The Real Impact
of Trade Agreements
How Trade Affects Jobs, Manufacturing,
and Economic Competitiveness
April 2017
REVISED EDITION
The Real Impact of Trade Agreements
About the Institute
Since 1990, the Bay Area Council Economic Institute has
been the leading think tank focused on the economic and
policy issues facing the San Francisco/Silicon Valley
BayArea, one of the most dynamic regions in the United
States and the world’s leading center for technology and
innovation. A valued forum for stakeholder engagement
and a respected source of information and fact-based
analysis, the Institute is a trusted partner and adviser to
both business leaders and government officials. Through
its economic and policy research and its many partnerships,
the Institute addresses major factors impacting the
competitiveness, economic development and quality
oflife of the region and the state, including infrastructure,
globalization, science and technology, and health policy.
Itis guided by a Board of Trustees drawn from
influentialleaders in the corporate, academic, non-profit,
and government sectors. The Institute is housed at and
supported by the Bay Area Council, a public policy
organization that includes hundreds of the region’s largest
employers and is committed to keeping the BayArea the
world’s most competitive economy and best place to live.
The Institute also supports and manages the Bay Area
Science and Innovation Consortium (BASIC), a partnership
of Northern California’s leading scientific research
laboratories and thinkers.
Acknowledgments
This report was prepared by Sean Randolph, Senior
Director at the Bay Area Council Economic Institute.
TheInstitute wishes to thank the many trade and
economic experts who provided valuable insights and
information, including Linda Dempsey, Vice President,
International Economic Affairs, National Association of
Manufacturers; Dorothy Dwoskin, Senior Director, Global
Trade Policy and Strategy, Microsoft; Lisa Malloy, Director,
Policy Communications, Intel; Matt Perault, Head of
Global Policy Development, Facebook; KenMonahan,
Director for International Trade Policy, National Association
of Manufacturers; and Chris Wall and RobertJames,
Partners, Pillsbury Winthrop Shaw Pittman.
The Institute particularly wishes to thank the many
organizations that supported this research: Bank of
the West, DLA Piper, HSBC, Intel, Microsoft, Pillsbury
Winthrop Shaw Pittman, the Port of Oakland, San
Francisco International Airport, Visa, and Wells Fargo.
Contents
Executive Summary ...................................................1
Free Trade Agreements in Perspective ..................... 1
Effects on Manufacturing .......................................... 2
Asia-Pacific Trade: Why TPP Still Matters .................. 2
Looking Forward ........................................................ 3
Introduction ...............................................................4
Bilateral and Regional Trade Agreements
Negotiated by the United States ..............................5
How have these agreements impacted trade? .......... 6
What about NAFTA? .................................................. 9
Do Trade Agreements
Kill Jobs andManufacturing? .................................. 10
How is technology impacting
manufacturing jobs? .................................................11
How has the manufacturing sector performed
since FTAs have been in force?................................ 12
How can we strengthen the
manufacturing economy? ........................................ 15
Asia-Pacific Trade: Why TPP Still Matters ................17
Understanding Dispute Resolution ......................... 19
Writing Global Rules: We Are Not Alone ................ 20
Asian Trade and California ......................................21
Conclusion ...............................................................24
Endnotes .................................................................25
1
How Trade Affects Jobs, Manufacturing, and Economic Competitiveness
Executive Summary
Political debate and the anxiety it has fueled have
created an unfortunate—and inaccurate—impression
that trade agreements have destroyed manufacturing
and are killing US jobs. A look at the facts reveals a
more complex story and points to a different conclusion.
Free Trade Agreements
inPerspective
On balance, free trade agreements have benefited
the United States, and US workers. This is true of both
bilateral and multilateral agreements. These agreements
have been negotiated by the US to advance US interests,
and accordingly reflect US values and objectives. They
also reflect an alignment of interests with our negotiating
partners, who similarly benefit from growing trade.
Contrary to what some have asserted, there is no
evidence that bilateral agreements are inherently superior
to multilateral ones, or that free trade agreements have
been abused or manipulated by our partners. By virtue
of their scale, multilateral agreements can in fact deliver
strategic benefits to the US that bilateral ones may not.
Since the 1980s, both bilateral and regional free trade
agreements (FTAs) have been used by nations around
the world to reduce barriers, open markets, and create
new and higher standards in areas such as investment,
intellectual property, and now digital commerce.
Behindthe US approach to trade agreements has been
a recognition that as global markets grow in importance
and emerging markets expand, trade and investment
opportunities grow as well.
The collapse of communism, the entry of China and
India into the world economy, and accelerating growth
in Asia and other regions have brought billions of
new consumers into the global market economy. That
includes hundreds of millions of consumers who have
entered the middle class with new
purchasing power. Byreducing trade
and investment barriers, leaders across
multiple administrations have believed
that markets overseas will expand,
due to the lowering of barriers but
also due to growing trade volumes.
US companies cannot afford to ignore
these opportunities, as 95 percent of
the world’s population and 75 percent
of global purchasing power now
reside outside the United States.
Multiple assessments have shown
that free trade agreements have clear
benefits for the United States. US International Trade
Commission economic analysis models have found that
in addition to positively affecting real GDP, employment,
and wages, FTAs currently in force increased US trade
surpluses or reduced trade deficits with partner
countries by 59.2 percent ($87.5 billion) in 2015.
Theyalso produced tariff savings of up to $13.4billion
in 2014, benefiting consumers—particularly those with
low or middle incomes—through lower costs.
Of the 267 bilateral and regional free trade agreements
that have been negotiated around the world, only 14
involve the United States. The provisions included in the
proposed Trans-Pacific Partnership (TPP), an agreement
between the United States and 11 trading partners,
were positioned as the centerpiece of US strategy both
to open markets and cement US economic leadership
in the Asia-Pacific region. The withdrawal of the United
States from the Trans-Pacific Partnership will not stop
this global process. Canada and the European Union
have recently approved a free trade agreement, and
Japan and Europe are discussing one. In Asia, China’s
proposed 16-nation trade agreement—RCEP—is
positioned to fill the void left by the US withdrawal.
US
Rest of the
World
95%
Rest of the
World
US
75%
World
Population
World
Purchasing Power
2
The Real Impact of Trade Agreements
Asia-Pacific Trade:
Why TPP Still Matters
The United States could have expected similar benefits
from the Trans-Pacific Partnership. While the US has
officially withdrawn from that agreement, it could still
benefit from successor agreements with similar terms.
The US International Trade Commission estimated
that with TPP, exports to TPP partners would have
grown faster than exports to other countries. Imports
from TPP partners would also have grown, but not as
fast as exports. Regarding employment, the Peterson
Institute for International Economics estimated that
the agreement would have raised real US wages
but would not have significantly changed overall
employment levels.
“Job churn,” the movement of jobs between firms,
sectors, and industries, was projected by the Peterson
Institute model to be 53,700 annually, including both
jobs eliminated in less productive import-competing
firms and jobs added in firms that expand. Experience
demonstrates that the resulting jobs, in both
manufacturing and services, are better paying than
jobs in companies that do not compete globally.
The great majority of these jobs are for middle-
class Americans who produce and move the goods
and generate the services.
While manufacturing is a major focus in trade debates,
services are also important: tradable business services
(including legal services, consulting, financial services,
accounting, architecture, engineering, healthcare, and
education) account for 25 percent of US employment —
double the share of manufacturing. The service
economy is growing fast, and the Peterson Institute
projects that 90 percent of US workers will be
employed in the service sector by 2030. In contrast
to trade in goods, the US enjoysa sizable trade
surplus in services.
Effects on Manufacturing
Taken together,
nearly half of all
US-manufactured
exports are
purchased by free
trade agreement
partners, even
though they account for only 6 percent of the world’s
consumers and less than 10 percent of the world’s
economy. In 2015, the US enjoyed a $6.4 billion
goods and services surplus with its 20 free trade
partners, compared with a $489.8 billion deficit
with non-FTA countries. Currently, the United States’
largest trade deficit is with China, which has no trade
agreement with the US and was not a party to the
proposed Trans-Pacific Partnership.
Contrary to critics’ claims, trade agreements are not the
fundamental cause of erosion in the US manufacturing
sector or of the disappearance of manufacturing jobs.
Manufacturing output is growing, and US manufacturing
companies produced a record $2.2 trillion in value in
2015. Manufacturing production, however, is different
from employment, which has been declining for
decades. Only a small part (approximately 13 percent)
of that decline is due to trade. The real reason we have
fewer manufacturing jobs is technology, which makes
production more efficient and requires fewer workers.
Aninstructive parallel is agriculture, where US production
since 2010 is up 13 percent, while jobs in agriculture fell
15 percent, both trends due to technology. These are
inexorable processes that will continue.
Free trade agreements have, in fact, had a positive
impact on manufacturing. In 2015, US manufacturers
sold $12.7 billion more in manufactured goods to
FTA partners than US companies bought from them.
At the same time, the US had a manufacturing trade
deficit of $639.6 billion with countries where no FTAs
are in place.
Share of US Manufactured Goods Exports
Rest of the World
FTA Partners
52% 48%
3
How Trade Affects Jobs, Manufacturing, and Economic Competitiveness
The principles and provisions contained in TPP significantly
benefit large and small companies across a range of sectors.
Technology companies and their workers would benefit
through the opening of service markets, the strengthening
of intellectual property protection, the protection of the
cross-border movement of data, and the protection of
source code from expropriation by foreign governments.
Agriculture would also benefit, as once-restricted markets
such as Japan’s would open to US exports. In other areas
of interest, TPP’s provisions included enforceable labor and
environmental protections, setting the highest standards of
any international trade agreement to date.
Looking Forward
Despite the formal withdrawal of the US from the Trans-Pacific
Partnership, the principles that it advanced would produce
net benefits for the economy and for American workers.
There is no doubt that trade contributes to economic churn,
as less competitive jobs decline and more competitive ones
grow. Many more Americans stand to gain in this process
than lose. For those who lose, however, the pain is real. In
response, we should overhaul Trade Adjustment Assistance
(TAA), the federal program that provides transitional help
toward new employment for dislocated workers. Beyond that,
our country needs a comprehensive, bipartisan strategy for
how to transition workers who are affected not just by trade,
but by global competition and the dramatic changes that
technology is producing across the economy.
Anxiety that trade agreements are responsible for these
dislocations is misplaced. The evidence is compelling
that California and the nation, through competitive
companies and their workers, benefit from more open
trade. Addressing the dislocations caused by global
competition and the technology-driven changes that are
transforming both industries and jobs — changes that are
not caused by trade agreements — is an important and
complex task that should be on the national agenda. But
the US should not back away from trade agreements or
abdicate its role as the leading global advocate forfree
and openmarkets.
4
The Real Impact of Trade Agreements
Introduction
International trade has historically been supported by
a bipartisan consensus in the public and in Congress.
Americans have generally stood together when facing
the outside world, whether on defense or the economy.
Coming out of World War II and for decades after,
America largely wrote the rules of the international
economy, operating from a position of strength. But
that consensus has eroded as US economic dominance
has lessened and global competition has increased,
particularly from fast-growing economies in Asia. The
world today is a more complex place. Nevertheless,
successive administrations—both Republican and
Democratic—have negotiated and sent to Congress a
succession of international trade agreements designed
to reduce barriers to trade and investment and open
global markets for US companies.
The move toward bilateral and regional free trade
agreements has been stimulated by a faltering of the
multilateral trading system embodied in the World Trade
Organization (WTO) and its predecessor, the General
Agreement on Tariffs and Trade (GATT). Since the late
1980s, the growing number of GATT/WTO members,
their different levels of development, and their varying
priorities have made large multilateral agreements
increasingly difficult to negotiate with the consensus
required by WTO rules. For those reasons, the most
recent multilateral negotiation for comprehensive
market opening that was launched in 2001, the “Doha
Development Round,” did not succeed. For countries
wanting to move ahead with liberalization, other
optionsbecame attractive.
Faced with this complexity, the United States and
other partners turned to bilateral and regional
trade agreements as a faster way to grow trade.
The conclusion of the North American Free Trade
Agreement (NAFTA) in 1993 was, for example,
credited with accelerating the completion of the last
successful multilateral negotiation, the “Uruguay
Round,” in 1994.
WTO agreements provide a critical floor of universally
accepted commitments and principles, and the basic
rules for trade in bilateral and regional trade agreements
build on them. But as important as those ground rules
may be, tariffs on US products overseas generally
remain higher than those in the United States. Non-tariff
barriers also persist, particularly in services, and the
multilateral system has been unable to embrace new or
higher standards on a range of issues of concern to the
US, including labor and environmental protection.
Working with like-minded partners to conclude free
trade agreements (FTAs) in parallel with global talks is
seen as a way to develop those higher standards and,
if possible, force the pace of global processes. While
multilateral negotiations are the preferred and more
efficient way to open markets, international trade rules
allow for bilateral and regional free trade agreements
where “substantially all the trade” between member
countries is liberalized.
1
According to the WTO, 267
bilateral and regional trade agreements are currently
in force around the world.
2
Of those, the United States
accounts for only 14.
3
Behind the US approach to trade agreements has been
a recognition that as global markets grow in importance
and emerging markets expand, trade and investment
opportunities grow as well. The collapse of communism,
the entry of China and India into the world economy,
and accelerating growth in Asia and elsewhere have
brought billions of new consumers into the global
market economy. That includes hundreds of millions of
consumers who have entered the middle class with new
purchasing power. By reducing trade and investment
barriers, leaders across multiple administrations have
believed that markets overseas will expand, due to the
lowering of barriers but also due to the growth that
partner economies would experience as trade and
investment flows increase. US companies cannot afford
to ignore these opportunities, as 95 percent of the
world’s population and 75 percent of purchasing power
now reside outside the United States.
4
5
How Trade Affects Jobs, Manufacturing, and Economic Competitiveness
Dates Entered Into Force for 14 US Bilateral and Regional Trade Agreements
Panama
Colombia
Korea
Peru
Oman
CAFTA-DR/Costa Rica
CAFTA-DR/Dominican Rep.
CAFTA-DR/Guatemala
CAFTA-DR/Nicaragua
CAFTA-DR/Honduras
CAFTA-DR/El Salvador
Bahrain
Morocco
Australia
Chile
Singapore
Jordan
Israel
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
8/19/1985
3/1/2006
1/11/2006
1/1/2006
1/1/2005
1/1/2004
1/1/2004
12/17/2001
1/1/1994
2/1/2009
1/1/2009
1/1/2009
3/1/2007
7/1/2006
4/1/2006
4/1/2006
10/31/2012
5/12/2012
3/15/2012
NAFTA (Mexico & Canada)
Sources: For agreements with Australia, Bahrain, Chile, Colombia, Korea, Morocco, Oman, Panama, Peru, and Singapore, dates are from the Office
of the US Trade Representative (USTR), “Free Trade Agreements,” https://ustr.gov/trade-agreements/free-trade-agreements; for the agreement with
Jordan, date is from USTR, “Countries and Regions,” https://ustr.gov/countries-regions/europe-middle-east/middle-east/north-africa/jordan; for
agreements with Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua, dates are from the US Department of State,
“Benefits of U.S. Trade Agreements,” http://www.state.gov/e/eb/tpp/bta/fta/c26474.htm; for agreements with Mexico and Canada (NAFTA) and with
Israel, dates are from the US International Trade Commission, The Impact of Trade Agreements: Effect…, 2003, https://www.usitc.gov/publications/
industry_econ_analysis_332/2003/impact_trade_agreements_effect_tokyo_rounds_us.htm. (All websites accessed May 2, 2016.)
Analysis: US International Trade Commission and Bay Area Council Economic Institute
Bilateral and Regional Trade Agreements
Negotiated by the United States
To date, the United States has concluded 14 FTAs
with a total of 20 countries, 12 of them bilateral
and 2 regional (the North American Free Trade
Agreement known as NAFTA and the Dominican
Republic–Central America Free Trade Agreement
known as CAFTA-DR).
6
The Real Impact of Trade Agreements
The first free trade agreement negotiated by the United
States, a bilateral agreement with Israel that entered
into force in 1985, was followed by agreements with
Canada in 1989 (superseded by NAFTA), Canada and
Mexico (NAFTA) in 1994, Jordan in 2001, Singapore in
2004, Chile in 2004, Australia in 2005, Morocco in 2006,
Bahrain in 2006, the Dominican Republic and Central
America (CAFTA-DR) in 2006–2009), Oman in 2009,
Peru in 2009, Korea in 2012, Colombia in 2012, and
Panama in 2012.
5
Trade agreements have always been hard-fought in
Congress. Unions and environmental NGOs in particular
have raised concerns about labor and environmental
standards, leading successive administrations to elevate
their importance. As each successive agreement has
been negotiated, increased attention has been given to
those issues by embedding strengthened commitments,
standards, and monitoring procedures. The Trans-Pacific
Partnership (TPP), from which the US has now withdrawn,
would have been the latest in this series, containing what
are considered to be state-of-the-art provisions.
“
For issues that have not been covered by binding
multilateral agreements—such as government
procurement, investment, electronic commerce, labor and
the environment—U.S. bilateral and regional agreements
have been pivotal in instituting key trade commitments
and establishing precedents for later agreements. For
example, labor rights were not covered in the URAs
[Uruguay Round Agreements], but have been included
in all bilateral and regional U.S. trade agreements since
NAFTA, with the commitments in later agreements
encompassing more obligations over time
”
.
—United States International Trade Commission
6
How have these agreements
impacted trade?
US International Trade Commission economic models
have found that in addition to positively affecting real
GDP, employment, and wages, FTAs currently in force
increased trade surpluses or reduced trade deficits
with partner countries by 59.2 percent ($87.5 billion) in
2015 and produced tariff savings of up to $13.4 billion
in 2014, benefiting consumers—particularly those with
lowor middle incomes—through lower costs.
7
“
…trade agreements have affected not only trade
but also other aspects of the U.S. economy, with results
including higher aggregate employment, lower prices,
and greater consumer choice, as well as negative effects
on production and employment in certain sectors.
”
—United States International Trade Commission
8
Data from the Office of the United States Trade Rep-
resentative shows that in most cases, US exports to
FTA partner countries have increased, sometimes quite
sharply, as illustrated by the following examples:
Manufactured goods exports to Canada and
Mexico have nearly quadrupled since NAFTA entered
into force in 1994, from $126 billion in 1993 to $477
billion in 2015;
Manufactured goods exports to Chile have grown
nearly six-fold since the US–Chile agreement entered
into force in 2004, from $2.5 billion in 2003 to $14.6
billion in 2015;
Manufactured goods exports to Australia have
increased nearly 80 percent since the US–Australia
agreement entered into force in 2005, from $13
billion in 2004 to $23.3 billion in 2015;
Manufactured goods exports to Central America
have increased since CAFTA agreements came into
force from $14.6 billion in 2005 to $24 billion in 2015;
Manufactured goods exports to Peru have
increased nearly 40 percent since the US–Peru
agreement entered into force in 2009, from $5.6
billion in 2008 to nearly $8 billion in 2015.
Data analysis by the National Association of Manufactur-
ers (NAM) also indicates that the rate of growth for US
manufactured goods exports to FTA partner countries is
generally faster than the growth rate of exports to non-
FTA countries. NAM examined the rate of growth with
FTA partners from 2001 onward compared to countries
that did not have FTAs with the US. Only Singapore, the
Dominican Republic, and Panama showed lower growth
in purchases of US manufactured goods exports than
non-FTA countries.
9
Singapore already had no tariffs and
few trade barriers before the agreement, so dramatic
movement was unlikely (though service exports have
increased substantially).
7
How Trade Affects Jobs, Manufacturing, and Economic Competitiveness
Comparison of Growth Rates of US Manufactured Goods Exports
to FTA and non-FTA Partners
FTA
Partner
Entry into
Force Date
Year 1
a
Year 2
b
Year 3
c
Since
Implementation
(Through 2014)
Year
Notes
d
Jordan
2001 (17 Dec.) 23.7% 5.9% 33.3% 388.4%
2003, 2004,
and 2005
Non-FTA
Partners
4.5% 6.3% 7.5% 91.4%
2003, 2004,
and 2005
Chile
2004 (1 Jan.) 44.2% 26.8% 21.3% 348.6%
2005, 2006,
and 2007
Singapore
2004 (1 Jan.) 5.5% 16.5% 7.3% 53.4%
2005, 2006,
and 2007
Non-FTA
Partners
7.5% 14.1% 12.7% 72.3%
2005, 2006,
and 2007
Australia
2005 (1 Jan.) 12.3% 8.1% 17.2% 69.0%
2006, 2007,
and 2008
Non-FTA
Partners
14.1% 12.7% 12.6% 60.3%
2006, 2007,
and 2008
Honduras 2006 (1 April) 19.2% 4.7% 32.0% 52.7%
2007, 2008,
and 2009
Nicaragua 2006 (1 April) 18.3% 17.8% 31.2% 63.0%
2007, 2008,
and 2009
Bahrain 2006 (1 Aug.) 26.7% 43.1% 20.5% 115.0%
2007, 2008,
and 2009
Morocco 2006 (1 Jan.) 17.0% 57.8% 27.7% 164.4%
2007, 2008,
and 2009
Guatemala 2006 (1 July) 16.8% 15.1% 19.8% 72.5%
2007, 2008,
and 2009
El Salvador 2006 (1 March) 6.8% 2.2% 19.0% 51.2%
2007, 2008,
and 2009
Non-FTA
Partners
12.7% 12.6% 18.1% 40.5%
2007, 2008,
and 2009
-
-
-
-
-
-
Dominican
Republic
2007 (1 March) 7.8% 21.7% 21.5% 19.8%
2008, 2009,
and 2010
Non-FTA
Partners
12.6% 18.1% 17.7% 24.7%
2008, 2009,
and 2010
-
-
Peru
2009 (1 Feb.) 34.1% 24.3% 18.1% 100.1%
2010, 2011,
and 2012
Costa
Rica
2009 (1 Jan.) 9.5% 16.4% 21.2% 52.0%
2010, 2011,
and 2012
Oman
2009 (1 Jan.) 4.5% 28.3% 24.5% 77.8%
2010, 2011,
and 2012
Non-FTA
Partners
17.7% 13.9% 3.5% 35.2%
2010, 2011,
and 2012
-
-
South
Korea
2012 (15 March) 1.8% 5.5% 7.4%
2013 and
2014
Colombia
2012 (15 May) 11.8% 5.1% 17.4%
2013 and
2014
Panama
2012 (31 Oct.) 4.9% 5.1% -0.4%
2013 and
2014
Non-FTA
Partners
3.3% 1.2% 4.6%
2013 and
2014
-
a
Calculated as the percentage change from the date before entry into force to first
year after entry into force.
b
Calculated as the percentage change from the date before entry into force to sec-
ond year after entry into force.
c
Calculated as the percentage change from the date before entry into force to 2014.
d
Dates for Year 1, Year 2, and Year 3
Source: US Department of Commerce
Analysis: National Association of Manufacturers as published in written statement
February 5, 2016 to the US International Trade Commission Re Section 332-555
investigation, pages 3 – 4.
Share of US Manufactured Goods Exports
by FTA and Non-FTA Markets, 2015
FTA PartnersRest of the World
Nearly half of US
manufactured goods
exports are purchased
by our 20 Free Trade
Agreement Partners.
52% 48%
Source: US Department of Commerce
Analysis: National Association of Manufacturers as
published in “Pre-Hearing Statement Before the U.S.
International Trade Commission Submitted on Novem-
ber 4, 2015,” page 8.
Delays in the entry into force of the
Dominican Republic and Panama
agreements may have contributed to the
slower growth there, and Panama is an
unusual case. The Panama FTA has not been
the main factor driving recent trade there,
since when the agreement entered into
force in 2012, the Panama Canal was being
expanded. Purchases of large amounts of
construction equipment and other US goods
for that project contributed to a rise in US
manufactured goods exports, but when the
job was done, Panama’s imports dropped.
This raises an important point about
interpreting the effects of trade agreements
on the balance of trade with any given
country. Trade agreements can contribute
to movements in the balance of trade, both
expanding and shifting their direction. But
they are not always the prime reason why
trade levels rise or fall. Those shifts are
often the result of larger macroeconomic
movements, where trade agreements
may contribute but are not the essential
cause, as was the case in the Panama Canal
example cited above.
In the case of Israel, a large part of bilateral
manufactured goods trade is in diamonds,
reflecting the fact that New York is the
world’s major diamond wholesaler and
Tel Aviv and Antwerp are the leading
diamond-cutting markets. As a result,
8
The Real Impact of Trade Agreements
US Trade Balance, 2015 (in Billions of US Dollars)
-800 -700 -600 -500 -400 -300 -200 -100 0 100 200 300
China (Largest Goods
Trading Partner)
Non-FTA Countries
(Rest of World)
All 20 FTA Countries
All World Trade Partners
-483.5
6.4
-489.8
-336.2
-745.7
-64.0
Total
Services
Total
Goods
Total Goods
& Services
-681.6
-366
262.2
70.4
191.8
29.5
Sources: Bureau of Economic Analysis, US Department of Commerce; US Census Bureau (Census Basis)
Analysis: Office of the United States Trade Representative and Bay Area Council Economic Institute
large amounts of diamonds are shipped from New
York to Israel for cutting and returned as higher value
products, which gets reflected in the trade balance.
So while the FTA helps grow two-way manufactured
goods trade, the balance is heavily influenced by the
structure of the diamond industry. Trade with Australia
provides another example. The US-Australia FTA
has made the US more competitive there, but trade
balance shifts also reflect variations in the strength of
Australia’s economy. For many years, Australia enjoyed
a commodity boom, based on surging exports to China.
More recently as China’s economy has cooled, so has
Australia’s economy and its commodity sector, which has
reduced that country’s purchases of US equipment. So
caution is required when attributing causality to trade
agreements—on the upside or the downside—when
larger national or global forces are at work. The ITC’s
estimates of the positive effects of existing free trade
agreements on the US trade balance, cited above, take
these larger movements into account.
Taken together, nearly half of all US-manufactured exports
are purchased by free trade agreement partners, though
they account for only 6 percent of the world’s consumers
and less than 10 percent of the world’s economy.
10
In 2015, the US enjoyed a $6.4 billion goods and
services trade surplus with its 20 free trade partners,
compared with a $489.8 billion deficit with non-FTA
countries. Currently, the United States’ largest goods
trading partner is China and its largest trade deficit is
with China, which has no trade agreement with the US
and was not a party to the Trans-Pacific Partnership.
11
Investment also figures prominently in free trade
agreements, where investment chapters provide
protection for US companies abroad and foreign
investors in the United States, by improving transparency
in international transactions. These protections are
important because investment overseas gives US
companies betteraccess to foreign consumers in their
home markets, just as foreign investment in the US
enhances the market access for foreign companies here.
For most US companies investing abroad, this doesn’t
mean leaving the US, but is instead an extension of their
activity that complements operations at home. Studies
of 2013 data from the US Department of Commerce
Bureau of Economic Analysis show that domestic
operations continue to account for a majority of their
total (domestic and foreign) operations, producing more
than 70 percent of their value-added, accounting for
more than 73 percent of their total capital expenditures,
performing more than 83 percent of their R&D, and
accounting for more than 65 percent of their total
employment. Contrary to popular belief, thevast
9
How Trade Affects Jobs, Manufacturing, and Economic Competitiveness
majority of sales by the overseas affiliates of those
companies are destined for markets outside the United
States, not sales in the US.
12
The record of existing FTAs shows an impact pattern
for investment similar to trade with strong investment
growth, both incoming and outgoing. Reflecting the
larger scale of the US economy and the fact that barriers
to inbound investment are generally higher overseas than
domestically before agreements are signed, US investment
in partner countries is typically on a larger scale than
foreign investment into the US. Lately, however, inbound
foreign direct investment (FDI) has been growing faster.
In 2015, for example, the United States had $49 billion
in outbound manufacturing investment, but $248 billion
inbound.
13
FTAs may be a factor, as the International Trade
Commission finds that FTAs tend to encourage inbound
FDI more than outbound, by making it easier in some
cases to export from the United States than to relocate
overseas in order to serve local markets.
14
This matters, as foreign direct investment in the
UnitedStates supports approximately 6.1 million
USworkers, including 2.3 million in manufacturing.
15
According to the Bureau of Economic Analysis, FDI
employs 665,000 Californians.
16
What About NAFTA?
Trade critics point to NAFTA as a worst case example of
the risks of international trade agreements, suggesting
it has caused the shift of a significant portion of US
manufacturing, particularly automotive, to Canada and
Mexico. But a careful assessment tells a more complex
story and points to a different conclusion.
When NAFTA was signed in 1993, Mexico gave up more
tariff protection than the United States gave up overall,
but different industry sectors have been impacted
differently.
17
In the automotive sector, US International
Trade Commission overall findings indicate that the tariff
reduction, rules of origin, and investment provisions in
NAFTA increased US automotive competitiveness and
exports, due to the expansion of supply chains to include
NAFTA partner countries.
18
However, this regionalization
of the supply chain network also led to a net decline of
automotive production and employment in the US.
Movements of parts and vehicles go in all directions.
Of the imported components used in US manufactured
cars—which support auto assembly here—the share that
comes from Mexico is 37 percent. For their part, US parts
manufacturers send 61 percent of their exports to Mexico
and Canada for incorporation into vehicles produced there,
meaning that cars imported from NAFTA partners include
a high level of US content. This has led to a stronger, more
competitive US automotive industry. Contrary to being in
decline due to NAFTA, more than two-thirds of automotive
investment in North America from 2010–2014 was made in
the US.
19
These investments helped generate 264,800 new
US jobs in vehicle and parts production from 2010–2016, a
40 percent increase in employment.
20
Other traditional industries, such as steel, also report
market access benefits as a result of NAFTA.
“
Turning to the impact of trade agreements
implemented in recent years, NAFTA has been the
most successful for the North American steel industry,
providing increased access to our two closest and
most significant export markets. It has resulted in
strengthened North American manufacturing supply
chains, especially with key customer groups such as
the automotive industry. Overall, U.S. steel exports to
NAFTA increased by 395 percent from 1993 to 2014.
”
—American Iron and Steel Institute (AISI)
21
Far from “hollowing out” US manufacturing, domestic
manufacturing output has doubled since NAFTA was
signed, from $1.06 trillion in 1993 to $2.17 trillion in
2015, reflecting double digit growth in both durable and
non-durable goods sectors including energy, chemicals,
computers and electronics, miscellaneous manufactures,
and transportation equipment.
22
NAFTA also benefited the agricultural sector, as US
agricultural exports now enter Mexico virtually tariff
free. The benefits extend beyond tariff reduction, since
NAFTA also reduced other barriers to US exports,
such as Mexico’s import license requirements. Prior to
NAFTA, about 60 percent of US agricultural exports to
Mexico required import licenses and, overall, Mexico
required import licenses on 230 products from the
United States, affecting about 7 percent of the value of
US exports to Mexico.
23
On balance, the evidence points to a net benefit to the
United States from the expanded and more integrated
North American market that NAFTA has produced.
10
The Real Impact of Trade Agreements
Do Trade Agreements Kill Jobs
andManufacturing?
Beyond NAFTA, critics claim that trade agreements
more generally have gutted US manufacturing and killed
middle class jobs. Again, a careful assessment finds that
this is not the case.
Manufacturing overseas has grown substantially since
the 1970s, as foreign governments sought to grow their
manufacturing sectors for the same reasons we do in the
United States—supporting innovation and providing
well-paying jobs for their citizens. As discussed above,
some of that production comes from US investment, as
US companies seek to reach new customers, participate
in overseas procurement and infrastructure projects,
and participate in more efficient global supply chains.
Analysis of recent data from the Bureau of Economic
Analysis shows that 93.6 percent of total foreign affiliate
sales by US manufacturers was not destined for the
United States, but was sold in foreign markets.
24
US manufacturing on the whole is healthy, and while
foreign competition has clearly impacted the sector, it
is not the core reason for the decline in manufacturing
jobs. Evidence points to technology and increased
productivity as the principal causes.
This is evident in California, which has more
manufacturing jobs than any other state. As of March
2015, manufacturing employment in California totaled
1,271,672, representing 9.3 percent of the state’s total
employment.
25
In 2014, the average annual income
reported for those manufacturing workers was $80,000,
which is toward the upper end of California’s wage
spectrum.
26
Production in the state spans sectors from
computers and electronic equipment to medical devices,
pharmaceuticals, fabricated metal products and apparel.
The size and structure of the state’s manufacturing sector,
and the issues that affect it, are analyzed in a recent Bay
Area Council Economic Institute report, Reinventing
Manufacturing: How the Transformation of Manufacturing
Is Creating New Opportunity for California.
27
Among its other conclusions, the study finds that
manufacturing employment in California has declined
nearly 40 percent from 1990 levels, similar to the
national trend. It also sustains the findings of two
earlier reports conducted by the Institute—The Future
of BayArea Jobs: The Impact of Offshoring and Other
KeyTrends
28
(developed in 2004 with A.T. Kearney, Joint
Venture Silicon Valley Network, and the Stanford Project
on Regions of Innovation and Entrepreneurship), and
One Million Jobs at Risk: The Future of Manufacturing
in California
29
(a 2005 study developed with support
from McKinsey and Company)—which found that
while offshoring was a factor, the fall in manufacturing
employment was attributable primarily to efficiency gains
in production processes. In other words, technology.
To be clear, the impacts of globalization cannot be
dismissed, as lower costs abroad have attracted some
manufacturers, particularly of lower-technology products
(such as textiles, toys, and furniture) that are labor-
intensive, and have low levels of embedded intellectual
property. Other production, as already noted, has moved
abroad to be closer to end customers, in the same way
that most Japanese cars sold in the US market are now
produced in the United States. These shifts, however, are
rooted in economics more than trade agreements and
are inexorable processes that will continue.
It should be noted in this context that much of the
growth in manufacturing overseas has been in China,
whose prominent role in global supply chains is enabled
by its membership in the WTO, which sets baseline
rules for trade. The United States does not have a free
trade agreement with China, and China was not a party
to the Trans-Pacific Partnership. Apart from low-end
production—which is leaving China for less expensive
countries (not the US)—much of China’s engagement in
high-value production involves the assembly of products
(such as the Apple iPhone, an instructive example
of how supply chains work) made with components
designed in the United States and produced around the
world (including in the US).
30
So even for China, which is
the elephant in the room, calculating trade’s impact on
manufac turing is more complex than it first appears.
11
How Trade Affects Jobs, Manufacturing, and Economic Competitiveness
insight
Robotic Advances Drive Change in
Manufacturing
Distinct from automation, industrial robots can
work in unstructured environments, making use of
sensors, vision software, sonar, and autonomous
navigation technology to perform tasks—faster
and more precisely—that in the past only humans
could do. In recent years, approximately three
quarters of industrial robots in use specialize in
three tasks: handling operations (38 percent),
welding (29 percent), and assembly (10 percent).
Their cost has fallen sharply, particularly when
compared to human compensation. A new gen-
eration of “co-bots” (collaborative robots that
work alongside humans on the factory floor) is
becoming available at even lower costs. Future
developments will be enabled by the Industrial
Internet (or Internet of Things), where computers
and production equipment communicate with each
other in real time, share information, and make
decisions to ensure quality and prevent downtime.
As this occurs, production lines will be digitally
connected to supply, service, and distribution net-
works to maintain optimum production levels.
The data is from “2010 World Robotics,” a survey made by
the International Federation of Robotics as reported by Jean-
Philippe Jobin, “Industrial Robots: 5 Most Popular Applica-
tions,” Robotiq Company Blog, Feb. 2014, http://blog.robotiq.
com/bid/52886/Industrial-robots-5-most-popular-applications.
How is technology impacting
manufacturing jobs?
Change is occurring through technology-driven
industrial transformations, under way in the US and
other countries, that are changing employment
patterns across the board, eliminating existing jobs as
they create new ones, and changing job descriptions
at a rapid pace. Much of this change is due to the
digitization of the industrial economy. Automation and
robotics are increasing the productivity of manufacturing
plants, making it possible to produce higher levels of
output with progressively fewer workers. (This process is
discussed in more detail in the Institute’s manufacturing
report, Reinventing Manufacturing.)
Another recent study by the Center for Business and
Economic Research at Ball State University calculated that
between 2000 and 2010—a period when manufacturing
employment fell by 5.6 million—productivity growth
caused approximately 87 percent of overall job loss in
manufacturing, while trade accounted for approximately
13 percent. (In two manufacturing sectors, apparel and
furniture, the job loss share due to trade was higher, at
about 40 percent).
31
These changes will continue with
the expanding use of robotics and the diffusion of the
Internet of Things throughout the industrial economy.
As this happens, the need for manual labor will continue
to shrink, and the skill levels required of manufacturing
workers will increase as the management of IT-enabled
processes becomes more prevalent.
This leads to two conclusions. One is that US manufacturing
is not collapsing, and by and large is healthy. Mirroring
the US as a whole—where manufacturing companies
produced a record $2.2 trillion in value in 2015
32
—at
$278.5 billion, California’s manufacturing output today
33
is at its highest level in history. The second conclusion is
that a healthy manufacturing sector need not be
reflected in high employment, and in fact is increasingly
consistent with lower levels of employment. While
manufacturing employment may grow in the future (in
California, it grew 3.1 percent from 2010–2014
34
) it will
not return to the levels seen in the last century.
Agriculture provides an instructive parallel, where
production is vastly higher than in the past, but
employs a much smaller percentage of US workers.
12
The Real Impact of Trade Agreements
Today farmworkers account for less that 1 percent of all
American workers
35
, compared to 21.6 percent in 1930.
36
And the trend is continuing: between 2010 and 2013, US
agricultural output increased 13 percent, while jobs in
agriculture fell 15 percent.
37
As with manufacturing
employment, this is largely due to technology.
The core issues underlying manufacturing employment
have more to do with skills than trade or weakness in
the sector. This, again, is due to technology; workers
without computer skills who lose their jobs are likely
to be replaced (though in smaller numbers) by workers
who do have those skills. In the manufacturing sector
between 2015 and 2016, after high-turnover sales
positions, demand was highest for jobs in software
engineering and development.
38
The US Department
of Labor reported 337 thousand manufacturing job
openings in August 2016 but only 227 thousand hires.
39
The Manufacturing Institute believes that in the next
decade as many as two million manufacturing jobs
will remain vacant due to a shortage of workers with
the right technical skills, most in companies that have
invested in advanced production technology.
40
How has the manufacturing
sector performed since FTAs
have been in force?
If the decline in manufacturing jobs in the last two decades
is primarily attributable to advances in technology, the
suggested correlation of trade agreements with a declining
manufacturing sector is at odds with the facts. In the
period between 1980 and 2014, which saw NAFTA enter
into force and China join the WTO, US manufacturing
output more than tripled, reaching a record high of
$2.2trillion in 2015. Manufacturing exports had a roughly
parallel growth trendline in the same period, increasing
from $142.2 billion in 1980 to $1.3 trillion in the third
quarter of 2015.
41
Since trade agreements have been in force, the trend
has been similar for California’s manufacturing sector,
with growth in California manufactured goods exports
since 1995 roughly paralleling the US manufactured
goods growth trend.
Manufactured imports have also grown, and at a
faster rate. They come in many forms, so assessing
theimpact is complicated. As the National Association
of Manufacturers has pointed out, some compete
with domestic US production, some take the form
of intermediate goods that are incorporated into
domestically-made products, and some come as finished
products containing intermediate components produced
in the US. These latter components constitute substantial
valued-added input which is not always reflected in the
way balance-of-trade statistics are reported.
42
Clearly, some of those imports have displaced US
manufacturing and workers. Their significance must
be weighed, however, against the scale of change
produced by technology and trade’s larger, positive
impact on competitiveness and employment in
companies that participate in the export economy.
The positive influence of free trade agreements on the
manufacturing trade balance is significant. According to
US government data compiled by the National Association
of Manufacturers Center for Manufacturing Research, US
manufacturers sold $12.7 billion more in manufactured
goods to FTA partners in 2015 than US companies bought
from them. At the same time, the United States had a
manufacturing trade deficit of $639.6 billion with countries
where no FTAs are in place.
43
US Manufactured Goods Exports and Imports,
1993–2014 (in Billions of US Dollars)
0
$500
$1,000
$1,500
$2,000
Imports
Exports
20151993
Data Source: US Department of Commerce
Analysis: National Association of Manufacturers
13
How Trade Affects Jobs, Manufacturing, and Economic Competitiveness
California Manufactured Goods Exports, 1995 – 2015 (in Billions of US Dollars
0
$30
$60
$90
$120
$150
201420122010200820062004200220001998199619941992199019881986198419821980
NAFTA
China
Joins WTO
Korea, Colombia
and Panama FTAs
Data Source: US Census Bureau (California data previous to 1995 not available)
Analysis: Bay Area Council Economic Institute
US Manufactured Output and Exports, 1980 – 2015 (in Billions of US Dollars)
0
$500
$1,000
$1,500
$2,000
$2,500
201420122010200820062004200220001998199619941992199019881986198419821980
NAFTA
China
Joins WTO
Korea, Colombia
and Panama FTAs
Manufactured Goods Exports
Manufacturing Output
Data Sources: Bureau of Economic Analysis, US Department of Commerce (2015 data through Q3), United Nations Database (for output data
before 1997), World Trade Organization (for export data before 2002)
Analysis: National Association of Manufacturers and Bay Area Council Economic Institute
14
The Real Impact of Trade Agreements
insight
Comparative Advantage:
Why It Makes Sense to Trade
If a hypothetical country were capable of producing
all the goods and services that it needed, why
would it still be beneficial for it to engage in trade?
The idea of comparative advantage was developed
by 19th century economist David Ricardo to answer
that question, and his insight remains relevant
today. Ricardo pointed out that what matters is not
absolute production ability, but ability in producing
one good relative to another. The Congressional
Research Service explains this as follows.
“If one country produces a given good at a
lowerresource cost than another country, it has
an absolute advantage in production. (Theother
country has an absolute disadvantage in its
production.) If all productive resources were
highly mobile between countries, absolute
advantage would be the criterion governing what
a country produces and the pattern of any trade
between countries. But Ricardo demonstrated
that because resources, particularly labor and
the skills and knowledge it embodies, are highly
immobile, a comparison of a good’s absolute
cost of production in each country is not relevant
for determining whether specialization and trade
should occur. Rather, the critical comparison within
each country is the opportunity cost of producing
any good—how much output of good Y must be
foregone to produce one more unit of good X. If
the opportunity costs of producing X and Y are
different in each economy, then each country has
a comparative advantage in the production of one
of the goods. In this circumstance, Ricardo predicts
that each country can realize gains from trade by
specializing in producing what it does relatively
well and in which it has a comparative advantage
and trading for what it does relatively less well and
in which it has a comparative disadvantage.”
Congressional Research Service, U.S. Trade Concepts, Per-
formance, and Policy: Frequently Asked Questions, RL33944,
pages 1–2, https://www.fas.org/sgp/crs/misc/RL33944.pdf.
Overall, at the national level, the existence of FTAs does
not correlate with job loss. The opposite may actually
hold. From 1992–2000, after NAFTA took effect, imports
increased 240 percent, while total employment rose by
22million and the unemployment rate fell. The 2001–2007
period, when most post-NAFTA FTAs were negotiated,
saw the same pattern of growing imports but also growing
employment.
44
These correlations are difficult to calculate,
however, since a wide range of factors can explain job
gains or job loss at the national level.
What is very clear is the benefit that manufactured
exports bring to the economy. Exports support higher-
paying jobs for an increasingly educated and diverse
middle class workforce. A study by the MAPI Foundation
using Bureau of Economic Analysis data found that jobs
supported by manufactured exports pay on average
18 percent more than other jobs. Employees in the
most trade-intensive industries earn an average annual
compensation of $94,000, which is 56 percent more than
workers in companies that are less engaged in trade.
45
This pattern of higher employment and higher
compensation can be seen even more prominently
in women-owned and minority-owned businesses.
According to the US Census Bureau’s 2012 analysis,
Ownership Characteristics of Classifiable U.S. Exporting
Firms, women-owned businesses that export employ an
average of 42 workers, with an average payroll of $42,717
per worker, while women-owned firms that don’t export
employ an average of 8 workers, with payrolls averaging
$27,011 per worker.
46
Employment and payroll per
worker are also much higher at minority firms that export.
This is particularly the case for Asian- and Hispanic-
owned firms, which show a higher propensity to export
than white-owned firms and play a disproportionately
large role in trade with the regions of their ethnic origin.
15
How Trade Affects Jobs, Manufacturing, and Economic Competitiveness
US Trade Balance for Manufactured Goods and Total Goods, 2015 (in Billions of US Dollars)
-800 -700 -600 -500 -400 -300 -200 -100
0
100
China (Largest Goods
Trading Partner)
Non-FTA Countries
(Rest of World)
All 20 FTA Countries
All World Trade Partners
Total
Goods
Total
Manufactured
Goods
12.7
-639.6
-745.7
-681.6
-366
-64.0
Sources: Bureau of Economic Analysis, US Department of Commerce, US Census Bureau
Analysis: Office of the United States Trade Representative, National Association of Manufacturers Center for Manufacturing Research, and
BayArea Council Economic Institute
How can we strengthen the
manufacturing economy?
At the national level, incentivizing the repatriation of
some of the over $2 trillion in profits that are parked
at overseas affiliates of US companies
47
and lowering
the corporate tax rate could make a difference.
Companies are leaving profits overseas because of
the United States’ worldwide tax system and the US
corporate tax rate, which at 35 percent is the highest
corporate income tax rate among the 35 industrialized
nations of the Organisation for Economic Co-operation
and Development (OECD).
48
Adding state corporate
tax increases the level to a net effective rate of
approximately 40 percent,
49
a rate that is exceeded
only by the United Arab Emirates and that is far above
the 2016 worldwide GDP-weighted marginal corporate
tax rate average of 29.5 percent.
50
Given tax incentives
for investment in some countries and the availability
of deductions that can lower effective tax rates, the
calculation of effective tax is more complex. But it is
clear that moving the US corporate tax rate to the
34-country trade-weighted statutory corporate tax rate
average of OECD economies (27.9 percent in 2014)
51
or lower would incentivize more of those profits to be
reinvested at home. A related strategy would involve
opening a one-time window with even lower rates to
encourage the return of profits earned abroad—on the
condition that they be invested for specified purposes
such as domestic production and worker training.
Currently, with the cost of repatriation, US companies
are incentivized to invest those profits overseas.
A related initiative, known as the “innovation box”,
would amend the tax code to incentivize domestic IP
development and the return of R&D jobs and related
manufacturing to the United States. Many other
countries, including the United Kingdom, Ireland,
Belgium, the Netherlands, Luxembourg, Hungary,
Spain, Italy and China have similar tax programs
designed to attract and retain domestic R&D, with
rates ranging from 5 to 14 percent. One version of
this concept, contained in legislation proposed in
2015 by Congressmen Charles Boustany (R-South
Louisiana) and Richard Neal (D-Massachusetts), would
16
The Real Impact of Trade Agreements
take qualified intellectual property (patents, formulas,
processes, design, and property produced using such
IP) gross receipts, minus the cost of goods sold and
expenses, and multiply it by the fraction of a company’s
budget spent on domestic R&D. That “Innovation Box
Profit” would be subject to a tax rate of 10 percent,
compared to the general corporate rate of 35 percent.
This approach could also include the repatriation of
appreciated IP held by foreign subsidiaries of U.S.
companies, now a taxable event, at a zero tax rate.
52
Improved retraining and support programs can also
help dislocated workers. Some have questioned the
effectiveness of the current Trade Adjustment Assistance
(TAA) Program, which is designed to provide transitional
assistance toward new employment. Douglas Irwin of
Dartmouth College suggests that expanding the Earned
Income Tax Credit (EITC) could be a better strategy
for protecting low-income individuals, since it rewards
work and staying in the labor market, where skills can be
developed.
53
Other analysts, such as Robert D. Atkinson
at the Information Technology & Innovation Foundation
(ITIF), suggest wage insurance as an option.
54
This
approach would replace a portion of lost wages for a
transitional period and possibly include mechanisms
forpublic contributions to personal accounts in order
toenable affected workers to remain on track for
decent retirements.
55
Suggestions for how to specifically strengthen California’s
manufacturing sector, including regulatory changes and
closer collaboration between industry and education
to accelerate and better target skills training, can
be found in the Economic Institute’s 2016 California
manufacturing report.
56
Whether at the state or federal
level, targeted education and retraining that enables
workers to continuously upgrade their skills in order in
order to adjust to advancing technology and changing
markets will be essential to American manufacturing
andits employment base in the future.
On the trade front, the US would be better served by
pushing for stronger enforcement of other countries’
(and particularly China’s) WTO commitments, or by
using domestic trade law more effectively to strengthen
reciprocal market access, than by foregoing the across-
the-board trade growth that free trade agreements with
other countries can provide.
17
How Trade Affects Jobs, Manufacturing, and Economic Competitiveness
Asia-Pacific Trade: Why TPP Still Matters
As its economies have grown in the past two decades,
Asia has assumed an increasingly central role in US and
global trade, both as a source of imports and as an
export destination for goods and services purchased by
a growing middle class. Intergovernmental organizations
like Asia-Pacific Economic Cooperation (APEC) provide
policy leadership and help to facilitate trade and
investment at a technical level, but the rules of trade
areset by the WTO and by a growing number of free
trade agreements, which may or may not include the
United States.
The provisions included in the proposed Trans-Pacific
Partnership (TPP) had been positioned as the centerpiece
of US strategy both to open markets and cement US
economic leadership in the Asia-Pacific region. In
addition to the US, the proposed agreement included
11 other countries (Australia, Brunei, Canada, Chile,
Japan, Malaysia, Mexico, New Zealand, Peru, Singapore
and Vietnam) that together accounted for 36 percent of
global GDP in 2014.
57
Despite the fact that the United States is no longer a
party to the Trans-Pacific Partnership, the provisions
andprinciples that the agreement contained (and
that continue as a focus for the remaining signatories)
are both significant and relevant for trade policy
going forward. The US withdrawal also leaves open
the question of whether the 11 other countries
might still proceed without the US (a real though
difficult prospect), or whether another regional trade
agreement—possibly one proposed by China—will
eventually fill the void.
The trade liberalization provisions of TPP would have
cut over 18,000 taxes or tariffs on US-made products
that are exported. Most tariffs would have been
eliminated immediately when the agreement entered
into force, while others in sensitive areas such as dairy
and agriculture, would have been phased out over time.
Most tariff liberalization would have been complete
by year 15 of the agreement. At that time, tariffs faced
by US manufactured goods exports to TPP partner
countries would have been almost entirely eliminated.
58
The labor protections included in TPP were the
strongest to be negotiated in any trade agreement to
date and were enforceable. These provisions obligated
the partner countries to protect the freedom to form
unions and bargain collectively; to eliminate exploitative
child labor; and to establish laws on conditions of
work related to minimum wage, hours of work, and
occupational health and safety. They would have
quadrupled the number of people outside the United
States who are covered by enforceable labor provisions.
From this perspective, TPP effectively rewrote NAFTA by
placing these provisions in the body of the agreement
and making them enforceable (which NAFTA did not).
TPP’s environmental protections were also the strongest
in any trade agreement to date, requiring that partner
countries enforce their environmental laws and not
weaken them to attract trade or investment. Similar to
the labor accords, they also effectively rewrote NAFTA
by putting environmental provisions at the core of
the agreement. Of special interest to the Bay Area
and California from an environmental perspective,
TPP’s provisions also would have eliminated tariffs on
environmentally beneficial products such as solar panels,
wind turbines, wastewater treatment systems, and air
pollution control equipment.
18
The Real Impact of Trade Agreements
Other provisions in TPP would have benefited the
economy and US leadership more broadly. A number
addressed issues that are of particular concern to
California and remain highly significant for the United
States going forward:
Digital Trade: Protecting a free and open Internet is
a core US interest. TPP provisions ensured the free
movement of data across borders and barred data
localization requirements, while protecting privacy
and security. This would help to preserve a single,
open, global digital marketplace, which is central
for innovation and the free flow of information—
an important objective of California’s technology
companies. It is also increasingly important for
manufacturers, as automobiles, satellites, farm
equipment and other goods now incorporate
sophisticated software that communicates with
US-based servers to fix problems and carry out
tasks. TPP provisions included duty-free treatment
for digital products delivered online (e.g., software
and video), as well as for hardware (phones, tablets,
laptops and game consoles). The digital market
standards set by TPP also provided a precedent
for US negotiations with the EU, where restrictions
are on the table to require data generated within
European countries to be held on servers located
there, raising business costs and restricting
data flows. Other provisions in TPP prevented
governments from requiring the disclosure of
source-code as a condition of doing business,
which is a form of expropriation that can undermine
the ability of companies to enter and compete in
foreign markets.
Services Trade: TPP’s service provisions offered
what may have been the largest opportunity for
American exporters—particularly with regard to
Japan. These provisions committed the agreement
partners to providing fair and equal treatment to
foreign service firms seeking to enter their markets
through trade or investment. New restrictions would
not have been permitted. This is another core
interest for the United States, where 90 percent of
US workers will be employed in the service sector by
2030, according to Peterson Institute projections.
59
Tradable business services (including legal services,
consulting, financial services, accounting, architecture,
engineering, healthcare, and education) account for
25 percent of US employment— double the share of
manufacturing—and are growing faster.
60
This is particularly important for the Bay Area and
California, where knowledge-based industries are
the leading source of economic growth. While it is
disadvantaged in some aspects of manufacturing
trade, the US enjoys a strong comparative advantage
in services, where its total services trade surplus
was 262.2billion in 2015.
61
An International Trade
Commission model estimated that the US services sector
output would have grown by $42.3 billion when TPP was
fully implemented.
62
Using a different methodology, the
Peterson Institute estimated services export growth of
$149 billion.
63
The two analyses together suggest the
range within which growth would have occurred.
Intellectual Property: Much of the United States’
comparative advantage, in life sciences and
technology for example, is based on intellectual
property. TPP provisions included strong protections
across all intellectual property areas: patents,
trademarks, copyrights and trade secrets. Enforceable
commitments were included to prevent trade in
counterfeit goods, including branded goods where
trademark integrity and control of logos is critical.
State-Owned Enterprises: TPP provisions required
that state-owned enterprises not receive unfair
subsidies or preferential regulatory treatment.
Thisisan issue in countries where governments
favortheir own enterprises at the expense of
overseas andprivate-sector competitors.
How these provisions would have impacted trade, the
economy, and employment will never be known. The
US International Trade Commission (ITC), however,
developed a model to assess the impact of TPP relative
to a baseline economic projection that did not include
TPP. For the analysis, TPP entry into force in 2017 was
assumed. The ITC estimates found that by year 15, when
the agreement would have been fully in force, US exports
to TPP countries would have totaled $57.2 billion, 5.6
percent higher than without TPP, and imports from TPP
partners would have been $47.5 billion, 3.5 percent
higher. The ITC estimated that this would have increased
US real income by $47.2 billion, or about 0.15 percent.
64
19
How Trade Affects Jobs, Manufacturing, and Economic Competitiveness
Some analysts think these numbers are low. The World
Bank produced a higher estimate of expected US
GDP growth, at 0.4 percent.
65
The Peterson Institute
for International Economics estimated that in the
United States, TPP’s “real income gains” effect (which
is similar but not identical to gains in real GDP) would
have been an increase of 0.5 percent of GDP when
fully implemented in year 15.
66
While these numbers
don’t appear dramatic, they are significant in light of
the US average GDP growth rate of barely two percent
between 2010 and 2015.
67
Regarding employment, the Peterson Institute
estimated that the agreement would have raised real
US wages but would not have significantly changed
employment levels. In their estimate model, while value-
added production and employment in manufacturing
would have continued to grow,121,000 fewer US
manufacturing jobs would have been created than in the
baseline case; these would have been offset, however,
by roughly the same number of new jobs created in the
service and primary goods sectors.
68
Estimates of trade
and FDI impacts for each of the TPP partner countries
including the United States can be found in Table 3 of
the Petersen Institute’s initial chapter (by Peter A. Petri
and Michael G. Plummer) in Volume 1 of Assessing the
Trans-Pacific Partnership online at https://piie.com/
system/files/documents/piieb16-1.pdf#page=16
Understanding
DisputeResolution
Critics of TPP raised concerns about its Investor-State
Dispute Settlement (ISDS) provision, claiming that it
limited sovereignty by opening the door to investor suits
in cases where treaty rights are claimed to have been
infringed, potentially forcing countries to change their
laws or overturn court decisions. These criticisms are not
well-founded. ISDS provisions are designed to protect
investors against expropriation and unfair treatment,
and such provisions are currently included in more than
3,000 existing agreements involving 180countries;
69
the
US already has ISDS agreements with 6 of the 11other
TPP parties.
70
These provisions provide a neutral,
legal mechanism for dispute resolution, which can be
important in countries that suffer from corruption or
where the rule of law is weaker.
TPP’s provisions explicitly confirmed that every country
retains the right to regulate in its public interest,
including health, safety, financial and environmental
protection. Other ISDS provisions were designed to
deter cases that are not merit-worthy and to allow
the public (e.g., labor unions and environmental
organizations) to participate in cases through amicus
briefs. A successful case could require a government to
pay damages but could not require it to change its laws.
The vast majority of international cases where ISDS has
been invoked have related to administrative treatment
of investors, as opposed to legislation, and have not
been successful. Over past decades, the United States
has had only 13 ISDS cases brought against it and has
won all of them.
71
20
The Real Impact of Trade Agreements
Writing Global Rules: We Are Not Alone
The United States has championed open global
markets and transparency in international transactions.
US companies and consumers benefit from this
rules-based competitive landscape, which reduces
the scope overseas for anti-competitive behavior by
private companies and manipulation by governments.
The advances cited above in intellectual property
protection and rules for state-owned enterprises and
data movement, as well as the labor and environmental
protections, are good examples embedded in TPP.
The United States is not the only game in town
when it comes to trade agreements, and now that
the US has formally withdrawn from the Trans-Pacific
Partnership, others who do not share the same market
values are positioned to fill the void—with outcomes
that could undermine US economic leadership and
interests. In particular, China has proposed a Regional
Comprehensive Economic Partnership (RCEP) with
16Asian countries, including seven signatories to TPP.
Taking Japan as an example of what could happen if
RCEP advances in the absence of TPP, the Council of
Economic Advisers has estimated that China would
see substantial tariff cuts in the Japanese market in the
range of 5–10 percent, with the average tariff on goods
covered by RCEP falling to less than half the average
rate faced by the same products exported from the
US. Should that occur, 35 industries that employ nearly
5million US workers and sell a combined $5.3 billion in
goods to Japan each year would become significantly
less competitive, with goods not just from China but
from other RCEP members.
72
These estimates are very conservative because they
include only goods exports and tariff differentials and
not services. An array of countries are involved in
addition to Japan, so if RCEP advances in the absence
of TPP, the negative implications for US companies and
their workers would likely be much greater. China, like
the United States, is understandably looking to expand
its leadership in Asia and to advance the interests of
its companies. The United States is under no less an
obligation to protect and assert the interests of US
companies and workers, as TPP would have done.
“
If TPP did not pass, the United States would not only
forego substantial economic gains, but would also face
trade diversion and enjoy less market access compared
with other countries such as China. RCEP will provide its
member countries with improved access to the markets
of seven countries that are members of the TPP, putting
U.S. exporters at a disadvantage and threatening the
billions of dollars of exports the United States currently
sells in the region…
”
—Council of Economic Advisers
73
21
How Trade Affects Jobs, Manufacturing, and Economic Competitiveness
spotlight
CA BOTANA International, Inc.—a San Diego-
based company with 25 employees that is involved
in the research, development and manufacturing
of advanced natural skin care products—exports
to more than 60 countries. The 60 percent share
of the company’s sales that are outside the
United States support its increased production
and workforce. CA BOTANA’s president, Ursula
Wagstaff, says, “We are selling and exporting
because we produce world-class products, but we
could be doing so much better if barriers overseas
were eliminated. However, that would take new free
trade agreements and the United States has been
sitting on the sidelines…NAFTA and our FTA with
Singapore in particular have helped CA BOTANA
grow sales and support our U.S. operations.…
more market-opening trade agreements will help
manufacturers across California increase overseas
sales and support manufacturing growth.”
80
spotlight
Varian Medical Systems is the world’s leading
manufacturer and supplier of medical devices and
informatics software for treating cancer and other
medical conditions with radiotherapy, radiosurgery,
proton therapy and brachytherapy. It is also a
premier supplier of high-energy x-ray equipment
used for cargo inspection, security applications
and non-destructive testing. Headquartered in Palo
Alto, the company has 6,800 employees located
in California and 7 other states. Exports constitute
55 – 60 percent of Varian’s annual sales, and its major
export destinations include Japan, China, France,
UK, India, Brazil, and Germany. Varian reports that
access to global markets is critically important to
its success, as many of its fastest growing markets
exist overseas; elimination of tariffs, reduction of
non-tariff barriers, and assurance of regulatory
coherence provided by trade agreements such
as TPP are necessary to allow Varian to compete
internationally on a level playing field.
81
Asian Trade
andCalifornia
California is the second largest exporting state in the
United States.
74
Because of this, policies or agreements
that open overseas markets have great potential
impact. Tapping into those markets is important to
companies throughout the state. Studies conducted
by the BayArea Council Economic Institute from
2003 through 2014 show that consistently, with only
a short pause during the recent global recession, the
share of the region’s leading companies’ revenue from
international sales has risen, while the share of revenues
from domestic sales has fallen. This finding confirms
the growing dependence of these companies and their
workers on access to global markets.
This is particularly the case with respect to Asia,
California’s largest export market. For nearly two
decades, Asia’s major economies have grown an average
5 percent per year, and some much faster. In 1990, Asia’s
share of world GDP was 23.2 percent; in 2014 it was
38.8 percent—a figure expected to grow to more than
45 percent by 2025. This is reflected in an expanding
middle class with increasing purchasing power. In 2009,
the Asia-Pacific region accounted for approximately one-
third of the world’s middle class population; by 2030 it
is expected to account for 65 percent.
75
Reflecting this,
9 of California’s top 15 export markets are currently in
the Asia-Pacific region and 5 of them are among the
originally proposed TPP partner markets.
76
Exports supported 11 percent of California’s workforce in
2015.
77
In that year, the state produced $143.87 billion
in manufactured goods alone, of which $60.56 billion
was exported to current free trade partners.
78
Theprovisions included in TPP could have been
expected to increase those numbers, and the jobs that
would have come with them. This is particularly true for
blue-collar jobs. In addition to jobs in export industries,
trade supports nearly 558.8 thousand California jobs in
transportation and warehousing, based on imports as
well as exports, that paid an average annual salary of
$43,678 in 2015.
79
22
The Real Impact of Trade Agreements
both online and offline services. BSA | The Software
Alliance estimates that reducing software piracy by
even10 percent could add 25,000 new high-paying jobs,
$38billion in new economic activity, and $6.1 billion in
tax revenues to the economy over four years.
86
At the higher end of the skills and income spectrum,
a 2016 study by the UC San Diego School of Global
Policy and Strategy linked 150,000 high-wage jobs in
the San Diego region to exports in the manufacturing
and innovation sectors. Of those jobs, 32,000 are in
the scientific R&D sector with average annual wages of
$175,000 and 107,000 are in the manufacturing sector with
average annual wages of $81,000. The study found that
more than 97 percent of the San Diego region’s exports—
primarily high-value advanced manufacturing products
with an aggregate value of $22 billion— are sold in TPP
markets. It concluded that export growth resulting from
TPP would have delivered real rising wages for San Diego’s
workers in the manufacturing and innovation sectors.
82
The intellectual property provisions in TPP are particularly
significant for technology companies. As the global
leader in innovation, the United States has consistently
maintained a surplus in license, royalty and other fees
derived from the use of intellectual property. In 2015,
US companies’ intellectual property receipts were $12.6
billion, compared to payments of $39.5 billion.
83
The
largest categories are for the licensing of industrial
processes and computer software, both of which are
based on payments for the use of patented technologies.
Disproportionately, those technologies are generated
by Bay Area and California companies. According to US
International Trade Commission surveys, 75 percent of
large firms and 50 percent of small and medium-sized
enterprises see intellectual property infringement as
a significant barrier to trade.
84
IT, life sciences, media
content, and advanced manufacturing are sectors where
California leads and has a major stake in open global
markets. Young, entrepreneur-led startup companies,
whose products are based on IP and who are ambitious
to grow globally but lack the resources to defend
themselves against theft in other countries, particularly
stand to benefit.
Those companies’ ability to grow overseas impacts
revenues and hiring at home. The Bureau of Labor
Statistics has estimated that software publishing jobs will
grow at an annual rate of 3.1 percent through 2020 and
that the software sector as a whole will grow almost 9
percent annually.
85
In a first for any trade agreement
negotiated to date, the provisions included in TPP were
designed to ensure that enforcement would apply to
spotlight
CTC Global, an Orange County producer of
conductors that improve efficiency in power lines,
exports more than 80 percent of its production.
Like other California companies that have grown
and are succeeding in export markets, it is a
technologically-enabled producer of high-value
products. With 130 employees, automation has
helped it produce cost-effectively in the US. Its
chief operating officer, Marv Sepe, notes that
“anything that would hamper our ability to sell
intoforeign markets would impact us greatly,”
andthat TPP would have helped to open doors.
87
spotlight
Headquartered in Los Angeles, Bobrick
Washroom Equipment, Inc. is the world’s
leading manufacturer of restroom accessories for
commercial buildings. (Its Koala Kare brand is a
familiar sight for most people who transit airports.)
The company’s products are manufactured in
California, Colorado, New York, Oklahoma, and
Tennessee. While selling extensively throughout
the US, Bobrick has also expanded its global focus,
exporting products to more than 100 countries
in Europe, the Middle East, Africa, Asia, and
Latin America. Alan Gettelman, Bobrick’s vice
president for external affairs says, “Free trade
agreements have lowered many of the tariff and
non-tariff barriers that Bobrick has faced overseas,
allowing us to improve access to these markets and
increase our competitiveness. The elimination of
all manufacturing tariffs under TPP would level the
playing field for our company’s exports to these
countries, allowing us to boost sales of products
crafted throughout the UnitedStates.”
88
23
How Trade Affects Jobs, Manufacturing, and Economic Competitiveness
spotlight
ALOM, a global contract assembly, packaging and
supply chain company based in Fremont, exports
from three US and 14 other locations around the
world. Clients include technology companies in
the automotive, medical, telecommunications,
technology, and energy/utility industries that sell
their products in the US and overseas. ALOM and
its customers benefit from the lower tariff and
non-tariff barriers and the transparent rules-based
environment that free trade agreements bring.
According to the company’s president Hannah
Kain, “TPP will aid ALOM in expanding our
business into more TPP countries—beyond our
growing business in places like Australia, Canada
and Mexico—in turn enabling ALOM to support
more jobs here in the United States.”
96
spotlight
Paulson Manufacturing, a producer of personal
protective equipment for the military, police and
fire, industrial, electrical safety, and sports markets,
maintains a research and development laboratory
and tooling division in Temecula, employing
180people. Twenty-five percent of sales and
payroll go to international markets, where Paulson
sells to more than 80 countries. The company’s
CEO, RoyPaulson, observes that “Recent free
trade agreements with South Korea, Colombia and
Panama broke down restrictive and stifling trade
barriers with those countries. The lowered tariffs
allowed me to offer products at significantly more
competitive prices to a new customer base. The
countries involved in the new trade agreements
promise even greater benefits due to the size and
impact of their global markets.”
97
The case studies cited here come from small and
medium-sized companies. At the other end of the
spectrum, large companies are deeply embedded in
global markets and have as much or more to gain from
free trade agreements such as TPP. Intel, for example,
manufactures three-fourths of its products in the United
States, but three-fourths of its revenue is generated
from sales overseas, making access to those markets
critical to its future.
Agriculture would have been another important
beneficiary. According to the American Farm Bureau,
having TPP in effect would have allowed annual net farm
income in the United States to increase by $4.4 billion,
driven by $5.3 billion per year in new exports.
89
“
Trade agreements have helped level the playing field
and grow U.S. wine exports by 1,420 percent, from $98
million in 1989 to nearly $1.5 billion last year.
”
—Wine Institute, 2015.
90
California is the largest agricultural producing state in
the nation in terms of cash receipts,
91
which totaled
$54billion in 2015.
92
At full implementation, an
agreement similar to TPP should increase California’s
cash receipts and net exports by $1.1 billion and
$924million respectively, adding close to 7,000 jobs.
This would be particularly important for California’s
Central Valley, which has the highest unemployment
in the state. A wide range of products, including fruits
and nuts, vegetables, beef, rice, dairy, and processed
food would benefit from the elimination of tariffs.
93
USwineries, most in California, shipped over $641
million in wine to TPP countries in 2014, representing
over 40 percent of total US wine exports; provisions
in afuture agreement similar to those included in TPP
would allow those numbers to grow.
94
Japan, which has historically maintained high barriers to
agricultural imports, is particularly important. Under the
provisions of TPP, Japan would have opened its highly-
protected markets for beef, pork, wheat, rice, and dairy
products for the first time. Its tariffs on cheese, which
run as high as 40 percent, would have been eliminated.
Other tariffs that would have been eliminated include
those on whey and whey protein, cherries (currently
8.5percent), nuts (currently 2.4–10 percent), grapes,
avocados, strawberries, blueberries, kiwi and
watermelon (as high as 17 percent), oranges (16–32
percent), and other fresh fruit (as high as 17 percent).
Japanese tariffs on ice cream, yogurt, blue cheese, and
whole milk powder, now as high as 35 percent, would
have been reduced 50 to 90 percent.
95
24
The Real Impact of Trade Agreements
Conclusion
On balance, free trade agreements have benefited
the United States, and US workers. This is true of
both bilateral and multilateral agreements. These
agreements have been negotiated by the US to
advance US interests, and accordingly reflect US
valuesand objectives. They also reflect an alignment
of interests with our negotiating partners, who similarly
benefit from growing trade. Contrary to what some
have asserted, there is no evidence that bilateral
agreements are inherently superior to multilateral ones,
or that free trade agreements have been abused or
manipulated by our partners. By virtue of their scale,
multilateral agreements can in fact deliver strategic
benefits to the US that bilateral ones may not.
There is no escaping or walling ourselves off from the
global economy. Global competition produces change
and disruption, but also opportunity—something familiar
to the Bay Area and California, which have thrived based
on the new technologies and business models. Our
interests in trade and the global economy could hardly
be greater, and where the US fails to lead, we are at risk
of losing, especially if countries we compete with have
alternative proposals that do not include the US.
Despite the formal withdrawal of the US from the
Trans-Pacific Partnership, the principles that TPP
advanced continue to promise net benefits for the
US economy and for American workers. Rather than
being discarded, those provisions should remain on
the table for consideration in successor agreements.
Trade agreements are about creating a larger pie,
based on transparent rules that open opportunity, and
about leveraging comparative advantage in tradable
goods and services. As that occurs, firms that are more
competitive in global terms will grow and hire, while
firms that are less competitive may not. This is similar to
the job and business churn that occurs in the domestic
economy every day and reflects the fact that our economy
is increasingly global and connected. It is also being
changed by advancements in technology. There is no
dialing this back.
It is important, therefore, that government and private
sector leaders begin a long-term conversation not just
about trade, but about the structural changes under
way in the economy that will impact competitiveness
and employment on a much larger scale. We need to
overhaul Trade Adjustment Assistance (TAA), the federal
program that provides transitional help toward new
employment for dislocated workers. But beyond that,
our country also needs a comprehensive, bipartisan
strategy for how to transition workers who are affected
by both global competition and the dramatic changes
that technology is producing across the economy.
Anxiety that trade agreements are responsible for these
dislocations is misplaced. The evidence is compelling
that California and the nation, through competitive
companies and their workers, benefit from more open
trade, particularly with Asia, and that multilateral and
bilateral trade agreements can contribute powerfully
to that process. Addressing the impacts of global
competition and of the technology-driven changes that
are transforming both industries and jobs—changes
that are not caused by trade agreements—is an
important and complex task that should be on the
national agenda. But the US should not back away from
trade agreements or abdicate its role as the leading
global advocate for free and open markets.
25
How Trade Affects Jobs, Manufacturing, and Economic Competitiveness
Endnotes
1 World Trade Organization, “General Agreement on Tariffs
and Trade 1994,” Article XXIV, https://www.wto.org/
english/res_e/booksp_e/analytic_index_e/gatt1994_09_e.
htm.
2 World Trade Organization, “Regional Trade Agreements:
Facts and Figures,” https://www.wto.org/english/tratop_e/
region_e/regfac_e.htm, accessed October 31, 2016.
3 Office of the United States Trade Representative, “Free
Trade Agreements,” https://ustr.gov/trade-agreements/
free-trade-agreements, accessed October 31, 2016.
4 National Association of Manufacturers, “Pre-Hearing
Statement Before the U.S. International Trade Commission
Submitted on November 4, 2015,” page 2, http://
documents.nam.org/IEA/Pre-hearing_statement_
November_2015-FINAL.pdf. Purchasing power calculation
is based on International Monetary Fund Exchange rates
for 2015.
5 United States International Trade Commission, Economic
Impact of Trade Agreements Implemented Under
Trade Authorities Procedures, 2016 Report, Publication
4614, June 2016, page 28, https://www.usitc.gov/
publications/332/pub4614.pdf.
6 Ibid., page 20.
7 Ibid., page 21.
8 Ibid., page 19.
9 National Association of Manufacturers, written statement
February 5, 2016 to the US International Trade Commission
Re Section 332-555 investigation, page 2.
10 National Association of Manufacturers, “Pre-Hearing
Statement Before the U.S. International Trade Commission
Submitted on November 4, 2015,” page 8, http://
documents.nam.org/IEA/Pre-hearing_statement_
November_2015-FINAL.pdf
11 Sources: Bureau of Economic Analysis, US Department of
Commerce; US Census Bureau (Census Basis). Analysis:
Office of the United States Trade Representative.
12 National Association of Manufacturers, written statement
February 5, 2016 to the US International Trade Commission
Re Section 332-555 investigation, page 5.
13 Data and Analysis: Office of the United States Trade
Representative.
14 United States International Trade Commission, Economic
Impact of Trade Agreements Implemented Under Trade
Authorities Procedures, 2016 Report, Publication 4614,
June 2016, pages 133–136, https://www.usitc.gov/
publications/332/pub4614.pdf
15 National Association of Manufacturers, written statement
February 5, 2016 to the US International Trade Commission
Re Section 332-555 investigation, page 5.
16 Bureau of Economic Analysis, US Department of
Commerce, Activities of U.S. Affiliates of Foreign
Multinational Enterprises, August 2016, page 4, http://
www.bea.gov/scb/pdf/2016/08%20August/0816_activities_
of_us_affiliates_of%20foreign_multinational_enterprises.pdf
17 United States International Trade Commission, The Impact
of Trade Agreements: Effect of the Tokyo Round, U.S.–
Israel FTA, U.S.–Canada FTA, NAFTA, and the Uruguay
Round on the U.S. Economy, Publication 3621, August
2003, page 158, https://www.usitc.gov/publications/332/
pub3621.pdf.
18 United States International Trade Commission, Economic
Impact of Trade Agreements Implemented Under
Trade Authorities Procedures, 2016 Report, Publication
4614, June 2016, page 179, https://www.usitc.gov/
publications/332/pub4614.pdf.
19 Center for Automotive Research, Contribution of the
Automotive Industry to the Economies of All Fifty States,
January 2015, page 11, http://www.cargroup.org/?module
=Publications&event=Download&pubID=113&fileID=132
20 Data Source: US Bureau of Labor Statistics, http://data.
bls.gov/timeseries/CEU3133600101?data_tool=XGtable.
Analysis: Wall Street Journal.
21 American Iron and Steel Institute, November 17, 2015
testimony of Kevin M. Demsey to the US International
Trade Commission for the Hearing on Inv. 332-555,
page 1, https://www.usitc.gov/press_room/documents/
testimony/332_555_004.pdf.
22 Data Sources: Bureau of Economic Analysis, US
Department of Commerce. Analysis: National Association
of Manufacturers.
23 Congressional Research Service, The North American Free
Trade Agreement (NAFTA), R42965, page 4, https://www.
fas.org/sgp/crs/row/R42965.pdf.
24 National Association of Manufacturers, written statement
February 5, 2016 to the US International Trade Commission
Re Section 332-555 investigation, page 5.
25 Data Source: US Bureau of Labor Statistics, Quarterly
Census of Employment and Wages. Analysis: Bay Area
Council Economic Institute.
26 Data Source: California EDD, Quarterly Census of
Employment and Wages. Analysis: Bay Area Council
Economic Institute.
26
The Real Impact of Trade Agreements
27 Bay Area Council Economic Institute, Reinventing
Manufacturing: How the Transformation of Manufacturing
Is Creating New Opportunity for California, April
2016, http://www.bayareaeconomy.org/files/pdf/
ReinventingMfgFullReport.pdf.
28 Bay Area Council Economic Institute, The Future of
Bay Area Jobs: The Impact of Offshoring and Other
Key Trends, http://www.bayareaeconomy.org/files/pdf/
FBAJoffshoreAug2004COLORFINAL.pdf.
29 Bay Area Council Economic Institute, One Million Jobs
at Risk: The Future of Manufacturing in California,
March 2005, http://www.bayareaeconomy.org/files/pdf/
CAManufacturingReport.pdf
30 This is starting to change, as China’s ability to produce
higher-quality components domestically is increasing.
MIT guest contributor Konstantin Kakaes reported in
June 2016, “Almost half—346—of Apple’s 766 suppliers
(counting those making parts for iPhones, iPads, and
Macs) are in China. Japan has 126, the U.S. 69, and Taiwan
41.” Konstantin Kakaes, “The All-American iPhone,”
MIT Technology Review, June 9, 2016, https://www.
technologyreview.com/s/601491/the-all-american-iphone/.
31 Michael Hicks and Srikant Devaraj, The Myth and Reality
of Manufacturing in America, Ball State University Center
for Business and Economic Research, June 2015, page 6,
http://conexus.cberdata.org/files/MfgReality.pdf.
32 Bureau of Economic Analysis, US Department of
Commerce, Industry Data, GDP-by-Industry, Industry Data,
Value Added by Industry, Release Date: April 21, 2016,
http://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#
reqid=51&step=51&isuri=1&5114=a&5102=1.
33 Bureau of Economic Analysis, US Department of
Commerce, Regional Data, Gross domestic product (GDP)
by state (current dollars), Manufacturing, http://www.bea.
gov/iTable/iTable.cfm?reqid=70&step=1&isuri=1&acrdn=
6#reqid=70&step=10&isuri=1&7003=200&7035=
-1&7004=naics&7005=12&7006=06000&7036=-1&7001=
1200&7002=1&7090=70&7007=2015&7093=levels.
34 Data Source: California EDD, Quarterly Census of
Employment and Wages. Analysis: Bay Area Council
Economic Institute.
35 US Department of Agriculture Economic Research Service,
“Farm Labor: Background,” http://www.ers.usda.gov/
topics/farm-economy/farm-labor/background.aspx.
36 Chapter in National Bureau of Economic Research book
Output, Employment, and Productivity in the United States
after 1800, (1966), “Labor Force and Employment by
Stanley Lebergott, Table 2, http://nber.org/chapters/c1567.
pdf.
37 Data Source: US Department of Agriculture Economic
Research Service. Analysis: Bay Area Council
EconomicInstitute.
38 Andrew Tangel, “Manufacturers Struggle to Woo Software
Developers”, Wall Street Journal, October 17, 2016, http://
www.wsj.com/articles/manufacturers-struggle-to-woo-
software-developers-1476741531.
39 Bureau of Labor Statistics, “Job Openings and Labor
Turnover—August 2016,” news release October 12, 2016
(USDL-16-1991), Table A, http://www.bls.gov/news.release/
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41 Data Sources: Bureau of Economic Analysis, US
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42 National Association of Manufacturers, “Pre-Hearing
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43 National Association of Manufacturers Center
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44 Congressional Research Service, U.S. Trade Concepts,
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45 National Association of Manufacturers, ”Top 20 Facts
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46 United States Census Bureau, Ownership Characteristics
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47 Vipal Monga, “U.S. Companies Bring More Foreign Profit
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48 OECD Tax Database, Table II.1 – Corporate income tax
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tax/tax-policy/tax-database.htm.
49 KPMG, “Corporate Tax Rates Table,”https://home.kpmg.
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27
How Trade Affects Jobs, Manufacturing, and Economic Competitiveness
50 Kyle Pomerleau and Emily Potosky, Fiscal Fact No. 525:
Corporate Income Tax Rates around the World, 2016, Tax
Foundation, August 18, 2016, http://taxfoundation.org/
sites/taxfoundation.org/files/docs/TaxFoundation-FF525.
pdf. Chad’s corporate tax rate was formerly the second
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now exceeded by the United States as well as the United
ArabEmirates.
51 MAPI Foundation, National Association of Manufacturers,
The United States Needs a More Competitive Corporate
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and-Reports/Reports/MAPI---Tax-Competitiveness.pdf.
52 Congressman Charles Boustany, “Boustany and Neal
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53 Douglas Irwin, “The Truth About Trade: What Critics Get
Wrong About the Global Economy”, Foreign Affairs,
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54 Robert D. Atkinson, Information Technology
& Innovation Foundation, “It’s time for tough
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55 William A. Galston, “Making Trade Work for
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56 Bay Area Council Economic Institute, Reinventing
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57 United States International Trade Commission, The Trans-
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58 Ibid., pages 81 and 585.
59 Peter A. Petri and Michael G. Plummer, “The Economic
Effects of the TPP: New Estimates,” Assessing the Trans-
Pacific Partnership, Volume 1: Market Access and Sectoral
Issues, Peterson Institute for International Economics,
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documents/piieb16-1.pdf.
60 Data Source: 2007 Economic Census, US Census Bureau.
Analysis: Peterson Institute for International Economics.
61 Source: Bureau of Economic Analysis, US Department of
Commerce, (Balance of Payments Basis). Analysis: Office of
the United States Trade Representative.
62 United States International Trade Commission, The Trans-
Pacific Partnership Agreement: Likely Impact on the U.S.
Economy and on Specific Industry Sectors, Publication
4607, May 2016, page 34, https://www.usitc.gov/
publications/332/pub4607.pdf.
63 Gary Clyde Hufbauer, “Liberalization of Services Trade,”
Assessing the Trans-Pacific Partnership, Volume 1:
Market Access and Sectoral Issues, Peterson Institute for
International Economics, February 2016, page 81, https://
piie.com/system/files/documents/piieb16-1.pdf.
64 Ibid., pages 22 and 23.
65 World Bank, “Potential Macroeconomic Implications of
the Trans-Pacific Partnership,” Global Economic Prospects,
January 2016, pages 226–227, https://www.worldbank.
org/content/dam/Worldbank/GEP/GEP2016a/Global-
Economic-Prospects-January-2016-Implications-Trans-
Pacific-Partnership-Agreement.pdf
66 Peter A. Petri and Michael G. Plummer, “The Economic
Effects of the TPP: New Estimates,” Assessing the Trans-
Pacific Partnership, Volume 1: Market Access and Sectoral
Issues, Peterson Institute for International Economics,
February 2016, page 6, https://piie.com/system/files/
documents/piieb16-1.pdf. The Peterson Institute
assessment used a global computable general equilibrium
(CGE) model with a 2015–2030 time period.
67 Matthew Goodman, “Yes, TPP is About Who Writes the
Rules”, Center for Strategic and International Studies,
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s3fs-public/publication/160830_GEM_V5_I8.pdf. Data
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68 Peter A. Petri and Michael G. Plummer, “The Economic
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Pacific Partnership, Volume 1: Market Access and Sectoral
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69 Office of the United States Trade Representative,
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70 Office of the United States Trade Representative, “FACT
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71 Gary Clyde Hufbauer, “Investor-State Dispute Settlement,”
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Market Access and Sectoral Issues, Peterson Institute for
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piie.com/system/files/documents/piieb16-1.pdf.
28
The Real Impact of Trade Agreements
72 Council of Economic Advisors, “Industries and Jobs at Risk
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73 Ibid., page 1.
74 Data Source: Foreign Trade Division, US Census Bureau.
Analysis: TradeStats Express, International Trade
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75 Akrur Barua, “Packing a mightier punch: Asia’s economic
growth among global markets continues,” Asia Pacific
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us-en/economy/asia-pacific-economic-outlook/2016/
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76 Data Source: US Census Bureau, “State Exports from
California,” https://www.census.gov/foreign-trade/
statistics/state/data/ca.html#ctry, accessed November 9,
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77 Jeffrey Hall and Chris Rasmussen, “Jobs Supported
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of Commerce, May 31, 2016, page 5, http://www.trade.
gov/mas/ian/build/groups/public/@tg_ian/documents/
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78 National Association of Manufacturers Center for
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79 Data Source: US Census Bureau. Analysis: Bay Area Council
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80 Ursula Wagstaff, “Reducing barriers benefits San Diego
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81 Source: Varian Medical Systems information sheet from
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82 UC San Diego School of Global Policy and Strategy,
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83 Data Source: Bureau of Economic Analysis, US Department
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84 Nigel Corey and Stephen Ezell, How TPP Critics Muddle
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85 BSA | The Software Alliance, Powering the Digital
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86 BSA | The Software Alliance, “Software Enforcement and
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87 Ben Bergman, ,“In California, Curbing Trade
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KQED Public Radio, August 31, 2016, http://
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in-california-curbing-trade-might-have-its-trade-offs.
88 Ken Monahan, “TPP in Real Life: TPP Levels Playing Field
for Leading U.S. Restroom Accessory Manufacturer,”
National Association of Manufacturers Shopfloor Blog,
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89 American Farm Bureau Federation, The Trans-Pacific
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California%20TPP.pdf.
90 Wine Institute press release, “Wine Institute Supports
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91 US Department of Agriculture, “FAQs,” http://www.ers.
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92 American Farm Bureau Federation, The Trans-Pacific
Partnership: Working for California, 2016, http://www.cfbf.
com/storage/app/media/documents/Issues/AFBF%20
California%20TPP.pdf.
93 Ibid.
94 Wine Institute press release, “Wine Institute Supports
Trans-Pacific Partnership Free Trade Agreement”,
October 6, 2016, http://www.wineinstitute.org/resources/
pressroom/10062015.
95 American Farm Bureau Federation, The Trans-Pacific
Partnership: Working for California, 2016, http://www.cfbf.
com/storage/app/media/documents/Issues/AFBF%20
California%20TPP.pdf.
96 Ken Monahan, “TPP in Real Life: TPP Helps California
Company Connect the Dots for Manufacturers”, National
Association of Manufacturers Shopfloor Blog, October 21,
2016, http://www.shopfloor.org/2016/10/tpp-in-real-life-
tpp-helps-california-based-company-connect-the-dots-for-
manufacturers/.
97 Roy Paulson, “Time to pass trade promotion authority,”
Opinion, April 13, 2015, The Press Enterprise, http://www.
pe.com/articles/trade-764706-small-new.html.
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