Politico | 29 June 2021
Decades of trade deals brought only slight benefit to US economy, commission says
By DOUG PALMER
Nearly four decades of U.S. trade agreements have had only a “small, positive effect” on U.S. economic growth and employment, the U.S. International Trade Commission said on Tuesday in a report ordered by Congress.
Using 2017 as its base year, the ITC estimated the trade deals had increased U.S. economic output by $88.8 billion or 0.5 percent. The trade pacts increased overall U.S. employment by 485,000 full-time equivalent jobs or 0.3 percent, based on a model that assumes the economy is at its long-run full employment level.
Why the report matters: That conclusion will hurt those pressing for freer trade rules and seems unlikely to spur the Biden administration to negotiate new trade deals. It may not bode well for negotiations with the United Kingdom and Kenya started by the Trump administration, if those pacts are only examined on their potential to boost the U.S. economy and create jobs.
The size of the U.S economy, now at nearly $23 trillion, makes it hard for any single trade deal to have a major impact on growth. But previous administrations have touted how some pacts are important tools for strengthening relationships with allies and to boost exports for specific sectors, such as agriculture or financial services.
What the ITC examined: Congress ordered the report as part of the 2015 Trade Promotion Authority law. That legislation, which expires on Thursday, facilitates the approval of trade agreements by allowing the president to submit them to Congress for a straight up-or-down vote without any amendments.
Former President Barack Obama used the TPA law to finish negotiations on the Trans-Pacific Partnership. However, his successor, Donald Trump, withdrew from the agreement on his third day in office.
The new ITC report looks at trade deals approved under similar negotiating authorities since 1984. Those include the North American Free Trade Agreement that went into effect in 1994, the multilateral trade deal that created the World Trade Organization in 1995, and a series of bilateral and regional trade agreements over the past 20 years. It also examined the one-year-old U.S.-Canada-Mexico Agreement, which replaced the original NAFTA.
One big trade deal outside the ITC report’s scope was the agreement struck by the United States to pave the way for China to enter the WTO in 2001. Critics of that agreement blame it for contributing to the loss of about 5 million U.S. manufacturing jobs over the following decade, a phenomenon known as the "China shock."
The study also does not examine Trump’s "phase one" trade deals with China and Japan, because neither were negotiated using Trade Promotion Authority.
Unevenly shared benefits: The ITC also noted that the employment gains from past trade agreements "were not distributed evenly, with the biggest gains estimated for college-educated male workers."
That supports the Biden administration’s critique that some sectors of the American manufacturing workforce have been repeatedly asked to make sacrifices for others.
Next step: With TPA expiring on Thursday, the United States could be entering a long period where the country doesn’t look to enter into new trade agreements, especially ones requiring congressional approval.