On Tuesday evening, President Obama delivered his annual “State of the Union” address. In his speech, Obama reiterated his goal of doubling U.S. exports by 2014 and called for quick passage of the free trade agreement with South Korea, but failed to set a timetable for the agreements with Colombia and Panama.
While his conclusion regarding the importance of trade and exports is not misguided, his record does not instill much hope in his trade agenda.
Passage of the US-Korea free trade agreement would increase U.S. exports by over $10 billion and create 70,000 American jobs. This agreement would abolish 95 percent of tariffs on all industrial and consumer goods within three years.
Passage of free trade agreements with Colombia and Panama would open up new markets for U.S. manufacturing and agricultural products while provide consumers with lower priced products at home. Immediately after approval and enactment of the U.S.-Colombia Free Trade Agreement, over 80% of U.S. exports to Colombia would enter Colombia duty-free and remaining tariffs would be phased out within a decade. The U.S. will have access to $4 billion in new markets and the American agricultural industry will see an estimated $1.1 billion dollar overall increase in their exports alone.
While more than ninety percent of imports from Panama are duty free, U.S. products still face tariffs when entering Panama. The Panama FTA will eliminate this trade barrier. Additionally, Panama is seeking to expand the Panama Canal, a project that could bring American contractors $5.25 billion if the U.S.-Panama Free Trade Agreement is enacted.
The focus should not be on exports alone. Increasing trade by removing tariffs and subsidies provides lower prices for American consumers. Tariffs are taxes and any increase in the price of imports is immediately passed on to consumers. While, protectionist measures are often enacted for the purpose of shielding domestic industries from "unfair trade practices," all indications are that they instead punish the multiple industries that rely on imports for their material inputs such as steel and raw materials. When input costs increase as a result of a rise in import tariffs, industries must cut costs elsewhere, the most likely being labor costs, meaning jobs.