PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Trade Data Show Need for Pro-Trade Policies

By at 7 October, 2017, 6:30 pm

by Raymond J. Keating-

International trade has been an area of growth and opportunity for U.S. entrepreneurs, businesses, and workers, and it has accounted for a significant chunk of U.S. economic growth in recent times (see, for example, this SBE Council analysis on trade). Unfortunately, the latest trade numbers have been troubling, and that continued with the release of data from August of this year.

According to the U.S. Bureau of Economic Analysis, after declining in July, exports in August grew, effectively getting back to the June level. Keep in mind that exports actually declined in 2015 and in 2016 (see the accompanying chart). And August’s $195.3 billion in exports is below the monthly level that prevailed throughout most of 2014.

Meanwhile, the news on the import side also is troubling. Like exports, imports declined in both 2015 and 2016. However, we saw a big pop up in imports in January of this year. But afterwards, there’s been an uneven decline, including a fall in each of the last four months.

So, we have an ongoing muddled mess in terms of trade numbers. Sluggish exports signal reduced opportunities for U.S. small businesses and workers, and falling imports point to underwhelming domestic growth (as imports largely reflect the health of the domestic economy) and, again, reduced opportunities for small businesses and workers involved with imports.

Keep in mind that, according to U.S. Census Bureau data and as SBE Council has noted before, 86.7 percent of U.S. exporting firms have fewer than 50 workers and 91.9 percent less than 100 employees. And on the import side, 85.5 percent have less than 50 workers, and 90.8 percent less than 100 employees.

Where is the U.S. Headed on Trade Policy?

Unfortunately, troubling trade numbers are coupled with a muddled mess in terms of trade policy, with the Trump administration continuing to push an agenda mistakenly focused on trade deficits and flirting with assorted protectionist measures. Removing the U.S. from the Trans-Pacific Partnership, renegotiating NAFTA, threatening to end the South Korea-U.S. free trade accord, and flirtations with dubious (to say the least) dumping claims create uncertainty, reduce opportunities for U.S. entrepreneurs, businesses and workers, and threaten consumers (again, including small businesses) with higher costs and reduced choices in the marketplace.

U.S. Businesses and Worker Need More Trade, Not Less

The U.S. desperately needs to get back to being the global leader in advancing free trade, as it largely was, for example, under Presidents Ronald Reagan, George H.W. Bush, Bill Clinton and George W. Bush. That means making the case for free trade agreements and moving ahead in negotiating them, and making sure that such agreements, for example, not only reduce or eliminate such trade obstacles as tariffs and quotas, but also protect the rule of law through Investor State Dispute Settlement mechanisms (so that U.S. businesses are not treated unfairly by politicians, courts and bureaucrats in other nations), and via strong property rights, including intellectual property.

On that last point, SBE Council has joined “ACTION for Trade.” ACTION stands for a coalition called the American Creative, Technology, and Innovative Organizations Network. ACTION for Trade is working to “make sure U.S. trade policy and trade agreements foster innovation and creativity and protect the intellectual property that drives U.S. trade competitiveness.”

After some 11 years of a grossly under-performing economy, the U.S. needs to shift gears and implement pro-growth public policies. That certainly is about providing tax and regulatory relief and reform. But it hardly stops there. It’s also very much about advancing free trade agreements that eliminate government obstacles to trade, and protect investors and intellectual property.

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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 here.

 

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