Argument: Free trade has a strongly positive effect on US economy

Issue Report: Free trade


  • Federal Reserve Chairman, Ben S. Bernanke, At the Montana Economic Development Summit 2007, Butte, Montana, May 1, 2007 “After all, the United States is a big country, and we can certainly achieve many of the benefits of specialization by trading within our own borders. How important is it for the health of our economy to trade actively with other countries? As best we can measure, it is critically important. According to one recent study that used four approaches to measuring the gains from trade, the increase in trade since World War II has boosted U.S. annual incomes on the order of $10,000 per household (Bradford, Grieco, and Hufbauer, 2006).2 The same study found that removing all remaining barriers to trade would raise U.S. incomes anywhere from $4,000 to $12,000 per household. Other research has found similar results. Our willingness to trade freely with the world is indeed an essential source of our prosperity–and I think it is safe to say that the importance of trade for us will continue to grow. In practice, the benefits of trade flow from a number of sources. By giving domestic firms access to new markets, trade promotes efficient specialization, permits economies of scale, and increases the potential returns to innovation.3 U.S. firms increasingly seek to expand production and profits through new export opportunities; indeed, U.S. exports grew about 9 percent in real (that is, inflation-adjusted) terms last year. Export-oriented U.S. manufacturing industries include producers of aircraft, construction equipment, plastics, and chemicals. The United States also excels in the manufacture and export of sophisticated capital goods and scientific equipment. Outside of manufacturing, a number of U.S. high-tech companies, including software developers and online service providers, are world leaders in their fields. American films and music attract large worldwide audiences. Montana’s exports include wheat, metal ores, and high-tech materials that are critical to the production of semiconductors.”
The gains from freer trade are substantial. Today, the $12 trillion U.S. economy is bolstered by free trade, a pillar of America’s vitality. In 2005, U.S. exports to the rest of the world totaled $1.2 trillion and supported one in five U.S. manufacturing jobs. Jobs directly linked to the export of goods pay 13 percent to 18 percent more than other U.S. jobs.[1] Moreover, agricultural exports hit a record high in 2005 and now account for 926,000 jobs.[2]
In Colorado, international trade supports one of every 20 private-sector jobs and more than 16 per­cent of manufacturing jobs. International trade sup­ports an estimated 6.1 percent of Ohio’s total private-sector employment and more than 20 per­cent of all manufacturing jobs. In South Carolina, trade supports one of every 10 private-sector jobs and more than 23 percent of manufacturing jobs.[3] State by state across America, international trade promotes opportunity.
The service sector accounts for roughly 79 per­cent of the U.S. economy and 30 percent of the value of American exports.[4] Service industries account for eight out of every 10 jobs in the U.S. and provide more jobs than the rest of the economy combined. Over the past 20 years, service indus­tries have contributed about 40 million new jobs across America.[5]
As today’s global economy offers unparalleled opportunities for the U.S., continuing to expand trade by lowering barriers to goods and services is in America’s economic interest. Freer trade policies have created a level of competition in today’s open market that engenders innovation and leads to bet­ter products, higher-paying jobs, new markets, and increased savings and investment. Small business, a critical component of the U.S. economy, creates two out of every three new jobs and accounts for about one-quarter of America’s exports.[6]”
  • “Benefits of Free Trade”. National Center for Policy Analysis. Retrieved 2. 205.08 – “Numerous free-trade pacts signed over the past ten years have contributed mightily to the U.S. economy, trade experts assert.

    • As recently as 1960, trade accounted for just 9 percent of U.S. gross domestic product (GDP) — but last year that figure had grown to 23 percent.
    • In the past four years alone, exports have accounted for about one-quarter of GDP growth.
    • More than 12 million workers here owe their jobs directly to exports.”