. household buying power is boosted every year by trade. 

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.

At the same time, the benefits of imports are incontrovertible. Imports mean lower prices for American families: 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 manufacturers and other 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 trade agreements—and for the TPP. It will generate economic growth through the mutual elimination of trade barriers and do so in a way that is fundamentally fair. 

About the Author

About the Author

Senior Vice President for International Policy

Murphy directs the U.S. Chamber’s advocacy relating to international trade and investment policy.