The Global Business Model
|Wednesday, April 29, 2015 at 03:19 PM
More than 80 percent of the world’s purchasing power resides outside the United States—that’s a lot of customers for U.S. businesses. More than one in five American jobs—38.1 million—depend on international trade. In addition, foreign-owned companies employ 5.3 million Americans.
Looking to the global marketplace for economic development and paying attention to export and import trends is no longer an option for state policymakers—it is a necessity.
A study by the International Trade Administration found that jobs in exporting industries actually pay better, with exports contributing an additional 18 percent to workers’ earnings on average in the U.S. manufacturing sector. That earnings premium is even higher for blue-collar workers, who get a 20 percent boost over white-collar workers.
While trade policy is largely handed down from Washington, state leaders must understand those policies—particularly how free trade agreements affect their state—as they craft their job growth strategies.
Although free trade agreements can be contentious, they are, at their essence, an agreement between two or more countries to abide by certain rules that affect trade and offer protections for investors and intellectual property rights. They are designed to reduce barriers to trade, protect U.S. competitive interests abroad and enhance the rule of law among partner countries.
In 2013, exports supported 11.3 million jobs, 1.6 million more than in 2009. Nearly half of merchandise exports go to five countries—Canada, Mexico, China, Japan and Germany.
Texas exported the most merchandise of any state in 2013—18 percent of the market—followed by California with 11 percent and New York with 5 percent.
Agreements Under Consideration
The U.S. is in the process of negotiating a new free trade agreement, the Trans-Pacific Partnership. The TPP, as it is called, would build on pre-existing trade agreements with six countries—Australia, Canada, Chile, Mexico, Singapore and Peru. It also would develop new agreements with five countries—Brunei, Japan, Malaysia, New Zealand and Vietnam. In 2013, the U.S. exported nearly $700 billion in goods—or 44 percent of total U.S. exports—to TPP countries.
Trans-Atlantic Trade and Investment Partnership
Negotiations to launch the Trans-Atlantic Trade and Investment Partnership, or T-TIP, were announced in 2013 and are ongoing. The agreement would set standards for trade and investment between the United States and the member states of the European Union. Trade among countries included in T-TIP account for one-third of world trade in goods and services and almost half of global economic output.
Policy Area›Economics and Finance›Economic Development and Trade›International Trade and Development