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U.S. deals make it a big week in global trade

Tracey Samuelson Nov 13, 2014
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U.S. deals make it a big week in global trade

Tracey Samuelson Nov 13, 2014
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It’s been a big week for global trade after the U.S. cleared hurdles to push two big deals forward.

First up was the Information Technology Agreement, in which the U.S. and China agreed to cut tariffs on technology products like semiconductors and other high-tech goods. The second cleared an impasse with India over food stockpiling that will, in turn, rejuvenate the Trade Facilitation Agreement, a trillion-dollar accord on international customs procedures.

“Ten years ago, this would have been business as usual,” says Derek Scissors, a resident scholar at the American Enterprise Institute. “Now, these are breakthroughs.”

That’s because there’s been a drought of new trade deals in recent years, so these agreements have given the World Trade Organization fresh momentum.

They also restore American leadership in trade, according to Scissors.

“We’re the ones breaking through the barriers,” he says. “We’re the ones making the deals, and with other important countries like China and India, but nonetheless we’re the common thread. That’s important.”

U.S. companies stand to benefit when the Information Technology Agreement is finalized.

“You go through the companies that are big in this space and a lot of them, say two-thirds, have U.S. names,” says Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics. “Apple, Cisco and you can go down the list.”

The key here isn’t the number of jobs this agreement might create, but the type – steady, high skilled, with good pay, Hufbauer says.

To a lesser extent, American companies that do a large volume of global shipping, like FedEx and UPS, also benefit from the Trade Facilitation Agreement, which will ease the process of moving goods across borders and seek to decrease corruption at ports.

Zooming out, these deals speak to how globally integrated our businesses have become, says Emily Blanchard, a professor at Dartmouth College’s Tuck School of Business.

“In this world with global supply chains, little pieces of product are being added all across borders to create a final product,” she says. “If you have even small transaction costs at every border, those really add up.”

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