It is difficult to escape the relentless drumbeat of politics these days as the last two weeks have been consumed with the major U.S. political parties’ national conventions.
One major international economic issue has emerged in this presidential race: The role of international trade and its relationship to domestic economics and politics.
Leaving aside the question of what is the “right” trade policy, let’s take a look at the numbers involved – which are very interesting.
Bilateral trade – that’s trade from one country to another – saw a shift this year when U.S.-China bilateral trade overtook U.S.-Canada trade for the first time. Some of that shift can be attributed to oil, which we import from Canada. With prices low, the dollar amount of that trading relationship has fallen.
In terms of multi-country trade, a lot of discussion has been paid recently to the Trans Pacific Partnership, or TPP. Its scope is massive: Even though it notably does not include China, the deal still covers Pacific Rim countries that are home to 800 million people, 40 percent of the world’s GDP and one-third of all trade on the planet.
By contrast, NAFTA (the North American Free Trade Agreement that took effect in 1994) covers roughly 28 percent of global GDP while the European Union comprises around 20 percent. Still, if you look again at just trade between the U.S. and China, we are talking about nearly 1.7 billion people and, similar to TPP, roughly 40 percent of global GDP.
One thing to emphasize on all modern trade pacts is that the level of complexity has gotten enormous. Gone are the days of simply haggling over tariffs on textiles.
Trade these days has to deal with e-commerce, international property rights, the internet, 3-D printers and so many other complex issues.
The whole production chain has undergone massive changes as well in just the last decade. The old divisions of raw materials to basic factory production to intermediate production to final product can happen in just one country or in multiple countries across the globe.
My View: Honestly it is hard to find bright spots in this election season. But I am happy that a discussion on trade has emerged as a key issue. It hits very close to home, can be very complicated, is changing as fast as technology is changing and is a big part of our future as a country.
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