Trade pacts vital to American jobs

In the January 2010 State of the Union address, US President Barack Obama set the goal of doubling the nation's exports over the next five years, supporting two million new American jobs through trade with international partners.

At the terminus of that timeline, our analysis indicates the completion of less than half the goal, with exports of goods and services at approximately US$2.35 trillion (S$3.14 trillion) last year, compared with US$1.57 trillion in 2009.

Although he did not hit the numbers, we credit Mr Obama for an ambitious trade agenda, including completion of previously negotiated free trade agreements (FTAs) with South Korea, Colombia and Panama, and the pursuit of new trade agreements like the Trans-Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (TTIP), and Trade in Services Agreement (TISA).

But why the failure in export growth? In 2009, total global trade decreased by 12 per cent, while US exports decreased by 14 per cent. At the time, it seemed reasonable to project stronger growth from 2010 forward. US exports did grow at a robust annual rate of nearly 17 per cent that year and 14 per cent in 2011. Growth of only 4 per cent in 2012 and 2.9 per cent in both 2013 and last year, however, did not help, since doubling exports requires annual growth of more than 15 per cent.

Mr Obama's export goal hinged on the strength of US production, but even the best products require customer spending to generate sales. Europe has experienced disappointing economic growth while major emerging markets like China, India and Brazil all sharply declined. A strong US dollar makes American products more expensive, further affecting demand.

One encouraging note is the transition of President Obama from a relatively protectionist US senator, in favour of trade barriers and subsidies for domestic industries, to a strong advocate of trade agreements.

Where are we now and where do we go from here? Jobs supported by exports now represent 13 per cent of the US economy, up from only 5 per cent in 1990. Yet, the US is still behind on a global scale. Exports represent half of Germany's economy, 30 per cent of Canada's, and one quarter of China's. These key trading partners export more than twice the value per capita than the United States.

Opponents of free trade agreements often claim that previous accords like the North American Free Trade Agreement (Nafta) sent US manufacturing jobs abroad. We disagree. A global economy imposes competitive pressures and requirements on all industries. US manufacturing and services companies cannot escape from the competitive realities of globalisation but they can benefit from FTAs.

Our outlook for this year's trade policy and politics: The administration and Republican majorities on Capitol Hill must and will collaborate on international trade. Mr Obama has asked for bipartisan support for Trade Promotion Authority (TPA), allowing Congress to vote yea or nay on trade Bills, but not on individual provisions. This will allow US trade negotiators to deliver meaningful industry and regional commitments. The TPA is a crucial negotiating tool which the Republican leadership supports. There should also be strong domestic support for FTAs like the TPP and TTIP, which can restore and perhaps even kick-start further global progress in the World Trade Organisation.

For both Republicans and Democrats, the key trade policy objective of increasing jobs requires policy assessments of the jobs affected by new laws, regulations and executive orders. It also means linkages between investment and job outcomes, and specific rewards for employment success and help for those hurt by trade. A successful economy requires new measures in technology-oriented education availability, and greater global partnerships in science, technology, research and development.

It is time for Congress and the administration to develop and share credit for progress in international trade. Past failures and shortcomings demonstrate the need for collaboration in achieving trade agreements that deliver significant economic results. This year offers an excellent opportunity for the President and Congress to achieve a new beginning. The US and the world will benefit from such joint leadership.

Professor Michael Czinkota researches international marketing issues and Professor Charles Skuba teaches international business and marketing. Both are from Georgetown University.