Why trade matters

Why trade matters
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Given the way trade has been discussed on the campaign trail, it is easy to overlook what our exporters accomplished last year. 

U.S. exports of goods and services in 2015 totaled more than $2.2 trillion. We increased goods exports to 58 international markets, reached record highs with 20 global partners and saw a record year in services exports, totaling $716 billion. 

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Most importantly, our exports support more than 11 million American jobs that pay up to 18 percent higher salaries on average.

Of course, the true measure of these successes only comes when you consider the global headwinds our economy contended with. Those headwinds included decreased global demand, driven in large part by declining growth in emerging markets and developing economies. And according to the World Economic Outlook released in October by the International Monetary Fund (IMF), they are projected to continue. 

The IMF estimates that weak commodity prices will subtract almost 1 percentage point per year from the average annual growth rate of commodity exporters between 2015 and 2017 relative to their average growth between 2012 and 2014.

For energy exporters, the effect will be even greater, with a predicted average decline in average annual growth rates of 2.25 percentage points over the same period.

These challenges coincide with a historic moment for our trade agenda. We have been and will continue to make the case for the Trans-Pacific Partnership (TPP) to lawmakers, business leaders and the American people. The TPP is critical because it will reduce and eliminate trade barriers across 12 Pacific Rim markets comprising nearly 40 percent of global gross domestic product (GDP). 

But in a global landscape defined in the immediate term by lower commodity prices, a stronger dollar and weakening demand, we need to do everything we can to place the wind at the back of the American business community. This requires trade agreements like the TPP.

Trade agreements are crucial to protecting our economy from boom-bust commodity cycles by removing barriers to U.S. exports. That includes services exports like financial, communications, logistics and insurance services. The services sector as a whole contributes nearly 80 percent of our private sector GDP and currently employs more than 4 out of every 5 private sector American workers. 

The TPP will protect our economy from volatile commodity cycles by prohibiting tariffs on digital exports, protecting cross-border data flows that are increasingly critical across business sectors and requiring criminal penalties for the theft of trade secrets in cyberspace.

Trade agreements are also crucial to countering price appreciation from a strengthening dollar by removing tariffs on our exports. In terms of the TPP, tariffs on 98 percent of U.S. industrial and consumer goods exports will be eliminated the first day the agreement is in place. About 18,000 tariffs on U.S. exports will be eliminated in the long run, including a 59 percent tariff on U.S. machinery in Malaysia, a 70 percent tariff on U.S. auto exports in Vietnam and a 40 percent tariff on U.S. poultry in Japan.

Finally, trade agreements are essential to maintaining and growing market share during challenging economic periods. Between 2008 and 2014, U.S. goods market share rose, on average, with six current free-trade partners who are also part of the TPP: Australia, Canada, Chile, Mexico, Peru and Singapore. 

Conversely, U.S. goods market share fell, on average, with countries that would become new partners under the TPP: Brunei, Japan, Malaysia, New Zealand and Vietnam. Japan and Malaysia represent the third- and 35th-largest global economies, respectively.

More critically, trade agreements matter because trade as a whole matters to economic growth. 

Trade policies optimize access to demand, deepen integration into global value chains, weed out inefficient industries and incentivize sound fiscal policies; the results are greater output, stronger demand and sustainable growth. 

Pro-trade policies in Latin American countries for example — Mexico, Colombia, Chile, Peru — are contributing to GDP growth lasting through 2018, according to World Bank projections. 

Conversely, historic protectionist policies in neighboring countries — Brazil, Venezuela, Ecuador — are contributing to projected economic contractions for all three in the coming year. 

At the same time, trade has proven time and again to be a global driver of institution building by making protections of labor, environment and intellectual property the cost of entry into global markets, which also maintains the competitiveness for American businesses.

But another piece of evidence is that our recovery from the worst economic crisis since the Great Depression to become the strongest, most durable economy in the world was significantly driven by exports supporting millions of good-paying jobs. 

Said simply, there is no path to robust, sustainable, inclusive growth that does not include trade and trade agreements like the TPP.

That most global economic growth, 80 percent of the global middle class and 95 percent of consumers are outside our borders explains why trade and trade agreements like the TPP matter in the long-term.

But the current economic environment facing American businesses makes it clear why they matter now.

Selig is U.S. undersecretary of Commerce for International Trade.