The evidence keeps rolling in about the value of having free trade agreements (FTAs) that open up foreign markets to American exports.  The Commerce Department data on FTAs that the International Trade Administration just posted shows that we are on track for a fourth straight year of manufactured goods trade surpluses with our FTA partners.

Moreover, based on their data through October, that surplus has already reached a record $40 billion.  If that rate continues for November and December, the U.S. manufactured goods trade surplus with FTA partners will be $46 billion in 2011 – double the 2010 surplus of $23.4 billion.

The manufactured goods surplus with NAFTA is running at a $12 billion annual rate, and with CAFTA at a $3 billion annual rate. 

The record with FTA partners is in sharp contrast to U.S. manufactured goods trade with countries that do not have FTAs with us.  Based on January-October data, it looks like U.S. manufactured goods trade with non-FTA partners will register a deficit of close to $500 billion in 2011. 

The facts are clear -  we need more FTAs to let our manufactured goods into more foreign markets – and we need them as fast as we can get them.

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

The Central-American Free Trade Agreement, or CAFTA, was signed into law five years ago today, August 2, 2005, (later expanded to include the Dominican Republic to become CAFTA-DR). Facing vicious opposition from labor, the anti-trade Global Trade Watch, and others, the agreement had passed Congress by just two votes. Opponents vilified the agreement, predicting it would hurt American manufacturing.

Global Trade Watch’s Lori Wallach, for instance, called CAFTA a “catastrophe”, “a moldering corpse waiting to be buried,” and confidently predicted U.S. deficits and job losses. The U.S. International Trade Commission, the National Association of Manufacturers and other responsible organizations, on the other hand, predicted the agreement would spur U.S. exports and result in significantly stronger growth.

The record shows how wrong Wallach and other trade detractors were. As is clearly shown in the inserted graph, far from greater deficits, the CAFTA-DR agreement has changed deficits to surpluses. In the years prior to CAFTA, American manufacturers ran deficits with the CAFTA countries averaging $1.1 billion a year. After CAFTA went into effect, those deficits quickly turned to surpluses that have averaged $3.5 billion a year.

The improvement in the trade balance with CAFTA-DR occurred because the dollar value of U.S. manufactured goods exports grew faster than imports. In the years prior to the agreement, U.S. manufactured goods exports to the region grew less than 5 percent a year. In the years immediately after the agreement, they soared almost 14 percent a year.  And even after the global trade collapse in 2009, manufactured goods exports to CAFTA-DR so far this year have boomed 30 percent, much faster than the 22 percent increase of U.S manufactured goods globally.

It is time for Lori Wallach to stop talking about a “failed CAFTA trade policy.”  The only thing that is failing here is her rhetoric.

We happened to catch two excellent speeches in Congress this week on the importance of Free Trade Agreements.

Rep. Kevin Brady (R-TX) spoke Wednesday during the House debate on H.R. 1875, to establish an Emergency Trade Deficit Commission. The full debate started on page H6813 of The Congressional Record. Brady, who managed the Republican side of the debate, spoke beginning on page H6188, noting that the day marked the fifth anniversary of House passage of the U.S.-Central American Free Trade Agreement, or CAFTA.

Trade agreements … give us a chance not one-way trade in, but two-way trade where we have a level playing field. The world has changed. It’s not enough to simply buy American. We have to sell American. We have to sell our products and goods and services throughout this world. In fact, over 80 percent of our trade deficit today is with countries that are not trade agreement partners, that are not level playing fields for the United States. That’s why we push hard for those agreements.

For example, 5 years ago the United States had a $1.2 billion trade deficit with Central America. Last year, the United States had turned that around, because of the agreement, to a $1.2 billion trade surplus, and we’re on track to surpass that surplus again this year. Last year, the United States had a trade surplus in manufactured goods with our Central American partners of almost $2 billion. We’re on track again this year.

 Nor is CAFTA the only example of how trade agreements can improve the U.S. trade balance. This week also marks the eighth anniversary of the final House vote on the Trade Act of 2002, under which we have resoundingly successful trade agreements with 13 countries now in force. Last year, the United States had a trade surplus of over $25 billion with these 13 countries. And so far this year, we have a surplus again.

Looking at just trade in manufactured goods reveals that these agreements were even better for American manufacturing workers. Last year, the United States had a trade surplus of over $29 billion in manufactured products with these countries that we have free trade agreements. And again, we have this year a surplus already of nearly $16 billion. Without question, these trade agreements have reduced U.S. trade deficits and increased U.S. trade surpluses.

Rep. Geoff Davis (R-KY) also spoke on the floor, emphasizing the importance of trade to the manufacturing sector: “In my home State of Kentucky, nearly 50,000 manufacturing jobs are dependent on exports. The simple fact is that 95 percent of the world’s consumers live outside the United States, and the fastest growing markets are outside our borders. So success in those markets is critical to growing our manufacturing sector and creating good paying jobs.”

In the Senate, Sen. Chris Dodd spoke on Thursday, making a strong case for enacting the U.S. Free Trade Agreements with Colombia and Panama. He argued that the agreements had value for both foreign policy and U.S. domestic economic reasons, and concluded: (continue reading…)

The NAM applauds today’s announcement that the U.S. Trade Representative (USTR) is seeking to improve how trade policy can bolster the export opportunities of small and medium-sized enterprises (SMEs). As SMEs account for one-third of all U.S. exports, this is a very important step on the part of USTR. The NAM represents thousands of SME exporters and looks forward to working with USTR, Commerce, and other agencies on this very welcome initiative.

SMEs already benefit greatly from U.S. trade policy. For example, SMEs account for 95 percent of all U.S. exporters to NAFTA, and ship an average per company of $630,000 a year to that market – pretty important sales to smaller companies. And SMEs account for 44 percent of U.S. exports to the nations of CAFTA — averaging $440,000 per company.

However, while SMEs benefit strongly from Free Trade Agreements and multilateral tariff-cutting negotiations, some aspects of trade policy bear more heavily on SMEs than large exporters. For example, complex and confusing rules of origin (where a product is produced) and labeling requirements are extremely difficult to comply with for small firms. Different foreign product standards and costly testing and certification requirements can pose insurmountable obstacles for some smaller firms. Focusing new trade policy initiatives on these obstacles in addition to continued market opening could really boost smaller company exports.

USTR’s request that the International Trade Commission examine export obstacles and opportunities is a great next step. Expanded policy attention to the particular export challenges faced by SMEs can pay big dividends, particularly if coupled with expanded export promotion services to get the job done. The NAM thinks that doubling smaller company exports would be a great goal, adding over $300 billion to U.S. exports, and lots of high-paying jobs.

Perhaps overlooked in the holiday rush, the winter storms and media slumber was the U.S. recognition of Costa Rica’s official entry into Central American Free Trade Agreement, also known as CAFTA-DR (the DR being Dominican Republic). The completion of CAFTA represents an important reaffirmation of trade’s economic value and importance in supporting Latin America’s democracies. We hope the Obama Administration recognizes the opportunities that should be embraced.

Reuters, “Bush clears way for Costa Rica to join CAFTA“:

WASHINGTON (Reuters) – President George W. Bush cleared the way on Tuesday for Costa Rica to formally join a regional free trade agreement between the United States, the Dominican Republic and four other Central American countries.

Bush issued a proclamation that brings the pact into force between the United States and Costa Rica on January 1.

“This step marks an important milestone in our relationship with Costa Rica, building on our strong economic and political partnership,” U.S. Trade Representative Susan Schwab said.

More…

• Presidential proclamation, “To Implement the Dominican Republic-Central America-United States Free Trade Agreement with Respect to Costa Rica and for Other Purposes.“
• U.S. Trade Representative, “Statement of U.S. Trade Representative Susan C. Schwab Regarding Entry into Force of the CAFTA-DR for Costa Rica.“
• The USTR’s website with the text and background of CAFTA-DR is here.

Usually this sort of Christmas week release is designed by the releasing party, in this case the White House, to bury the news. That seems less likely this time, as various delays and process steps ran up against a December 31, 2008, deadline for action. (See this article from Inside Costa Rica for the timeline.)