Insight Washington 1: THE ECONOMIC BENEFITS OF U.S. TRADE

Why does President Obama advocate Trans-Pacific Partnership (TPP)? How can TPP grow U.S. businesses, create local jobs, and expand the middle class? The Council of Economic Advisors published a report, The Economic Benefits of U.S. Trade 2015 (click for the full report), which presents original empirical evidence, alongside a summary of the extensive economic literature, on a broad range of effects of enhanced U.S. trade and U.S. free trade agreements (FTAs). Highlights from this report include:

  1. U.S. businesses must overcome an average tariff hurdle of 6.8 percent, in addition to numerous non-tariff barriers (NTBs), to serve the roughly 95 percent of the world’s customers outside our borders.
  1. Exporters pay higher wages, and the average industry’s export growth over the past twenty years translated into $1,300 higher annual earnings for the typical employee.
  1. Middle-class Americans gain more than a quarter of their purchasing power from trade. Trade allows U.S. consumers to buy a wider variety of goods at lower prices, raising real wages and helping families purchase more with their current incomes.
  1. Over the past twenty years, the average industry’s increase in exports translated into 8 percent higher labor productivity, or almost a quarter of the total productivity increase over that time.
  1. When countries make trade deals with China, outsourcing of American jobs increases, while U.S. trade agreements do not change the rate of U.S. investment abroad.
  1. Trade raises labor standards and incomes abroad, helping developing countries lift people out of poverty and expanding markets for U.S. exports.
  1. The United States has a $43 billion surplus in agricultural trade and is a worldwide leader in agriculture, employing almost 1.5 million American workers.