Manufacturing exports make up $1.45 trillion or 7.8% of US GDP. Today more than 20% of all US manufacturing jobs depend on exports. The United States is currently renegotiating trade agreements with a number of its trading partners, potentially threatening billions of dollars of US exports and millions of jobs across the country. The top 10 states with the most jobs are California, Texas, Ohio, Michigan, Pennsylvania, Illinois, Indiana, Wisconsin, New York, and North Carolina. Protecting US exports protects US manufacturing jobs.
Threatening to withdraw from the US Korea Trade Agreement (KORUS) should not be taken lightly.
South Korea is an important U.S. trading partner, providing parts and services to American manufacturers and affordable quality products to US consumers. The potential impact of withdrawing from KORUS would be noticeable, especially when it comes to consumer electronics, transportation equipment and chemicals where South Korea ranks fifth, sixth and ninth, respectively, in terms of U.S. imports from individual countries. While some of these products are sold straight to consumers (TVs, cars, smart phones, etc.), other items are purchased by manufacturers to produce goods in the U.S. For instance, chemicals are used by U.S. manufacturers to create anything from packaging to medicines.
Withdrawing from the agreement would increase prices for those goods in the U.S., and there would be no meaningful impact on the trade deficit.
It is unclear what free trade opponents are against in the current trade debate. Is it about Trade Promotion Authority (TPA), Trans-Pacific Partnership (TPP), or something that has nothing to do with free trade? Contrary to claims that trade agreements have been big failures and disastrous to American workers and the U.S. economy, the numbers decisively tell a success story. The U.S. needs to export more and not less.
Since its first Free Trade Agreement (FTA) with Israel in 1985, the United States has implemented 14 preferential trade agreements with 20 countries located in the Americas, North Africa, the Middle East, and Asia. Nearly half of U.S. merchandise exports went to these FTA partner countries. While having more than $524 billion trade deficits in manufactured goods in 2014, the U.S. enjoyed a $55 billion trade surplus in manufactured goods with FTA partners.
We applied trade data to estimate the impacts of FTAs on U.S. exports over the past 30 years. Our analysis indicates that FTAs spurred more than $41.9 billion and 7.3% of U.S. manufacturing exports to FTA partners. As expected, our analysis shows that Americans export intellectual property (IP)-intensive products such as pharmaceuticals, computer and electronic products, transportation equipment, chemical products, and medical devices; all areas where Americans have comparative advantages in the global markets. We also found that FTAs spurred over $34.2 billion in exports from IP-intensive industries, or 10.9% of IP-intensive exports. In comparison, exports of non-IP-intensive industries grew by approximately $7.7 billion, or 3.0% of U.S. exports, to those FTA partner countries.
By reducing and eliminating tariffs and non-tariff barriers, trade agreements have boosted exports which consequently raised outputs, employment, and wages in the exporting countries. Our analysis show that IP-intensive manufacturing industries added more jobs during the most recent economic recovery period while non-IP-intensive manufacturing industries cut more jobs during the economic downturn. While IP-intensive manufacturing industries employ nearly 30% of American manufacturing workers, they account for nearly 50% of gross output (total sales) of manufacturing industries. IP-intensive manufacturing industries pay 50% higher wages than non-IP-intensive manufacturing industries (approximately $60,000 compared to $40,000 per employee annually).
All in all, the numbers are favorable for U.S. trade agreements. Although U.S. exports have increased substantially in the past 30 years since its first trade agreement with Israel, the share of U.S. merchandise exports has declined from 11.2% to 8.6% of world exports as world exports have increased more than ten times. With the rapid increase in global economic integration, it makes perfect sense that American leaders are in search for FTA partners.
New Report Reveals Enormous Benefits of TPP Only Realized if Strong Protections in Place to Protect Innovation, Spur Job Creation in all Member Countries.
Washington, D.C. (December 17, 2013) – NDP Analytics today released a new study analyzing the substantial economic boost that countries participating in the Trans Pacific Partnership (TPP) stand to achieve from one of the most ambitious free trade agreements in history. The report, titled “The Economic Benefits of Intellectual Property Rights in the Trans-Pacific Partnership,” finds that two-thirds of the total economic benefits of the TPP would come from intellectual property (IP)-related manufacturing industries. The authors argue that stronger protection of IP rights in the TPP leads to greater economic growth and development across all participating countries.
“There is no question that strong intellectual property protections benefit all TPP nations, and that IP is the linchpin to maximizing the full potential of the TPP,” said Nam D. Pham, PhD, Managing Partner of NDP Analytics. “As our latest research shows, critics of IP rights in the TPP both at home and abroad are far off base. Indeed, an agreement that weakens IP rights will significantly dilute any economic benefits for all participating countries, and could cause a backslide in future innovation across all TPP partners.”
The study finds that a TPP agreement including IP protections at least as strong as current U.S. law would have the following effects:
Boost U.S. manufacturing exports by $26 billion and increase U.S. GDP by $11 billion, two-thirds of which would be derived from IP-intensive industries
Create up to 48,000 new jobs in the U.S. economy
U.S. companies’ exports to their foreign affiliates in the TPP result in $6.4 billion combined additional increase in local GDP and over 68,000 new jobs created in those nations