Legislation would benefit trade, SoCal businesses

International trade is a critical to Southern California’s economy providing 5.3 percent of the jobs in Los Angeles County.  In the San Gabriel Valley, the impact of international trade is even greater- 6.7 percent of the jobs depend on international trade.

International trade depends on the ability to sell American goods to other countries - 95 percent of the world’s customers live outside the U.S.  According to the U.S. Chamber of Commerce, 97 percent of the 300,000 businesses that export are small and medium sized companies. It is small and medium size business that provide most of the job growth in the U.S.

While trade is generally open, some current tariffs are in the double digits. Regulations can inhibit trade.  Trade agreements can breakdown these and other barriers and allow goods and services to flow more smoothly, thereby growing the U.S. economy.

Currently there are two pieces of federal legislation under consideration which could have huge positive impacts on international trade and Southern California’s economy:

1. The Trans-Pacific Partnership (TPP) Trade Agreement and

2. The Export-Import Bank (Ex-Im) Reform and Reauthorization Act.

The TPP is a giant trade agreement that would include Australia, Brunei, Chili, Malaysia, Mexico, New Zealand, Canada, Peru, Singapore, Vietnam and Japan.  Other countries including Korea might also join.

Trade in the 21st century brings more complications than trade in the past.  Most existing agreements are concerned with eliminating tariffs and setting standards for the sale of goods.  Today’s trade agreements need to also consider the import and export of products like financial services, telecommunications, and intellectual properties, not just cars and corn.  That requires a very different kind of agreement. 

Opponents say the TPP would reduce environmental protections, eliminate American jobs and hurt small businesses.  No one wants to see that happen. But fair rules based on strong negotiated trade agreements level the playing field and help prevent those impacts.

The second piece of legislation is a bill to reform and reauthorize the Export-Import Bank of the U.S.  The Ex-Im Bank is the “official credit agency” of the U.S.  It fills the financing gap for companies that cannot access private financing.  It’s been around for eight decades and since 1990 transactions enabled by the bank have repaid the U.S. Treasury $7 billion more that the bank received in appropriations.  It has a low default rate and holds reserves of $4 billion to cover losses. What do you know- a government sponsored business that makes money and helps create American jobs!

Opponents say the Ex-Im Bank serves big business, but usually don’t mention it also directly serves almost 9,000 small businesses.  And the big businesses Ex-Im does serve buy from small business. International trade benefits both.  Other nations understand the connection. Last year export credit agencies in our top trading competitors provided 18 times more export credit than the Ex-Im Bank.

Getting things done in Washington D.C. is difficult today and that is affecting these trade bills.  Tough global competition requires that politics take a back seat to the ability for free trade and global markets to support our national and local economies.