Stop the Whining — Why Free Trade Matters for Exports

Given all the current talk around how China has played its so-called free trade cards unfairly (which we believe, mind you) it would be easy to turn around and argue for a system with more controls. But when everyone plays by the free trade rules fairly, it can have a positive impact on our economy as much as any other. This recent piece from the National Association of Manufacturer's Shop Floor blog highlights why, using one of my favorite commodities as an example: wine. The post argues for supporting the US-Korean Free trade agreement, which will remove "tariff and non-tariff barriers" for manufactured goods and processes foods, not to mention for US companies that provide services as well.

The reasons it's important to support such legislation becomes all the more clear if we look at "a cautionary tale about what happens when you put trade agreements on pause." To wit, "In 2001 the U.S. had a 5 percent share of Korea's wine market, and Chile had zero percent." Yet only three years later, Chile signed a free trade agreement with Korea. In this year (2004), both Chile and the US had an equal 9% market share of the Korean wine market. Yet after the free trade agreement's enactment, when "Korea's tariffs on wine went to zero for Chile but remain[ed] very high for the United States," Chile's overall share of the Korean wine market climbed to 15% (while the US stagnated at the low double digits).

In times where it is easy and justifiable to place blame on countries like China for playing zero-sum trade and currency games, we must not forget the benefits of working with other nations willing to play by the free trade rules. Procurement and supply chain organizations should gear up for new free trade agreements like the one that will soon (we hope) be put into place with Korea by analyzing both supply and customer opportunities which, from a total cost basis, could very well be significantly more attractive than before.

And besides, let's take it as a breath of fresh air that a civilized nation with a sustainable free trading policy is watering down its consumption of that horrible, dangerous stuff that passes for wine in China and ramping up US and Chilean imports. That oxidized rocket fuel has no place in Asia let alone the West, aside from cleaning out melamine and lead paint canisters within its home country.

Jason Busch

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