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Free Trade Essential for Economic Growth

Posted By Conn Carroll On January 29, 2008 @ 6:54 am In Economics | Comments Disabled

In his final State of the Union address, the President not only raised the politically contentious issue of making tangible progress on advancing pending free trade initiatives, but also highlighted the importance of freer trade in helping America weather today’s economic turbulence and in promoting American competitiveness in the future.

Identified as a top priority, U.S. leadership in concluding the Doha Round of multilateral trade negotiations in the World Trade Organization this year would – of all that remains on the free trade agenda – go the farthest toward allowing America to continue to reap the benefits of globalization and lead the world in how globalization progresses and evolves.

Lowering tariffs around the world and opening new markets not only helps U.S. companies remain competitive, but also enables America’s families to stretch their incomes further by having access to a wider variety of less expensive goods. Freer trade spurs economic growth, job creation and boosts living standards.

Listed second of the President’s three top trade issues in this year’s State of the Union address is ratifying pending bilateral free trade agreements with Colombia, Panama and South Korea. The U.S. has already been providing Colombia and Panama preferential access to America’s marketplace through programs such as the Generalized System of Preferences and the Andean Trade Preference Act.

Trade agreements with these countries would even the score, lowering trade barriers against U.S. firms and products and promoting American competitiveness. The proposed free trade agreement with South Korea would strengthen an already important economic and strategic alliance in a critical part of the world. While these agreements aren’t perfect, they go a very long way towards advancing solid policies aimed at promoting lasting peace and prosperity for America and her trade partners alike.

Last, but not least, of the President’s top trade priorities identified in the State of the Union address is much needed reform of Trade Adjustment Assistance (TAA) – an ineffective jobs program that attempts to help workers that lose their jobs as a direct result of free trade get the support and training they need to recover.

TAA has long been the political price paid in exchange for Congress awarding the President Trade Promotion Authority (TPA) to advance free trade policies. However, while a Congress hostile to trade was in no mood to extend TPA last year, it seems more than willing to expand TAA, even though the program has not been effective. With less than 3 percent of the workforce negatively affected by trade in a given year and no TPA in sight, the economic and political rationale for TAA is weak. The President is right to call on Congress to fix the program, yet should be wary of efforts to make it bigger and more costly.


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