Federalism

Trade Promotion Authority – The States Are Stakeholders

Republicans and Democrats are learning to work together again and nowhere is this more consequential for the states than the bipartisan support for Trade Promotion Authority (TPA). TPA, a negotiating tool that presidents have enjoyed for decades, is a constitutional partnership between the executive and legislative branches of government that facilitates Congressional oversight of and input into U.S. trade negotiations. It is the most effective way for Congress to establish important negotiating objectives before negotiations have concluded.

Once TPA sets the negotiating parameters, the president is authorized to negotiate and conclude trade frameworks with U.S. trading partners that are in the best interests of the nation and the states. The U.S. is currently in the midst of negotiations on three major trade agreements – Trans-Pacific Partnership (TPP); the Transatlantic Trade and Investment Partnership (TTIP) and the Trade in Services Agreement (TISA). Only one of the 14 trade frameworks negotiated since 1974 was concluded absent TPA, so it is highly likely that conclusion of these agreements depends on TPA’s success.

Free trade agreements (FTAs) have spurred the rapid growth of U.S. export markets, and the states are economic stakeholders in the United States’ international trade agenda. The states are keenly aware that 95 percent of the world’s consumers and 80 percent of the world’s purchasing power are beyond U.S. borders and that high-standard trade agreements help American businesses access those markets. In 2012, FTA partners purchased 12.8 times more goods per capita from the U.S. than non-FTA partners.

International trade is a job creation and economic growth engine – a fact not lost on the states. According to the U.S. Department of Commerce, since mid-2009, nearly one-third of America’s economic growth has been driven by exports and almost 30,000 U.S. businesses began exporting for the first time. According to the Office of the U.S. Trade Representative (USTR) ore than 38 million American jobs are supported by international trade imports and exports, and 11.7 million of these jobs are supported by exports alone. Trade-related jobs tend to be higher-paying than non-trade related jobs, and job growth from 2004-2011in trade-related jobs was 6.5 times higher than in non-trade-related jobs.

Trade-related jobs exist in all 50 states and at enterprises large and small. These companies export everything from agricultural products to sophisticated aerospace components. One of the great untold stories about American exports is that small-to-medium-sized enterprises comprise 98 percent of all American goods exporters. These smaller companies occasionally send goods directly to export markets; other times, they indirect sell goods to larger concerns that in turn export those goods overseas.

Imports play an important role in reducing prices and increasing choice for American consumers. Importing raw materials also helps U.S. manufacturers stay competitive in global markets protecting U.S. manufacturing jobs.

To remain economically competitive, the United States must engage fully with its trading partners around the world, and TPA will facilitate those efforts. Protectionism is a tempting chimera not supported by the historical evidence. Open economies grow faster than closed ones, and the 1930 Smoot-Hawley tariff is widely credited with lengthening and deepening the Great Depression. According to the World Bank, per capita real income in the 1990s grew more than three times faster in developing countries that lowered trade barriers than in ones that did not. The Organisation for Economic Co-operation and Development (OECD) observes that trade has played a “catalytic role in the [economic] recovery” and that “open trade is an essential component of any realistic policy framework for continued, sustainable development.” This lesson is not lost on U.S. trading partners around the world who are accelerating rapidly into the international trade space. Canada, for example, just announced plans for a Canada-India Free Trade Agreement by September.

The United States must forge ahead on negotiating trade frameworks or risk being left behind. Congress should take advantage of this rare moment of bipartisan fervor and give the president Trade Promotion Authority to negotiate high standard agreements on America’s behalf. The states’ economic futures depend on it.


In Depth: Federalism

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