3 Key Trade Trends the U.S. Can’t Ignore

May 8th, 2013



When America debated the North American Free Trade Agreement in 1993, Groundhog Day – a film about doing the same things over and over – was a box office hit. Since then, our trade debates have often been like Groundhog Day, with trade supporters and critics repeatedly recycling well-worn talking points. But before everyone dusts off old scripts for upcoming debates about trade deals with Asia and Europe, it’s worthwhile to consider what America might learn from more recent trade developments – especially those currently happening outside the United States.

Three trends in global trade highlight why it’s more vital than ever that America continue to play a strong role in writing robust rules for trade.

1. America’s Not the Only Game in Town. As America works to conclude a Trans-Pacific Partnership trade deal and to ramp up new trade talks with the European Union, it’s important to remember that other major economies are also pursuing a bevy of new trade deals.

There are already hundreds of trade agreements in force among groups of countries that don’t include the United States, with many more under negotiation. The EU, for example, is negotiating agreements with Canada, India and Japan. And China, Japan and South Korea have begun talks on a pact that would boost trade among the world’s second-, fourth- and twelfth-largest economies. These three countries – together with 13 regional neighbors – are also negotiating a massive Regional Comprehensive Economic Partnership that would tie together 16 countries with a combined GDP of over $26 trillion.

For the United States, the implications of growing trend are clear – if we don’t continue to engage in developing new norms for global trade, global competitors like China surely will.

2. Not Everyone Shares America’s Priorities. In negotiating for the Trans-Pacific Partnership and other trade initiatives, America traditionally seeks comprehensive agreements that cover the full range of trade-related challenges in the global economy: expanding market access for American goods and services, advancing rules to protect U.S. investments and intellectual property, eliminating non-tariff barriers and promoting important ideals like labor rights and environmental protection.

In contrast, other countries often take a much more limited, low-standard approach to the role and content of new trade agreements, frequently excluding a wide range of products and services and ignoring vital issues. Take the new China-Japan-Korea trade negotiations: When they recently outlined the key topics for their trade talks, China, Japan and Korea did not include issues that the United States regards as critical, such as information technology, the environment and labor and employment.

For American businesses, workers and consumers, this means that we can’t count on others to forge new trade rules that reflect our priorities and values.

3. Other Countries Lack America’s Leverage.  Over the last two decades, America has concluded comprehensive trade deals with 20 countries. We’ve significantly opened up foreign markets and advanced U.S. commercial interests – and key values – by employing our significant leverage in two ways:

  • First, access to our $15+ trillion economy provides a major inducement to other countries to eliminate barriers, adopt fair rules and enforce environmental and social protections.
  • Second, because U.S. trade agreements are comprehensive – with few carve-outs or exclusions – our negotiating partners must broadly open their markets if they want to reach a trade deal with the United States.

The many other countries currently negotiating new trade deals often have much less leverage than the United States. Smaller countries that share important values with the United States have often had less success in advancing these principles because they offer only limited market access. And larger economies that take large numbers of products and issues off the negotiating table often lose the leverage they need to get the concessions they want. This is likely one reason, for instance, why Japan was recently unsuccessful in including labor and the environment as priority issues in its trade talks with China and Korea.

The United States brings substantial leverage to trade negotiations. But to maximize this leverage our own trade offers must remain truly comprehensive, and we must resist the urge to keep protected sectors off the negotiating table.

The global economy will continue to see a proliferation of new trade agreements in the years ahead. But who will write them? What will they say? Will countries like China increasingly be able to advance low-standard deals that ignore commercial priorities and values that are critical to America? Or will America stay in the game, work with like-minded nations, and use our considerable leverage to forge deals that reflect our key interests and vital principles?

As America prepares for important trade debates, it’s time to revise our scripts to ensure that they answer these critical new questions.

This piece was originally published in U.S. News & World Report.