Foreign Trade
Return to Common Sense
May 13, 2015
Section: Foreign
– Trade
“Global free trade is
essential for American economic growth and it rewards those partner countries
that embrace free markets with economic and job growth.”
“No nation was ever
ruined by trade.” Benjamin
Franklin.
Philosophy
(Background, Issues, Objectives):
Commerce Department International Trade
Administration (ITA) promotes trade and investment.
- ITA represents
in trade negotiations, bilateral and multilateral discussions, and the
rulemaking process.
- ITA stimulates
innovation and investment, enhances economic growth, and supports U.S.
industries.
- Bureau of
Economic Analysis (BEA) tracks imports and exports by date, type, and
country.
- In 2012, annual foreign aid budget was $31.2 billion in economic
assistance, going to 183 countries, varying from $3.3 billion to
Afghanistan to $3,950 to Brunei.
- In 2012, USAID assistance was $13.5 billion.
- In 2012, annual military assistance was $23.3 billion.
U.S. is the world’s largest
trading nation, and a clear beneficiary of free trade.
- World Trade
Organization (WTO) global trade talks seek consensus on transnational
trade issues.
o
WTO and bilateral Free Trade Agreements (FTA)
increase access.
o Globalization
and free trade undermines the economic basis of terrorism.
o Trade
barriers and agricultural subsidies are key discussion issues.
- American
security is enhanced by free trade as countries with trade relationships
likely to cooperate.
- A growing trade deficit is generally a sign of a healthy, expanding
economy.
- Countries that
have liberalized trade have seen growth rates rise, while closed economies
lagged.
- The 2013 Index of Economic Freedom only ranks the U.S. 37th
in Trade Freedom.
Globalization with its open movement of people and stuff across
borders pays off in many measurable ways, some obvious, some more surprising.
- Longer,
Healthier Lives - Economic globalization
significantly boosts life expectancy, especially in developing countries,
measured by life expectancy and infant mortality.
- Women's
Liberation - Economic
and social globalization exert a positive influence on the social
institutions that reduce female subjugation and promote gender equality. Globalization tends to liberate
women from traditional social and political orders.
- Less Child
Labor - The
more open a country is to international trade and foreign investment, the
lower the incidence of child labor exploitation.
- Faster
Economic Growth - Trade
openness and liberalization significantly boost a country's rate of
economic growth, producing average annual growth rates that were about 1.5%
higher than before liberalization and investment rates rose 1.5–2.0%.
- Higher
Incomes - A
lower level of trade protection is associated with higher per-capita
income.
- Less Poverty
- Globalization and trade openness revealed
a negative correlation between globalization and poverty, with most of the
reduction in absolute poverty results from better information flows (e.g.,
access to cellphones) that improve the
functioning of markets and lead to the liberalization of trade.
- More Trees -
Trade
openness tends to improve environmental quality in rich countries while
increasing pollution and deforestation in poor countries. Air and water
pollution decline among rich-country members of the OECD, whereas it
increases in poor countries as they liberalize and embark on the process
of economic development, but as poor countries become rich, they flip from
getting dirtier to becoming cleaner. Deforestation reverses when average
incomes reach a bit more than $3,000 per year. These studies basically confirm the
Environmental Kuznets Curve hypothesis, in which various indicators of
environmental degradation tend to get worse during the early stages of
economic growth, but when average income reaches a certain point,
subsequent economic growth leads to environmental improvement.
- Peace - Bilateral trade and
global openness decrease the probability of conflict between countries and
an increase in bilateral trade interdependence significantly promotes
peace.
- More
Productive Workers - Total
factor productivity (TFP) is the portion of output not explained by the
amount of inputs used in production. Its level is determined by how
efficiently and intensely the inputs are utilized in production. In other
words, it is all those factors—technology, honest government, a
stable currency, etc.—that enable people to work "smarter"
and not just harder. Removing
mobility barriers could plausibly produce overall gains of 20–60
percent of global GDP.
- Better Job
Prospects - Migration inflows contribute to host country economic
prosperity (positive impact on GDP per capita and total unemployment
rate). Immigration flows do not harm the employment prospects of
residents, native- or foreign-born.
United States has had great success
expanding Free Trade in this hemisphere.
- NAFTA includes
Canada and Mexico.
o
The trade deficit with NAFTA countries grew from
$70 billion in 2000 to $140 billion in 2008.
§
$58 billion of deficit increase has been in energy
imports from Mexico and Canada.
§
Agricultural and manufactured goods sales to NAFTA
countries have basically kept pace with imports.
o
Mexico is benefiting greatly from NAFTA.
§
Mexico is America’s second largest trading
partner.
§
U.S. imports from Mexico increased from $48 billion
to $216 billion from 1993 to 2006.
§
U.S. exports to Mexico increased from $52 billion
to $156 billion from 1993 to 2006.
§
Mexico is #1 source of U.S. illegal immigration.
o
Customs Union may be appropriate for Canada FTA for
common external trade policy.
§
Canada is America’s #1 customer and energy
supplier.
§
Canada’s industries enjoy no currency
advantage.
§
Canadiens
are not flooding the U.S. marketplace with cheap labor or social disruption.
- CAFTA includes
Dominican Republic, Costa Rica, El Salvador, Guatamala,
Honduras, and Nicaragua.
Seven FTAs with 11 countries have dramatically
improved trade from 1999 to 2007:
·
US merchandise exports to these countries increased
by 75.1%.
·
US merchandise exports to Chile increased by 170%.
·
US merchandise exports to CAFTA increased by 78.5%.
·
US trade balance with CAFTA improved from $2.8
billion deficit to $3.7 billion surplus.
·
US merchandise exports increased to Singapore by
61.8%; to Jordan by 211%; to Australia by 62.5%; to Morocco by 137.3%; to
Bahrain by 69.9%.
There is some trepidation about Security
and Prosperity Partnership of North America (SPP):
·
Breadth and depth of agreement seems more like a
Treaty, requiring Senate approval.
·
“North American Union” and
“NAFTA Superhighway” are both urban
legends.
o
Fear of replacing American dollar with worthless
new currency “The Amero.”
o
Closer economic integration could lead to lowered
immigration barriers.
A
Pacific Alliance was established in 2012 to support free trade and open
commerce.
- The initial members were Chile, Columbia,
Mexico and Peru, representing more than one third of Latin America’s
total GDP, a similar share of population, and roughly half of its global
trade.
- First year they abolished tariffs on 90% of
all goods they trade with each other.
The Organization
for Economic Co-operation and Development (OECD) is an international
economic organization of
34 countries founded in 1961 to stimulate economic progress and world
trade.
- The OECD originated in
1948 as the Organization for European Economic Co-operation (OEEC)to
help administer the Marshall
Plan for the reconstruction
of Europe after World
War II.
- Most OECD members are high-income economies with a "very high" Human
Development Index (HDI) and are regarded as developed countries.
- Currently,
25 non-members participate as regular observers or full participants
in OECD Committees and about 50 non-members are engaged in OECD
working parties, schemes or programs.
- The OECD's headquarters are in
Paris, France.
- The United States funds the
OECD by about $100 million per year.
Principles:
The less government intervention
translates into a better economy.
- Free trade
allows the flow of jobs and revenues freely across international borders.
- Strong
currencies encourage investments overseas, while weak currencies encourage
investments here.
The United States requires export
licenses for only a bare minimum of national security concerns:
- Denied Party
Restrictions (non-governmental entities).
- Country
Restrictions (governments contrary to our national interests).
- Product
Restrictions (national security leadership).
Recommendations:
Short
Term, Integrate all agency opinions (State,
Intelligence, Defense, UN, USAID) into a unified
foreign policy.
- Reduce U.S. agricultural trade barriers to promote greater
efficiency in U.S. industry and agriculture.
- Eliminate “Buy American” laws.
- Eliminate the Mercant Marine Act of 1920
and the Passenger Services Act of 1896 that require ships moving from one
U.S. port to another to be U.S. made and crewed
Seek additional partners in bilateral Free
Trade Agreements, including labor standards requirements.
- Extend President’s Trade Promotion Authority (TPA).
- Require swift vote on Free Trade Agreement approval.
- Sign Free Trade Agreements
with Ecuador, Peru, and Bolivia.
- Sign Free Trade Agreements
with New Zealand, Switzerland, Malaysia, South African Customs Union, Thailand,
Oman, and United Arab Republics.
- Ratify Permanent
Normal Trading Relations (PNTR) with Russia.
Long Term, Create
an alliance of free-trading nations with a commitment to free trade and the
rule of law:
- Finalize the Trans-Atlantic Investment Partnership (TPIP) - a
comprehensive, multilateral free-trade agreement that the United States
and the European Union to reinforce the longstanding close relationship
with Europe.
- Finalize the Trans-Pacific Partnership (TPP) - a
comprehensive, multilateral free-trade agreement that the United States, Canada,
Mexico, Peru, Chile, Japan, Australia, Singapore, New Zealand, Malaysia,
Brunei, and Vietnam are negotiating, using many of our existing bilateral
free-trade agreements as a basis to create a strong bloc of allies united
by free trade.
- Formalize a U.S.-EU free-trade agreement - the EU is America’s
largest trading partner, with $1.5 trillion in annual trade, representing
40% of the world’s GDP and 47% of global trade.
- Sign a U.S.-Brazil free-trade agreement - Brazil, with the
world’s 6th largest economy, is a growing regional power
and a natural U.S. ally and a FTA will cement Brazil’s position as a
primary force for stability and peace in South America, and as a
counterweight to neo-socialist regimes and budding narco-states.
- Reform the Generalized System of Preferences (GSP) - provides a helping
hand to developing economies by offering them non-reciprocated trade
preferences if they strictly adhere to the rule of law.
References:
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free trade breed poverty and pollution?” by Steve Chapman dated March
24, 2002 published by Chicago Tribune.
“North
American Union: Deconstructing the U.S.” by Diane Alden dated June
16, 2006 published by News Max at http://www.newsmax.com/archives/articles/2006/6/15/132429.shtml .
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Road Again: Four Goals for the New U.S. Trade Representative” by Tim
Kane dated June 16, 2006 published by The Heritage Foundation on http://www.heritage.org/Research/TradeandForeignAid/wm1130.cfm .
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American Union: Coup d’etat American Style”
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.
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.
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.
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.
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Adjustment Assistance: Another Evaluation Finds the Program to Be Ineffective
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.
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