The Case For Trade

Since the end of World War II, American economic leadership, paired with the principles of free market capitalism and open trade, has shaped the global economy, won the Cold War, and propelled the United States to become the largest economy in the world. Every American President from Dwight Eisenhower to Barack Obama has embraced open market principles which have allowed the American economy to grow by trillions of dollars and create millions of jobs.

Our ability to lead the global economy and freely trade goods and services with other nations has tangible benefits for all citizens of the United States.  These benefits include:


Job Creation

Exporting and importing goods and services with our trading partners has created millions of jobs in the United States. As the United States and other countries have opened their economies to free trade more and more jobs have been created.

For example, since the North American Free Trade Agreement (NAFTA) was enacted the U.S. has added nearly 25 million net new jobs and real wages are nearly 13% higher than when the agreement was enacted. Furthermore, Economic studies show that trade with our 20 free trade agreement (FTA) partners has risen by 57 percent in the last five years and created 1.5 million new jobs since 2010.

In total the U.S. government estimates that in 2015 over 11.5 million domestic jobs were supported by our ability to export goods and services to our trading partners. If we close down our markets then foreign trading partners will do the same, which will cost the U.S. jobs.


Economic Growth

American leadership of the global economic system has been extremely beneficial for our own domestic economy. The American economy is the largest and most dynamic in the world, and our ability to trade with other nations supports economic opportunity at home.

95 percent of the world’s population lives outside the United States and free trade allows U.S. exporters to sell their goods and services in these markets. In 2016, U.S. producers and manufacturers exported nearly $1.5 trillion dollars’ worth of merchandise. The largest buyers of U.S. made goods where Canada, Mexico, China and Japan. On an ongoing basis, U.S. exports account for approximately 14 percent of American GDP.

The economic benefits are not just related to U.S. exports. A 2013 study by the St. Louis Federal Reserve found “imports have played a critical [and] positive role in boosting manufacturing output in the United States—much more so, in fact, than exports.” Since 1994, North American trade has quadrupled to $1.2 trillion. That number represents millions of American jobs, record business growth, and incredible new opportunities for American companies to sell their goods and services to new consumers.


Lower Consumer Prices

Our ability to import from abroad lowers prices for all types of consumer good in the U.S. and improves the variety of items that we can buy in our stores. One study found that having access to imports boosts the purchasing power of the average American household by about $10,000 annually. For example, today, the clothes in U.S. stores cost about the same as they did in 1986. Similarly, consumers can furnish an entire home for the same amount as they could 35 years ago. These prices have remained steady for decades, despite constant inflation, because we participate in international trade.

A report by The White House found that the benefits of trade are particularly important for middle and low income households. For the 50th percentile income earners the lower price in the U.S. meant a 29 percent boost in purchasing power. For the bottom 10 percent for income earners trade produced at 62 percent increase in purchasing power. If we shut down U.S. consumer’s access to international goods then prices for nearly everything would quickly rise, and the variety of goods available would decline.


US Global Competitiveness

In today’s economy many final consumer goods that we buy in stores or online are manufactured, produced and assembled across several countries, including the United States. For example, according to the Department of Commerce 40 percent of the parts in a typical Mexican product that is exported to the U.S. are actually made in the U.S. Additionally, many intermediate goods imported by the U.S. ultimately are exported as final products to customers outside the U.S. Put simply, imports are fundamental to production of U.S. goods and exports.

Furthermore, the North American economic supply chain that was enabled by NAFTA helps make our continent and U.S. industries globally competitive. The removal of tariffs and other impediments to cross border commerce means that U.S. industries can use inputs from Mexico and Canada to produce goods and services that compete globally on price and quality. Other nations in Europe, Central Asia, the Caribbean, Africa, East Asia, and South America understand this and all have regional free trade agreements modeled after or inspired by NAFTA’s success. Terminating NAFTA or other trade pacts would be a huge setback for the global competiveness of U.S. exports and a boon to our competitors.


National Security

National security is linked to economic security, and as we saw in the Cold War, America’s ability to spread capitalism and free market economic policies has a powerful effect on global geopolitics. For the last seventy years or more, America has shaped the world economy based on our own economic principles, and the foremost tool has been trade policy. Throughout this process, and through robust bilateral trade, America has seen former enemies – like Germany, Japan, and Vietnam – become valuable trading partners and reliable allies.

Similarly, national security across the U.S., Mexico and Canada has benefited from the NAFTA. From its inception NAFTA has fostered greater cooperation between U.S. and Mexico’s border patrol and required collaboration on the part of customs and immigration services from both countries. Additionally, U.S. trade through NAFTA has fostered an increasingly democratic Mexico and a strengthening of Mexican institutions that further adds to regional stability.

The United States must continue to lead the global economy by pushing for lower barriers to free market trade, both at home and abroad. If we abandon our leadership role then rising powers – like China – will become the center of the global economy and will define the rules that govern international trade in the 21st century.