In defense of trade deals

NFTC's comments on Trump administration review of trade agreements speak volumes

By: Eric Johnson
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Photo: Andrew Cline / Shutterstock.com
   Lost amid a newsy week of trade happenings was an interesting set of comments about the usefulness of trade agreements.
   The National Foreign Trade Council, a Washington, D.C. organization that promotes an open trading system for U.S. businesses, on Tuesday submitted comments to the Office of the United States Trade Representative (USTR) and the U.S. Department of Commerce in response to performance reviews of trade agreements by those agencies.
   The reviews are being conducted as a mandate attached to Executive Order 13796, signed in late April by President Donald Trump, who campaigned heavily on the idea that Americans were being shortchanged by existing U.S. trade deals.
   The NFTC noted that such reviews of U.S. trade policy have recently been undertaken.
   “In conducting these performance reviews, we urge USTR and (Commerce) to consider the wealth of detailed information already available which addresses these issues,” NFTC said. “Principal among these is a report prepared by the ITC (International Trade Commission) last year, which essentially conducted a similar exercise while also cataloguing other previous studies done to assess the value of U.S. trade agreements.
   “The ITC report found that ‘U.S. bilateral and regional trade agreements have expanded bilateral trade flows with partner countries by 26.3 percent on average across the traded goods and services sectors’ and that such agreements had a positive effect on both U.S. aggregate trade, U.S. real gross domestic product and U.S. employment.”
   The ITC report also found that “’trade agreements have affected not only trade but also others aspects of the U.S. economy, with results including higher aggregate employment, lower prices, and greater consumer choice’ while acknowledging that trade did have some negative effects on production and employment in certain sectors,” the NFTC added.
   Trade advocates have noted this point regularly in response to the Trump Administration’s focus on the negative aspects of trade deals.
   NFTC also said the focus of the administration’s trade policy should be on those countries with which the United States doesn’t currently have trade deals, not those it does.
   “In terms of the 10 countries referenced in the (Federal Register) Notice with whom the U.S. does not have a free trade agreement but only has a WTO relationship, any prioritizing of the U.S. trade partners would place China, India, Japan and the European Union (EU) higher on the list with regard to barriers than either Canada or Mexico, our North American Free Trade Agreement (NAFTA) partners,” NFTC wrote. “This does not suggest that the barriers faced in Mexico and Canada are less significant, but it does mean that the existing commitments of these two countries under the NAFTA agreement have addressed many barriers, and that, in the case of major trade partners with which we have no such agreement, the degree and magnitude of barriers is much greater.”

Any prioritizing of the U.S. trade partners would place China, India, Japan and the European Union (EU) higher on the list with regard to barriers than either Canada or Mexico.

   Those barriers with China, of course, take precedence given the volume of trade conducted between the world’s two biggest economies, and the relative inequality in market access for U.S. exporters and multinationals. The coalition pointed to the positive effects the Trans-Pacific Partnership (TPP) might have had in coercing China to provide a more level playing field to U.S. business.
   Trump withdrew the United States from the TPP almost immediately after his inauguration in January.
   “The lack of progress – and in many cases policy reversals – in the adoption of fair and non-discriminatory rules and policies by the current Chinese authorities in areas such as subsidies, state-owned enterprises, technology, intellectual property protection, services and agriculture are major causes for concern,” NFTC said. “The TPP agreement would have created a powerful new normative force in the Asia-Pacific region to help move Chinese policymakers in a more responsible direction. With TPP off the table, it is now imperative to outline a policy direction with respect to China and other trading partners in the Asia-Pacific that will help achieve similar results.”
   The comments, in particular, highlight the benefits of the Information Technology Agreement (ITA), negotiated under the auspices of the WTO.
   “The ITA is a prime example of a trade agreement that lowers tariff barriers, creates benefits and opportunities for U.S. exporters and American workers, and promotes the rate of innovation in the United States,” NFTC said. “The original version of the ITA was completed in 1996 as a plurilateral agreement to eliminate tariffs on certain information and communications technology products. Initially accepted by 29 members of the WTO, the agreement currently includes 82 participants and covers over 97 percent of world trade in information technology products.”
   The coalition noted that the United States and its ITA partner countries recently agreed to update and expand the agreement to ensure that it keeps pace with rapidly evolving technologies.
   “The ITA is one of the most commercially successful of the WTO’s trade agreements,” NFTC said. “From 1996, when the agreement was signed, to 2015, total trade in ITA listed goods has increased from $1.2 trillion to more than $5 trillion – an increase of an average 9.3 percent per annum. And as the WTO has observed, ‘the ITA is not only about eliminating duties and expanding trade, it is also about stimulating innovation.’ Indeed, the ITA’s biggest return has been through its ‘multiplier effect’ on the rest of the economy. Only 20 percent of the economic benefits of technology come from technology production, with the other 80 percent coming from technology use.”
   More broadly, the NFTC urged the USTR and Commerce Department to involve shippers more directly in their reviews of existing trade agreements and the negotiation of future ones.
   “In light of the need for effective economic diplomacy to tackle barriers in non-FTA markets, it is imperative for the Administration to consult with U.S. exporters and producers as it plans a path forward.”