America‚Äôs foreign trade agreements have not only been bad for jobs and deficits but have actually been bad for trade as well.  
Monday, September 16, 2013 at 02:13PM
Skeptic in Employment, Favorites, Free trade

If you think foreign trade agreements ("FTAs") have been improving America's position in the international trade of goods and services and that we should continue entering into similar FTAs including the pending Trans-Pacific Partnership, here's an opportunity to compare those beliefs with what has actually happened under FTAs.

US exports to non-FTA partners as a group have increased faster than have exports to FTA partners as a group. Yes, that's right. Read it again: US exports to non-FTA partners as a group have increased faster than have exports to FTA partners as a group. Figures here. We've been repeatedly promised that each new FTA will increase US exports, but the actual FTAs we have entered into have slowed the growth of exports. This implies that US trade negotiators may be bad at their jobs, but the reality is that—despite the empty promises—improving the US balance of trade has not been a priority for our (Democrat and Republican) Presidents and their negotiators. Here is how Deputy U.S. Trade Representative Karan Bahtia encouraged a South Korean audience to embrace KORUS FTA negotiations:

Myth #1: The U.S. will get the bulk of the benefits of the FTA

If history is any judge, it may well not turn out to be true that the U.S. will get the bulk of the benefits, if measured by increased exports. From Chile to Singapore to Mexico, the history of our FTAs is that bilateral trade surpluses of our trading partners go up.

Our most recent FTA, with Korea, has resulted in above-baseline imports and below-baseline exports in every one of the 16 months it has been in effect. Graphs here.

The US trade deficit has gotten substantially worse with FTA partners as a group while improving modestly with non-FTA partners. Figures here. Again, getting US international trade into balance has not been a priority for our negotiators. The US has had a trade deficit every year since 1975, and the average deficit has been about 3% of GDP, which is roughly as large as the average federal budget deficit over the same time period.

By 2012, NAFTA alone had eliminated approximately 1.0 million more US jobs than it created. This is based on the Commerce Department estimate that it takes $165,000 in net exports to support one domestic job and the fact that the annual trade deficit between the US and Canada/Mexico increased by $160.2 billion annually from the beginning of the North American Free Trade Agreement to 2012.

We could increase US domestic employment by approximately 3.2 million jobs simply by bringing foreign trade into balance. The US trade deficit in 2012 was $534.7 billion. Dividing by the Commerce Department's estimate of $165,000 of net exports per job gives 3.2 million jobs at stake. To put that in context, America needs to create about 8.3 million new full-time jobs and to upgrade an additional 8.3 million part-time jobs to full-time.

US foreign trade agreements are not really about "trade." The US has a long history of making bad "trade" deals in order to get what it really wants on other matters. What are these more important matters for which the US routinely sacrifices domestic jobs and incurs imprudent levels of foreign debt? The list is long, but these seem to be the most important: Free international movements of capital, opening other nations up to US banks, supra-national legal protections for cross-border investments, enhanced protection of intellectual property, and promotion of e-commerce. To this list, we should add geopolitical considerations, i.e., strengthening the US's political and military influence abroad. All of those have been more important than growing the US economy through balanced trade and having full employment in America.

Hat tip to Ben Beachy for passing on research from Public Citizen's Eyes on Trade blog.

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