The Power of Free Trade Impacts Industry
Brent J. McClendon, CAE
Executive Vice President
International Wood Products Association
I often find myself advocating the merits of free trade as Executive Vice President of an international trade association. My belief in the power of trade is borne out by success stories of countries that have entered into partnerships with U.S. and other developed countries. For example, last year a delegation of wood processors from Guyana attended IWPA’s convention. The Guyana companies found customers that provided financial and technical assistance to strengthen environmental practices and two U.S. businesses found new suppliers of certified wood.
Despite the many “win –win” scenarios brought about by free trade, there are times when praise for the merits of free trade gets the cold shoulder. Neighbors who have family that have lost jobs to the recession, domestic industry colleagues who are experiencing declines in membership and Members of Congress whose email boxes are filled by angry constituents sometimes mistakenly point to imports as the villain stealing away jobs and wealth from America.
“Fair trade” and “level playing field” have dominated discussions on trade relations. Difficult terms to argue against, but should come with a disclaimer for what is often meant by “fair” and “level.”
The latest example of how these terms are translated into policy can be found in legislation named, “Making Opportunities Via Efficient and More Effective National Transportation Act of 2009” or the “Movement Act of 2009.” The proposal calls for a tax to be placed on commercial cargo being imported into the U.S. The bill is ostensibly intended to improve and secure ports. But tucked into it is a bit of protectionism as it only assigns a tax duty to imports. Presumably these same ports are used for exports, but the cargo on outbound ships is given a free pass.
The author of the measure states the rationale for the bill as:
In these increasingly dire economic times where ports are considering individual fee systems from California, to Washington, to New York; it is in the best interest of the Congress to ensure that America develops a nationwide strategy that will protect our competitiveness at home and abroad while maintaining the ability to invest in a coordinated nationwide freight strategy.
I do not dispute the need for modern, secure ports. I do take issue with placing the full burden on importers. Certainly this approach does not pass the “fair” trade or “level playing field” test. However unintended, this legislation is a short-sighted barrier to trade that would ultimately pass the cost onto Americans in terms of higher costs for goods and jobs. How so?
Let’s look at a recent study commissioned by the National Retail Federation on the Impact of Imports from China on U.S. Employment. It found every U.S. state has a net positive number of jobs related to imports from China, meaning trade with China adds jobs, not the reverse. It also found that U.S. consumers enjoy price levels that are 1.4 percent lower thanks to imports from China. The study concludes that nearly 1 million U.S. jobs benefit from imports from China alone.
In the wood industry, many U.S. consuming industries use products that were originally exported from the U.S. for value-added manufacturing and then imported for final processing or distribution. Flooring, kitchen cabinets and furniture are a few of the product industries benefiting from free trade. U.S. wood exporters and manufacturers will be harmed by this legislation as well as importers. Others will also be impacted should this legislation move forward. Overseas trade provides jobs to people directly associated with moving the imports along the U.S. supply chain. Dockworkers, customs agents, truckers, rail workers, distributors, wholesalers, and retailers handling imports will experience diminished revenue.
The "Movement Act 2009" deserves our serious scrutiny and unified work by the entire U.S. wood products industry. After all, the Trojan Horse was made of wood.
Import/Export Wood Purchasing News - August/September 2009