Since 1974, when Trade Promotion Authority (previously called Fast Track authority) was first implemented, U.S. trade agreements have significantly opened foreign markets for U.S. and New York exporters, resulting in tremendous growth in sales abroad. In fact, U.S. exports rose by 690% between 1974 and 1999.

Trade Promotion Authority requires Congress to pass or reject trade agreements — without making any changes. Without it, foreign governments are reluctant to make agreements and concessions that could be changed later by Congress. Trade opponents, however, claim that Trade Promotion Authority is an inherently undemocratic and secretive process. This is untrue. Since no administration wants to submit a trade agreement to Congress that will be rejected, Members of Congress are routinely consulted during negotiations. While they cannot amend final agreements on the floor, they have ample opportunity to do so beforehand. And, as the final democratic check, Congress can simply reject the deal.

Under Trade Promotion Authority, trade agreements such as the Tokyo Round and the Uruguay Round of the GATT, and NAFTA have been implemented benefitting New York by substantially reducing foreign trade barriers. And, since its implementation in 1994 and despite a Mexican recession, NAFTA is fulfilling its promise.

To the disadvantage of New York, Trade Promotion Authority has not been renewed in several years. As a result, the United States has not been able to successfully negotiate new multilateral trade accords and is losing out to countries that have. For example, since Trade Promotion Authority has not been renewed, Canada and Chile forged a trade agreement that created freer access to each others’ markets. This has benefited the Canadian province of Ontario a great deal and has put New York companies and workers at a competitive disadvantage. Numerous other trade pacts, some involving European and Latin American countries, are in negotiations or have been finalized without U.S. involvement.

The proposed Free Trade Agreement of the Americas and other economic integration accords under consideration will not only open foreign markets to New York’s goods and services, they will also encourage the expansion of small business exports to developing countries whose economies are growing faster than developed economies. To take advantage of these opportunities, New York needs Congress to pass Trade Promotion Authority.

Trade Promotion Authority Assists Small Business

Often overlooked is the tremendous opportunity international trade represents to New York’s small and medium-size businesses. According to the U.S. Small Business Administration, one-third of the value of exports are attributable to small businesses. Their well-being is of great importance to New York’s economy. Firms with fewer than 100 employees account for the vast majority of the jobs created during the past five years. Like all businesses, they are actively seeking greater access to foreign markets.

According to data from the Exporter Data Base (a joint International Trade Administration-Census Bureau project), the number of U.S. firms exporting goods tripled from 1987 to 1997. Importantly, small and medium-sized enterprises (companies with fewer than 500 workers) accounted for over 97% of this growth in the exporter population.

Small and medium-sized enterprises continue to increase in number while generating a larger share of total U.S. exports. In 1997, small and medium-sized enterprises accounted for 96.5% of all U.S. exporters. This is up slightly from 1992. And these companies accounted for 30.6% of all U.S. exports in 1997, also slightly up. Very small companies (those with fewer than 20 employees) made up nearly two-thirds of all U.S. exporting firms in 1997.

Small and medium-sized company exports are not limited to the United States’ three largest destinations, which include Canada, Japan, and Mexico. In 1997, small and medium-sized enterprises were responsible for 38% of total U.S. goods exported to the combined China and Hong Kong markets. This is up from a 33% share in 1992.

In addition to eliminating trade barriers, trade agreements also offer a number of conditions that are particularly important in helping small and medium-size businesses take advantage of growing foreign markets. For example, trade agreements eliminate much of the red tape, such as licensing requirements and other restrictions, that has effectively kept small businesses out of foreign markets. Large corporations often can devote the time and resources to figuring out ways to work around non-tariff barriers. Small businesses usually can’t afford to do that. By eliminating non-tariff barriers, bilateral and multilateral agreements give small firms market access similar to that enjoyed by large companies.

Furthermore, one way large corporations have avoided trade barriers is by establishing facilities in foreign markets. Here again, small firms have been at a disadvantage. Generally, they do not have the resources to establish facilities abroad. But, with the elimination of trade barriers, a company will not have to locate abroad to sell abroad. This helps small and medium-size businesses gain access to overseas markets from a base in New York, creating jobs here in the state.

Why Exports Matter: More!, concludes that export commitment by small American firms has surged over the past decade. And it is this commitment to export, rather than the volume or share of exports in overall sales, that is responsible for higher performance. Furthermore, small firms are not disadvantaged relative to large firms in realizing the gains from exporting, the report says. This is key since small businesses now provide virtually all net new U.S. jobs, represent 99.7% of all employees, and provide 55% of innovations.

If the President is granted Trade Promotion Authority, new resulting trade agreements will help small businesses to export more goods and services. This will undoubtedly benefit New York companies and workers.

This section appeared in the report International Trade Benefits New York, published on behalf of goTRADE New York and the Business Roundtable, 2001.
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John Manzella
About The Author John Manzella [Full Bio]
John Manzella is a world-recognized author and speaker on global business, competitive strategies and the latest economic trends. He also is CEO of World Trade Center BN, chair of the Upstate New York District Export Council, and founder of The Manzella Report and Manzella Trade Communications Inc. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.




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