Economy & Trade
Constituting less than one-twentieth of the world's population, Americans generate and earn more than one-fifth of the world's total income. America is the world's largest national economy and leading global trader. The process of opening world markets and expanding trade, initiated in the United States in 1934 and consistently pursued since the end of the Second World War, has played important role development of this American prosperity. According to the Peterson Institute for International Economics, American real incomes are 9% higher than they would otherwise have been as a result of trade liberalizing efforts since the Second World War. In terms of the U.S. economy in 2012, that 9% represents nearly $1.4 trillion in additional American income.
Such gains arise in a number of ways. The ability to expand the output of America's most competitive industries and products, through exports, raises U.S. incomes. Shifting more of our work effort to the most competitive areas of our economy helps raise the productivity of the average American worker and average compensation earned from employment. With the ability to serve a global market, investment is encouraged in our expanding export sectors and the rising scale of output helps lower average production costs. Such effects help strengthen America's rate of economic growth. Moreover, imports increase consumer choice, restrain price increases and raise purchasing power. High quality inputs imported by U.S. companies can help companies and their U.S. employees become or remain highly competitive in the U.S. domestic and foreign markets.
The potential economic gains from trade for America are far from exhausted. Roughly three quarters of world purchasing power and almost 95% of world consumers are outside America's borders. The Peterson Institute analysis also estimated that elimination of remaining global trade barriers would increase the gain America already enjoys from trade by another 50%. Trade remains an engine of growth for America. The negotiation of further reductions in global barriers and efforts to effectively enforce existing agreements are the tools to reap those additional benefits.
As policy actions taken in the United States and countries around the globe continue to restore economic and job growth, an important part of the recovery will be the restoration of trade expansion. Over the past 14 quarters of recovery (from the 3rd quarter of 2009 to the 4th quarter of 2012), U.S. real GDP is up 2.1% at an annual rate, and exports have contributed 0.8 percentage points to this growth. Jobs supported by U.S. exports of goods and services are up an estimated 1.3 million since 2009, to an estimated 9.8 million in 2012.
Rapid trade growth may well act as a transmitter of economic stimulus around the globe and a vehicle of continued recovery, particularly if enhanced by additional efforts to reduce barriers and expand trading opportunities further. Recognition of the long term benefits of expanded trade, as well as the positive role trade can play in the current economic recovery are central factors reflected in the Administration's trade policy.