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When the US engages in free trade, ‘we all win’

  • The Trump administration has announced a series of tariffs in the past weeks, including ones against China.
  • Major retailers and trade associations are imploring the Trump administration to refrain from imposing tariffs that will raise the price of goods for American consumers and trigger international retaliation.
  • The overarching message from industry must be: When the U.S. engages openly in free and fair trade, we all win.
President Donald Trump and Chinese President Xi Jinping (R) arrive prior to a meeting on the sidelines of the G20 Summit in Hamburg, Germany, July 8, 2017.
Saul Loeb | AFP | Getty Images
President Donald Trump and Chinese President Xi Jinping (R) arrive prior to a meeting on the sidelines of the G20 Summit in Hamburg, Germany, July 8, 2017.

Major retailers and trade associations have sounded the alarm on trade. They are imploring the Trump administration to refrain from imposing tariffs that will raise the price of goods for American consumers and trigger international retaliation in the form of tariffs on American goods.

Other members of the U.S. business community could be tempted to jump on the protectionist bandwagon and identify more products that could be subject to tariffs. Instead, they should take this opportunity to communicate the shared, widespread economic benefits of fair and open trade in a way that taps into the same emotional response that has been so effectively evoked on the anti-trade side.

The overarching message from industry must be: When the U.S. engages openly in free and fair trade, we all win. Competition makes the country better, encouraging industry around the world to deliver more value to more people. Trade is not zero sum. It helps to grow the standards of living of people around the globe. We need the inexpensive products from outside the country to raise our standard of living. And, with only 5 percent of the world population, we need open access to markets for our own goods to grow our economy. We cannot have one without the other.

Of course, sometimes trade does hurt some workers in specific industries. And we must advocate policies that help these workers recover, retrain, and redeploy into other jobs. Sometimes trading partners take advantage of the U.S. and violate agreements. So we must enforce agreements and advocate fair trade.

But overall, free trade is beneficial to the U.S. Because of free trade, Americans enjoy higher living standards and a wider variety of more affordable products like clothing and electronics. Imports from low-cost countries deliver products at lower prices to consumers.

Imports actually boost the purchasing power of the average American household by approximately $18,000. These products sell because American consumers choose to buy them, and they are more affordable because they are made in low-cost regions.

Trade also yields work opportunities and well-paying jobs, all while benefiting American businesses. U.S. trade is part of an inter-connected, global supply chain. Half of what the United States imports is not consumed directly, but rather goes into other U.S.-produced goods.

The importation of these intermediate goods, raw materials, and capital goods lowers costs for manufacturers and other employers. When underlying business costs go down, more cash remains for worker salaries, wages, and benefits. About 41 million American jobs depend on trade. That's about one in four U.S. jobs.

And then there are the many benefits of exporting. U.S. businesses that export their goods also tend to create higher paying jobs. When engaged in competition around the world, those firms necessarily must remain sharp and competitive – increasing their productivity to the benefit of the customers, employees, and business owners.

On U.S. exporting in particular, the numbers back up the jobs argument: U.S. exports to current free trade agreement partners support an estimated 11.5 million American jobs. Moreover, free trade advocates should never miss a chance to point out that trade benefits Main Street. Roughly 98 percent of the 300,000 U.S. companies that export are small and medium-sized businesses.

Don't forget the flip side of open markets—it encourages others to invest here. Foreign investment also puts people back to work. For example, after the shutdown of textile factories devastated workers in South Carolina, BMW came to the state and, working with IBM and Microsoft, invested $2.5 billion in a training center. The BMW factory in the state employs 10,000 workers producing vehicles and buys from 40 suppliers based in South Carolina (of 235 suppliers nation-wide). Mercedes employs 3,600 in its Alabama plant. Honda. Nissan. The examples go on.

Tariffs have terrible consequences for consumers. The time is right for a positive, hopeful message that reminds us all of the tremendous macro-economic benefits of free and fair trade.

Commentary by Steve Odland, the CEO of the Committee for Economic Development and former CEO of Office Depot and AutoZone. Check out CED's trade report here. Follow Steve Odland on Twitter @CEDUpdate and @SteveOdland .

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