by Raymond J. Keating-
Compared to the same time last year, U.S. international trade has shown growth – though with some concerns in the most recent months’ numbers.
Exports
As detailed in the latest trade report from the U.S. Bureau of Economic Analysis, real U.S. exports over the period of January to April 2018 were up by 5.2 percent versus the same period last year. That’s pretty solid real growth. However, in real terms, exports declined in April compared to March.
Imports
Meanwhile, real U.S. imports over January to April of this year grew by 5.5 percent compared to same time last year. Again, that’s solid growth, reflecting positive trends in the domestic economy, which translate into increased demand for imports from consumers, entrepreneurs and businesses. Real imports, though, are down from their recent high in December 2017, and have declined in three of the last four months, including in both March and April.
Policy Uncertainty and Increased Costs
Unfortunately, uncertainty has expanded and costs have risen due to measures advanced by President Trump, including pulling out of the Trans-Pacific Partnership, imposing steel and aluminum tariffs, actions taken against select goods from China, and there are serious questions about the future of NAFTA – along with retaliation from our trading partners.
Trade Vital to U.S. Economy and Small Business
The importance of trade to the U.S. economy cannot be ignored. As noted in my April 2018 testimony before the House Committee on Small Business, “[I]nternational trade is deeply integrated in and vital to the U.S. economy. Consider, for example, that real total trade (exports plus imports) in 1955 equaled 6.1 percent of real U.S. GDP. That grew to 29.3 percent in 2017. U.S. exports as a share of the economy jumped from 2.7 percent of GDP to 12.8 percent over this period, and imports from 3.4 percent of GDP to 16.5 percent. Indeed, growth in trade equals or accounts for a significant portion of U.S. economic growth, at least 40 percent in recent times.”
In the same testimony, the importance of trade for small businesses was pointed out, with 87 percent of U.S. exporters having fewer than 50 employees, and 86 percent of U.S. importers with fewer than 50 workers.
Finally, in that testimony, it was argued, “U.S. policymakers should be working to reduce barriers to trade by entering into and expanding free trade agreements.” That means strengthening, not undermining NAFTA; reclaiming global leadership in advancing free trade; and serving as a free trade example to countries like China.
For example, “Rather than raising costs to trade with China, the best path forward would be to enter into serious discussions that lay the groundwork for a China-U.S. free trade agreement. Through that process, the U.S. would be able to constructively advance the cause for open markets and property rights in China. And a free trade accord between the world’s two largest economies would considerably expand opportunities for entrepreneurs, small businesses and workers in both nations.”
Policymaking has largely moved in a pro-growth direction in terms of business tax and regulatory policies. That needs to be the case on trade as well.
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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP: The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.