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Press Release

Trade Promotion Authority Promotes Economic Growth


Last week, by the narrowest of margins-215 to 214, the House passed legislation granting the president trade promotion authority, critical to the United States' continued prosperity in a global market. Trade promotion authority, also known as fast track authority, allows the president to negotiate trade agreements that are then sent to Congress for and up or down vote-no amendments allowed. This allows the president to expand the marketplace for American goods and services without becoming embroiled in the partisan wrangling of congressional politics. As the world's largest trading nation, the United States has much to gain from the passage of trade promotion authority.

Trade has always played an important role in the United States and our greatest eras of economic prosperity have coincided with our pursuit of free and open trade. Today, we live in a truly global world, with the United States integrally linked to markets across the globe. The value of trade in goods and services reached 26 percent of the nation's output in 2000 (over 33 percent if earnings and payments on investments are included), and growth in the trade sector has outpaced the overall growth of the economy since 1970. Exports now provide more than 12 million American jobs; one out of five manufacturing jobs is export-related, and one in every three acres is farmed for export. On average, export-related jobs pay 13 percent to 18 percent more than the national average.

Consumers also benefit from open markets and free trade. Protectionist policies have always benefited producers at the expense of consumers. International trade expands the choices available to consumers and increases competition, which brings prices down beyond the savings from simply eliminating tariffs. The United States Trade Representative estimates the trade agreements of the 1990s (NAFTA and the Uruguay Round) provided annual benefits of between $1,260 and $2,040 for the average family of four in America.

Despite the clear potential and benefits of a global marketplace, the United States lags in pursuing opportunities for trade. Of over 130 existing free trade agreements, the United States is party to only 3 (Israel, Jordan, and NAFTA agreements). Other developed nations aggressively pursue new trade opportunities. According to the Department of Commerce, Europe is party to 27 trade agreements and is currently negotiating 15 additional agreements. Japan is pursing opportunities in Mexico, Korea, and Chile. The United States cannot ignore foreign markets in a world that is tightly integrated through technology and transportation that allow capital as well as goods and services to move seamlessly across the globe.

Granting the president trade promotion authority is nothing new; every president since Gerald Ford has had fast track authority that allowed Congress only an up or down vote on trade agreements. However, in 1994 the authority expired, and pressures from environmental interests and Big Labor (both key constituencies for the Democratic Party) kept fast track renewal at bay for the rest of the Clinton-Gore administration.

While opposition to trade promotion authority has been protectionist and self-interested, opponents have couched their arguments in concerns over labor and environmental standards. They claim that such negotiations create a "race to the bottom," where capital and investment flow to those nations with the weakest protections in place for workers and the environment. Cheap labor and the lack of environmental enforcement are said to drive foreign trade. However, an examination of foreign investment suggests this is not the case. The vast majority of overseas investment from the United States goes to other developed nations. And when American firms invest in developing countries, they are actively pursued by those nations for the economic benefits they can provide to the country and its workforce. At the same time, American firms operating abroad tend to have higher environmental standards than their local counterparts.

Nonetheless, opponents to trade promotion authority insist that such authority should be granted only if it includes sanctions for trading partners who violate labor or environmental standards. Yet, the House-passed trade promotion authority includes a stipulation that countries must enforce their own standards, which would a notable step in enforcement in and of itself. Moreover, it must be remembered that trade agreements are not negotiated in a vacuum, even with fast track authority. The president knows that Congress is looking over his shoulder, and every agreement is subject to an up or down vote in Congress. Agreements that ignore labor or environmental concerns can be challenged when they reach Congress. The administration negotiates in the shadow of Congress, attempting to craft a treaty that will survive congressional scrutiny.

What trade promotion does eliminate is the endless pursuit of concessions from congressmen protecting special interests. Even the House vote on trade promotion authority demonstrated the potential burden of politics on trade as concessions were made to textile and citrus producers to ensure passage of the bill. Such protection raises prices for consumers as favored industries are protected from foreign competition. While this may make constituents in North Carolina or Florida happy, it drives up prices for consumers across the nation and diverts resources away from our most dynamic sectors, such as high-technology, in order to promote special interests. Fast track authority minimizes such meddling and allows Americans access to new markets abroad.

Simply put, trade promotion authority is recognition that the United States is a prominent player in the global economy. Trade has been an important component of our history, while our future in a world made smaller by new technology and more efficient transportation only makes access to new markets more important. Trade allows consumers the benefits of lower prices and expanded choice; it allows America's innovators and entrepreneurs access to new and growing markets across the globe. As Secretary of Commerce Don Evans noted, "Trade is ultimately about freedom in this changed world. Barriers to trade must be eliminated to allow America's farmers, entrepreneurs and workers to pursue their own economic destiny free from government interference."