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Trade: Good for the Country

May 16, 2008

In New Orleans to attend the recent meeting of the “three amigos”—President Bush and his colleagues President Calderón of Mexico and Prime Minister Harper of Canada—I couldn’t help but notice how well the city has rebounded since the devastation caused by Hurricane Katrina. How appropriate that the leaders chose New Orleans as the location for their summit on ways to deepen the trade and cooperation initiated by NAFTA. As a city whose economy—and admirable economic recovery—depends in large part on international trade through its port, what better place to highlight the importance of trade to the U.S. economy than New Orleans?

And yet, as indicated by the primary campaigns across the United States and in the Midwest particularly, Democratic candidates apparently see it differently. Vying for votes in states that have seen significant job losses in the manufacturing sector—mainly due to factors other than trade—they have made scapegoats out of NAFTA and global trade. These candidates have suggested that trade is responsible for the United States’ current economic woes. To the contrary, it’s trade that is keeping our economy afloat.

Trade, in fact, is good for our economic well being, fueling growth and supporting jobs even as the economy softens. U.S. exports have reached record levels, contributing 25 percent of overall growth in 2007 and on track to do the same this year. More and more jobs are linked to trade, and jobs in export industries tend to pay more than the national average, as much as 18 percent more. It’s not a stretch to say, in fact, that trade is actually propping up the economy during this difficult time.

While trade has been favorable for the United States overall, it has also had a positive impact on the Midwest. According to figures compiled by the U.S. Departments of Commerce and Agriculture, exports are a staple of the Midwest’s economy. Close to 20 percent of manufacturing jobs in the Midwest are supported by trade. And one-third of farm goods are exported, so trade is also important for Midwestern farmers. Global agriculture conditions mean that agriculture exports will continue to expand.

Expanding trade agreements makes us even more competitive. It is through such agreements that taxes on U.S. goods are reduced or eliminated overseas. As home to some of the top U.S. states for agricultural exports, the Midwest has benefited from the elimination of tariffs on most agricultural exports to Mexico and Canada through NAFTA. As a result, corn and other agricultural exports from the Midwest to Mexico and Canada have gone up. And because of the passage of the Dominican Republic–Central America Free Trade Agreement, Indiana beef now enjoys privileged access to Central American markets, and the tariffs on Wisconsin dairy products and Illinois pork products exported to Central America are on track to be phased out. If Congress passes the agreement with Colombia, most of the agricultural and manufactured goods Midwestern states export to Colombia will become duty free.

What’s more, because of the preferential access granted to U.S. products, we tend to trade more with countries with which we have formal trade relations. More than 40 percent of all U.S. exports are to countries with which we have trade agreements.

Looking at these facts, it’s hard to make the case that trade has been detrimental to our economy or that taking a “time out” from trade makes sense. Quite the opposite. We must continue to trade, and we must continue to negotiate trade agreements with countries that are willing to open their markets to us. Let’s keep those Midwestern goods flowing down the Mississippi to New Orleans and other ports on the Gulf Coast.

Susan Segal is president and CEO of the Americas Society and Council of the Americas in New York.