On June 24, 106 Members of Congress introduced the Trade Reform,
Accountability, Development and Employment (TRADE) Act (H.R. 3012)
as the vehicle for reshaping U.S. trade policy. Mandating
additional reviews of current and potential trade agreements and
adding a multitude of new exceptions, regulatory barriers, and
other requirements, the act, if implemented, will effectively bring
to a halt the free flow of goods and services into and out of the
United States--hurting U.S. consumers and exporters alike.
Though cloaked as a measure designed to "ensure that trade is
fair for our workers and economy," in reality such "fairness"
means special breaks and government handouts for the politically
connected and powerful, with the rest of America paying the bill.
The real intent of the legislation is clear: to erect costly,
protectionist walls around America's economy. In the process, it is
likely to sound the death knell for the international trade system
as a whole.
Open Markets: A Vital American
As a consequence of more than six decades of trade
liberalization, the United States has become the central and
critical player in the global market, serving as a principle
consumer and producer of goods and services flowing around the
world. This trade has bolstered U.S. investment, jobs, economic
growth, and prosperity. Trade accounts for about one-third of U.S.
GDP, and open markets are vital to America's well-being. The
proposed interventions of the TRADE Act would end openness by:
- Granting an unfair competitive advantage to the special
interests that lobby the hardest for protection, demanding
onerous--and likely unfeasible--concessions from America's trade
partners; and ultimately
- Eroding the rules-based system of trade that has lifted
millions from poverty and driven economic growth in the U.S. and
The legislation would reduce America's presence in international
commerce and hurt workers and businesses in all nations--including
Rather than embracing protectionism in a misguided attempt to
promote "fair" opportunity, policymakers should preserve open
markets and instead redress the factors that produce less
competitive firms and workers. High U.S. corporate tax rates,
complex and inefficient retraining and jobs programs, costly
regulations, weak protection of property rights, and direct and
indirect subsidies are only some of the policy failures that bar
many from a "fair" chance to succeed.
Free trade is one of the greatest economic engines of change,
inspiring innovation and bolstering growth. By keeping America open
to trade, Congress can ensure that U.S. workers, consumers, and
companies really get a fair shot to earn and keep their place at
the top of the global marketplace.
Revamping U.S. Trade Agreements
As of the beginning of 2009, the U.S. has 11 free trade
agreements (FTAs) with 17 countries. Though not all of the
agreements have been fully implemented, the U.S. has already seen
impressive results from these bilateral trade deals. In 2008, the
FTAs in force accounted for more than $1 trillion in two-way trade,
which is about 35 percent of the total of U.S. trade with the
world. Along with the economic benefits of the
agreements, the FTAs bring strengthened political relationships
with strategic allies around the world.
Proponents of protectionist measures such as those in the TRADE
Act paint a dire picture of trade's impact on the U.S. economy,
pointing to factory closures and lost jobs. That picture is a lie.
Economy-wide, international trade accounts for only about 3 percent
of annual job losses, and in most years the U.S. economy overall
continues to create more jobs than it loses.
Far more important in changing the composition of America's
workforce have been improvements in technology and shifts in
consumer preferences. The combined impact of innovation and reduced
barriers to trade has served to help the economy, not harm it.
Today, more than 57 million Americans are employed by firms that
engage in international trade.
While production may fall in less competitive industries,
exporters and domestic producers that use lower-cost imported
inputs gain a competitive boost that promotes investment,
productivity, and growth in these industries. Lower prices for
imported goods also help households stretch their incomes, enabling
them to buy more of everything, including goods and services that
are produced domestically. With freer trade, resources flow from
less competitive uses to more competitive and efficient uses,
creating opportunity and bolstering long-run economic growth and
The TRADE Act would compromise all of these benefits by:
- Mandating reviews and renegotiations of trade agreements that
fail to meet a laundry list of new regulatory requirements and
- Requiring congressional participation in every step of the
trade agreements process, from selecting potential partners to
setting mandatory negotiating objectives;
- Mandating that trade agreements include and legally enforce, in
both the U.S. and partner country, a host of new standards,
including voluntary core ILO labor standards and strict U.S.-style
food and product safety regulations, while loosening restrictions
against government intervention in services and agriculture,
domestic preferences in government procurement, protection of
intellectual property rights, and carving out exceptions for
national security, subsidies, and unilateral action against
perceived dumping and other unfair practices; and
- Eliminating the expedited consideration of a negotiated trade
In addition to holding trade agreements hostage to every
populist whim of Congress, the proposed legislation also seeks to
force America's trade partners to adopt U.S.-style regulations and
other policies that could be costly and inappropriate for their own
economies or else lose the benefits of a trade agreement. Moreover,
the TRADE Act could be used as a back door to increasing U.S.
regulation of labor, health, food, product safety, environment, and
other laws without transparent debate.
Introducing more stringent regulations into trade agreements
will not make trade "fairer" for America. Instead, it will unfairly
penalize American consumers and more efficient producers to benefit
uncompetitive firms unable to survive the marketplace without
government assistance. America cannot afford to abandon open market
The major economic benefits of free trade derive from the
differences among trading partners, which allow any country
embracing world markets a chance to become competitive. Free trade
is fair when countries with different advantages are allowed to
trade and capitalize on those differences.
TRADE Act Is Not the Answer
While it is certainly the case that America's trade agreements
can always be improved, that does not mean they are broken. Indeed,
reopening them is most likely to break them: Should the U.S. demand
to reopen NAFTA or other agreements as a means to pull back from
previous market access commitments, then it is fair to expect that
America's trade partners will retaliate with protectionist demands
of their own.
U.S. trade agreements do not need to be renegotiated to make
them better. Because it is clear that economies evolve over time,
NAFTA and the other agreements have working groups and formal
committees designed to continuously ensure that the rules of trade
defined in the agreements work effectively for all parties. More
can be done to help U.S. families, workers, and businesses by
vigorously supporting these efforts to keep trade free in the face
of changing economic conditions than by opening them to an
onslaught of special interest demands for protection and weakening
the rules-based system of international trade that has served the
U.S. so well.
The best approach to ensuring that America continues to reap the
benefits of international commerce is one that is based on a solid
commitment to advancing trade liberalization--not one that
undermines it. Without this commitment from the U.S., the pressure
for erecting barriers to trade and investment will build in many
countries, creating the real potential for a costly contraction in
global trade and world prosperity. Perhaps even more important,
advancing trade liberalization signals to the rest of the
international community that the U.S. will not abandon its world
economy by turning inward but remain committed to providing the
global leadership and vision needed to bolster its economic
recovery and growth in the long term.
Markheim is Jay Van Andel Senior Trade Policy Analyst in the
Center for International Trade and Economics at The Heritage
Daniel Griswold, "Trading Up: How Expanding
Trade Has Delivered Better Jobs and Higher Living Standards for
American Workers," Cato Institute, October 25, 2007, at www.freetrade.org/node/782 (June 28, 2009).
Similar results were derived on 2003 jobs statistics in Erica L.
Groshen, Bart Hobijn, and Margaret M. McConnell, "U.S. Jobs Gained
and Lost through Trade: A Net Measure," Federal Reserve Bank of New
York, August 2005, at www.ny.frb.org/research/current_issues/ci11-8/ci11-8.html
(June 28, 2009).