Hope on the Trade Front?
To say the least, President-elect Barack Obama was something less than an enthusiastic free trader while on the campaign trail in 2008, especially during the Democratic Party's primaries and caucuses.
But perhaps there is some hope for advancing free trade given a couple of appointments to the President-elect's administration.
It is no mere coincidence that when trade grows, the economy grows. And when the economy turns down, so does trade.
For example, with the economy moving into a downturn, real imports declined in each of the last four quarters. Real export growth began to slow in the third quarter of this year as well.
Also, during the 2000-2001 recession and its sluggish aftermath, real exports declined in 2001 and 2002.
However, during the subsequent period of economic growth, real exports grew by 41 percent and real imports by 33 percent, while the overall real economy grew by 15 percent from 2002 to 2007.
In fact, over this 2002-2007 period, export growth equaled 20 percent of total GDP growth, while total trade (exports plus imports) came in at 48 percent of total GDP growth. So, nearly half of the economic growth experienced from 2002 to 2007 was linked to trade.
And keep in mind that much of the trade front is linked to small and medium-sized businesses. The Small Business Administration has noted that firms with fewer than 500 employees made up 97.3 percent of exporters in 2006, producing 28.9 percent of known export value.
Many trade and economy watchers are worried that President-elect Obama will lean in the protectionist direction. But two key appointments are encouraging.
New Mexico Governor Bill Richardson should be a plus as commerce secretary given his generally strong record on free trade, including his role as a Member of Congress in helping to get NAFTA passed.
In addition, former Dallas Mayor Ron Kirk has been appointed to serve as U.S. trade representative. Kirk also is a free trader, who, according to The Wall Street Journal, not only favored NAFTA, but championed building a "NAFTA Freeway" to speed cross-border trade. On favoring permanently normalizing trade relations with China, in 2000, Kirk, according to the New York Times, said that "you're either part of the global economic community, or you're going to be left out."
Kirk was absolutely correct. Trade is cricitcal to economic growth.
The choice is clear: Either choose free trade, and allow consumers, entrepreneurs, businesses and employees to reap the rewards of expanded economic opportunity; or choose protectionism, and fall behind and/or drag down the rest of the globe.
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
www.sbecouncil.org
Copyright 2008. All Rights Reserved.
