PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

U.S. Needs to Embrace Free Trade During “World Trade Week 2020”

By at 21 May, 2020, 10:06 am

by Raymond J. Keating-

In case you missed it, this week is World Trade Week 2020. And it’s a good time to remind government and elected officials about the importance of trade to the U.S. economy, and that steering U.S. trade policy in a free trade direction will help the economy recover more quickly, and boost job creation and entrepreneurship.

The U.S. economy suffered due to protectionist trade policies and threats leading up to the COVID-19 outbreak. If protectionism is the chosen path for trade policy looking ahead, economic recovery and expansion will be, at best, hampered or, at worst, delayed.

In terms of trade policies, there are two ways to deal with this pandemic and its aftermath – either out of fear and defeatism, by inflicting policies emphasizing stepping back from global commerce and opportunity; or out of American confidence and optimism, by engaging the world via free trade, and thereby expanding opportunities for U.S. consumers, entrepreneurs, workers and businesses.

The choice should be obvious: Confidence, optimism and free trade.

World Trade Week 2020 is the perfect time to point out that small to mid-size businesses dominate on trade. According to the U.S. Census Bureau, small- and mid-sized companies comprised 97.5 percent of all identified exporters. Small businesses and entrepreneurs benefit greatly from lowering costly barriers at the border, and 95% of the world’s consumers live outside of the United States. There is opportunity and growth for entrepreneurs and small businesses in the global marketplace.

We need to keep in mind that U.S. tariff increases, threats of more tariffs, and retaliatory measures by other countries led to stagnation in trade prior to the pandemic; contributed to slow business investment; increased costs and reduced choices for U.S. consumers and small businesses; and reduced international opportunities for American entrepreneurs, businesses and workers.

And make no mistake, protectionism via increased tariffs and/or quotas on foreign products is paid for by American consumers, small businesses and workers. Nearly all imports are inputs to U.S. businesses, from consumer goods for retailers to capital goods for manufacturers. And when understanding that industry after industry in this nation is overwhelmingly populated by small businesses, then it becomes increasingly clear that protectionism hurts and free trade helps small business.

Indeed, tax increases and more regulation – including on the trade front – always serve to hamper investment, entrepreneurship, business development, and economic and income growth. That was the case before the COVID-19 pandemic, and it will be the case during and after this crisis.

In the end, quite simply, free trade is about reducing or eliminating governmental barriers that raise costs and reduce the ability of individuals and businesses to trade. And trade, by definition, is mutually beneficial, otherwise individuals and businesses would not engage in the transaction.

If we are serious about getting this economy back on a path of strong economic growth, then we need to rein in governmental costs so that free enterprise can reignite and flourish. That includes on the trade front. Free trade must be part of the pro-growth policy agenda, and World Trade Week 2020 is an ideal time to make clear that the U.S. is ready to reclaim its global leadership role in expanding trade.

In this time of crisis, the U.S. economy and the economies of our trading partners need to expand opportunities to trade – that is, for individuals and businesses to engage in mutually beneficial transactions – and therefore, boost entrepreneurship, investment, and growth.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

News and Media Releases