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After years of slow-but-steady progress on reducing trade barriers, international trade has come under fire from President Trump, who has maintained that discouraging imports would increase the demand for domestic goods and bring back millions of manufacturing jobs. Within days of taking office, he signed an executive order withdrawing the United States from the Trans-Pacific Partnership trade agreement, and indicated that he wants to review all current free trade agreements.
Trump followed by launching renegotiation of the landmark North American Free Trade Agreement, which has boosted trade between the United States, Canada and Mexico for a quarter century. The first of several rounds of talks with Canada and Mexico began in August 2017 and are expected to continue through the spring of 2018.
Why it Matters to Retailers
Rather than new tariffs, NRF believes the United States needs a 21st century trade policy that would not only improve American families’ standard of living but also create more U.S. jobs. Outdated import tariffs – which drive up prices for American consumers on imported goods and limit U.S. exports when other countries pass retaliatory tariffs – should be eliminated. Trade policy should recognize that both exports and imports create American jobs in fields such as research and development, distribution, transportation, merchandising, sales and a host of other well-paid fields.
Retailers rely heavily on imported merchandise to provide American families with the products they need at prices they can afford. Imports have reduced the prices of a wide range of consumer products – television sets are down 87 percent over the past decade, computers 75 percent and toys 43 percent, according to the Imports Work for America study conducted for NRF. But prices could be even lower if not for protectionist tariffs as high as 48 percent on shoes, 32 percent on apparel and 26 percent on dinnerware, for example. At $138.7 billion annually, home furnishings are the nation’s second-largest category of imported goods after automobiles, followed by apparel at $99.8 billion. Imports support more than 16 million U.S. jobs – including retail workers and many individuals who shop in U.S. stores.
Another study performed for NRF – Trade Matters for Retailers and Families – found that international trade supports 6.9 million jobs in the retail and restaurant industries alone. Of that number, more than half come from countries that would have been part of the now-blocked Trans-Pacific Partnership and the Trans-Atlantic Trade and Investment Partnership, which also has an uncertain future. The study highlights $6 billion in annual tariffs that could have been eliminated if the two agreements became law. It also breaks down trade’s benefits with state-by-state statistics on employment and economic contributions.
NRF Advocates for Global Trade
NRF is working to ensure that renegotiation of NAFTA does not harm the underlying agreement, and is closely monitoring other issues. NRF is working on Capitol Hill and with the administration to educate policymakers on the importance of international trade to the economy and to warn of the negative impact that would come with new tariffs.
NRF agrees that a number of NAFTA’s provisions need to be updated to reflect today’s business environment, including issues such as digital trade, for example. But NRF responded told the Office of the U.S. Trade Representative that the priority in negotiations should be to “do no harm” to the existing pact.
NRF has said threats by the White House to withdraw from NAFTA or include a sunset provision “should be a non-starter.” Other proposals to include restrictive new rules of origin, new trade remedies or the elimination of investor protections would significantly weaken the agreement and should be rejected. In an op-ed, NRF President and CEO Matthew Shay said an end to NAFTA would cost the United States jobs and harm the economy while resulting in higher prices for consumers and reduced availability of products ranging from apparel and electronics to fresh fruits and vegetables.
NRF has helped lead lobbying visits to Capitol Hill to reinforce the message that the business community supports NAFTA modernization but that withdrawal should not be an option. NRF wants Congress to assert its oversight authority to ensure that the negotiations improve the agreement rather than weaken it. NRF has joined with other business groups in sending letters to negotiators emphasizing specific issues such as investor-state dispute settlement, perishable seasonal products, tariff preference levels and Mexican trucks entering the United States.
Trump’s actions and proposals ignore the fact that many of the affected goods are no longer made in the United States. Retailers and other importers could not easily or quickly switch to domestic sources because they do not exist on the scale that would be needed. Even if there were to be an eventual switch to U.S. sourcing, it would take years to build up a base to support it. And new U.S. factories would likely be high-tech and highly automated, creating relatively few new jobs.
In 2017, NRF and other business groups formed the U.S. Global Value Chain Coalition to educate the public and policymakers about the U.S. jobs and economic contributions included in products manufactured elsewhere. In one example, a study conducted for the coalition found that 75 percent of the retail price of five types of apparel examined goes to U.S. contributors.
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Find out how trade agreements impact retailers and families in your state.