Will new report offer impetus for more US trade agreements?

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A new report by the US ITC has identified a "small but positive" benefit for the country from its current FTAs.


The impact of trade deals has had a "small but positive" effect on the US economy, according to a new report into the impact of free trade agreements (FTAs), which may be used as a factor by the country's government when determining whether to pursue more deals in the future.

What does the report say about US trade?

The report, which was compiled by the US International Trade Commission (ITC) at the request of Congress, found that in 2017, which was used as the base year for the study, FTAs boosted the US' gross domestic product (GDP) by $88.8 billion, the equivalent of 0.5 percent. 

Such agreements also helped increase exports by $37.4 billion (1.6 percent) and
imports by $95.2 billion (3.4 percent), as well as adding 485,000 workers (0.3 percent) to the country's labor market, while real wages increased by 0.3 percent.

"Trade agreements have created more favorable conditions for many US firms through a variety of means," the report continued. It said these include "expanding market access through the reduction or elimination of tariff and non-tariff barriers, enhancing the protection of US intellectual property rights, opening opportunities for government procurements in FTA partner countries, and increasing protections for US investors in FTA partner countries".

In addition, FTAs have also benefited consumers in the country by giving them access to a larger variety of imported foods at more competitive prices. Such agreements also offered more protections for US intellectual property and have had a positive impact on trade in services as well as goods.

What could the report mean for US trade policy?

Some commentators, however, have suggested that the modest headline gains in terms of GDP and job creation may act as a disincentive for any new deals. Politico, for example, reported that those pushing for freer trade rules will be disappointed by the report's conclusions and are "unlikely" to convince the Biden administration of the value of more agreements.

The publication said: "It may not bode well for negotiations with the United Kingdom and Kenya started by the Trump administration, if those pacts are only examined on their potential to boost the US economy and create jobs."

One reason for this may be that the government will conclude that the benefits to the US' economy will not be worth the political costs involved, especially if domestic producers feel they will lose protections currently in place. 

For example, the country has a powerful steel industry that has welcomed new import tariffs on these products, which may be threatened if there were to be a future FTA with affected nations. In turn, this may make it more difficult for President Biden's Democratic party to win votes in parts of the country where this industry is a major employer.

An alternative interpretation

Not everyone shares this view, however. For instance, Marc Busch, professor of International Business Diplomacy at Georgetown University's Walsh School of Foreign Service, suggested the ITC's report actually makes the case for more FTAs in the coming years.

He said in a piece for The Hill that while the GDP and jobs figures "may not seem like big numbers, they’re impressive when you consider a few facts about US free trade deals".

For instance, with the exception of the US-Mexico-Canada (USMCA) deal, the US does not actually have many modern, wide-ranging FTAs. In fact, most of the US' current agreements are with comparatively minor trading partners such as Bahrain, Chile, Jordan and Oman, and have been created to forge closer political ties rather than for primarily economic gain. 

As the ITC study looked at data from 2017, and thus did not include the USMCA, much of its findings are also based solely on older, less comprehensive deals. Despite this, it was still able to show a clear positive impact, which bodes well for any new, potentially much larger deals with the likes of the EU, UK or Japan.

"In finding that a handful of outdated free trade deals are still benefiting the US economy, the ITC study makes the case for more US free trade deals that are built on cutting-edge WTO-plus provisions," Prof Busch concluded.