Topic Category: Trade & Finance

Recessions bring out the worst in people. The search for economic scapegoats almost always turns to trade. People want to pull up the drawbridge to imports, further reducing growth around the world. Americans have benefited greatly from the increasingly globalized economy. Yet trade growth, which fueled years of global economic expansion, has slowed. David Smick, publisher of The International Economy, warned of the potential crack-up of “the globalization model of the past thirty years.”

The United States and Canada have achieved a level of international business and economic integration like no other two countries in the world. The U.S.-Canada Free Trade Agreement of 1989, which evolved into the 1994 North American Free Trade Agreement (NAFTA), has helped make this a reality. And U.S. and Canadian transportation systems, including international bridges, railways, highways, waterways and airports, also are a major contributing factor.

In this age of financial austerity, an increasing number of U.S. and European companies are seeking financial backing from and alliances with cash-rich Chinese companies. Those same Chinese investors however, are keen to snap up assets at what are sometimes bargain basement prices.

On December 16th, the World Trade Organization’s 153 members unanimously approved Russia’s accession as a member. This will solidify Russia’s transition from a closed communist economy to a full participant in the global marketplace. The only question is whether the United States will embrace Russia as a fellow WTO member or forfeit the benefits for the sake of an outdated policy rooted in the Cold War.

The United States completed negotiations and signed free trade agreements (FTAs) with Colombia in November 2006, and with Panama and South Korea in June 2007.(1)  After much political wrangling, these agreements became stalled in Washington, D.C.

However, after various changes were made to the deals, in mid-October, with large bipartisan support, the United States' House and Senate approved the FTAs with all three countries. Soon afterward, on October 21st, President Obama signed legislation to implement the new accords. The governments of Panama, Colombia and South Korea approved their bilateral deals and now must demonstrate compliance.(2)

The impact of a declining greenback is no longer black and white.

A weakening dollar traditionally resulted in lower priced American exports that stimulated sales abroad. It also caused the price of foreign goods and services to rise, reducing U.S. demand and effectively lowering the trade deficit. These past realities, although still applicable, no longer play out as they did years ago.

The integration of national markets through international trade and investment, known as economic globalization, has had an enormous beneficial impact on the world. Based on capitalism and powered by advances in telecommunications, transportation and finance, globalization has boosted competitiveness, productivity, innovation, and standards of living. Plus, it has enabled companies and individuals to establish relationships anywhere in the world. But that's not all.

From the Korean War to Operation Just Cause in Panama to Plan Colombia, the U.S. has expended lives and treasure to protect Colombia, Panama, and South Korea from Communist aggression, narco-violence, insurgency, and misrule. The investment has paid off.

After four years of stasis on the trade front, the new post-election environment is a welcome change. Removing barriers to trade—in both directions—is essential to sustained economic recovery and long-term growth.