Trade is the beating heart of economic growth and job creation in this country. Yet for many, including some administration officials—even those whose job it is to develop and coordinate U.S. international trade policy—railing at trade is all the rage.
In recent weeks, the National Security Advisor, U.S. Trade Representative, and Treasury Secretary have made a series of speeches outlining what they refer to as the “New Washington Consensus.”
They offer a prescription for “a modern industrial and innovation strategy”—largely in defense of the Inflation Reduction Act and the CHIPS and Science Act.
But they also misguidedly seek to undermine the bipartisan consensus on trade that has been a hallmark of the postwar era and has led to the growth and progress they claim to support. In this way, the so-called “New Washington Consensus” is more of a “New Washington Fallacy.” Here’s why:
1. The “race to the bottom” is actually a climb to the top—and trade has been a ladder for many Americans.
These speeches argue a change in trade policy is needed because the U.S. economy is in dire straits—with jobs shipped abroad, working families left behind, and industries offshored.
America certainly has its challenges, and while making trade a scapegoat may be convenient, it isn’t accurate.
The U.S. economy has generated more than 45 million jobs—net—over the past 30 years. The number of U.S. jobs that depend on trade now exceeds 40 million—and jobs tied to trade pay, on average, 15% to 20% more than those that aren’t.
Over the past three decades, real household incomes of America’s lowest earners have risen more than 50%. And over the past 10 years in particular, low-income Americans have experienced the fastest wage growth among any group.
Further, U.S. manufacturing production has risen by about two-thirds since the early 1990s. Of course, some industries expand, and others contract, but it’s wrong to call that kind of growth “hollowing out.”
2. Companies are revising supply chains but—contrary to what some may suggest—trade can, and does, make us more resilient.
COVID-19 tested our supply chains and exposed gaps in our emergency preparedness in ways never before experienced, but when taking stock of our long-term vulnerabilities it’s important to not paint with a broad brush.
Take “the panicked race to secure masks” the U.S. Trade Representative noted in her speech. Masks were indeed in short supply in 2020, however, a U.S. government report issued after the shortage ebbed found U.S. production of N95 masks accounted for “roughly 80 percent of the U.S. market” prior to the pandemic.
In other words, the problem was never that production moved offshore. Rather, widely reported shortages of N95s arose due to an unprecedented 40-fold surge in demand.
This was both foreseeable and foreseen. Over the years, pandemic preparedness recommendations have identified stockpiling as the only feasible way to get ahead of such shortages. Unfortunately, these efforts were underfunded and insufficient prior to 2020.
In any event, blaming trade is not just misleading—it’s plain wrong. The ability to source from other countries helped fill urgent needs in the first year of the pandemic.
Different products call for different solutions. For example, Ambassador Tai correctly notes “we are dependent on a range of critical minerals and materials for products we use every day … but the PRC already controls more than half of global mining capacity and 85 percent of refining.”
That’s all true, but the administration’s laudable objective of boosting U.S. production is hobbled not just by an absence of forward-leaning trade policy but also by an abysmal U.S. permitting process. The U.S. hasn’t opened a major new mine in years. Important new mining projects in Alaska, Arizona, and Minnesota have endured years in the permitting wilderness, facing seemingly endless bureaucratic and political roadblocks while seeking approval to access critical resources. The case for permitting reform is urgent, and the Chamber is putting forward actionable solutions and calling for legislation to be enacted before the end of summer through our Permit America to Build campaign.
To increase resilience, the U.S. must also supplement expanded domestic production by working with a diverse array of allies and partners abroad to secure new sources of critical minerals. Deconcentration and diversification should be the order of the day. To reach this goal, trade is a solution—not an obstacle.
3. Efficiency and low costs aren’t the sole purpose of trade—but they should be celebrated, not disparaged.
“Let’s make the American people poorer” isn’t a winning political argument, and yet some officials have made an attack line out of trade policy’s focus on efficiency and low costs.
The reality is that inefficiency and high costs are actually the hallmarks of low incomes, declining competitiveness, and economic stagnation. By contrast, the efficiency and lower costs trade brings stimulates competition and innovation, providing materials and inputs at lower cost and promoting specialization.
Humanity rose out of the dire poverty of the Stone Age thanks to specialization and exchange, and these two forces of capitalism remain the twin engines of human progress. But don’t just take it from me—even Bono agrees.
That said, trade policy is complicated, and officials are correct to note, for instance, the ways the China “uses trade and economic measures in an abusive or arbitrary way to achieve a strategic political objective or interfere with foreign governments’ exercise of their legitimate sovereign rights.”
The Chamber has long called for solutions that address China’s massive state subsidies, unfair commercial practices, and human rights abuses. We need to safeguard U.S. national security with appropriately scoped and targeted measures like export controls on key technologies—without cutting off the wider flow of trade worth approximately $1 trillion annually. And global engagement is a critical means for the U.S. to address challenges in the relationship and to cooperate with likeminded partners who share our values.
The U.S. should be pursuing a more ambitious trade agenda with the many other countries that share our concerns about Chinese policies. Many are eager for closer ties with Washington. Such a trade agenda could help mitigate the risk of critical dependencies on China or any other single market.
From Europe to Japan, Southeast Asia to Africa, and more, other countries are racing to ink new trade deals. And trade ministers from other countries tell us regularly they can’t understand why America is standing on the sidelines.
4. Business is an ecosystem where small and large businesses succeed together—including through trade.
Some administration officials say their predecessors “placed a traditional priority on promoting the interest of the ‘bigs’” rather than small and medium-sized businesses—and they suggest that their goal is to help the smaller companies (while going after those they view as too big).
The Chamber takes a back seat to no one in standing up for our hundreds of thousands of small business members, and it’s important to note that they too benefit from market-opening trade policies. More than 97% of the 270,000 American companies that export are small and medium-sized businesses, and they generate about one-third of U.S. merchandise exports, according to the U.S. Department of Commerce (which joined the Chamber recently to recognize particularly successful exporters).
In fact, if you ask small-business owners what kind of trade agenda they want, they say they want a bolder market-opening trade agenda. For instance, the National Association of District Export Councils—which represents more than 1,500 small businesses that are members of the Commerce Department-chartered District Export Councils all across the country—stated in May that “Market Access is our No. 1 issue… The Time for New Free Trade Agreements is NOW!”
The same is true in agriculture. The Farm Bureau estimates that one American farm produces enough food to feed 166 people annually—making exports essential to the prosperity of U.S. farms of all sizes. Recently, more than 50 leading agriculture associations sent a letter urging Congress “to advance new tariff-reducing trade agreements … and to provide direction to the Executive Branch about the importance of expanding new markets for America’s food and agriculture products.”
It's easy to see why. The same foreign trade barriers that are a nuisance to larger firms and farms can be prohibitive for smaller exporters too. That’s because U.S. trade agreements include not only cuts to foreign tariffs but also provisions that disproportionately help smaller enterprises, such as rules to ensure foreign technical and sanitary standards don’t shut out U.S. products.
Finally, it’s worth highlighting how small and large exporters succeed in global markets together. For example, when Boeing exports a 777 jet, the thousands of small and medium-sized suppliers that contributed to its production are also, in effect, exporters. This is true across our economy, with large enterprises representing the largest single market for America’s small businesses.
In short, there’s much more that brings America’s large and small businesses together than there is dividing them. And that holds true for trade policy.
The bottom line is that despite trade bashing being seemingly en vogue in some quarters, trade continues to produce big benefits for the American economy.
It’s a ladder for working families seeking better jobs and higher wages. It can help enhance our resiliency, and it benefits firms and farms of all sizes. Politicians can continue to rail against it, but trade will continue to deliver for the American people.
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About the authors
Suzanne P. Clark
As President and CEO of the U.S. Chamber of Commerce, Suzanne Clark heads strategy, government relations and market innovation to support member companies and businesses.
