December 2015 | Sponsored | Knowledge Base

Free Trade – Vital to Our Industry

Tags: Legislation, Public Policy, and Regulations, Global Logistics, Logistics, Supply Chain

Rob Kriewaldt is Director of Client Solutions, WSI, 920-831-3700

Free trade has been a pillar of the U.S. economy for much of our nation's history. Over the past several decades, the United States has negotiated many bilateral and multilateral free trade agreements (FTAs) to increase access to other countries' markets while opening the U.S. market and benefiting consumers. In addition to membership in the World Trade Organization, the United States has free trade agreements in place with 20 other countries.

For the United States, the international trade of goods and services represented 30% of the economy, or over $5 trillion in 2014. The export side of the equation supports almost 12 million jobs spread across both the manufacturing and service sectors of our economy.

For our industry, trade represents an outsize role. From port workers to truck drivers, train crews to warehouse workers, thousands of supply chain jobs depend on exports. The handling of products for export alone generates over $192 billion in revenue for the U.S. logistics industry annually.

Trans-Pacific Partnership

Over seven years ago, the United States began negotiating a comprehensive free trade agreement covering many countries on the Pacific Rim. The Trans-Pacific Partnership (TPP) has grown to encompass 12 countries, including our NAFTA partners Mexico and Canada, as well as Japan, Singapore, Malaysia, Vietnam, Australia, New Zealand, Chile, Peru, and Brunei. These countries represent 800 million people, 40% of global GDP, and 15% of global trade overall.

Only during 2015, as the TPP agreement neared completion, has it become a regular news item. First with the very close vote to approve "fast track" authority, which requires a yes or no vote on the entire agreement by the U.S. Congress without amendments; and more recently with the announcement of the successful completion of treaty negotiations.

The next steps for the United States will be for the President to submit the agreement to Congress for approval. Congress is then required to vote on the agreement within 90 days.

Given the importance of free trade to our industry, it is important that our industry is armed with accurate facts. Here are the positive effects of free trade and TPP on the U.S. economy:

  • 11.7 million U.S. jobs attributed to trade.
  • 5,600 jobs created for every billion dollars in exported goods and services (2013).
  • 25% of U.S. manufacturing jobs support exports.
  • Over 13% of the U.S. economy attributable to exports of goods and services (2013).
  • The typical American consumer can purchase 29% more goods and services per dollar due to the positive effects of free trade (U.S. Council of Economic Advisors).
  • $700 billion in U.S. goods (44% of total) were exported to TPP countries in 2013.
  • One-third of the world's GDP ($27 trillion+ per year) is produced by TPP countries.
  • Countries that have free trade agreements with the United States purchase 12 times more goods and services per capita from the United States than non-FTA countries. Consequently, the potential for trade growth with current non-FTA countries participating in TPP are huge.
  • The single greatest benefit for the United States from the TPP agreement will be the removal of trade barriers with Japan, the world's third largest economy. Over 200 pages of the agreement address reductions/elimination of Japanese tariffs.
  • The TPP contains extensive provisions addressing employee rights and labor protections. These provisions require other partner countries to bring their standards closer to U.S. rules, while eliminating unfair advantages these countries have under current trade rules.

In the coming months, there will be considerable rhetoric and political posturing regarding the effects of TPP on the U.S. economy. The TPP represents a phenomenal opportunity for our industry to continue to grow and prosper. As an industry, it is vitally important that we make our voice heard to our representatives in Washington D.C. by actively touting the benefits to our economy of free trade, and more specifically the Trans-Pacific Partnership.