Top 10 Reasons Why Cross-Border Trade, Free Trade Agreements, and Open Markets Matter

TradeMoves just celebrated its 10th anniversary (Happy Birthday, TradeMoves!).  The past decade has seen efforts by the United States to continue to open markets, implement and pursue new free trade deals to benefit the United States, and encourage US companies to find overseas customers via the National Export Initiative and other export promotion programs.  It is timely that TradeMoves’ 10-year anniversary coincides with a change in Administration.  As we prepare for the incoming trade policy team to roll out its priorities and initiatives, we thought it was fitting to outline why open markets matter and cross-border trade opportunities should continue to be prioritized and encouraged.

1. Protectionism is short-sighted and contrary to growth.  Protectionist, isolation policies and attempts to close the US market will hurt US manufacturers who rely on imported inputs to support US manufacturing. The Smoot-Hawley tariffs of the 1930s saw tariffs raised on more than 20,000 imported goods, and virtual closing of the US market.
2. A closed US market will only lead to “tit for tat” by our trading partners.  Erecting tariff and non-tariff barriers in the United States to imports from other countries will encourage more barriers to US goods and stymie export growth.  Again, in the 1930s, retaliatory actions in response to Smoot-Hawley tariff increases helped contributed to global economic calamity.
3. Sales beyond our borders fuel growth.  Open markets to foreign customers is key to growing business for US exporters.  The US Foreign Commercial Service cites that most of the world's consumers and more than 70% of the world’s purchasing power are located outside of the United States. Foreign competitors are increasing their global market share, and US companies should too. 
4. US export sales support US jobs and pay more than non-exporting jobs.  A 2015 study by the US International Trade Commission cites export-intensive industries pay more on average.  Overall, the export earnings premium is 16.3% on average in the manufacturing industries and 15.5% on average in the services industries.
5. Open markets support US SMEs.  SMEs are the engine for growth in the United States, and exports help SMEs grow faster.  The US Foreign Commercial Service cites that US companies that export not only grow faster, but are nearly 8.5% less likely to go out of business than non-exporting companies.
6. FTAs lower US export transaction costs. Preferential tariff rates for US goods in overseas markets allow US companies to better compete with others in their target market and increase export sale opportunities for US companies of all sizes.  In addition, FTAs can help remove regulatory barriers which reduce the cost of doing business overseas.
7. FTAs expand sales reach.  SME exporters typically can't invest behind border-barriers like multinational companies can, so FTAs are critical to improve access to foreign markets via exports.
8. Strong FTAs improve standards, rules, transparency, and trade facilitation.  US trade agreements level the playing field so US exporters can better compete on cost and access, while raising standards in FTA partner countries, including environmental and labor protection.
9. Positive momentum on open trading regimes should not be halted.  The World Trade Organization and its predecessor – the General Agreement on Tariffs and Trade -- have made great strides to reduce barriers to trade for nearly 70 years.  Furthermore, the United States has been the world leader in the WTO to open markets, encourage free trade, and tackle unfair barriers.  Any sliding back by the United States would jeopardize the market liberalization efforts that have bolstered US growth since World War II.
10. Cross-border trade can help the US continue to recover from economic recession.  Thoughtful trade policies should be help the United States to be nimble in opening borders, helping companies grow, and contribute to a stronger, more vibrant US economy.  Various studies, including Brookings study outline why a more open trade policy is critical to the United States’ recovery.  A more open trade policy “helped the United States regain its economic footing after the Great Depres­sion”. Similarly, in the period of 2009 to 2014, “increased exports have been responsible for one-third of U.S. economic growth.  For example, in 2013, “US exports of goods and services reached a record high of $2.3 trillion. America’s ex­ports to its 20 free trade agreement (FTA) partners have risen by 57 percent in the past five years, compared to just 44 percent for the rest of the world.”  These statistics underline the importance of open markets in our ongoing recovery. 

We look forward to the next decade for TradeMoves and helping US companies maximize their supply chains to take advantage of cross-border trade opportunities and minimize the challenges arising from trade barriers that countries put up to limit export growth.
 
Shawn Marie Jarosz
sjarosz@trademoves.net
 
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