December 20 2004
Free Trade: What Global Girls Need
With the holiday season upon us, American women will be shopping for extra groceries and the special outfits required for endless get-togethers -- not to mention gifts needed for under the tree. Women looking for good deals and savings should recognize that it isn't just coupons and holiday sales that are creating bargains -- free trade is helping to fulfill all of these needs.
In fact, if you've gone shopping lately, you've gone global. American stores are teeming with imported products ranging from Australian lamb and Belgian chocolate to flowers from South America.
Even without the holiday rush, free trade helps make women's day-to-day lives better by offering a greater range of goods at lower prices. Trade allows countries to specialize in what they're best at and purchase the products that they're not as competitive in -- making use of what economists refer to a "comparative advantage." The United States doesn't have a comparative advantage in all of the products that we consume, therefore it's best to export what we specialize in and import what we don't.
As a result of trade, consumers have access to products year round that could only be provided during certain seasons by domestic producers. Consumers can purchase flowers and tropical fruits mid-winter thanks to trade. In fact, according to the Progress Policy Institute, nearly half of all flowers sold in the United States come from overseas.
Yet American women, families and consumers would reap greater benefits if more trade barriers were eliminated. The existing barriers to trade limit our choices, regulate and tax our purchases, and stifle economic growth. These trade barriers come in different forms -- each with their own pernicious effects.
One common trade barrier is a tariff or a tax the government collects on each imported good. U.S. policy has even put a tariff on the shirt on your back. According to Edward Gresser of the Progressive Policy Institute, shoes and clothes face among the heaviest tariffs: they account for one fifteenth of U.S. merchandise imports but for nearly half of U.S. annual tariff revenue. The women who burned their bras in the sixties may have been ahead of their time because current U.S. policy is anti-bra. The United States maintains a 17 percent tariff on imported bras. When you purchase an imported bra for $25.00, the tariff comprises $4.25 of the price.
Barriers to trade don't end there. Quotas regulate the quantity of goods and services imported, which increases the cost of those products. As a result, not only are prices higher, but producers have distorted what they export in order to make the most of the quota regime. For example, according to a study by Consumers for World Trade, as a result of the U.S. quotas on textiles, exporters focus on selling more expensive adult sweaters instead of lower-cost children sweaters since both count against the quota. The good news is that on January 1, 2005, all textile quotas will be eliminated when the World Trade Organization's multi-fiber agreement expires.
The U.S. government also employs tariff-rate quotas (TRQ), a combination of traditional tariffs and quotas. Once the quota limit is exceeded, a tariff is imposed. For example, the U.S. imposes a TRQ on imported sugar, which allows domestic producers to charge high prices for their product. The holiday cookies that you're baking cost more because of this policy.
From the televisions that we watch to the flowers we buy, free trade has lowered the prices we pay. But as the sugar and clothing examples indicate, much work remains to be done. Fortunately, Ambassador Robert Zoellick, the U.S. Trade Representative, cares about the global girl. Since taking office in 2001, Ambassador Zoellick has completed trade agreements with Australia, Bahrain, Central America, Chile, Jordan, Morocco, and Singapore just to name a few. These agreements have given American consumers lower prices and expanded choices while also giving American exporters greater access to foreign markets. Zoellick remains hard at work negotiating more agreements -- and more agreements mean more free trade, which is exactly what the global girl needs.
So this holiday season, while raising your cup of eggnog to toast the benefits of free trade, also be sure to put greater trade liberalization on your wish list for next year. The lower prices and greater variety more trade liberalization would create would make next Christmas even merrier.