Emergency Committee For American Trade - Publications

Trade: Discover the Opportunity ^TM

Importance of Trade and Investment to Global Growth and the U.S. Economy

Trade is an increasingly important component of the world economy. In the United States, the share of gross domestic product (GDP) attributable to trade has more than quadrupled since World War II, rising to more than 30 percent in 1999. Global flows of foreign direct investment are also an increasingly important source of worldwide economic growth and integration, and have increased sixty-one fold, from $14 billion to $865 billion between 1970 and 1999. The annual flows of U.S foreign direct investment have grown too, increasing from just under $5 billion annually in the 1960s to nearly $150 billion in 1999.

Trade and investment liberalization have been essential components in the economic growth and high standard of living enjoyed in the United States. As highlighted in the 2001 Trade Policy Agenda recently released by the United States Trade Representative:

Expanded trade -- imports as well as exports -- improves the well-being of Americans. Exports accounted for over one-quarter of U.S. economic growth over the last decade and support an estimated 12 million American jobs. In the American agricultural sector, one in three acres are planted for export purposes, and last year, American farmers sold more than $50 billion worth of agricultural products in foreign markets. Export-related jobs pay 13 to 18 percent more than other jobs.

As further documented in ECAT’s Global Investments, American Returns (GIAR), global integration has strengthened the U.S. economy by generating new U.S. economic activity here at home for American companies and their workers in the form of expanded research and development, capital investments, purchases of inputs and services, exports, and better, higher-paying U.S. jobs. The fact is that American companies with global operations are generally able to make greater contributions to U.S. economic growth than purely domestic firms because of the opportunities provided by world economic growth.

ECAT’s GIAR study and the 1999 Update also demonstrate that the foreign direct investment of American companies has complemented, rather than substituted for, economic activity in the United States in areas determinative of productivity, such as research and development and capital investments. In addition, over 70 percent of the total income earned by the foreign affiliates of U.S. firms is repatriated. This in turn has promoted economic growth and a higher standard of living in the United States.

While job dislocations have occurred in the process of global integration, they have not weakened the U.S. economy. Over the past two decades, as American firms have sought opportunities in global markets, they have maintained some three-quarters of their total employment in the United States. At the same time, the foreign affiliates of American firms are an important market for American companies with global operations, accounting for over 40 percent of U.S. exports. Furthermore, the output of the foreign affiliates of American companies is not flooding U.S. markets; over 90 percent of their exports are sold outside of the United States.

It is also important to note that the global integration of the U.S. and other economies is not a new phenomenon. Indeed, the world achieved a relatively high degree of global integration during the period from the late 1800s to World War I. That integration was reversed, however, as a result of political conflicts and the enactment of shortsighted protectionist trade policies, such as the prohibitively high Smoot-Hawley tariffs in the Tariff Act of 1930 that presaged the great U.S. depression. Much of the last half of the 20th century, then, was an effort to regain the level of integration that had been achieved by World War I. It was only in the early 1980s that the world was able to exceed the level of economic integration achieved in that earlier period.

The Continued Need for Trade Outreach and ECAT's Trade: Discover the Opportunity ^TM Program

Despite the importance of trade and investment liberalization in supporting economic growth and a high standard of living in the United States, there remains much skepticism in Congress and the broader public on whether the United States should continue to pursue liberalized trade and investment. In a recently published book, Globalization and the Perceptions of American Workers, Drs. Kenneth Scheve and Matthew Slaughter review public opinion surveys dating back to the 1930s documenting this uncertainly. Their review indicates that while a large majority of Americans acknowledge the gains from globalization, a plurality to a majority are worried about the impact of trade and globalization on labor issues, particularly lower wages and the loss of jobs.

In Congress as well, there remains uncertainty over the value of liberalized trade and investment policies. Trade-negotiating authority legislation (so-called fast track or trade promotion authority) expired in 1994 and has not been renewed since. While the 106th Congress passed several important pieces of trade legislation -- indeed more trade legislation than any other Congress in the last 20 years, including Permanent Normal Trade Relations with China and the Trade and Development Act of 2000 -- there remain deep divides on the role, objectives, and value of U.S. trade and investment policy. These divides were particularly apparent in negotiations over the Trade and Development Act which aimed to provide greater access to apparel and other products from eligible Caribbean Basin and sub-Saharan African countries. The final legislation, while important, provided much more limited benefits than many had sought. As well, many Members of Congress remain focused on the large U.S. trade deficit as a symptom of the failure of U.S. trade policy, rather than a result of macroeconomic factors, such as higher demand and lower savings in the United States. Notably, on November 14, 2000, the Congressionally established Trade Deficit Review Commission released a report -- divided along partisan lines -- on the causes and impact of the trade deficit. The primary area where members were able to achieve consensus, however, was on the need to provide effective worker adjustment assistance.

Given the gap between public perception and most economic studies that demonstrate the value of trade and investment liberalization to the growth of U.S. economy, it is clear that trade education efforts must continue and be reinvigorated. ECAT is committed to continuing and heightening its efforts in this area. Among the top projects on ECAT’s 2001 agenda is the commissioning of a new study on the linkages between trade and investment liberalization and the new economy. ECAT also plans to continue the use and development of its trade education messages to communicate the benefits of trade to Congress and as well as to American workers and their families through its website-based employee trade outreach program, entitled Trade: Discover the Opportunity ^TM.

New ECAT Study on U.S. Trade and Investment Policy and the Growth of the New Economy in the 21st Century

Information technology, e-commerce, and other parts of the so-called new economy have, along with trade and investment, played an enormous role in the continued growth of the U.S. economy during the last decade. Indeed, some economists have suggested that nearly two-thirds of productivity gains of the U.S. economy can be traced to high-tech investments made over the past five years and that information technology has contributed over one-third of economic growth since 1995.

There is extensive discussion of the economic impacts of globalization on the one hand and the new economy on the other. But to date, relatively little analysis has examined the economic and policy linkages between these two issues, in a framework aimed at better informing U.S. trade and FDI policies. This matters, because many new-economy forces have become important in large part because of the opportunities globalization presents American firms and their workers. Based on the foundation laid in ECAT’s path-breaking GIAR study, ECAT has commissioned a new study by noted Dartmouth College international economist Dr. Matthew Slaughter to examine the role that U.S. trade and investment policy plays in the growth of the new economy. The study will be based on an analysis of publicly available U.S. government data, academic research, public-opinion surveys, focus-group research, and company case studies.

The proposed study has several goals. One is to define the new economy and document its contribution to U.S. economic growth. It is important to note that the so-called "new economy" is not limited to e-commerce and technology companies, but consists of all parts of the U.S. economy where technology helps companies to produce or serve their customers more efficiently and competitively. A second goal is to explain the role that U.S. trade and FDI have played in enabling the growth of the new economy. Here, particular attention will be paid to both the producers and users of many new-economy technologies. A third goal is to relate study findings to U.S. trade policy, in particular both to public ambivalence about globalization and to the importance of fostering a renewed public and private commitment to promoting a skilled U.S. workforce via meaningful retraining and skill enhancement programs.

ECAT plans to release this new study in Spring 2001. Once the study is released, ECAT plans to incorporate the results of this study in ECAT’s other trade education efforts as described below.

ECAT's Trade Education Messages

ECAT’s trade education messages are based on focus group research on public attitudes and sentiments about trade carried out with ECAT member company employees and the general public in different parts of the country. The findings of the research indicate that pro-trade supporters need to talk about trade in ways that not only inform, but also respond to public anxiety about the impact of trade and economic expansion. The research also revealed that positive trade messages must be: (1) credible, and not "oversell" the benefits of trade; (2) centered around how trade and investment support a better home and family life; (3) focused on the ways in which employees personally benefit from their company’s role in trade, and (4) organized around the theme of trade as a road to life and growth.

The research also found that certain words and phrases are more effective than others when talking about trade. Words such as higher standards of living, unlimited possibilities, choice, pioneer, opportunity, growth and explore are all positive terms to use when describing the benefits of trade. In contrast, words such as open trade, free trade, open markets, competition, more jobs, or global economy are likely to raise public anxiety about trade and should be avoided in communicating the benefits of trade.

ECAT has shared its message research with the broader U.S. business community, to help to shape communications on key issues on the U.S. trade agenda. In 1999, ECAT’s message research formed the basis of the communications developed by the U.S. Alliance for Trade Expansion for the Seattle WTO ministerial. ECAT also used the message research in developing its "food chain" proposal intended to put the spotlight on the human aspects of trade liberalization by focusing on the elimination of barriers to food trade. In 2000, ECAT’s message was used as the basis for the advertising and development of materials to promote PNTR with China.

In 2001, ECAT plans to broaden this message, combined with the results of its study on the new economy, to help rebuild the national consensus on the value of trade and investment liberalization as the foundation for seeking Congressional support for trade-negotiating authority legislation and other trade measures.

ECAT's Trade: Discover the Opportunity (TDO)^TM Employee Outreach Program

In October 1999, ECAT Chairman Ernest Micek and Congresswoman Jo Ann Emerson (R-8 MO) inaugurated ECAT’s innovative, website-based employee trade education program at a full day trade education training session for ECAT member companies in St. Louis, Missouri. The TDO program is based on ECAT’s message research and is constructed around the themes of opportunity, growth, and success for individual employees. The program messages focus on how trade is helping employees achieve a better life and offers real life examples of ordinary Americans who are achieving their dreams because of expanding trade opportunities.

Under the TDO program, each subscribing ECAT member company is supplied with a set of trade education materials, such as posters and a newsletter template, which can be downloaded from the TDO portion of ECAT’s new website. The TDO website also includes a "best practices" bulletin board, where we are encouraging ECAT member companies to share their experiences in implementing trade education programs. The materials are designed to be easily modified to fit individual company communications styles.

In 2000, ECAT provided materials to all ECAT member companies and the broader business community for use in educating employees about the importance of enacting PNTR treatment for China.

In 2001, ECAT will use its new study on the new economy to revitalize this message and create new materials on the importance of trade and investment liberalization for American workers and their families.


	Trade: Discover the Opportunity ^TM Importance of Trade and Investment to Global Growth and the U.S. Economy Trade is an increasingly important component of the world economy. In the United States, the share of gross domestic product (GDP) attributable to trade has more than quadrupled since World War II, rising to more than 30 percent in 1999. Global flows of foreign direct investment are also an increasingly important source of worldwide economic growth and integration, and have increased sixty-one fold, from $14 billion to $865 billion between 1970 and 1999. The annual flows of U.S foreign direct investment have grown too, increasing from just under $5 billion annually in the 1960s to nearly $150 billion in 1999. Trade and investment liberalization have been essential components in the economic growth and high standard of living enjoyed in the United States. As highlighted in the 2001 Trade Policy Agenda recently released by the United States Trade Representative: Expanded trade -- imports as well as exports -- improves the well-being of Americans. Exports accounted for over one-quarter of U.S. economic growth over the last decade and support an estimated 12 million American jobs. In the American agricultural sector, one in three acres are planted for export purposes, and last year, American farmers sold more than $50 billion worth of agricultural products in foreign markets. Export-related jobs pay 13 to 18 percent more than other jobs. As further documented in ECAT’s Global Investments, American Returns (GIAR), global integration has strengthened the U.S. economy by generating new U.S. economic activity here at home for American companies and their workers in the form of expanded research and development, capital investments, purchases of inputs and services, exports, and better, higher-paying U.S. jobs. The fact is that American companies with global operations are generally able to make greater contributions to U.S. economic growth than purely domestic firms because of the opportunities provided by world economic growth. ECAT’s GIAR study and the 1999 Update also demonstrate that the foreign direct investment of American companies has complemented, rather than substituted for, economic activity in the United States in areas determinative of productivity, such as research and development and capital investments. In addition, over 70 percent of the total income earned by the foreign affiliates of U.S. firms is repatriated. This in turn has promoted economic growth and a higher standard of living in the United States. While job dislocations have occurred in the process of global integration, they have not weakened the U.S. economy. Over the past two decades, as American firms have sought opportunities in global markets, they have maintained some three-quarters of their total employment in the United States. At the same time, the foreign affiliates of American firms are an important market for American companies with global operations, accounting for over 40 percent of U.S. exports. Furthermore, the output of the foreign affiliates of American companies is not flooding U.S. markets; over 90 percent of their exports are sold outside of the United States. It is also important to note that the global integration of the U.S. and other economies is not a new phenomenon. Indeed, the world achieved a relatively high degree of global integration during the period from the late 1800s to World War I. That integration was reversed, however, as a result of political conflicts and the enactment of shortsighted protectionist trade policies, such as the prohibitively high Smoot-Hawley tariffs in the Tariff Act of 1930 that presaged the great U.S. depression. Much of the last half of the 20th century, then, was an effort to regain the level of integration that had been achieved by World War I. It was only in the early 1980s that the world was able to exceed the level of economic integration achieved in that earlier period. The Continued Need for Trade Outreach and ECAT's Trade: Discover the Opportunity ^TM Program Despite the importance of trade and investment liberalization in supporting economic growth and a high standard of living in the United States, there remains much skepticism in Congress and the broader public on whether the United States should continue to pursue liberalized trade and investment. In a recently published book, Globalization and the Perceptions of American Workers, Drs. Kenneth Scheve and Matthew Slaughter review public opinion surveys dating back to the 1930s documenting this uncertainly. Their review indicates that while a large majority of Americans acknowledge the gains from globalization, a plurality to a majority are worried about the impact of trade and globalization on labor issues, particularly lower wages and the loss of jobs. In Congress as well, there remains uncertainty over the value of liberalized trade and investment policies. Trade-negotiating authority legislation (so-called fast track or trade promotion authority) expired in 1994 and has not been renewed since. While the 106th Congress passed several important pieces of trade legislation -- indeed more trade legislation than any other Congress in the last 20 years, including Permanent Normal Trade Relations with China and the Trade and Development Act of 2000 -- there remain deep divides on the role, objectives, and value of U.S. trade and investment policy. These divides were particularly apparent in negotiations over the Trade and Development Act which aimed to provide greater access to apparel and other products from eligible Caribbean Basin and sub-Saharan African countries. The final legislation, while important, provided much more limited benefits than many had sought. As well, many Members of Congress remain focused on the large U.S. trade deficit as a symptom of the failure of U.S. trade policy, rather than a result of macroeconomic factors, such as higher demand and lower savings in the United States. Notably, on November 14, 2000, the Congressionally established Trade Deficit Review Commission released a report -- divided along partisan lines -- on the causes and impact of the trade deficit. The primary area where members were able to achieve consensus, however, was on the need to provide effective worker adjustment assistance. Given the gap between public perception and most economic studies that demonstrate the value of trade and investment liberalization to the growth of U.S. economy, it is clear that trade education efforts must continue and be reinvigorated. ECAT is committed to continuing and heightening its efforts in this area. Among the top projects on ECAT’s 2001 agenda is the commissioning of a new study on the linkages between trade and investment liberalization and the new economy. ECAT also plans to continue the use and development of its trade education messages to communicate the benefits of trade to Congress and as well as to American workers and their families through its website-based employee trade outreach program, entitled Trade: Discover the Opportunity ^TM. New ECAT Study on U.S. Trade and Investment Policy and the Growth of the New Economy in the 21st Century Information technology, e-commerce, and other parts of the so-called new economy have, along with trade and investment, played an enormous role in the continued growth of the U.S. economy during the last decade. Indeed, some economists have suggested that nearly two-thirds of productivity gains of the U.S. economy can be traced to high-tech investments made over the past five years and that information technology has contributed over one-third of economic growth since 1995. There is extensive discussion of the economic impacts of globalization on the one hand and the new economy on the other. But to date, relatively little analysis has examined the economic and policy linkages between these two issues, in a framework aimed at better informing U.S. trade and FDI policies. This matters, because many new-economy forces have become important in large part because of the opportunities globalization presents American firms and their workers. Based on the foundation laid in ECAT’s path-breaking GIAR study, ECAT has commissioned a new study by noted Dartmouth College international economist Dr. Matthew Slaughter to examine the role that U.S. trade and investment policy plays in the growth of the new economy. The study will be based on an analysis of publicly available U.S. government data, academic research, public-opinion surveys, focus-group research, and company case studies. The proposed study has several goals. One is to define the new economy and document its contribution to U.S. economic growth. It is important to note that the so-called "new economy" is not limited to e-commerce and technology companies, but consists of all parts of the U.S. economy where technology helps companies to produce or serve their customers more efficiently and competitively. A second goal is to explain the role that U.S. trade and FDI have played in enabling the growth of the new economy. Here, particular attention will be paid to both the producers and users of many new-economy technologies. A third goal is to relate study findings to U.S. trade policy, in particular both to public ambivalence about globalization and to the importance of fostering a renewed public and private commitment to promoting a skilled U.S. workforce via meaningful retraining and skill enhancement programs. ECAT plans to release this new study in Spring 2001. Once the study is released, ECAT plans to incorporate the results of this study in ECAT’s other trade education efforts as described below. ECAT's Trade Education Messages ECAT’s trade education messages are based on focus group research on public attitudes and sentiments about trade carried out with ECAT member company employees and the general public in different parts of the country. The findings of the research indicate that pro-trade supporters need to talk about trade in ways that not only inform, but also respond to public anxiety about the impact of trade and economic expansion. The research also revealed that positive trade messages must be: (1) credible, and not "oversell" the benefits of trade; (2) centered around how trade and investment support a better home and family life; (3) focused on the ways in which employees personally benefit from their company’s role in trade, and (4) organized around the theme of trade as a road to life and growth. The research also found that certain words and phrases are more effective than others when talking about trade. Words such as higher standards of living, unlimited possibilities, choice, pioneer, opportunity, growth and explore are all positive terms to use when describing the benefits of trade. In contrast, words such as open trade, free trade, open markets, competition, more jobs, or global economy are likely to raise public anxiety about trade and should be avoided in communicating the benefits of trade. ECAT has shared its message research with the broader U.S. business community, to help to shape communications on key issues on the U.S. trade agenda. In 1999, ECAT’s message research formed the basis of the communications developed by the U.S. Alliance for Trade Expansion for the Seattle WTO ministerial. ECAT also used the message research in developing its "food chain" proposal intended to put the spotlight on the human aspects of trade liberalization by focusing on the elimination of barriers to food trade. In 2000, ECAT’s message was used as the basis for the advertising and development of materials to promote PNTR with China. In 2001, ECAT plans to broaden this message, combined with the results of its study on the new economy, to help rebuild the national consensus on the value of trade and investment liberalization as the foundation for seeking Congressional support for trade-negotiating authority legislation and other trade measures. *ECAT's Trade: Discover the Opportunity* (TDO)^TM Employee Outreach Program** In October 1999, ECAT Chairman Ernest Micek and Congresswoman Jo Ann Emerson (R-8 MO) inaugurated ECAT’s innovative, website-based employee trade education program at a full day trade education training session for ECAT member companies in St. Louis, Missouri. The TDO program is based on ECAT’s message research and is constructed around the themes of opportunity, growth, and success for individual employees. The program messages focus on how trade is helping employees achieve a better life and offers real life examples of ordinary Americans who are achieving their dreams because of expanding trade opportunities. Under the TDO program, each subscribing ECAT member company is supplied with a set of trade education materials, such as posters and a newsletter template, which can be downloaded from the TDO portion of ECAT’s new website. The TDO website also includes a "best practices" bulletin board, where we are encouraging ECAT member companies to share their experiences in implementing trade education programs. The materials are designed to be easily modified to fit individual company communications styles. In 2000, ECAT provided materials to all ECAT member companies and the broader business community for use in educating employees about the importance of enacting PNTR treatment for China. In 2001, ECAT will use its new study on the new economy to revitalize this message and create new materials on the importance of trade and investment liberalization for American workers and their families. ECAT - Homepage About ECAT \| Hot Issues \| ECAT Positions Press Releases \| Trade Resources \| Key Trade Votes \| Publications Steel \| CAFTA \| Search \| Members Only Copyright 1999-2002, the Emergency Committee for American Trade