Small And Medium-Size Business And Global Competitiveness

Is foreign trade important for American business? The quick and most definitive answer is a resounding YES!

Here is why:
96% of the world’s consumers live outside of the United States. Therefore, to reach them, exports are the key ingredient.

96% of all firms directly involved in exports are small businesses.

U.S. exports directly support an estimated 12 million good paying U.S. jobs. In fact, in almost all of the 50 states, small and medium-size business accounts for more than 70% of the businesses in that state that have foreign trade as a component of their business.

On a broad basis, foreign trade and investment accounts for one third of the U.S. economy. This is the fastest growing and strongest segment of the U.S. economy. A deeper look here shows that:

• Over the past 20 years a third of the growth in the U.S. economy has come through exports;
• One third of U.S. farmland acreage is planted for export purposes;
• One fifth of all U.S. manufacturing jobs produce products shipped overseas; and
• U.S. service providers generated in excess of $400 billion in export revenues in 2006.

In regards to pay, statistics show that small and medium-size businesses that benefit from foreign trade pay higher wages and are less likely to go out of business than similarly situated businesses that do not participate in foreign trade. These statistics show that small and medium-size business pays (on average) 14% more to employees involved in foreign trade than to non-trade related employees.

A logical question then, given the above data, is “How do I get a piece of the foreign trade pie?”

Foreign Trade Agreements that the U.S. has are a good place to start. Currently there are numerous FTA’s in place.

Why are these agreements so important? Of the nine countries with which the U.S. has struck new trade agreements since 2002, U.S. exports increased by 19% in 2006. This is roughly 50% greater than the overall growth of U.S. exports.

The bottom line is this – to remain competitive, all companies regardless of size must think and act globally. The alternative may be fatal.

Here are the FTA highlights (more detailed information can be found at http://www.ustr.gov/):

The U.S.-Chile Free Trade Agreement:
The U.S.-Chile FTA entered into force on January 1, 2004, and immediately eliminated tariffs on 90% of U.S. exports to Chile and on 95% of Chilean exports to the United States. This allowed for an increase in bilateral trade between the two countries of 33% during the first year that the agreement was in effect.

The U.S.-Singapore Free Trade Agreement:
The U.S.-Singapore FTA was enacted on January 1, 2004. Annual two-way trade in goods and services between these two countries approached $40 billion in 2003. Singapore is also an important base of operation for U.S. companies working in the region. More than 1,500 American companies have operations in Singapore, with more than 300 using Singapore as their regional Asia-Pacific headquarters.

The U.S.-Australia Free Trade Agreement:
Nicknamed “the manufacturing agreement,” the U.S.-Australia FTA was implemented on January 1, 2005, and it is the first FTA between the United States and a developed country since 1988.

The U.S.-Morocco Free Trade Agreement:
The U.S.-Morocco FTA is the first FTA between the U.S. and an African country, and it was approved by the U.S. Congress in July 2004 by the largest margin in FTA history.

The U.S.-Bahrain Free Trade Agreement:
The U.S.-Bahrain FTA was signed on September 14, 2004. Both houses of The U.S. Congress unanimously approved the implementing legislation, and the president signed it on January 11, 2006.

The U.S.-Oman Free Trade Agreement:
Negotiations for the U.S.-Oman FTA opened on March 12, 2005 and were completed in early October 2005. U.S. and Omani officials signed the agreement on January 19, 2006. The legislation is currently under consideration in congressional committees.

The U.S.-Thailand Free Trade Agreement:
The sixth round of U.S.-Thai negotiations was completed in January 2006. Relations between the U.S. and Thailand date back to the 1833 Trade and Amity and Commerce Agreement. After several permutations, the 1966 Treaty of Amity and Economic Relations came into force, which granted reciprocal most-favored-nation status. The 1966 Treaty expired in December 2004; the FTA is intended to replace it.

The U.S.-Panama Free Trade Agreement:
Negotiations to complete an FTA between the U.S. and Panama began in April 2004. There have been eight rounds of negotiations, and talks concluded in 2006. In 2004, bilateral trade between the U.S. and Panama totaled more than $2.1 billion, with U.S. exports accounting for $1.8 billion of that amount. Nearly half of Panama’s total imports come from the United States.

The U.S.-Andean Free Trade Agreement:
Negotiations for a U.S.-Andean FTA began in May 2004. Currently, the trade relationship between the U.S. and the Andean countries is conducted under the framework of the Andean Trade Preferences Act (ATPA), which was enacted by Congress in 1991 and renewed and expanded in 2002.

The U.S.-Peru Trade Promotion Agreement:
After 18 months of negotiations, the U.S.-Peru Trade Promotion Agreement was concluded in December 2005. It was signed in April 2006. U.S. exports to Peru total more than $2 billion per year.

The U.S.-Colombia Trade Promotion Agreement:
Negotiations with Colombia were completed in February 2006, but then reopened over sensitive agricultural issues in Colombia.

Free Trade Area of the Americas (FTAA):
FTAA expands NAFTA to every country in Central America, South America, and the Caribbean, except Cuba. Negotiations began soon after the completion of NAFTA at the Summit of the Americas in 1994 and have continued steadily over the years.

The U.S.-Southern African Customs Union (SACU) Free Trade Agreement:
The United States and the five member countries of the SACU (Botswana, Lesotho, Namibia, South Africa, and Swaziland) launched negotiations on June 2, 2003. The U.S.-SACU FTA will be the first U.S. FTA in sub-Saharan Africa, and the first time the SACU nations have jointly negotiated such an agreement.

The U.S.-United Arab Emirates (UAE) Free Trade Agreement:
Negotiations for the U.S.-UAE FTA opened on March 8, 2005. Current economic cooperation is based on a Trade and Investment Framework Agreement entered into in 2004.

The U.S.-South Korea Free Trade Agreement:
The United States announced its intent to negotiate a free trade agreement with the Republic of Korea in February 2006. Negotiations can begin after a 90-day consultation period.

The U.S.-Malaysia Free Trade Agreement:
The United States announced its intent to negotiate a free trade agreement with Malaysia in March 2006. Negotiations can begin after a 90-day consultation period.