America Closer to Estonia Than Canada on Free Trade

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A Chinese bank worker counts 100-yuan notes and U.S. dollar bills at a bank counter in Hefei, in east China's Anhui province, September 30, 2010. AFP-Getty Images

What countries have the freest trade? Hint: the United States is not even in the top 10. Countries that are more welcoming to business with foreign states are both small and authoritarian (Singapore at No. 1) and big and democratic (Germany at No. 13). The U.S. places 19th, right below Chile, according to a study from the World Economic Forum.

America slipped three spots down the list, since the 2009 index, as the recession helped freeze negotiations over trade deals, and anti-terrorism rules made it tougher for foreigners to bring products to the U.S. A similar slide, next year, would put America between Estonia and Bahrain, and behind most industrialized nations.

And with voters angry about an economic slump that just won’t quit, America could become even less hospitable to trade. Many Americans believe that the outsourcing of jobs to China and India has held up the economic recovery and kept wages frozen. “There has been a real souring in people’s attitude towards trade,” says Robert Lawrence, a professor of international trade at Harvard University who worked on the WEF study. ”With a very sluggish recovery, people need to find someone to blame, and trade is a logical place to look.”

A poll released by the Wall Street Journal and NBC, Monday, showed that 53 percent of Americans now believe free-trade has damaged the U.S. economy, up from 46 percent three years ago. The sentiment could have real ramifications in Congress, as the economy takes front stage ahead of the mid-term elections. The House just passed a bill that could punish China's importers, if the country doesn’t adjust its currency. And Congress has also stalled trade agreements with Korea and Colombia. The deals are unlikely to move forward if a mood of protectionism sweeps the hill.

Most economists agree that allowing more flow of goods by lowering tariffs is good for the economy—even during a slump. The argument is that while placing taxes on imports – like steel for example—may help some American industries in the short term, it hurts the country over the long haul. More expensive steel means in costs more to make other products that use the metal, raising the price. Also, other countries are likely to hit back with their own tariffs.

America has largely sat out, over the past few years, as nations around the world have made their own free trade pacts . That might have hurt the U.S. more than it hurt its trade partners. America is ranked 116th out of 125 countries on how good its own access is to other markets. That means U.S. businesses are getting hit by worse tariffs than just about any other nation's exporters. “There is a real danger in standing still while others are moving forward,” I.M Destler, a fellow at the Peterson Institute for International Economics told NEWSWEEK. “If we want our economy to grow we need to be able to sell in the parts of the world that are growing.”

 

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