New CRS Report: U.S. Trade with Free Trade Agreement (FTA) Partners

3Key findings:

  • Between 1985 and 2011, the United States entered into 14 free trade agreements (FTAs) with 20 countries. Data from the Census shows that U.S. merchandise trade (or trade in goods) with FTA partner countries represents nearly 70% of all U.S. exports in goods and services, and more than 80% of all U.S. imports of goods and services.
  • In 2016, the United States ran a merchandise trade deficit of -$71.3 billion with the 20 FTA partner countries and a services surplus of $68.9 billion. The share of the U.S. trade deficit with FTA partners, however, has fallen by nearly half over the 2007-2017 period, from 18% to only about 10% of the total -$734.4 billion U.S. merchandise trade deficit.

1

  • Regarding the economic impact of FTAs on the United States, a study conducted by the U.S. International Trade Commission suggests that bilateral and regional trade agreements increased U.S. aggregate trade by about 3%, but less than 1% for U.S. employment (or 159,300 full-time equivalent employees). Specifically, the study finds that rising imports, due in part to the Agreement on Textiles and Clothing (ATC), accounted for most of the reduction in U.S. employment in the apparel industry between 1998 and 2014.
  • Current trade data treat exports and imports as though the full value of an export was produced domestically and the full value of an import was produced abroad. However, the rapid growth of global value chains and intra-industry trade (importing and exporting goods in the same industry) has significantly increased the amount of trade in intermediate goods in ways that can blur the distinction between domestic and foreign firms and goods. For example, foreign value added accounts for about 11% of the content of U.S. exports in 2010. As a result of the growth in value chains, traditional methods of measuring trade may obscure the actual sources of goods and services and the allocation of resources that are used in producing those goods and services.

2

  • Trade agreements of the type currently being negotiated by the United States comprise a broad range of issues that could have significant economic effects on trade and commercial relations over the long run between the negotiating parties, particularly for developing and emerging economies. However, the negative effects of international trade and trade agreements, particularly potential job losses and lower wages, often are distributed disproportionately with the effects falling more heavily on some workers and on some firms.

The full report can be downloaded from HERE

Author: Sheng Lu

Professor @ University of Delaware

9 thoughts on “New CRS Report: U.S. Trade with Free Trade Agreement (FTA) Partners”

  1. While it is frustrating to learn of the negative effects of international free trade, it is important to remember the positives as well. While US T&A manufacturing jobs have fallen throughout the years over the favorable prices in other nations, we have also grown tremendously in the corporate world of T&A. And, in turn, the free trade agreements we enter help our economy import garments at a much cheaper cost, while still giving LDC’s and developing nations the change to gain market share of the T&A global market. If we were to remained closed, we would be drastically harming these countries and would be holding them hostage to the never ending cycle of poverty. In addition, we would not be able to be as advanced and technologically driven we are today. By lowering our barriers of trade we have been able to focus our efforts on greater projects, and more capital intensive manufacturing. But, since our society is so capital focused, we rarely help those who lost their career’s from trade. I feel that as this “Great” nation, we should prioritize helping others, instead of making ourselves richer. This country could start to offer free trade schooling so that those unemployed could learn new skills demanded by our advanced manufacturing plants. That way, everyone involved in the T&A process can benefit.

  2. It is interesting to see that due to rising imports from the ATC, accounted for most of the reductions in employment in the U.S between 1998 and 2014. It is also very interesting to see the distinct differences throughout the value chains in trade throughout the past few years, and where it is heading. There is no time like now, where our trade regulations where head and where we will be in 5-10 years from now. That thought has encountered many, and I’m sure we are all interested to see the % differences, such as this article in a few years from now.

    1. Why “interesting”? Be more specific–for example, why do you think these numbers make sense? What are their limitations? You mentioned about the next 5-10 years, so what could happen? What new factors we should consider?

  3. Because the measure of trade deficit does not provide a comprehensive picture of all components of supply & trade, it is unwise for policy makers to remain fixated on the “trade deficit” numbers as a mode for determining laws. Creating FTAs and bilateral agreements help to develop working trade relationships among countries, which undoubtedly strengthen ties on levels of government as well as culture. I think it’s important for large industry players such as the US expand their scope in order to keep up in this increasingly connected age. The way I see it, loss can be expected in the face of changes in sourcing, but implementing protectionist, nationalist policies (especially in this current political climate) does not value the advancements in product and technologies that can be achieved by cross-border efforts. In order to make better decisions on behalf of the US GDP rather than being motivated by fear of loss, a more comprehensive formula must be created that takes into account all levels and steps involved in creating and selling a product. Economic strength among US trade partners must in turn be good for the US itself.

  4. I think it is important to remember competitive advantage when we look at the T&A industry. As it many be disappointing that more production isn’t done here in the United States, we also must understand that it is simply more beneficial for other countries to focus on production. I agree with the article when it discusses the possibility of altering the way that we measure “successful” trade partners. Older methods, like the percentage of export, is no longer the only way that a textile industry can be successful.

    1. Absolutely!!! I think this is something that is so important to remember and is alarming that President Trump at times does not quite grasp. While yes, creating jobs for Americans is a phenomenal goal to have, placing the core of that goal into the manufacturing industry, especially the apparel manufacturing industry, is not wise. The United States is too developed of a country to be a significant leader for apparel manufacturing. While yes, I think textile manufacturing could have a larger role in the U.S., that is for very different reasons. Textile manufacturing has become much more advanced with manmade fibers and complex fiber production requiring more advanced skillsets and higher education knowledge. This is why time and time again I’ve felt the need to stress the importance of education and providing education because there are a number of Americans without access to this education. A census taken in 2017 showed that 33.4% of Americans over the age of 25 had a Bachelor’s Degree or higher. http://thehill.com/homenews/state-watch/326995-census-more-americans-have-college-degrees-than-ever-before

      While this is an increase from recent years, there is still room for growth considering the fact that the United States is so developed with jobs requiring much more education and a more advanced skillset. I’d be very interested to see how those numbers change in the next few years and how they may or may not correlate with the jobs available to Americans.

  5. I think the biggest argument against free trade, especially in President Trump’s eyes, is that it’s taking away from U.S. manufacturing jobs. However, while it may be taking those jobs away, it’s creating various other jobs in terms of things like sourcing, public relations, etc. The question that can be posed here is whether or not free trade can still be seen negatively if it’s creating jobs in some way, even if it’s not in manufacturing. While it would be great to have more products manufactured in the U.S., it’s proven to be more efficient and cost effective to produce certain items in other countries. Why take away production from countries’ who are experts in certain products, when we can realistically bring back those manufacturing jobs in the U.S. by creating new ones to source product from those expert countries?

  6. It is concerning that the growth in value chains may obscure the actual sources of goods and services and the allocation of resources that are used in production. Although free trade is good, I can understand why some people might be hesitant because some arguments are that it negatively effects employment in the United States. However, I believe trade allows for diversification and it is critical for the U.S. to utilize resources from other countries in production.

  7. I think that it is important to note that while the current political climate is all about bringing manufacturing back to the US, therefore creating more jobs, this might not be the most beneficial thing for the T&A industry. The industry has benefitted from sourcing and manufacturing from other countries, and I think that the article above makes a good point that ‘chains’ are what’s valuable. I think that there is a common misconception that manufacturing in the US is what is most beneficial for most industries. However, it is proven that the T&A industry benefits from global value chains and intra-industry trade. Trade of intermediate goods blurs the line of what is an imported and exported product. This brings up the question of what type of manufacturing would be beneficial to bring back to the US, if any at all? Would it be the intermediate goods or finished products or both?

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