With the anticipated introduction in Congress this week of legislation that would give President Obama the authority to conclude massive regional trade agreements in Asia and Europe, the issue of trade and its impact on the American economy is about to take center stage in Washington. To help shine some light on the issues at stake, we have substantially updated and revised, and are re-releasing today, the Renewing America infographic Scorecard and Progress Report on U.S. Trade and Investment Policy.
This report, like others in the series on education, corporate taxes, worker retraining and other issues, is intended to assess how the United States is doing against its peer competitors in Europe and Asia in creating a policy environment that enhances the competitiveness of the U.S. economy. The conclusions will not be entirely to the liking of either advocates or critics of the U.S. trade agenda.
Compared to the sometimes outsized claims of proponents, the U.S record on trade and investment has been mixed. While U.S. exports are growing fairly strongly, the United States does not export as much as it should for an economy of its size and product mix. While the United States still attracts more foreign investment than any other country, our share has dropped sharply over the past decade, and the United States has lost more ground to China than other advanced economies.
In contrast to opponents of further trade liberalization, however, the United States is likely to be among the biggest beneficiaries of additional trade opening. We are the most competitive in those sectors where the barriers to trade remain highest, such as business services, and where the potential gains from stronger rules prohibiting anti-competitive practices are the greatest. Service sectors like architecture, financial consulting, legal services and others now provide twice as many U.S. jobs as manufacturing, most of them at good wages. Removing trade barriers and strengthening rules in these sectors would almost certainly benefit the U.S. economy.
The Obama administration, despite its initial reluctance on further trade opening, has tried to tackle some of these challenges head-on. The National Export Initiative, the Obama administration's first big trade initiative, rightly focused government policy on boosting the country’s lackluster export record, even though it has fallen well short of the president's stated goal of doubling U.S. exports. The creation of SelectUSA in the Commerce Department and the launch of the annual investment summits for the first time have seen the U.S government do what every other country in the world does by actively marketing the United States as a desirable investment location. The administration has undertaken similar efforts to encourage tourism to the United States, which is an often overlooked source of export earnings.
And finally, the Obama administration has embraced the most ambitious U.S. trade agenda in two decades--including the Trans-Pacific Partnership (TPP) with Japan and 10 other Asia-Pacific countries, and the Trans-Atlantic Trade and Investment Partnership (TTIP) with Europe. While there are important substantive issues that must still be resolved in the negotiation of each of these agreements, their successful conclusion would put the United States in an enviable position in terms of international competition. Removing trade restrictions and aligning regulations where appropriate would make it easier for U.S.-based businesses to sell into the two other largest markets in the world, and thereby encourage investment in the United States. And, while the rising dollar is currently a source of concern, the United States today -- blessed by falling energy costs and technological leadership -- is a highly cost-competitive place to invest.
Americans, it seems, understand the potential with trade. For 15 years, Gallup has regularly asked the public whether it sees foreign trade more as “an opportunity for economic growth through increased exports” or as “a threat to the economy from foreign imports.” This year, 58 percent of Americans said they saw more opportunity than threat, versus just 33 percent who answered the opposite. Those numbers are the strongest since the early 2000s, when Americans had enjoyed more than a decade of robust U.S. growth.
The conclusions of this report will not resolve, of course, what are certain to be wrenching debates in Congress over whether to grant Trade Promotion Authority (TPA) to President Obama. But they should at least help frame the right questions--namely, where does the United States stand today against its peer competitors in Europe and Japan, and what are best ways to build on our advantages and minimize our deficits in the future? We hope this report will be a helpful contribution to that discussion.