What's in those free-trade agreements—and do they really boost exports?

Trade and job creation
Dec. 2 2010 12:54 PM

Trade Policy 101

What's in those free-trade agreements—and do they really boost exports?

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Several socioeconomic changes in emerging economies were far more responsible for chipping away at the United States' manufacturing sector. Emerging economies have been building roads and ports at a rapid rate, investments that make shipping goods cheaper and quicker, says Gresser. Container shipping has boomed, multiplying the impact of all that new infrastructure, while telecommunications costs have dropped. Smaller producers and manufacturers in far-flung locations can play a role in the global economy.

There's no doubt that the nature of American manufacturing is shifting. For better or for worse, we're moving away from the unskilled type of production work that let a less-educated workforce attain middle-class status. Today, our manufacturing sector stands out in the creation of complex items like airplanes and machinery. In reality, though, even the implementation of tariffs haven't stemmed the exodus of lower-end manufacturing jobs. Low-end apparel and footwear are among the most heavily-tariffed imported goods sold in the United States, and yet most of the T-shirts and sneakers we buy in this country are made abroad.

In addition, we've built up a much bigger service sector in the past two decades or so. Generally, when the term service economy is used, it's as a pejorative; the image is one of a fast-food fry cook or big-box retail cashier. But some of the biggest growth in services—and exports—is in engineering, professional services like accounting and finance, software development, and the like.

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Unfortunately, today's trade agreements don't do a good job of addressing the service sector. "The world of services trade policy is pretty young," says Gresser. There are very few negotiators who specialize in it; plus, the jargon is dense and often confusing, even for experts. Issues surrounding copyright protection, consumer privacy, and other issues all need to be worked out more or less from scratch. Figuring out how to structure trade agreements with other countries for services exports is a good role for FTAs in the near term, Gresser suggests. The negotiations can operate as a sort of test lab for the policies we're going to need in the coming decades, with the idea that we'll be better prepared to uphold the interests of American workers in future global trade forums.

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Martha C. White is a freelance writer in New York.