Senior Vice President for International Policy
March 16, 2023
The world is charging ahead in pursuit of new market-opening trade agreements, as explained earlier in this series, but in recent years Washington policymakers have been sitting on trade policy’s sidelines. The United States derives huge benefits from trade and trade agreements , but will America lead on trade as it has in the past? This week’s installment looks at the strategic benefits of trade to the United States.
The benefits of trade for American workers, farmers, and companies are hardly a secret. As this series has explored:
- More than 41 million Americans jobs depend on trade, and jobs tied to trade tend to pay 15-20% higher wages than those that don’t.
- Nearly half of everything American manufacturers produce is destined for export markets; in fact, about 6 million of the 13 million Americans employed in manufacturing owe their jobs to exports.
- Similarly, about 25% of U.S. farm products by value are exported each year, with farm exports reaching nearly $200 billion in fiscal year 2023.
But the benefits of trade for America go beyond growth, jobs, and prosperity.
Simply put: Trade agreements enhance our national security, strengthening ties with our allies at a time when autocracy is on the march worldwide.
The history of American leadership on trade is compelling. In the aftermath of the Second World War, the U.S. took the lead in framing a global, rules-based trading system based on the principles of reciprocity, non-discrimination, and openness. Successive rounds of tariff-cutting negotiations over half a century helped increase world trade from $58 billion in 1948 to $25 trillion today.
No country benefitted more from this growth in trade than the United States. Overall, trade expansion has raised America’s GDP per household by more than $18,000 per year .
America’s Greatest Generation established this post-war trading order because they knew the costs of protectionism. The disastrous Smoot-Hawley Tariff Act of 1930 triggered a 66% decline in world trade between 1929 and 1934. This contributed powerfully to the Great Depression, which set the stage for war.
They vowed not to let history repeat itself. And for more than 75 years, trade agreements have fostered economic growth and good jobs, but they have also strengthened ties of peace, cooperation, and friendship between nations. The 40-fold increase in world trade over post-war period helped drive a dramatic decline in absolute poverty in developing countries, which recently fell to 8% for the first time.
Trade policy remains strategically important because no country can afford a strong military without a strong economy. Indeed, America’s military leaders are quick to point out their preference for the “soft power” of trade and diplomacy over the “hard power” of military force: The former is a bargain compared to the latter—both in terms of treasure and blood.
A changing global economy makes America’s trade leadership even more important. Most of our trade pacts were negotiated long before the rise of the internet and e-commerce, before the U.S. economy became so dependent on intellectual property, and before state-owned enterprises became major players in the global economy.
The United States must be at the table as the rules for global trade are written. The rise of China and its model of state capitalism makes this more important than ever. Beijing’s subsidies, industrial policies, and unfair trade practices favor its national champions in key industries and put foreign enterprises at a disadvantage. At substantial cost, this has afforded China commercial advantages in a number of areas.
U.S. trade agreements can provide new tools so that we and our partners can respond to these practices in our own markets. They enhance commercial ties that make our economies more competitive. Trade agreements can also, in the words of George Washington, raise “a standard to which the honest and honest can repair” — a standard of fair play and transparency that others will want to emulate.
Trade enhances not only our standard of living but our standing in the world. For both these reasons, America must lead on trade.
Read more in our Lead On Trade Series:
- Why America Must Lead on Trade
- The Benefits of Trade for America
- The Benefits of Trade Agreements in America
- How America’s Small Businesses Benefit from Trade
- Why Manufacturers Need a Bold Trade Agenda
- How U.S. Farmers and Ranchers Depend on Trade
- Why Services Are the New Frontier in Trade
- Why America Must Lead on Innovation