International trade links could support jobs and growth in the US
US exports have more than doubled in a decade, reaching USD2.28 trillion in 2013. Trade in goods and services has become more diverse, helped by the dynamism of some of the nation’s major cities. Take Houston, for example. The city’s growth has been driven by global trade and investment since it was founded in 1836. Today it is one of the busiest ports in the US and continues to connect the region to the world, with exports worth more than USD110 billion in 2012.
Trade continues to have an influence on the city, which is a major energy exporter. Rising US shale gas production has encouraged investment in chemical plants and liquefied natural gas export terminals on the Texas Gulf Coast and reforms to open up Mexico’s oil and gas industry to foreign investment are likely to create opportunities for businesses, despite recent falls in oil prices.
The economies of other US cities have also been strengthened by international flows of goods, services and capital
The economies of other US cities have also been strengthened by international flows of goods, services and capital. In the San Francisco Bay Area, for example, exports support more than 370,000 jobs*. Its expertise in technology and innovation has helped it to bolster trade ties with fast-growing emerging markets, particularly in Asia.
In the Chicago region, exports have more than doubled since 1997, drawing on a traditional strength in manufacturing goods including machinery and iron and steel products.
These cities all have different characteristics. But they share one important attribute: openness to trade. The development of international connections has enabled their economies to prosper, helped their businesses to access new markets and created jobs for their citizens.
US businesses today are trading with more countries than ever and are also increasing their exports of services. The growing middle classes in emerging economies such as China, India and Brazil are eager to buy the high-value technologies and sophisticated services that the US produces. At the same time, many successful US companies are increasingly locating parts of the production process in different countries, outsourcing some elements and keeping others in-house based on factors such as costs, the availability of skills and scale.
Sometimes there are concerns about the impact of globalisation on domestic jobs and communities. However, a report** produced for HSBC by the academic and policy adviser Professor Matthew J Slaughter suggests that communities and companies involved in global trade enjoy significant benefits.
The research found that as well as being larger, more productive and more capital-intensive, US companies involved in international trade pay wages that are on average between 15 per cent and 20 per cent higher.
Additionally, over the past decade, international trade has boosted annual US income by at least 10 percentage points of GDP. This translates into an aggregate gain in 2013 of at least USD1.7 trillion, or an average gain of more than USD13,600 per US household per year.
Slaughter estimates that as many as ten million new jobs connected to trade could be created in the US over the next decade, if the US pursues a comprehensive pro-trade policy agenda that focuses on trade agreements, investment, immigration, taxation and the labour market safety net.
Broad support from US policymakers to deepen international trade links could boost jobs and growth at home. Negotiations on two key trade agreements – the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) – are seen as crucial by many businesses.
The TPP focuses on trade ties between the US and 11 countries in the Asia-Pacific region, while the TTIP would strengthen links with the 28 member states of the European Union. Deals on these agreements would help US businesses to access these markets, as well as boosting global investment in the US.
A domestic business environment that provides a strong platform for companies to succeed overseas is also important. Slaughter argues that reforming the complex corporate tax system in the US would be one way of supporting businesses seeking to compete in world markets.
The US continues to be a leader in global trade. Its highly skilled workforce, technology expertise, deep capital markets and culture of innovation mean it is well placed to benefit as global trade flows increase.
* Trade in the Bay Area: Investment and Global Financial Flows, report by Bay Area Council Economic Institute for HSBC
** How America is Made for Trade by Professor Matthew J Slaughter