The full story is always more complex than the soundbites.
Throughout this year’s election, there has been a big focus on trade, specifically anti-free trade rhetoric and anti-TPP positions. In the first minutes of the first presidential debate on Monday, September 26, candidates focused on US trade policy as a whole and on ways the US should approach globalized trade. Encompassed in the arguments (and the soundbites) are several misconceptions on how trade actually works and the benefits it does provide. We thought it would be helpful to clarify some misleading statements from the debate.
Misconception #1: Trans-Pacific Partnership (TPP) only helps big corporations
According to the USTR, 98% of US exporters are considered small and medium-sized businesses. TPP is different from previously negotiated trade agreements in that it includes language intended to help small business better navigate trading between the 12 member states. This includes an approach to streamline customs procedures and create efficient and transparent trade. Also, for the first time ever, the agreement creates a Small Business Committee that meets regularly to discuss how small businesses can gain better access to TPP markets. For more information on how TPP benefits SMEs, see USTR’s TPP factsheet and our previous blog post.
Misconception #2: NAFTA (North American Free Trade Agreement) has lost hundreds of thousands of jobs to Mexico
Some estimates show that nearly 14 million US jobs rely on trade with Canada and Mexico. According to the Peterson Institute for International Economics, it is believed that nearly 200,000 export-related jobs are created annually as a result of NAFTA. That’s nearly 4 million jobs in twenty years! Compare this to the estimated 600,000 job losses over two decades reported by the Council of Foreign Relations. Further, exporting jobs can pay up to 19% more on average in the US manufacturing sector than non-exporting jobs.
Calls to review whether free trade agreements (FTAs) do work are valid in order to ensure continued benefits for US exporters and workers. The net job increase since NAFTA implementation is one example of how NAFTA continues to have a positive overall impact for the US economy. Though we cannot be sure what would have happened without NAFTA, to blame NAFTA alone for the loss of hundreds of thousands of US jobs is misleading.
Misconception #3: We can just raise tariffs on other countries imports to get jobs back in the US
Unilaterally raising tariffs across the board is an isolationist policy that can cause trade wars, lead to strained international relations, and, as a consequence, will not bring jobs back to United States. All major economies, including the United States, China, Russia, the European Union, Mexico, India, and Brazil, are members of the World Trade Organization (WTO) and have committed to international trade rules to help facilitate global commerce. For the United States, this means they have committed average tariff rates at 3.5% for all WTO members. Raising tariffs on one WTO member without justification would be viewed as “inconsistent” with our international trade obligations, and could spark retaliation with steep tariff increases applied on US goods.
Raising tariffs across the board does not protect US jobs; instead, it can lead to a trade war in which consumers ultimately pay more for the same goods. In fact, higher tariffs can lead to increased costs on needed inputs while limiting exports to outside consumers, subsequently straining US manufacturers. In contrast, accessing new export markets through the reduction or removal of tariffs and other trade barriers helps create jobs.
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Chelsea Hamati and Shawn Jarosz
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The TradeMoves blog allows our team to share and connect with our followers. We hope to continue sharing our insight and providing helpful tips.