Free Trade Agreements: Leveling the Playing Field

By December 13, 2011Trade

A lot of public opinion polls over the last year or so have shown the American public believes free trade agreements (FTAs) are harmful to American manufacturing and jobs because they open the U.S. market to foreign competition. This view is one reason why it took so long to gather sufficient support in the Administration and the Congress to pass the FTAs with Colombia, Korea, and Panama.

 The general public, unfortunately, seems unaware that the United States is already a very open market, while American manufacturers frequently face much higher barriers trying to sell abroad. So FTAs don’t open our market so much as they open foreign markets. 

How open are we? The Commerce Department trade figures through October 2011 released last week show that so far this year, the average U.S. import duty (tax on imports) on foreign manufactured goods brought to the United States was only 1.6 percent – $23.8 billion of import duties on $1,467.4 billion of imports. 

Moreover, half of those import duties, $12 billion, were assessed on imports of only two sectors that accounted for only seven percent of U.S. imports of manufactured goods – apparel and leather products.

The average import duty for the 93 percent of the rest of U.S. manufactured goods imports was less than one percent – 0.9 percent, to be more precise. Far from being a barrier, that is barely a speed bump. Is the American public aware of this? I think not. In fact, I think it would be eye-opening for pollsters to ask the public just what they would guess our import duties are.

But when American manufacturers try to sell abroad, they encounter significant import barriers. For example, right now, the average import duty manufacturers in America have to pay to sell their products in Colombia (which imports $35 billion of manufactured goods a year) is effectively 15 percent. That’s a real barrier. 

When the U.S.-Colombia FTA goes into effect next year, Colombia’s duties on products made in the U.S. will go to zero. That’s what I call leveling the playing field. Far from opening up our market – which is already wide open in most industries – FTAs open our trading partners’ markets and level the playing field for us so our manufacturers export more and generate more jobs. That’s why we need more of these agreements. 

Frank Vargo is vice president of international economic affairs, National Association of Manufacturers.

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