Thursday, June 9, 2011

Cato: FTAs Lead to More Trade (Shocking, I Know)

It's actually kinda sad that a study showing that the reduction or elimination of nations' bilateral/regional trade barriers results in more trade (exports and imports) among them is a much-needed addition to the trade policy debate, but, well, it is.  And, as usual, Cato's Dan Griswold has us covered with a great new paper.  Here's the intro:
As Congress and the administration decide the fate of pending free-trade agreements (FTAs) with Korea, Panama, and Colombia, advocates and opponents will likely point to the experience of other recent bilateral and regional trade deals to support their positions. In the past decade, FTAs with 14 other nations have been signed, approved, and enacted, providing evidence to evaluate the effects of such agreements on bilateral trade flows.

After a hiatus in the 1990s, a number of free-trade agreements have been enacted in the past decade. The U.S. government entered into an FTA with Jordan in December 2001, an agreement first negotiated by the Clinton administration. After Congress approved trade promotion authority during the Bush administration in 2002, the United States entered FTAs with Chile and Singapore in January 2004, Australia in January 2005, Morocco and Bahrain in January 2006, El Salvador in March 2006, Honduras and Nicaragua in April 2006, Guatemala in July 2006, the Dominican Republic in March 2007, Costa Rica and Oman in January 2009, and Peru in February 2009.

Collectively, these countries accounted for $96.4 billion in U.S. goods exports in 2010 and $71.3 billion in imports. If these 14 nations were considered a single economic unit, they would collectively be America's third largest export market, and our sixth largest source of imports.

An analysis of trade flows with each of these 14 countries reveals that, on the whole, these agreements have delivered on their central promise to promote more trade between the United States and its agreement partners. Both U.S. exports and imports with this group of countries have expanded more rapidly than overall U.S. trade since each agreement was enacted. This has delivered a double benefit to the U.S. economy, as exports have expanded markets for U.S. producers, while imports have delivered lower prices and more variety for American consumers and more affordable inputs for U.S. producers.

Specifically, total U.S. exports to our more recent FTA partners were 5 percent higher in 2010 than they would have been if exports to each country had grown at the same rate as our overall exports since each agreement was enacted. Imports from our FTA partners were 9 percent higher compared to overall import growth. By this rough method, imports were $5.9 billion higher and exports $4.5 billion higher, for a total boost to trade of $10.4 billion.4 For the politically sensitive manufacturing and agricultural sectors, the story was similar, with the recent FTAs boosting two-way trade compared to the overall trend in U.S. trade, with the additional growth concentrated in exports. Although country-specific data on services exports are more limited, the agreements appear to have delivered a boost to both imports and exports with Chile, Singapore, and Australia.
Nice.  Now check out this sweet table:

Table 1
FTAs and Manufacturing Trade (in millions of U.S. dollars)
2010 (Actual)ProjectedAbove Projected
CountryFTA EnactedExports from USImports to USExports from USImports to USExports from USImports to US
El SalvadorMar–061,7871,8051,9301,950–142–145
Dominican Repub.Mar–074,8612,8825,2423,953–381–1,071
Costa RicaJan–094,3797,0774,7562,365–3774,712
FTA Total84,05048,17676,07448,3657,976–189
Source: U.S. Census Bureau, "Foreign Trade," Country Product Trade Data.
Note: Projected exports and imports are calculated by assuming a growth rate from the base year equal to the growth of total U.S. manufacturing exports and imports. The base year is the full calendar year before the individual agreement was enacted.

Be sure to read the whole thing here.

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