U.S. Trade Leadership Has Been Absent Over a Decade
Real export growth was basically nonexistent in 2015 and 2016. In fact, exports actually declined by 0.3 percent last year – the first decline since the recession – after barely inching forward by 0.4 percent in 2015. While an assortment of factors come into play here – in particular, slow growth among our trading partners – it should not be ignored that the U.S. has been absent on the world stage in terms of advancing free trade for more than a decade now.
President George W. Bush was active and productive on the trade front. In fact, by signing into law nine free trade deals covering a total of 14 nations, and negotiating another three agreements that became law in the following administration, a case can be made that Bush was the most active president in terms of advancing free trade.
The last three deals that Bush negotiated came in 2006, with South Korea, Colombia and Panama. A Democrat-led Congress blocked the deals, and President Barack Obama, who ran a protectionist presidential campaign in 2008, including wanting to renegotiate NAFTA (sound familiar?), showed little interest in trade. He finally got around to tweaking these three accords, and sending them to Congress for approval in 2011.
Toward the end of Obama’s eight years in office, his administration finally got to work by negotiating the Trans-Pacific Partnership trade accord with 11 Asia-Pacific countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam). In February 2016, Obama signed the TPP, which would have eliminated some 18,000 tariffs imposed on U.S. goods and services. However, Obama failed to put any effort into getting the deal across the finish line in Congress.
And then upon taking office, President Donald Trump signed an executive order ending U.S. participation in the TPP, and on May 18, 2017, Trump officially told Congress that his administration intended to renegotiate NAFTA – carrying through on his own 2016 campaign pledge, as well as Obama’s in 2008. For good measure, it was reported in March that the Trump White House had plans to renegotiate all U.S. trade agreements, and the President said in June that the South Korea trade agreement would be renegotiated.
Let’s get this free-trade thing straight. Reducing government-imposed international trade barriers quite simply means expanding economic freedom, allowing, for example, U.S. entrepreneurs, businesses, workers and investors to tap into new opportunities, and providing expanded choices and increased savings for consumers. It’s critical to keep in mind that governments do not trade; instead, individuals and businesses do. There’s no difference if such trades take place across town, the nation or the globe. Trade policy should be focused on reducing government obstacles to trade, not on trying to “fix” meaningless trade deficits nor on complaints from businesses that face increased competition.
In 1930, the U.S. Congress passed and President Herbert Hoover signed into law the Smoot-Hawley Tariff Act. That notorious, massive piece of protectionist legislation helped push the U.S. and the globe into the Great Depression, as global trade collapsed in a trade war. After World War II, on the other hand, the U.S. led the globe on a path of reducing trade barriers (with some minor protectionist failings along the way).
In the 1980s, President Ronald Reagan, a leading free trade advocate, got the U.S. rolling in terms of agreements – with accords implemented with Israel and Canada – while advocating for other agreements, including a North American agreement that became NAFTA and a free trade area covering the Western Hemisphere.
As the U.S. led on advancing freer trade, economic growth benefited accordingly. Consider that from 1980 to 2016, for example, growth in total trade (exports and imports) registered 40 percent of overall real U.S. GDP growth.
But for more than 10 years now, the U.S. has abdicated its leadership role on trade.
From a policy perspective, economic growth rests on a foundation of low taxes, limited regulation, restrained government spending, sound money, and free trade. Throughout the Obama years, we basically got all of that wrong, and the economy has suffered as a result. As we look at the issues before us today, along with tax and regulatory relief, for example, the U.S. needs to put aside recent flirtations with protectionism, and instead reclaim its vital leadership role in terms of advancing free trade. As other nations work to reduce trade barriers, the U.S. quite simply is at risk of being left behind.