Trade Facilitation

The Cato Institute’s Daniel Ikenson and World Bank’s Simeon Djankov presented the findings of a new Cato trade policy analysis at the Rayburn House Office Building on July 11.

Ikenson’s paper, entitled Protection without Protectionism: Reconciling Trade and Homeland Security, highlights the disconnect between Americans’ perception of the economy and the realities of international trade.

“The polls tell us that Americans have soured on trade…” said Ikenson. “It’s because Americans are barraged nightly by reports on the news that they’re losing their jobs and that the economy is imperiled by globalization and international trade.”

The reality, according to Ikenson, is that international trade is a boon to the economy, and could be an even greater boon with the help of trade facilitation.

“You talk about trade in terms of export markets,” said Ikenson. “You don’t talk about the benefits of imports. And that is a major oversight. Imports are actually the main benefit of trade. Exports are the icing on the cake.”

While media reports focus on job loss and a dwindling manufacturing industry, Ikenson’s findings tell a different economic tale. He presented what he sees as three myths concerning trade that have been propagated by the media: that the United States manufacturing district is in decline, that the trade deficit is a sign of a poor economy, and that we lack enforcement of the nation’s trade agreements.

According to Ikenson, the manufacturing industry’s struggle has little to do with trade, and people ignore the benefits of imports to the manufacturers.

“People value the probability of losing a lot more than the probability of winning,” said Djankov.

Djankov explained this theory, which he calls trade aversion, as one that dominates the mindset of not just Americans, but other nations that could benefit from trade facilitation to improve the flow of goods and services, both internationally and within their individual countries.

Using formulas of Djankov’s design, Ikenson outlined examples of how trade facilitation could drastically increase profits. For example, it takes five days for containers entering the country to reach customers, and six days to export due to increased checkpoints within the United States. If one day were to be shaved from the processes of goods coming and going, Ikenson claims that $31 billion could be added to trade in one year.

Ikenson called for better cooperation between Department of Homeland Security policies designed to protect the nation from global threats and the global trade that the DHS hinders in the process.

Still, Ikenson and Djankov admit that the US market remains dominated by the trade balance. And as long as the balance shows a deficit of exports, the perception remains negative.

“Trade advocacy is still rooted in this idea that it’s our producers versus their producers,” said Ikenson.

It is Ikenson’s hope that trade facilitation will help bring about a free market trade model at both local and global levels to improve the U.S. and global economies.

“The benefits of improved access to foreign markets are very widespread,” said Ikenson. “We just need to find a new way to pitch it.”

Ben Giles is an intern at the American Journalism Center, a training program run by Accuracy in Media and Accuracy in Academia.