A business guide to international trade and investment

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Key points to remember

  • International trade is essential to the growth and competitiveness of the US economy, with more than 40 million US jobs dependent on trade.

  • A major challenge facing international businesses is the collection of customs duties in relation to free trade agreements.

  • America’s success in international trade largely depends on its relationships with other major players in the global economy.

International trade and investment have long been important contributors to the US economy. Selling more American goods and services around the world is essential to creating American jobs, stimulating the national economy, and ensuring that American businesses can compete on the world stage.

With fair and enforceable trade agreements, the United States can continue to enjoy economic growth and job creation at home. From the benefits of global markets to foreign relations, here’s what you need to know about the state of international trade in 2021 and beyond.

How trade benefits the US economy

International trade is essential to the Growth and Competitiveness of the U.S. Economy. More than 95% of the world’s population lives outside the United States. More than 40 million American jobs depend on trade, a critical success factor in many sectors of the economy. American manufacturing, agricultural and service industries depend on foreign exports. Trade isn’t just for big business, either: small and medium-sized businesses account for 98% of US businesses that export, as well as one-third of US merchandise exports.

Trade is a two-way street and foreign imports also have a positive impact on the US economy for both individuals and businesses. Imports offer increased choice and lower prices to US consumers, including products that would not otherwise be available. In fact, access to imports increases the purchasing power of the average American household by $18,000 per year. Many companies also depend on foreign imports for raw materials, intermediate goods and capital goods, which helps reduce costs for companies, allowing them to be more competitive in their respective markets.

International investment can support U.S. businesses and help fill export gaps

In addition to engaging in international trade, U.S. businesses can access foreign markets and enhance their competitiveness through international investment. Some sectors cannot be easily served by US exports, due to high transportation costs or trade barriers. These gaps can easily be filled by investments abroad.

While public opinion is largely supportive of international investment, some worry about whether it will actually support the US economy and production. Although some Americans fear that international investment will simply substitute foreign production for domestic production (thereby replacing American workers with lower paid foreign labor), more than 90% of foreign production stays abroad. Additionally, two-thirds of U.S. multinational capital spending and employment stays here at home, and two-thirds of that foreign investment goes to developed countries with labor standards and wages similar to those in the US. America.

Similarly, investing is also a two-way street. The United States welcomes foreign investment in our economy, in sectors from energy to infrastructure, and the American jobs it creates. Companies from Europe, Japan, Canada and elsewhere have invested trillions of dollars in the United States and employ 8 million Americans. These investments strengthen our economy and contribute significantly to research and development and innovation.

Relations between the United States and other major players in the world economy

America’s success in international trade largely depends on its relationships with other participants in the global economy.

The relationship between China and America remains complex. Although the two countries are considered major competitors to each other, their economies also remain intertwined. The complete decoupling of these economies could have a negative impact on both. Yet many of China’s business and regulatory practices present challenges for the American workforce and the global economy as a whole.

Elsewhere, Europe and America have long enjoyed a strong and mutually beneficial trading relationship. Although there has been political turmoil and an economic downturn amid the pandemic, the United States and Europe remain each other’s most important trading and investment partners. American and European companies have combined their sales in their respective markets, exceeding $6.2 trillion a year and supporting the jobs of 16 million workers on both sides of the Atlantic.

The United States’ main export markets are Canada and Mexico, which together buy about one-third of all United States merchandise exports. Barriers to U.S. exports of manufactured goods, agricultural products and services were eliminated 25 years ago by the North American Free Trade Agreement, which was recently modernized into the United States-Mexico- Canada. The freedom to buy and sell anywhere in North America is a powerful contributor to the dynamism and growth of the American economy.

The freedom to trade

One of the biggest challenges facing international businesses is the collection of customs duties. A tariff is a tax imposed on imported goods and services. However, contrary to popular belief, it is Americans – not foreigners – who pay US tariffs. The average US fare has doubled since 2018.

During the previous presidential administration, the The United States introduced new tariffs on steel and aluminum imports from the European Union, Mexico and Canada, as well as customs duties on several goods from China. In response, China and Europe imposed retaliatory tariffs on American products. Those tariffs remain in place today, with negotiations among policymakers continuing to determine the best course of action moving forward.

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