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Global trade

Global Trade

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Open Markets for Consumer Goods

The NRF Retail Opportunity Index encourages Congress to open markets for consumer goods by tearing down trade barriers that drive up prices for American shoppers and limit export markets for American companies, ending regulations that artificially drive up prices, and making it easier for foreign visitors to come to the United States to shop. Learn more.

The Issue

After years of slow-but-steady progress on reducing trade barriers, international trade has come under fire with the election of President Trump and the administration’s focus on manufacturing and reducing trade deficits.

As early as the campaign, Trump proposed “huge” tariffs as high as 45 percent on imports from China, Mexico and other countries, saying that discouraging imports would increase the demand for domestic goods and bring back millions of manufacturing jobs that have been lost in recent years. Since taking office, he has suggested a tax or tariff on imports from Mexico as an option for paying for his proposed border wall to fight illegal immigration. He has also signed an executive order withdrawing the United States from the Trans-Pacific Partnership trade agreement, and has indicated that he wants to review all current free trade agreements.

This spring, Trump notified Congress that he would seek renegotiation of the landmark North American Free Trade Agreement, which has boosted trade between the United States, Canada and Mexico for almost a quarter century. U.S. Trade Representative Robert Lighthizer released the administration’s priorities for a rewritten NAFTA in July, and the first round of negotiations with Canada and Mexico began in Washington in August. NRF submitted comments to USTR this summer, saying a number of the agreement’s provisions need to be “updated and modernized to reflect today’s business environment” including issues such as digital trade, for example, but that the priority in negotiations should be to “do no harm” to the existing pact.

NAFTA renegotiations are now fully underway, and NRF is concerned that recent threats by the White House to withdraw from the agreement 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 a recently published 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 also helped lead recent lobbying visits on Capitol Hill to reinforce the message that the business community supports NAFTA modernization but that withdrawal from the agreement should not be an option. NRF wants Congress to assert its oversight authority to ensure that the negotiations actually improve the agreement rather than weaken it. NRF has also 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.

In another trade development, Trump in August directed Lighthizer to examine whether a formal investigation should be conducted to determine if China has engaged in “unreasonable or discriminatory” policies that have harmed American companies’ intellectual property rights. While Trump did not say what potential trade actions should be taken if harm is found, any tariffs imposed on Chinese consumer products as a result of the investigation could harm U.S. retailers.

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 addition to Trump’s initiatives, a border adjustment tax that would have created a 20 percent tax on all imported goods, including retail merchandise, was included in House Republicans’ “Better Way” tax reform proposal earlier this year. NRF strongly supports tax reform but launched an intensive campaign against the BAT provision, arguing that it would drive up prices for consumers and could put some retailers out of business. After months of debate, the border tax proposal was dropped from the House plan this summer, and the issue has not been raised in the new “United Framework” tax plan that has replaced the Better Way plan.

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 defeated the border adjustment tax proposal in Congress, 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 or import taxes.

Beyond the current issues, NRF has supported a wide range of policy initiatives to remove or reduce trade barriers, and has helped win renewal of a series of important trade provisions that had either expired or were about to expire. Trade Promotion Authority, which allows the House and Senate to consult with the administration on negotiating priorities for trade agreements in return for taking a straight up-or-down vote without amendments once negotiations are done, was renewed with NRF’s support and helped negotiators reach final agreement on the 12-nation Trans-Pacific Partnership. Unfortunately, TPP became bogged down in 2016’s election year politics and never received congressional approval before Trump’s decision this year to withdraw from the agreement.

NRF also helped win a two-year renewal of the Generalized System of Preferences, allowing duty-free treatment for 3,500 products from nearly 130 less-developed countries to continue through the end of 2017. NRF is now working to ensure renewal of the GSP program before it expires. The African Growth and Opportunity Act has been given a 10-year extension through September 2025. And in 2016, a new customs reauthorization bill helping ensure efficient movement of imported retail merchandise through the supply chain was signed into law.

Trade Matters
Trade mattters

Find out how trade agreements impact retailers and families in your state.