John Allison is former Chairman and CEO of BB&T Corporation, Distinguished Professor of Practice at Wake Forest University School of Business, Job Creators Alliance member and author of the forthcoming book "The Financial Crisis and the Free Market Cure" from McGraw-Hill this fall.
When ABC News revealed that the U.S. Olympic team's opening ceremony uniforms were made in China, the public rallied in outrage. In a rare moment of bipartisanship, members of Congress took to the podium, denouncing the "Made In China" label as offensive to all things American. Senate Majority Leader Harry Reid declared, "I think they should take all the uniforms, put them in a big pile and burn them and start all over again." A strikingly anti-free trade statement from one of the most powerful elected leaders in the United States, given that one of the primary purposes of the U.S. Constitution was to promote free trade across state borders.
International trade has never been popular in the United States; this has become doubly true as Americans find themselves in the midst of a global economic downturn, high rates of unemployment, and the rise of a new economic powerhouse in Asia. The policy debate in the U.S. has been dominated by powerful industry lobbies who have tirelessly decried jobs and money moving overseas. Outsourcing, trade deficit, Chinese dominance--these buzzwords have come into high relief in American discourse since the Great Recession.
Unfortunately, this debate misses a fundamental fact. As the world's largest trading nation, American prosperity - and jobs - depend on trade.
Most economists and trade scholars agree that trade is good for the economy. It allows for greater specialization and efficiency, resulting in more diverse, affordable products and services for consumers. Trade allows American firms to tap into larger markets, and generate economic growth and job creation through American exports. Trade fosters innovation through cross-country information exchange and industry collaboration. According to the office of the United States Trade Representative (USTR), in 2011, U.S. exports supported approximately 9.7 million jobs. That same year, exports made up 13.8% of GDP.
In an increasingly globalized era, trade relationships have become denser, more complex, and more necessary. Production and supply chains regularly cross borders and oceans to create goods with inputs from all over the world. This kind of trade increases efficiency and adds value, both for producers and consumers.
American prosperity is a testament to this value. Almost twenty years after the implementation of the North American Free Trade Agreement (NAFTA), the USTR estimates that the average American household of four sees anywhere from $350 to $930 in annual benefits. In the midst of a flagging economic recovery, foreign trade zones, which face fewer trade barriers, have consistently outperformed the rest of the country, boasting increasing revenues linked to growing exports.
Trade is a key engine of economic growth, and a crucial tool to the American recovery. Since World War II, our nation has been the world's most vocal advocate of free trade. With more than ten free trade agreements with countries around the world, America is at the center of a global network that brings talent, resources, and growth to our nation's shores.
Now is not the time to turn inward. In order to grow, businesses must be able to tap into markets and consumers abroad, export domestic products and attract innovation. More than ever, the United States should take the lead in pushing forward a free trade agenda--a way to affirm our international presence both economically and politically.
Congress can wield the trade tool in a variety of ways to encourage economic growth. In the immediate term, lawmakers must pass legislation that would grant Russia permanent normal trade relations with the United States. If not, American firms may lose valuable opportunities in one of the world's largest markets.
The recent implementation of free trade agreements (FTA) with South Korea and Colombia are promising advances, but legislators should continue to push for the implementation of the U.S.-Panama FTA. The Trans-Pacific Partnership, which aims for a free trade area that stretches across the Pacific Ocean, would allow American firms to tap directly into emerging markets in Asia. The U.S. should take the lead in these negotiations, affirming America's commitment to free markets and the flow of goods, services, and innovation around the world.
American greatness relies on our relationships with neighbors, both near and distant. The way out of the Great Recession is not economic isolationism, but an embrace of our nation's heritage as a global trade leader.