Between working as CEO of a company in the boating industry with global distribution (70 countries) and serving, until recently, as co-chair of the Manufacturing Council’s Trade, Tax Policy and Export Growth Committee (a group of business leaders who advise the U.S. Secretary of Commerce), I have spent a fair bit of time thinking about global trade.
Trade was a hot issue during the Obama Administration and continues to be a hot issue during the Trump Administration. Very smart and well-intentioned people have differing perspectives on free trade and the geopolitical perspectives are seemingly endless. While it is an emotionally charged issue, most economists agree that on a macro level trade is beneficial to those who participate. Sometimes the benefits are disproportionate or occur at different times, making them seem inequitable, but free trade almost always helps those who participate.
As U.S. manufacturers we, of course, want free trade agreements to be beneficial for U.S. companies, employees and the country in general. Free trade can help U.S. companies and employees by reducing protective tariffs in global markets allowing U.S. manufacturers to sell our products around the world at lower prices which generates jobs. Free trade also helps U.S. consumers by giving them access to a larger variety of products at lower prices. Additionally, free trade agreements can help level the playing field by requiring our foreign trading partners meet (or at least get closer to) U.S. labor and environmental standards. This not only levels the playing field, which makes doing business more equitable for U.S. companies (which creates U.S. jobs), it also helps both the environment and a lot of workers around the world. The potential benefits of free trade are not just financial.
The arguments against free trade include national defense concerns, which are legitimate for certain products, but are primarily focused on concerns about American jobs. Some smart people argue that if we allow free trade there will be situations where U.S. companies are challenged to be competitive with foreign businesses, which may threaten some U.S. jobs. This is a legitimate concern and can be understandably scary to people in vulnerable industries. We should do what we can to make sure trade is not only free but fair, and after that we need to help people who are negatively impacted.
However, we should also take a long-term view when trying to figure out how to create the most U.S. jobs in the decades ahead. The world is changing whether or not we participate and we need to be competitive in the global marketplace. While artificially protecting industries/companies can mitigate short-term disruption for some, it often has costs and loss of benefits for others. When the U.S. places tariffs on imported goods, they are not actually paid by the foreign importer – they are either paid by the U.S. consumer who purchases the goods or they limit U.S. consumer’s access to goods.
Globalization can be unsettling but capitalism has taken root around the world and many regions accross the globe are becoming much wealthier because of it. This is good for many people around the world and is going to continue whether or not the U.S. participates in more global trade. Ninety-five percent of the world’s consumers live outside the U.S. and the world economy will continue to expand with or without us, so we need to find the right balance and grow with the world economy.
Finally, free trade can be the difference between war and peace. Related to that, I recently read the book Economic Interdependence and War by Dale Copeland, a University of Virginia professor. Dr. Copeland researched the world economy since 1790 to determine how trade impacts the likelihood of a country going to war. As a result of his findings he developed his “Trade Expectations Theory” which states, in summary, that if countries are optimistic about future trade together they are much less likely to go to war. This is interesting to think about as we look at the current geopolitical landscape and particularly related to the U.S. relationship with China (who has stated a desire to step into any global vacuum left by U.S. protectionism).
I have traveled to over one hundred countries and know that the U.S. is respected and “Made in the USA” means something – people around the globe want our products and specifically our boats. We can still build the world’s best products at competitive pricing. History has demonstrated that protectionism does not work in the long-run, but free trade can increase wealth for everyone.
Our industry has historically supported free trade and, while we clearly need to ensure our trade agreements are equitable, I hope we will continue to embrace the global trade challenge and move forward confident that we can compete with anyone.
Bill Yeargin is the president and CEO of Correct Craft.
Free trade creates US jobs. Even though some US jobs may be lost to a more efficient foreign competitor, the savings that is brought to the US consumer results in net job creation. In the world of economics, there is very little dispute about this concept. The problem is that the lost jobs are much more visible than the jobs that are created.
Thanks Bill for this very timely blog given that we have just begun NAFTA re-negotiations. We've been hearing such negative rhetoric about the arguments against fair trade when, in actuality, the benefits far outweigh the negatives as you've outlined in your blog. Like you, I believe that educating the American workforce with facts is our best bet to ensuring that our country's focus on free trade remains a priority.
Unfortunately, experts have noted that many jobs lost to globalization simply are never coming back - not because of free trade but rather because of advances in technology and automation. It often seems that fingers are erroneously pointed at free trade as the culprit.