Published
October 28, 2022
What are the benefits of trade and trade agreements for the United States? As noted earlier in this series, the world is charging ahead in pursuit of new market-opening trade agreements, while Washington policymakers have been sitting on the sidelines.
In that context, it’s worth taking a moment to assess the benefits of trade for American manufacturers.
For this critical part of the U.S. economy, 2022 has seen significant growth and job creation. In sharp contrast to the “we don’t make anything here” refrain commonly heard in Washington, U.S. industrial production has risen by two-thirds in the past 30 years in inflation-adjusted terms. Manufacturing has bounced back from the pandemic recession and today employs 12.9 million Americans, with average earnings topping $31 per hour.
Trade is essential to the success of U.S. manufacturers. American exports of manufactured goods surpassed $1.13 trillion in 2021, a sum representing nearly half the sector’s total output. In other words, nearly half of everything made in American factories is destined for consumers overseas.
That’s why American manufacturers have been among the biggest supporters of the push for more market-opening trade agreements. These trade agreements are designed to tear down the tariffs and other trade barriers that block U.S. exports, and they’ve delivered tremendous benefits for U.S. manufacturers and the workers they employ.
The U.S. has trade agreements with 20 countries representing just 7% of the world’s population, but these countries purchase 49% of all U.S. exports of manufactured goods. This shows a good trade agreement can turn even small markets into big opportunities.
However, while other economies race to ink new deals, the U.S. has not entered an agreement with a new trade partner in a decade. The Biden administration has yet to embrace a market-opening trade agenda — not even uncontroversial initiatives it inherited such as trade negotiations with the UK, our closest ally, or Kenya, a promising market in East Africa.
Meanwhile, the EU has 46 trade agreements with 78 countries, and a massive trade pact called the Regional Comprehensive Economic Partnership covering all of East Asia entered into force on January 1. These agreements mean better access to some of the world’s fastest growing markets — but not for American manufacturers.
The U.S. needs to get back in the game on trade agreements. America’s ability to deliver on a “make it here, sell it everywhere” agenda for U.S. manufacturers depends on it.
On other fronts, there are steps the Congress can take today to advance the trade interests of U.S. manufacturers. The Chamber has urged Congress to pass the long-delayed Miscellaneous Tariff Bill (MTB), which the Senate approved as part of a broader trade package a year ago on a 91-4 vote.
With a three-decade track record of success, MTBs temporarily suspend tariffs on select goods. The U.S. International Trade Commission leads a rigorous vetting process established by Congress to confirm that products proposed for tariff relief are not made in the U.S. or are unavailable in sufficient quantities to meet U.S. manufacturers’ needs.
MTBs enhance the competitiveness of American companies. Indeed, raising costs for U.S. manufacturers through the application of duties to inputs that are not available from domestic sources only hurts American workers and businesses.
Holding up the measure’s approval are some in the House who say finished goods should be disallowed from future MTBs. However, there’s no way MTBs can flood the U.S. market with duty-free imports of finished goods: There’s already a strict limit on the volume of any particular goods category ($500,000 annually) they can cover. The door should remain open to including finished goods in future MTBs.
Looking at the big picture, it’s clear U.S. manufacturers are benefitting from access to imported materials and components as well as the expansion in U.S. exports — especially to the markets where the U.S. has trade agreements in place.
In fact, consumers and businesses in those 20 countries purchased $691 billion of U.S. manufactured goods in 2021 — a sum representing 49% of all the exports produced by the 12.9 million Americans employed in manufacturing.
Do the math, and you’ll find trade agreement partner countries generate export revenue of $53,500 for each American factory worker. Compare this with the average annual earnings — including pay and benefits — of an American manufacturing worker: $95,990. How could manufacturers make their payrolls without the revenues they earn by exporting to these trade agreement partners? The short answer is, they couldn’t.
Read more in our Lead On Trade Series:
- Why Americas Must Lead on Trade
- The Benefits of Trade for America
- The Benefits of Trade Agreements in America
- How America’s Small Businesses Benefit from Trade
- How U.S. Farmers and Ranchers Depend on Trade
- Why Services Are the New Frontier in Trade
- Why America Must Lead on Innovation
About the authors
John G. Murphy
John Murphy directs the U.S. Chamber’s advocacy relating to international trade and investment policy and regularly represents the Chamber before Congress, the administration, foreign governments, and the World Trade Organization.
