Politics & Policy


Despite Democrats' rhetoric, Americans embrace trade.

Whatever Hillary Clinton and Barack Obama say about the fallout from free trade, producers in Indiana and North Carolina are enjoying a golden age of exports.

Both Clinton and Obama promise to halt new trade agreements and force our trading partners to renegotiate their existing deals. Both candidates support actions that would ultimately hurt American producers, consumers, and investors. And both insinuate that our trade partners are actually adversaries.

But Indianans should recognize those trade partners as their fastest-growing customers. According to the U.S. Department of Commerce, Indiana’s producers shipped $26 billion worth of goods to foreign customers in 2007 — 14 percent more than the year before, and 80 percent more than in 2001. In fact, since 2001, the state’s exports have grown at a rate one-third faster than U.S. exports overall. In North Carolina, producers shipped $23 billion worth of goods to foreign customers in 2007 — 10 percent more than the year before, and 59 percent more than five years ago.

In 2007, exports accounted for 20 percent of U.S. manufacturers’ total sales revenues — the highest percentage in modern history. And nowhere in America is manufacturing more important to the economy than in Indiana, where the sector accounts for over 30 percent of the state’s gross domestic product. Manufacturing is also more important to North Carolina’s economy than it is to most other states, accounting for 22 percent of the state’s gross domestic product, ranking it fifth among states in that measure.

In China, Canada, and Mexico — the primary villains in the candidates’ anti-trade narratives — Indiana’s producers are building relationships that are yielding extraordinary returns. Exports from Indiana to China increased by a whopping 36 percent between 2006 and 2007 — twice the rate of total U.S. export growth to China, and nearly four times Indiana’s exports to China in 2001.

Likewise, Indiana’s exports to Canada and Mexico have grown 9 percent from 2006 and 67 percent from 2001, eclipsing overall U.S. export growth to the NAFTA countries in both periods. North Carolina’s exports to NAFTA have grown 46 percent over the past five years — to $7.4 billion.

Export growth is not concentrated is one or two industries either. It is economy-wide and the numbers are staggering. Of 32 broad industry groupings, 28 in Indiana experienced export growth between 2006 and 2007, and 30 experienced growth between 2001 and 2007. Of the 28 industries showing export growth between 2006 and 2007, 23 experienced double- or triple-digit percentage growth. From Indiana’s largest goods-producing industries to its smallest, strong export growth is evident.

The fact is that U.S. manufacturing is thriving. But Clinton and Obama never mention that U.S. factories account for 21 percent of the world’s manufacturing output, while China’s account for just 8 percent. Instead, at the behest of the steel industry, unions, and other protectionist lobbies, the Democratic candidates are threatening to take harsh actions against China and other American trading partners.

Blaming trade for all that ails us is a time-honored political tradition. Acting on that impulse by imposing trade barriers or otherwise retreating from the global economy is never the proper course, but it would be particularly foolish now, with industry after industry experiencing an export boom.

That boom couldn’t be happening at a better time. In the past, whenever the U.S. economy slowed, the world economy slowed along with it. But with the awakening of demand in developing economies, growth remains strong in many parts of the world. The U.S. slowdown might therefore be short-lived, as export growth keeps the economy moving ahead. That is, unless policymakers do something to jeopardize America’s access to foreign markets.

As the residents of Indiana and North Carolina understand, and Senators Clinton and Obama must realize, our trading partners are our customers. We don’t want them to take their business elsewhere.

– Daniel Ikenson is associate director of the Cato Institute’s Center for Trade Policy Studies.


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