It should come as no surprise that I tend to get speaking requests from groups that see free trade as a great lubricant for economies and businesses large and small. Between our annual TradeNumbers publications, which we produce for communities around the country, and our website www.ustradenumbers.com, I am seen as, if not completely “in the tank” for the free-trade crowd, then at least favorably inclined to speak about it, well, freely.
Invariably, when speaking to these groups, someone will ask about — or more generally make an assertion about the benefits of — free trade agreements and presidential “fast-track” authority.
Doesn’t matter the crowd. It happened when I spoke to crowd of real estate brokers, investors and property owners at a national industrial real estate conference in Chicago earlier this year. It happened this summer when I spoke to logistics and manufacturing executives gathered for an annual conference in Laredo, Texas. And it came up earlier this month when I spoke to the Atlanta branch of the Federal Reserve’s transportation and logistics committee.
So, what happens with U.S. trade once an FTA is in place? And, bringing it home to South Florida, what happens here, once an FTA is in place?
Quickly, some background. Although all FTAs have differences and distinctions, they generally allow for most goods to be exported and imported freely, without duty, tariff or quota. Quite often, with controversial products or items, these obstacles or protections are phased out.
The United States’ best-known FTA is NAFTA — the North America Free Trade Agreement, which in 1994 added Mexico to an FTA previously in existence between Canada and the United States. But the United States, while lagging many other nations, has a host of other FTAs, including the 2005 Dominican Republic-Central America Free Trade Agreement, better known as DR-CAFTA, and bilateral FTAs with Israel (1985), Jordan (2001) Australia (2004), Chile (2004), Singapore (2004), Bahrain (2006), Morocco (2006), Oman (2006), Peru (2007), Colombia (2011), Panama (2011) and South Korea (2011).
Among the nation’s top 10 trade partners, which account for almost two-thirds of all U.S. trade, the United States is in FTAs with only three: No.1 Canada, No.3 Mexico and the recently added South Korea, the nation’s No. 6-ranked trade partner. The United States is not in FTAs with No.2. China, No.4 Japan, No.5 Germany, No.7 United Kingdom, No.8 France, No.9 Brazil or No.10 Saudi Arabia.
Back to the question at hand. Here are some quick data points, using data through August, the most recent U.S. Census Bureau data available, regarding U.S. FTAs:
As a percentage of total U.S. trade, none of the 15 FTAs is setting a record for greatest percentage so far this year. In other words, every one of the FTA partners has had a greater percentage of U.S. trade at some point in the last 10 to 12 years than currently.
A slightly different story with exports. Colombia is accounting for 1.24 percent of all U.S. exports in 2014, a record, and the third year above 1percent. Chile, while not at a record level, is accounting for more than 1percent of all U.S. exports for the fourth consecutive year. For the third consecutive year, Oman is accounting for 0.11 percent of all U.S. exports, a record.
On the import side, Bahrain is tying a previous record of 0.04 percent. Going back to total trade, this year, U.S. trade within all FTAs is up 3.65 percent while U.S. trade with the world — all nations, whether within an FTA or not — is up 3.18 percent. Going back five years, when many but not all of the FTAs were in place, FTA trade is up 68.65 percent compared to 58.62 percent for all trade. All other things being equal, FTAs are good for trade.
U.S. exports are up 4.80 percent within all FTAs compared to 3.33 percent for all U.S. trade. Going back a similar five years, FTA trade is up 73.01 percent while all trade is up 60.35 percent. FTAs are good for U.S. exports — again, all other things being equal.
U.S. imports are up 3.08 percent from 2013 while imports within FTAs are up a lesser 2.60 percent. Going back five years, imports are up 64.79 percent for FTA trade partners compared to 57.44 percent for the world. Imports from FTA nations are rising faster over the long haul, just not when compared to last year.
The impact of the above? Overall FTA trade — exports combined with imports — is accounting for 40.31 percent of all U.S. trade through the first eight months of 2014, compared to 37.92 percent through the same time period in 2009, five years ago.
What of South Florida? Here are some data points:
For total trade, only one FTA partner of consequence — Chile — is running at a record percentage.
Through the first eight months of 2014, Chile is accounting for 4.53 percent of all South Florida trade. Bahrain is also at a record level, though that record is only 0.07 percent.
On the other end of the spectrum, the DR-CAFTA nations account for 18.80 percent of all South Florida trade in 2014, the second-lowest total in a decade and well below the record 30.73 percent in 2003. Sometimes, economic conditions or changing supply chains can trump benefits of an FTA.
For exports, South Florida trade with three nations is at a record level: Colombia, at 8.62 percent of all exports; Panama, at 2.99 percent; and South Korea, at 0.31 percent. For imports, shipments from Chile are at 3.49 percent of all South Florida imports, a record.
But how are South Florida trade partners covered by an FTA performing compared to all trade partners? Not particularly well. When comparing this year to last, South Florida trade within FTAs is down 10.31 percent compared to 4.86 percent for all trade partners. In fact, $3.49billion of the $3.89billion decrease in South Florida trade this year is within the FTA nations. Of that, $1.63billion is within DR-CAFTA, mostly in computer chips imported from Costa Rica, and $1.22billion with Peru, most of that gold imports into South Florida.
Over the five-year period, it’s actually more balanced. Trade within the FTA is up 51.84 percent compared to 51.67 for the entire world.
Next week, I will look at how balanced South Florida trade is within FTAs when compared to its overall trade — what has happened to surpluses and deficits — and how South Florida fares with FTAs when compared to other U.S. Customs districts.
Ken Roberts is president of WorldCity, a Coral Gables company focused on import-export trade and multinationals’ impact on local communities. Reach him at firstname.lastname@example.org.
South Florida trade within FTA’s
Change in rank
August 2014 YTD
Total South Florida Trade
Source: WorldCity analysis of U.S. Census Bureau data