The Importance of Imports: The “To Do” List
By John Murphy, Senior Vice President, International Affairs, U.S. Chamber of Commerce
We’ve been celebrating “Imports Work for America” week (see earlier posts on what imports mean for American jobs, families, manufacturing, and development). While the Chamber has long argued that boosting exports is vital to our economy, imports also play a critical role.
So how can we better ensure that imports work for America going forward? First, trading away U.S. import barriers to secure better access to foreign markets is a terrific deal—a true win-win.
Specifically, the United States should move forward with the Trans-Pacific Partnership (TPP), which will eliminate tariffs and other trade barriers between the United States and many of the most dynamic economies of the Pacific Rim.
Among other measures, the TPP eliminates more than 18,000 foreign tariffs — that is, taxes levied on American-made goods by foreign governments. Similarly, the United States will eliminate 6,000 import tariffs.
This is why anti-tax advocate Grover Norquist, president of Americans for Tax Reform, has praised the TPP. “This is both sound foreign policy” and “great economic policy,” Norquist recently told National Journal:
“It’s 4,000 pages of tax cuts. Tariffs … tariffs suck. Tariffs kill jobs. Tariffs slow the economy. This is good. It’s not everything you wanted—no. But it’s progress towards almost everything you wanted.”
As U.S. Trade Representative Michael Froman has written: “With [the TPP and the Transatlantic Trade and Investment Partnership] in place, the United States will be at the center of a free trade zone covering nearly two-thirds of the global economy.” The United States should vigorously pursue such trade agreements.
Separately, Congress has just approved — as if to celebrate Imports Work Week not in word but in deed — a bill to reform the Miscellaneous Tariff Bill (MTB) process. On May 10, the Senate gave final passage to H.R. 4923, the “American Manufacturing Competiveness Act of 2016,” by unanimous consent.
Over the past three decades, MTBs have helped manufacturers cut production costs and maintain their competitive edge by providing temporary relief from select tariffs. These are taxes applied to imported materials and intermediate products that are essential to U.S. manufacturers but are generally unavailable domestically.
However, since the expiration of the last MTB on December 31, 2012, U.S. businesses both large and small have faced hundreds of millions of dollars in higher tariff costs. The negative impact on the competitiveness of American companies has been especially significant for small and mid-sized firms. These higher costs limit the ability of companies to expand production, hire additional workers, or invest in new cost-saving equipment.
The reform bill will set in motion a process through which firms may request tariff relief from the U.S. International Trade Commission. A new MTB package will be assembled in the months ahead on this basis and is likely to be enacted sometime in 2017.
As a matter of fact, the 114th Congress has seen a number of pieces of legislation enacted that display a healthy, pro-growth outlook on trade and imports. Last summer, Congress renewed through 2017 the Generalized System of Preferences (GSP), which had lapsed in mid-2013. Since 1976, GSP has promoted economic growth in developing countries by providing duty-free access to the U.S. market for thousands of selected products from 122 developing countries.
GSP helps keep U.S. manufacturers and their suppliers competitive. Approximately three-quarters of U.S. imports using GSP are raw materials, parts and components, or machinery and equipment used by U.S. companies to manufacture goods in the United States for domestic consumption or for export.
The benefits of GSP are tangible. U.S. importers enjoyed nearly $750 million in savings on import duties under the GSP program in 2012, the last full year the program was in effect.
Also last summer, Congress extended the African Growth and Opportunity Act (AGOA) through September 30, 2025. Since it was enacted in 2000, AGOA has become the cornerstone of U.S. trade and investment policy with regard to sub-Saharan Africa.
Across Africa, U.S. companies of all sizes and sectors see a vast array of business opportunities. In the 2002-2014 period, the continent’s two-way merchandise trade with the United States rose by 47% to reach $72.5 billion.
This increase in trade has led to the creation of thousands of American and African jobs and has fostered an impressive expansion of Africa’s middle class to nearly 350 million consumers. AGOA’s 10-year extension will allow these new trade patterns to take root and flourish.
There’s more on the “to do” list. The Chamber supports the U.S. Optimal Use of Trade to Develop Outerwear and Outdoor Recreation (OUTDOOR) Act, which eliminates tariffs on recreational performance outerwear for which there is almost no production in the United States. Supporters in Congress such as New Hampshire Senator Kelly Ayotte (R-NH) see it this way:
“New Hampshire’s economy relies on the outdoor recreation industry, which generates $4.2 billion in consumer spending in our state each year. This legislation would lower costs for outdoor enthusiasts and companies that sell outdoor recreational apparel, ensuring that they can continue to thrive and create jobs.”
In the end, imports are important because they show that trade is a two-way street — with benefits on both sides.