Trade Agreements Create U.S. Jobs and Increase U.S. Exports

“If America sits on the sidelines while other nations sign trade deals, we will lose the chance to create jobs on our shores.”

          -- President Barack Obama, the State of the Union, January 27, 2010

United States Trade Representative (USTR) Ron Kirk recently announced that he would begin technical discussions with Congress to draft implementing legislation for the Colombia Trade Promotion Agreement, along with similar bills for South Korea and Panama.1 All three agreements have been ready since 2007,2 and after years of blocking them3 even Democrats are finally starting to support the agreements.4

Despite the strong economic benefits to be gained from passage of these agreements, the President is now demanding more concessions to please his union allies before he will present these agreements to Congress.5 The time for delay is over; it is time to close the deal.

Trade agreements mean more American jobs. Almost 18 million U.S. jobs are currently supported by trade with our current trade agreement partners.6 The President’s failure to present the three trade agreements could result in a net loss of hundreds of thousands of jobs.7 The time has come for the President to put job creation ahead of politics and finally allow these agreements to move forward.

Trade agreements open markets to U.S. products. Reducing tariffs result in more trade, more jobs, and more money in American pockets.8 Nearly 80 percent of the world’s purchasing power is outside the U.S.9 Just 40 percent of U.S. exports are free from foreign tariffs because of trade agreements, while 60 percent of our exports remain subject to tariffs.10 Trade agreements open markets, eliminate tariffs and should be a part of our economic recovery.

Trade agreements increase exports. When the U.S. enters into new trade agreements, exports to those countries have historically grown fourfold in the first five years.11 The U.S. is the second largest exporter of goods, the largest exporter of services and the largest combined exporter in the world.12 The U.S. is a proven exporter and can increase its exports through leveling the playing field with trade agreements.

The Korea Agreement will increase U.S. exports by $10-11 billion per year.13 The Colombia Agreement will increase U.S. exports by more than $1.1 billion per year.14 The Panama Agreement would increase U.S. exports of grain to Panama by 61 percent and cars and light trucks by 43 percent.15 In a difficult economic time, it would be counterproductive to not export more U.S. products overseas.

Trade agreements will level the playing field. While other nations negotiate trade agreements, it is irresponsible for President Obama to not submit these agreements to Congress for a vote. Korea and Colombia already have, or are negotiating, trade agreements with the EU, Canada, each other, and other nations.16 Failure to implement U.S. trade agreements could result in $40 billion worth of lost exports to our competitors.17 Further delay continues to keep American companies on the sidelines and operating at an economic disadvantage.

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1 Letter from USTR Kirk to Sen. Hatch, May 4, 2011.

2 The Colombia Trade Promotion Agreement since November 22, 2006, “Proposed U.S.-Colombia Free Trade Agreement: Background and Issues,” CRS Report RL34470, May 3, 2011, http://www.crs.gov/Products/RL/PDF/RL34470.pdf; the Korea Trade Agreement since April 1, 2007, “The Proposed U.S.-South Korea Free Trade Agreement (KORUS FTA): Provisions and Implications,” CRS Report RL34330, May 2, 2011, http://www.crs.gov/Products/RL/PDF/RL34330.pdf; and the Panama Trade Promotion Agreement since June 28, 2007 “The Proposed U.S.-Panama Free Trade Agreement” CRS Report RL32540, May 3, 2011, http://www.crs.gov/Products/RL/PDF/RL32540.pdf.

3 Speaker Pelosi indefinitely postponed voting on the Colombia Agreement on April 10, 2008, by altering House rules governing Trade Promotion Authority. See http://clerk.house.gov/evs/2008/roll181.xml.

4 “Baucus: President’s Trade Agenda Fails to Advance Pending FTAs,” Finance Committee Press Release, March 1, 2011, http://finance.senate.gov/newsroom/chairman/release/?id=4c010a06-faee-4a8d-816d-4ca3d9a52089.

5 “Trade Extortion Assistance,” Wall Street Journal, May 20, 2011. USTR Kirk announced for the first time that the Administration will not submit the three trade agreements until Congress agrees to an expanded Trade Adjustment Assistance bill, although the provisions expanding TAA expired over three months ago on February 13, 2011. http://online.wsj.com/article/SB10001424052748703421204576329383595710142.html. See also “A Free-Trade Fast One” Investor’s Business Daily http://www.investors.com/NewsAndAnalysis/Article/572385/201105161848/A-Free-Trade-Fast-One.aspx.

6 “Opening Markets, Creating Jobs: Estimated U.S. Employment Effects of Trade with FTA Partners,” by Laura M. Baughman and Joseph F. Francois, May 14, 2010, U.S. Chamber of Commerce, http://www.uschamber.com/sites/default/files/reports/100514_ftajobs_full_0.pdf.

7 “Trade Action – or Inaction: The Cost for American Workers and Companies,” by Laura M. Baughman and Joseph F. Francois, September 15, 2009, U.S. Chamber of Commerce, http://www.uschamber.com/sites/default/files/reports/uscc_trade_action_inaction_study.pdf.

8 This is the very basis of our trade system and has been since our founding, see Adam Smith in “The Wealth of Nations” (1776) first proving the benefits of international trade and David Ricardo in “On the Principles of Political Economy and Taxation” (1817) demonstrating that all nations benefit from free trade.

9 Letter from National Association of Manufacturers (NAM) to the President’s Council of Advisors on Science and Technology, 4/20/2010, http://www.nam.org/~/media/D3A22734DDDB4249AA61E6AD1A7B78E6/PCASTfinal.pdf.

10 “Manufacturers: Blueprint to Double Exports in Five Years” NAM, http://www.nam.org/~/media/721F46B89BF1436DA9C3832874FE7BCE/Blueprint_to_Double_Exports_in_Five_Years.pdf.

11 “Myths and Facts: Trade Agreements, Deficits, Jobs and Growth” http://www.chamberpost.com/2011/05/myths-and-facts-trade-agreements-deficits-jobs-and-growth.

12 “The World’s Top Exporters and Importers,” Reuters, Los Angeles Times April 8, 2011, http://articles.latimes.com/2011/apr/08/business/la-fi-toptraders-20110407.

13 Supra Note 2.

14 Supra Note 2.

15 “U.S.-Panama Trade Promotion Agreement: Potential Economy-wide and Selected Sectoral Effects” USITC Publication 3948, http://www.usitc.gov/publications/332/pub3948.pdf.

16 Supra Note 2.

17 Supra Note 7.