The USA, more than most other countries, has been reluctant to engage in trade agreements. As a backdrop, the US-Israel Trade Agreement is the oldest agreement involving the US and it went into effect on September 1, 1985. Since then, the US has signed 13 more trade agreements, covering 20 countries in total with the Israeli agreement (with 18 more agreements being deliberated).
But, during the same 30-year period the world has seen 256 new trade agreements involving a large portion of the world, as registered with the World Trade Organization (see my article in The Conversation). Nineteen trade agreements were in force worldwide in 1985. Now there are 275, with 132 agreements being implemented in the last decade. The bottom line is that the US is very reluctant to engage in almost any form of trade agreement compared with the rest of the world.
When excluded from a trade agreement, it is not uncommon for US manufacturers to see tariffs that are five times higher in foreign markets than the US average. Or, a more telling story is that the US ranked 130 of 138 nations in “tariffs faced” by the country’s exports. Even then, politically, both Republicans and Democrats face (potential) backlash if they support any new trade agreements. Somehow, the public sentiment, on average, in the country has become all-out negative toward international trade.
But, let’s look at the numbers. The US is the world’s largest trading nation at more than $2 trillion annually, supporting more than 11 million US jobs, or, alternatively, every billion dollars of exports supports about 6,000 jobs. About 25 percent of the manufacturing economy in the country is based on exporting jobs, and these jobs pay, on average, 13 to 18 percent more in salary than the average US job not targeting exporting. And the positive numbers go on and on. Despite that, somehow we have seen public sentiment toward anything related to trade become a buzzword for negativity and lack of US interests.
At the same time, trade continues to become an increasingly important part of the US economy even in the face of skepticism. Again, it started with the US-Israel trade agreement in 1985, and that agreement became the staple for our relationship with Israel; a relationship all politicians bring up at election time! But, strangely, the thinking behind the Israel pact does not carry to new engagements. Logically, the idea would be, for example, that the Trans-Pacific Partnership (TPP) would serve as a similar pact between the US and the Asia-Pacific region.
Instead of reassuring our allies in the Asia-Pacific region, the US sentiment now is that the TPP is bad all-around, which economically and even politically makes no sense at face value. Obviously the TPP, or any agreement, could be more advantageous for the US but all agreements are negotiated to develop strategic partnerships, not to have one party win; which appears to be the public’s expectation in the US when the country signs any trade agreements. Naturally, a trade agreement should be win-win, not win-lose, or lose-win.
Somewhere along the lines, the 256 trade agreements that were signed in the same period as the US signed an additional 13 must be reasonable. We seldom – beyond BREXIT perhaps and some European rumblings – hear about awful trade agreements that give countries no benefit. As the most powerful country in the world, and the country already trading the most, but facing among the stiffest tariffs when trading, the US should be engaged in many more trade agreements with our strategic partners in the world. Trade agreements are great for US producers and great for political stability.