Our Freedom to Trade Expanded in 2011

The news right now is full of retrospective stories about 2011. Not to be left out, here are a few observations on the real if modest progress made in 2011 to expand the freedom of Americans to trade in the global economy. (I’ll add links along the way to related Cato work.)

After four years of stalemate, this fall Congress passed and President Obama signed legislation implementing three pending free-trade agreements, with South Korea, Colombia, and Panama. When fully implemented, these FTAs will eliminate just about all barriers to trade with three key allies. The U.S. International Trade Commission estimates the three agreements will boost U.S. exports and output by more than $12 billion.

Just as importantly, their passage signals that the two major parties can still work together to promote trade liberalization. Republicans voted overwhelmingly for the agreements, including freshman members connected to the Tea Party movement, and enough Democrats joined in to pass them all by comfortable margins. President Obama, to his credit, found a political path to support the agreements despite the opposition of his labor-union base.

With the passage of the agreements with Panama and Colombia, the Pacific Coast of the Americas has been effectively transformed into a free-trade area. (Ecuador is the lone hold-out.) When combined with NAFTA, CAFTA-DR, and FTAs with Peru and Chile, the United States now has free-trade agreements with neighbors that account for 87 percent of our two-way trade in the Western Hemisphere. The vision of a free trade area of the Americas from the Yukon to Tierra del Fuego has been effectively realized.

2011 also witnessed the United States and Mexico sort out the dispute over cross-border trucking—the last piece of unfinished business from the 1994 North American Free Trade Agreement. Under a pilot program put forward by the Obama administration, safety-certified Mexican trucks can now deliver goods within the United States, and U.S. trucks can do the same in Mexico. Now that the U.S. government is finally complying with its commitments, Mexico lifted sanctions on $2.4 billion of U.S. exports. This is real progress for economic freedom, the rule of law, and showing respect for our 100 million Mexican neighbors.

The United States and eight other Pacific Rim nations made substantial progress in negotiating the Trans-Pacific Partnership, a regional agreement that could bear fruit in 2012 or 2013. Japan, Canada, and Mexico have expressed interest in joining the talks.

Even the hapless World Trade Organization managed a bit of forward progress this year. While the Doha round of talks remains comatose, its 153 members agreed at its ministerial meeting this month in Geneva to admit Russia as a member next year. And a critical mass of its members, including the United States, agreed at the same meeting to open their government procurement to more international competition.

Free trade made progress this year in practice as well as in policy. Through the first three quarters of 2011, American exports of goods and services were up 16 percent compared to the same period in 2010; imports were up 15 percent. Compared to gross domestic product, U.S. exports have reached a record high of 18.8 percent. The ratio of imports to GDP has yet to return to its pre-recession peak, but it is also expanding once again. As government barriers continue to recede, Americans are choosing everyday to trade more and more in the global marketplace.

Our freedom to trade remains less than it should be. The U.S. government continues to impose an array of barriers on trade and investment, including quotas on imported sugar, regressive tariffs on shoes and clothing, unfair and economically damaging anti-dumping duties, and restrictions on foreign investment in media, inter-coastal shipping, and air travel (all of which I describe in Chapter 9 of my 2009 book Mad about Trade). But those can all be resolutions for 2012.

For now, let all of us who favor economic liberty and limited government take due satisfaction in the welcome expansion of our freedom to engage in commerce with our fellow human beings.