International Free Trade: An Engine for Small Business Growth in Washington State
March 2004
The 2004 Legislature is scheduled to adjourn on March 12. This year's short session has been galvanized by debates over the best way to create jobs and improve the economy. While most of the discussion in Olympia is focused on state-specific tax and regulatory changes, the role of international trade in growing the state's economy cannot be overlooked. Washington is one of the most trade-dependent regions of the world. Of the state's $220 billion Gross State Product, almost $35 billion is exported to other countries. Total trade with Canada, our largest and closest trading partner, is valued at over $21 billion each year.
For Washington, free trade is essential to maintaining a healthy local economy, but the debate over how best to manage trade is at the center of a wider national debate. The North American Free Trade Agreement (NAFTA) recently celebrated its 10th anniversary, and the use of overseas contractors by US companies will be a key issue in this year's Presidential election.
Much of the debate over international trade is focused on the role of big businesses like Boeing, Microsoft and Weyerhaeuser. But small businesses have a vital stake in the lucrative opportunities offered on the world marketplace. One in three Washington jobs is tied to international trade. Other trade statistics help illustrate the importance of international commerce to every area of the state economy. The obvious leader is aircraft and aircraft related products, with Boeing and its legions of small business suppliers exporting more than $20 billion in new products during 2003.
Next on the list are oil, seeds, grains, fruits and other agricultural products at $1.6 billion in exports, then electronic machinery at $1.4 billion, industrial machinery and computers at $1.3 billion and cereals at $1.1 billion each year. Three different categories of wood products comprise more than $1.5 billion in total exports.
Notable for small businesses are the $54 million in live trees, plants and bulbs that are sold abroad each year and over $40 million in ships and boats that our local shipyards build and send out of the country. And add to that the artists and craftsmen in our state who, in 2003, earned almost $25 million through foreign sales.
Despite the benefits of international trade to Washington businesses, some claim that jobs moving overseas threaten the American economy. This familiar refrain is a common concern, but history shows it is misplaced. The debate has been ongoing since the founding of our Republic, but despite the fears of protectionists, our economy grows stronger and more prosperous every generation.
So what is the real story? For the most part, free trade with other countries is good for Washington residents and businesses. By opening up new markets, with new customers and new trading partners, Washington businesses and consumers benefit. International trade does have its downsides. Forrester Research estimates that just over 3 million American service-industry jobs will be lost to overseas competition by 2015. But at the same time, normal turnover results in the loss of as many as 8 million jobs every quarter. This means that the total number of jobs lost to overseas competition over the next ten years represents only 0.93 percent of all jobs lost - hardly a national crisis.
So what happens to those 3 million people? The vast majority quickly find jobs doing something else, probably in a more advanced industry that will take advantage of our free economy to outpace the advances of any foreign competition. In Washington we benefit from our highly skilled and educated workforce. Our educational system and job training programs, while far from perfect, outclass nearly every other region in the world. Simply put, Washington workers and businesses are well prepared to come out far ahead as a result of increased global competition. The resources we conserve through international trade can be used to create new technological innovations, new lifesaving drugs and better quality agricultural and industrial products.
The clear lesson of US and world history is that protectionism never works. Not only does it increase costs for US consumers, but it also fans the fires of international distrust. Trade is not just a mechanism for economic gain, but also a tool for breaking down cultural and historical barriers and fostering productive, peaceful competition between international innovators and entrepreneurs.