The United States is the world’s largest economy and the world’s third largest exporter. Exports account for more than 12 percent of our nation’s gross domestic product, more than 12 million American jobs (and those jobs pay an estimated 13 to 18 percent more than the national average), and nearly half of economic growth in 2010. More than ever, America’s prosperity and security depends on active engagement with the global economy.
For 60 years, the United States has advocated expanding global trade – and for good reason. Academic research has repeatedly demonstrated that countries that have more open economies and engage in international trade enjoy higher growth rates and faster reductions in poverty than more closed economies. Each year, our nation’s GDP is an estimated $1 trillion greater as a result of decades of trade and investment liberalization.
On October 21st, 2011, President Obama signed into law trade agreements negotiated between the United States and Korea, Colombia, and Panama, as well as an extension of the Trade Adjustment Assistance program, which benefits American workers displaced by international trade. Each of these trade agreements brings significant benefits to American manufacturers, services providers, farmers, workers, and consumers.
The U.S.-Korea FTA is of particular significance. The agreement – the most significant U.S. trade achievement since the North American Free Trade Agreement in 1994 – eliminates within three years nearly 95 percent of existing tariffs and other barriers to bilateral trade in consumer and industrial products, providing U.S. manufacturers and service producers virtually unfettered access to the world’s 15th largest economy and its 51 million consumers. As a result, trade flows with South Korea – already America’s 7th largest trading partner – will expand by an estimated $20 billion each year, adding $10 to $12 billion annually to GDP, according to the International Trade Commission (ITC).
In negotiating the agreement, South Korea went far beyond its WTO obligations, permitting market access across virtually all service sectors. This is enormously important to the United States because services account for 80 percent of our nation’s GDP and an equivalent portion of the private sector workforce. For example, under the terms of the agreement American banks, securities firms, insurers, and asset managers may establish or acquire financial institutions in Korea, establish branches, and supply a wide range of products and services cross-border.
Greater participation in foreign markets by U.S. services providers – including financial services –will not only boost services exports and employment but, by fueling the growth of overseas economies, will also help expand overseas markets for other American products and services.
Our major competitors – including the European Union, China, and Japan – continue to negotiate with other nations to gain advantages for their workers and businesses. Congress must renew the President's authority to negotiate further trade agreements, especially given his worthy goal of doubling U.S. exports by 2014.
Today, more than ever, the U.S. economy depends on foreign investment. U.S. subsidiaries of foreign-based companies employ more than 5 million Americans throughout all 50 states – roughly one out of every 20 jobs in this country – paying compensation totaling $320 billion annually. Foreign companies also account for roughly 20 percent of all U.S. exports, 15 percent of private sector research and development, 10 percent of private-sector capital investments, and 12 percent of corporate taxes collected. Ninety-four percent of foreign investment comes from OECD countries, and 98 percent is from private sector firms – only two percent of foreign assets are owned by companies controlled by foreign governments.
Open, stable, and predictable markets are a prerequisite for attracting global capital. While the United States has been the favored destination for foreign investment, it is prudent to be mindful that markets in Europe and Asia are increasingly competitive. The introduction of a single currency in Europe has eliminated currency conversion costs and exchange rate risk, making Europe much more attractive. And with the Chinese and Indian economies growing at 9 and 6 percent respectively, those economies are already attracting enormous amounts of investment capital.
Global capital is very sensitive to changes in the political climate. Poorly considered economic, trade, tax, or regulatory policies risk a 'chilling effect' on the inflow of foreign investment, with results that might well include higher interest rates, lower equity prices, and slower economic growth. Finally, it should be recalled that the United States is the world’s largest investor, with over $10 trillion in assets overseas. Erecting unreasonable barriers to participation in U.S. markets would likely invite retaliation by other countries, at great cost to U.S. interests.
Long-awaited free trade agreements signed into law
24 Oct 2011 • ForumBlog
Forum CEO Praises Signing of Korea, Colombia, Panama Free Trade Agreements
21 Oct 2011 • Press Release
Forum CEO Commends Final Approval of Korea, Colombia, Panama Free Trade Agreements
13 Oct 2011 • Press Release
Sovereign Wealth Funds Fact Sheet (DOC)
23 Jul 2008
Meeting the Challenges of a Global Economy
18 Jan 2008 • Charlotte Business Journal Op-Ed by Rob Nichols
2007 Global Capital Market Survey (PDF)
11 Dec 2007
The Financial Services Forum is a non-partisan financial and economic policy organization comprising the CEOs of 19 of the largest and most diversified financial services institutions doing business in the United States.
The purpose of the Forum is to pursue policies that encourage savings and investment, promote an open and competitive global marketplace, and ensure the opportunity of people everywhere to participate fully and productively in the 21st-century global economy.