A Case for More U.S. Trade
International trade and trade policy has continued to be a controversial issue and because of this the United States has committed itself to an open market for more than half a century, however this has never been the case. According to the history, America has imposed a number of barriers to importation to protect its producers from foreign competition (CIA par. 4).
Looking at the tariffs on the imports shows that the Americans have continued to increase their tariffs its imports; in 1820s, its tariff duty rose sharply to over 60% much higher in 1930s. During the civil war it fell and stood at 20%; this was because of the political economy factors (CIA par 6). During this time, the North favored high tariffs, the south low tariffs while the West swung in the region. A coalition in Congress was formed between West and North, in 1820s, to raise the tariffs by an exchange of votes on import duties o spend on internal improvements that benefited the West. President Andrew Jackson began vetoing the internal improvement bills, and declined the issues as well as destroying the North-West alliance.
When it came to the exports, America produced 80% of the world's cotton before the Civil War, and exported most of it. After the Civil War, the American continued to maintain high tariffs to protect its domestic manufacturers from competition. They advocated for high tariffs claiming that it helped to expand industrial employment as well as keep its wages high. It was also claimed that it aided the farmers in creating a high and steady demand in their home market of raw materials and food they produced. The critics claimed that the import duties were raising the cost of living of harmed agricultural producers and the consumers through effective taxation of their exports, leading to redistribution of income from farmers and consumers to the big businesses in the North (Hornbeck 13).
The magnitude of protection to the import-competing producers as well as the costs imposed on the Export-oriented producers focused on the change in domestic prices on the goods traded, which is relative to the non-traded goods. The increase in tariffs increased the prices on non-traded goods; this means that the degree of protection was less than the one indicated by the nominal rates of protection (Nanto 25). This beg the question, were the policies for protection essential for domestic industries, which can only be answered by the domestic industries themselves.
At the end of the 19th century, U.S changed its trading patterns. During this century, it enjoyed a comparative advantage in goods from agricultural sector and their main exports were grains, raw cotton, and meat products. They exchanged these goods with imports of manufactured goods (CIA, par 14).
This history shows that the American views of international trade have not started yesterday, and these views are complex and their explanation cannot be explained in simple preference to protectionist or free trade. Majority of Americans view trade as something significant for benefiting the American economy (U.S. Department of Commerce 13). On the other hand, the majority also has reservations on how trade has been put into practice. The American's are concerned with the way trade is widening the gap between the poor and the rich, and the way it is harmful t the environment, international labors and poor countries. This is because they believe that U.S has trade practices that are fair compared to other countries. If only the Americans address their reservations, then they would comfortably support free trade.
The Americans believe that US policy should support increasing trade goal. On the other hand, they are unhappy with the policy with the policymaker's policies on commercial interests as well as incorporating other priorities such as protecting the environment, the American workers and preserving international labor standards. They are only willing to slow down trade growth to address this other priorities, and apart from the American concerns for the workers, they show ambivalence about trade barriers, and the majority supports the long-term goal of slowly removing them. The government programs also help American workers to retrain and educate to the globalizing economy (Hornbeck 18).
The Americans also show a concern to maintain international labor standards as a part of international trade agreement. It is overwhelming how the US supports the international labor standards compliance. The Americans also feels that the US should not allow imports that are not made under conditions that violate international labor standards. They are ready to pay for expensive goods, which are manufactured under standard conditions (Nanto 19).
They also support the view that trade has implications on the environment and strongly support the idea of incorporating environmental standards into trade agreements. The Americans at the same time agrees that WTO is much responsive to business interests on the world interests. These views of the Americans make them not to open up to new markets for their products (U.S. Department of Commerce 17).
At the moment the US trade policy at crossroads because of the policy issues and challenges between the Obama administration and the 112th Congress. it is unclear how the issues would be addressed concerning the administration, the community and the congress. Among the issues are the free trade agreement and negotiations concerning the free trade agreement. The US trade laws enforcement and the rights under the existing trade agreements, the role of export promotion to the US economy recovery and the link between trade and the foreign direct investment (Hornbeck 20).
The current trade policy on the environment is affected by economic and political forces, whereby the political forces involve the American public opinions, the stakeholders in labor, business and agriculture and non-governmental organizations, the congress perspective and the perspective of the president. The economic forces include the rice of developing countries, which include markets from Brazil, China, and India, the global economic downturn, limitations of trade policy as an economic tool policy and the long standing US trade deficits (Nanto 33).
According to the trade liberalizers argues that the United States would benefit greatly on trade liberalization, and the benefits are greater than the cost that they are trying to minimize. Therefore, the United States should get encouraged by this and reduce the trade barriers they are imposing on the trade with the other countries. The fair traders, on the other hand, acknowledge the trade liberalization benefits, however, they assert that the US workers and firms are forced in competition under unfair conditions. The fair traders support the trade agreements, but they emphasis on a level playing field. There is also a view by trade skeptics; they argue that the trade liberalization costs outweigh the benefits of the United States; therefore, they do not see why the United States should accept trade liberalization (Hornbeck 26)
The only people who could save the United States from the dilemma are the policy makers. This is because their policy positions do not belong to one group or another; they provide a mechanism to be used in the analysis of the major concepts in the trade policy and their possible implications.
Every trader in the international market should understand that trade policy is important in the economic policy because its objective is the enhancement of national economic welfare. However, the constituents of the economic welfare among the groups interested in the United States vary. These interested groups comprise the stakeholders such as the manufacturers, the farmers, workers, service providers, importers, consumers and environmentalists. The conduct and shape of the trade policy depend on the debate among the policy makers (Nanto 12).
The future of the direction, content and shape of the United States are uncertain, and some observers have a suggestion that the trade policy role should be given lower priority compared to the domestic economic issues and foreign policy, and others call for an activist policy, which faces the challenges head on (U.S. Department of Commerce 27). There is also the question on the role the trade policy should play in promoting the United States economic together with the foreign policy interests. It is also argued that the emergence of the global production networks, which the manufacturers have internationalized the production processes across the borders. This makes the government-to-government trade policy and trade agreements, less effective (Hornbeck 30). The rapid increase in capital flows across borders also dwarfs the effects of flow of services together with the goods. However, it is argued that the trade policy is the significant aspect of foreign and economic policy, which can promote or hinder national interests and has a high level of relevance, reflected in the growth of trade as well as the increase in regional and bilateral trade agreement in the world.
The American public opinion affects the direction of the United States trade policy, which includes the views of the major stakeholders for example, labor, farmers, business and no-governmental organizations concerning the trade agreements and trade liberalization (U.S. Department of Commerce 16). The recent surveys proposes an overall ambivalence among the American public if not growing opposition regarding trade liberalization. The majority of American public believe free trade agreements are not good for them. The research released on November 9, 2010 shows that 35% of the Americans view free trade as a good thing and 44% view it as a bad thing. In the same study, some of the American thought that increasing trade with Japan, the European union and Canada was something good for the Americans (CIA 18). However, the views varied with the stakeholders. The general, the business community of America supported the trade agreements; it was largely supported by the agriculture community, although the sugar producers have opposed the agreement, which would allow foreign producers to access their markets. The labor has been skeptical on this issue, and opposed most of the free trade agreements. The non-governmental organizations, especially those who serve poor countries, are not for the liberalization. Others view free trade as a chance for economic growth and development.
The congress takes it time to reflect on the public's ambivalence on trade policy. Its perspective is critical because the constitution gives primary responsibility on the trade policy to the branch of legislature. The congress support on free trade has declined over the years, although in December 6, 2001, it passed the versions that are most recent, which is now known as the trade promotion authority (CIA 20). The house the passed US- Peru free trade agreement and the most recent that it has approved is the US-Dominican Republic-Central American.
Another political factor shaping the trade policy is the president, and the president is influenced by the favored trade liberalization that is for foreign and economic policy reasons. The president also acknowledges through actions and rhetoric, the effects that trade liberalization has on the segments of the economy. In the united states this has been the case for both the Democratic and Republican Administrations. For example, the Tokyo Round Agreement was enacted under President Carter and its negotiations were under President Nixon. The Uruguay Round Agreements were under President Clinton and its negotiations were under President Reagan and under President George W. Bush (Fergusson, & Vaughn, 22). The trend might continue to President Obama, who has expressed support for the free trade agreements that are pending, which include the South Korea, Panama and Colombia, which were all launched under President George W. Bush.
The United States assigns authority over foreign trade directly to congress. This power given to congress regulate commerce with foreign nations as well as lay and collect excises, imposts, duties and taxes. The congress has exercised its power through setting tariff rates, which are also the source of revenue for the federal government. The early congressional debates on trade pitted the members from the Northern manufacturing regions. These members benefited from the protectionist tariffs, as opposed from the members from the southern, who are large raw material exporting regions (Fergusson, & Vaughn, 28).
The congress has delegated some of its trade authorities to the President for pragmatic and political reasons. This is done without relinquishing overall congressional authority on trade policy. An example is the trade agreement negotiations in the area. In 1934, congress enacted the Reciprocal Trade Agreements Act, which authorized the President in negotiating the Reciprocal Agreements that reduced tariffs. This tariffs were applied on an MFN terms. Under this act, congress authorized the President in implementation of the new tariffs. Through proclamation without any additional legislation. This act was the first the first congress delegated with President major trade authority (Hornbeck 33). By doing this, the Congress aim is to lessen pressure to protect particular industries and firms from import competition as well as assuring the trade partner-countries, which agreements would not be altered by Congress before enactment.
Additionally, the act was itself a practical way for Congress to exercise the constitutional responsibility mandated to it for trade and at the same time recognizes the president's constitutional role, which is the authority to negotiate the foreign agreements. For the past years, Congress has expanded the presidential trade authority while the negotiations and agreements become more complex. When we start with the trade Act of 1974, the congress allowed the legislation of certain trade agreements, which the president negotiated as the subject band expedited legislative procedures (Nanto 17).
Congress has also delegated trade policy authority to the branch of the executive through granting the authority in implementation of a number of trade remedies as well as other trade programs. For instance, the US Department of Commerce has a responsibility to implement the anti-dumping as well as countervailing duty trade programs (Hornbeck 22). These are remedies designed to offset the price advantages accrued to imports as a result of dumping as well as the foreign government subsidies. Congress has also given the president authority together with the United States international Trade Commission to implement the escape clause trade remedy, dampen the injurious effects concerning domestic industries of in fairly traded imports (Fergusson, & Vaughn, 36).
Congress has also maintained reins on its implementation a part from delegating trade policy authority selectively to the president. It has also made trade promotion authority subject to ,lay provisions requiring the and it needs the president to follow the deadlines, negotiate objectives as well as consulting with the Congress for the implementation of legislation to be eligible in the expedited legislative procedures. Concerning the trade remedies, the congress sets procedures and other criteria, which the relevant agencies follow in implementing the programs. In the past decades, Congress has tightened the veins as well as shifting the balance of power from the executives to themselves (Nanto 35). Concerning the trade agreement authority, it has expanded the negotiation objectives and requirements for consultation. It has also participated in increasing the role of the activist in the implementation process. Concerning the trade remedies, it has reduced executive discretion in order to increase the rate of decision making, which benefit the domestic industries.
In the executive-legislative relationship on the trade policy, there are inherent institutional tensions if the two branches are managed by the same party. Congress reflects the interests of individuals of groups. The president is seen to represent the interest of the country, which includes the relationship between the trade policy and the US political and international economic concerns. Sometimes, there are conflicts between the national interests and the individual interests for example when the free trade measures affect firms and industries that are import sensitive (U.S. Department of Commerce 25).
The US trade is carried out in a rapidly changing economic environment and its role has in the economy has increased significantly over the years. There are a number of factors which affect the trade policy,; this include financial crisis as well as the economic downturn. Downturn's effect on the employment in the United States affects the trade policy directly. During an economic crisis, United States withdraw from the global trade and raise tariffs together with non-tariff barriers in order to protect the domestic workers and producers from foreign competition. This kind of measures cause trade to contract, an example is the high Smoot-Hawley tariffs, which are contained in the trade act in 1930. This act led the US trading partners to retaliate by raising the tariffs, which slow down the world trade as well as deepen the Great Depression (Nanto 24).
There is also the case of emergence of developing countries like brazil, India China, which affect the US trade policy. The developing countries accounted for 32.8% of the US export and 34.5% of US imports in 1985 and by 2009, they accounted for 59.8% of the US imports and 51.6% of US exports (CIA, par.19). This growth in foreign trade and economies presents the United States with challenges and opportunities. The imports provide, the United States with a wide range of variety of goods with lower prices, which raises real income and contribute to high standards of living in United States. The intermediate goods used in production of goods in the United States are also available, lowering the cost, thus helps in maintaining the competitiveness of the firms in the United States in the global economy. Another benefit is that some of the developing countries have become markets for Goods produced in the United States (Fergusson, & Vaughn, 14).
The workers in the united states compete with a pool of labor with lower-wage from Chinas, India and other developing countries. This kind of competition makes the US-based firms to lower their costs using labor saving technology in order to remain productive as well as reduce labor costs, shut down operation entirely, force workers to adjust and move production to offshore. Trading with the developing countries raises issues concerning labor rights, intellectual property rights, environmental protection and others, which have become fixtures on US trade agenda (Nanto 34). They are also challenging the United States on the policies concerning trade remedies, import-sensitive products, high tariffs on apparel, pricing of medicine and entry of foreign workers. The developing countries have made their concerns listened to in the WTO, where they are the majority members, and they are in most of the free trade agreements, which means most of the issues on trade policy take into account the developing countries. This results from the growing of the developing countries. Now, China has become one of the best partners trading with United States, as well as the focal point for trade policymakers in the United States (U.S. Department of Commerce 14).
It is time the United States realized what they are missing in the name of protecting their workers, consumers and producers. They should redefine their trade policy in order to enjoy all good things that come with free trade (U.S. Department of Commerce 24). The policy-makers in the United States, should come up with policies which reflect the United States commitments in regional and trade agreements, treaties, WTO, and other international agreements. They should be flexible enough to conduct trade with the other countries within the bound of rules that are mutually accepted by the members belonging to the agreement (Fergusson, & Vaughn, 32).
The United States policymakers should also come up with policies, which reflect the demands of the economic stakeholders together with their interests. These stakeholders include service providers, labor, agriculture, producers, manufacturers, environmental interest groups among others. Mostly, the interests of the stakeholders' conflict, but at least most of their interests should be addressed (Nanto 17).
If the United States allows more free trade with the international community, then they would concentrate to produce goods and services, which they are in a position to produce efficiently and import from the other countries the goods that they cannot produce efficiently. When trading with the other countries the United States should consider removing tariffs and non-tariff barriers in order for it and other members to trade basing on their comparative advantage (U.S. Department of Commerce 23). Comparative advantage is determined by a country's endowments of land, capital, labor and technology and in this case America would be able to use its resources efficiently. The result would be an increase in United States' economic welfare as well as that of the world. The economic welfare of a country might increase; however, free trade does not distribute the benefits equally (Fergusson, & Vaughn, 34). There is an increase in trade barriers, and some parts of the economy for instance, the firms which cannot survive increased competition incur adjustment costs and their workers would also lose. This leads to layoff of workers, plant closure, and contraction of operation among others. The industries and firms and workers who are competitive gain increased exports; this challenges the United States to increase its firms, industries and workers' competitiveness rather than shielding them from competition (Fergusson, & Vaughn, 24). The trade liberalizers help in trade policy by supporting measures that eliminate trade barriers in order to allow counties to come up with their own comparative advantages and employ them. In the same breathe, the United States is asserted by the liberalizers to remove its trade barriers immediately for reciprocal liberalization from its trading collaborates.
The United States should include policies, which change the personal tax structure in order to make foreign trade more progressive as well as provide deductions for tuition in latest professions and other incurred expenses in adjusting to career changes. Having trade adjustment assistance programs together with other worker assistance programs make the worker more efficient. Trade Expert Grant Aldonas suggest that U.S. trade policies provide ways to improve primary and secondary level education as well as pre-K level in order to prepare its workers better for global economy. These experts discourage the use of trade policy in stopping the effects of globalization (Nanto 10).
The United States should find its way to acknowledge the benefits that come with free trade and it should also realize that some of the forms and their workers are affected by foreign competition, therefore it should have tariff preference trade agreements programs that have provisions demanding the US trading partners to enforce environmental and labor standards. These standards would help US in protecting their firms and workers when they engage in trade with its partners (U.S. Department of Commerce 20).
When making a trade policy for United States, the political factors are the ones which are outstanding. These include the president's perspective, Congress perspective and public opinion; these factors sometimes are the hindrances to the development of United States in terms of free trade. This is because satisfying the interest of all the three parties is always not easy, and sometimes their interests might not be beneficial to the stakeholders in the business world (Nanto 12). The president is believed to represent the views of the citizens, which is not always the case. He president fail to agree to specific trade agreements with specific countries not because of its bad effects on the county's economy but because of his or her selfish interest or hatred. In such cases the country misses an opportunity to enjoy the benefits of the free trade. Following this, the United States should be careful on the mandates given to the president and Congress on trade. The views of the stakeholders should always come first before that of the resident and the Congress because they are always on the receiving end when it comes to the effects of free trade (Nanto 15).
United States should not just put off all the free trade agreements in the name of protecting the consumers and the producers. They should first look at the benefits that come with the agreement together with the cost, then weigh them. If the benefits exceed the costs in both weight and strength then the agreement is worth trying. The barriers they impose are helpful, but sometimes they deny the United States a chance to improve its economy as well as good international relations.
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