World Trade Month: Recognizing the Benefits of Trade and the TPP
By SBE Council at 26 May, 2016, 5:54 pm
by Raymond J. Keating-
May is World Trade Month, and there is a lot to focus on with respect to the role of small business in global markets and the importance of trade for the U.S. economy.
Indeed, trade has become increasingly vital to healthy job creation, innovation, small business growth and the health of our economy. And if the Trans-Pacific Partnership (TPP) agreement gains congressional approval, trade promises to become even more vital to U.S. well-being.
The Growth of Trade
Consider that during the post-World War II era, trade’s role in the U.S. economy has increased significantly. In 1950, U.S. exports came in at 4.22 percent of GDP, imports registered 3.95 percent, and total trade (exports plus imports) equaled 8.17 percent of GDP. As of 2015, exports had jumped to 12.56 percent of GDP, imports to 15.53 percent, and total trade to 28.09 percent of the U.S. economy. That is, trade as a share of GDP more than tripled over this period.
The Role of Entrepreneurs and Small Businesses
In 2014 (latest Census Bureau data), 97.7 percent of identified U.S. exporters have less than 500 employees, and 87.0 percent have fewer than 50 workers. Similarly, 97.1 percent of U.S. importers have less than 500 workers, and 85.2 percent less than 50 employees.
The approval of the TPP – a trade agreement between the U.S. and 11 other Pacific nations (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam) – would reduce or eliminate trade barriers (such as tariffs), and enhance intellectual property rights and protections. By doing so, the TPP would be a plus for U.S. entrepreneurs, businesses of varying types and sizes, and consumers. In fact, the TPP is first trade pact with a chapter dedicated to enabling and encouraging small business participation.
More Benefits from TPP
A new study from the U.S. International Trade Commission estimated that the TPP would be positive for U.S. real economic growth, real income growth, job creation, and capital investment, with exports and imports with TPP nations growing faster than trade with other nations. That’s not surprising. It lines up with economic common sense and experience.
Pro-growth policies are desperately needed to get the U.S. economy back on a path of robust economic growth. Those policies most certainly include free trade agreements that reduce governmental costs imposed on entrepreneurs, businesses, workers and consumers seeking to expand opportunity via the international marketplace.
In the end, free trade reduces costs through the removal of trade barriers (such as tariffs and quotas); expands choices for consumers; keeps U.S. firms competitive; and opens new markets and opportunities for U.S. goods and services. That’s good news for U.S. economic, income and employment growth. Whenever and wherever entrepreneurs, businesses, workers and consumers are free to trade – locally, regionally, nationally, or internationally – it’s a win-win. That includes the Trans-Pacific Partnership.
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP: The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website.