Labor and the American Trade Agenda

Oct 1, 2009

A complicated topic to be sure, for a little context it’s important to first ask: What should the U.S. trade agenda be?

Senior administration officials acknowledge that boosting exports will play a critical role in America’s economic recovery. The rationale is clear. The American consumer’s credit cards are maxed out. The same is true for the federal government. So where can we find the customers we need to get our economy back on its feet? Ninety-five percent of the world’s consumers lie outside the United States, and some major foreign markets, especially in Asia, continue to grow briskly. Standing in the way, however, is a complex array of foreign barriers to American exports. Those barriers are alive and well—and they pose a major competitive challenge to U.S. industry and agriculture and the millions of workers here in the United States who depend on exports.

The way to get rid of those foreign barriers is by negotiating agreements for their elimination on a reciprocal basis. This can be done bilaterally, as in the free trade agreements with Colombia, Panama, and South Korea. Or it can be done multilaterally, as in the Doha Round, the global trade agreement currently being negotiated by the United States and 152 other countries. And to create a level playing field in investment we have bilateral investment treaties, or BITs. Fundamentally, these agreements are about making trade fair. The truth is the trade playing field isn’t always level. Our market is largely open to imports from around the world, but other countries continue to slap tariffs on U.S. exports that are often 10 or 20 times higher than U.S. tariffs.

And tariffs are just the tip of the iceberg—a symbol I will use as a stand-in for a wide variety of barriers that shut U.S. goods and services out of foreign markets. This includes use and misuse of laws and regulations covering intellectual property, competition policy, performance requirements relating to investment, and of course subsidies to assist so-called national champions and place U.S. business at a competitive disadvantage in global markets.

How unfair is the trade playing field? In July, the World Economic Forum issued its annual Global Enabling Trade report, which ranks countries according to their competitiveness in the trade arena. One of the report’s several rankings gauges how high the tariffs are that a country’s exporters face. Leading the pack as the country whose exporters face the lowest tariffs globally is Chile, with its massive network of free trade agreements with more than 50 countries around the globe. While the report found the United States did well in a number of areas, we ranked a pathetic 114th out of 121 economies in terms of “tariffs faced” by our exports overseas. In other words, American exporters face higher tariffs abroad than nearly all our competitors.

This dire situation calls for focused action to dismantle these barriers holding back our exports, and consequently, our economic recovery. Sadly, though, the last time Congress voted to lower the tariffs that American exporters face was in 2007, almost two years ago, when Congress passed a trade agreement with Peru. By contrast, the House has voted six times to lower U.S. tariffs on imports since then.

In sum, rather than knocking down foreign barriers to U.S. goods and services, the United States is providing largely free access to our market without even asking for reciprocity. This imbalanced approach mirrors labor’s opposition to reciprocal, market-opening agreements and the fact that it has not opposed unilateral tariff preferences. I will explore this further in a later post.

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