Fighting the wrong kind of trade wars
With markets in turmoil and consumer confidence at record lows, it is time for the U.S. to overtly become more selfish. In fact, looking out for number one is likely the best way to remain number one. To be clear, by selfish I do not mean senseless. Focusing first on the nation’s self-interest should not be a proxy for surface level patriotism or protectionist policies. Selfish, in today’s economic context, means engaging in a national effort that is singularly focused on competing and winning in a globally competitive and interconnected society.
The President and Congress can do just that over the next 60 days. We have a window of opportunity right now in which the United States can spur much-needed growth by passing the pending free trade agreements and then pivoting to upgrading our trade agenda. By passing free trade agreements with Colombia, South Korea and Panama the U.S. can increase exports by more than $12 billion a year and create or sustain 70,000 jobs.
We badly need the revenues from lower barriers to trade. The United States had more than $34 billion in two-way trade with Colombia and Panama in 2010. Despite facing high tariffs, U.S. exports to both countries have risen more than five-fold since 1990 and are expected to dramatically increase with the passage of the pending trade agreements. Colombia and Panama are already two of Latin America’s largest export markets for U.S. high-tech goods and services. With more than 90% of imports from Panama and Colombia entering the United States duty free, passing these two FTAs will level the playing field for U.S. high-tech companies.
As for Korea, it is a $1 trillion economy and is the United States’ 7th largest trading partner. It is a top-ten destination for U.S. high-tech exports -- $9.7 billion of those exports went to Korea in 2010. The U.S.-Korea Free Trade Agreement, or KORUS, includes cutting-edge commitments that will yield even greater opportunities for the U.S. high-tech industry and its workers as Korea’s IT sector continues to grow.
As Representative Erik Paulsen of Minnesota said recently, “This is a no-cost job creator.” Sounds easy, right?
Unfortunately, the window of opportunity is closing for Republicans and Democrats. If the pending free trade agreements are not passed in the next two months, it will be difficult for the nation’s lawmakers to focus on anything but deficit reduction and then on elections. The benefits of FTAs are vast and have been covered extensively, but failure to pass them will signify that a broader symbolic problem exists with American progress. NAFTA, despite its shortcomings, showed us that embracing the global supply chain leads to tangible economic results. The higher standard of living we have experienced over the last 30 years is a direct result of globalization and reducing impediments to trade.
Inactivity will also inject fresh uncertainty into already reeling global markets and raise legitimate questions about the nation’s commitment to growth. Canada began negotiating with Colombia and South Korea after the United States commenced negotiations and have already completed free trade agreements with both nations. The same is true for the E.U who this summer inked its agreement with South Korea thereby creating an estimated $30 billion in new trade of goods and services annually.
The delay in approving the pending FTAs does not bode well for the U.S. because international agreements are just part of what needs to happen in the short term. The U.S. share of global commercial services export is almost twice that of its nearest competitor, and the U.S. competitive advantage in technology innovation yielded a nearly $65 billion trade surplus in 2010 from intellectual property royalties and license fees. Advancing an expanded information technology trade agreement (or ITA) – which will make it easier for high-tech companies to export tech goods to our biggest trade partners – is a practical and overdue step that will create jobs here at home.
Political infighting, market uncertainty and commercial stagnation signify the wrong kind of trade wars, and the United States cannot afford to wait beyond the timeframe recently outlined by Senate leaders. Failure to move forward means losing out on one of the greatest assets at our fingertips to drive growth and signal to the world that America is serious about leading a 21st century globalized economy.