Asia Global Institute

Lower or Abolished Barriers Bring Prosperity, Productivity

Tuesday, August 30, 2016

Lower or Abolished Barriers Bring Prosperity, Productivity

James Bacchus, a member of the AsiaGlobal Fellows Faculty Committee, outlines the positive effects global trade has had on the US, and why the country works best if it has an open economy.

Editor's note:

Trade has emerged as a contentious issue in the 2016 Presidential Elections.ButJames Bacchus, a former US trade negotiator, a former member of the US House of Representatives (Congress) , and a former chief judge for the World Trade Organization, says that this should not be the case, as trade has brought benefits to the US Economy.  Mr Bacchus served as a panelist on Trade at the Asia-Global Dialogue 2016 in January this year.

Has trade been positive for the US economy? For those still interested in facts in this "post-factual" era, here are a few:

We Americans have gained no less than $1 trillion annually in national income from the decisions we have made to lower barriers to trade and investment since 1945. That's an extra $9,500 every year for every American household.

We Americans could gain another $500 billion annually in national income by abolishing all the remaining barriers to trade and investment worldwide. That could add $4,500 more every year for every American household.

The fact is, America is among the most prosperous countries in the world precisely because our economy is among the most open in the world. No country has ever succeeded economically - and continued to succeed over time - without being open to trade and investment with the wider world.

To maintain and increase our global competitiveness, our economy must remain open to trade and investment. Closing our economy would deny us the competition, innovation, and efficiencies essential to increasing our productivity and thus raising our standard of living.

Trade must flow for our economy to grow by becoming more productive. Trade flows best when there are agreed rules that enable trade. Rules can always be improved. But where would we be without rules?

Quit the World Trade Organization? Binding, enforceable WTO rules prevent other countries from discriminating against American trade, and our membership in the WTO means our exports face foreign duties that are a tiny fraction of what they would be if we quit the WTO.

Scrap NAFTA? Consider this fact. Forty cents of the value of every good exported by Mexico to the U.S. is actually the re-export to the U.S. of a good originally produced in the U.S. by American workers. Scrap NAFTA, and those American jobs will soon be in Southeast Asia.

Defeat the Trans-Pacific Partnership? The TPP would establish new rules for 40 percent of the world economy reflecting basic American values of free private enterprise and the rule of law. Defeat the TPP and there will be no rules - or worse rules - on digital trade, intellectual property, competition policy, environment, labor, and much more that is vital to Americans.

Cut ourselves off from globalization? Here President (Barack) Obama is right: "The answer is not cutting off globalization. The answer is, how do we make sure that globalization, technology, automation - those things work for us, not against us?"

Trade and investment are necessary - but they are not nearly enough. To make trade and investment work for us by enhancing our competitiveness, our openness internationally must be matched by actions domestically to enable not just some of us - but all of us - to benefit from the opportunities of an open economy in an open society.

The contributions of trade far exceed the costs. One in five American jobs depends on trade. Job losses blamed on trade are often caused by productivity gains from new technologies, which have, for example, caused 85 percent of US manufacturing job losses. Trade? Only 13 percent. In the meantime, trade has supported a 40 percent increase in US manufacturing output.

The fact is, our slow productivity growth may be the gravest threat to lasting American prosperity. To become more productive, we cannot turn away from trade or technology. Instead of blaming "foreign" trade, we should be busy doing the hard work here at home of boosting our productivity by creating new and better jobs while embracing more trade and new technologies.

Trade can continue to be positive for us if we do much more to provide more American businesses with incentives to create more jobs, and more American workers with the education, skills, tools, and other basic and enabling resources they need to get and keep good jobs in the midst of technological change in a globalized world.

This article was first published in the Orlando Sentinel on August 26, 2016 as Trade advocate: Lower or abolished barriers bring prosperity, productivity

The views expressed in the reports featured are the author's own and do not necessarily reflect Asia Global Institute's editorial policy.


James Baccus

Member, Asia Global Fellows Facuilty Committee

James Baccus


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