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Economy & Trade
Constituting less than 5 percent of the world's population, Americans generate and earn more than 20 percent of the world's total income. America is the world's largest national economy and leading global trader. The process of opening world markets and expanding trade, initiated in the United States in 1934 and consistently pursued since the end of the Second World War, has played an important role in the development of American prosperity. According to the Peterson Institute for International Economics, American real incomes are 9% higher than they would otherwise have been as a result of trade liberalizing efforts since the Second World War. In terms of the U.S. economy in 2013, that 9% represents $1.5 trillion in additional American income.
Such gains arise in a number of ways. Expanding the production of America's most competitive industries and products, through exports, raises U.S. incomes. Shifting production to the most competitive areas of our economy helps raise the productivity of the average American worker and through that the income they earn. With the ability to serve a global market, investment is encouraged in our expanding export sectors and the rising scale of output helps lower average production costs. Such effects help strengthen America’s economic growth rate. Moreover, imports increase consumer choice, and help keep prices low raising the purchasing power for consumers. Imports also provide high quality inputs for American businesses helping companies and their U.S. employees become or remain highly competitive in both domestic and foreign markets.
The potential economic gains from trade for America are far from exhausted. Roughly three quarters of world purchasing power and over 95% of world consumers are outside America's borders. The Peterson Institute analysis also estimated that elimination of remaining global trade barriers would increase the benefit America already enjoys from trade by another 50%. Trade remains an engine of growth for America. The negotiation of further reductions in global barriers and effective enforcement of existing agreements are the tools to reap those additional benefits.
As policy actions taken in the United States and countries around the globe continue to restore economic and job growth, an important part of the recovery will be the restoration of trade expansion. Over the past 5 and one quarter years of recovery (from the 2nd quarter of 2009 to the 3rd quarter of 2014), U.S. real GDP is up 2.3% at an annual rate, and exports have contributed one-third (0.7 percentage points) to this growth. Jobs supported by U.S. exports of goods and services are up an estimated 1.6 million since 2009, to an estimated 11.3 million in 2013.
Rapid trade growth may well act as a transmitter of economic stimulus around the globe and a vehicle of continued recovery, particularly if enhanced by additional efforts to reduce barriers and expand trading opportunities further. Recognition of the long term benefits of expanded trade, as well as the positive role trade can play in the current economic recovery are central factors reflected in the Administration's trade policy.