Alabama Voices: Free trade helps Alabama economy

August 15, 2011

The Montgomery Advertiser

Michael Ciamarra

Adam Smith wrote 235 years ago, "In every country it always is and must be the interest of the great body of the people to buy whatever they want of those who sell it cheaper."

Further, "If a country can supply us with a commodity cheaper than we ourselves can make it, better buy it off them."

Smith's principles still guide today's global economy.

Long overdue is the need for Congress to ratify the pending bilateral trade agreements, free trade agreements, with Colombia, Panama and South Korea. Congress, despite its endless dramas, is inching closer to that important vote.

Free trade's benefits are lasting to main street America and are essential to enhancing prosperity. Free trade benefits all the partners who learn the rules of engagement. Free trade's reciprocity is "insourcing" -- Mercedes, Hyundai, Toyota, to name a few, all have successful operations in Alabama.

According to the U.S. Dept. of Commerce, only 1 percent of U.S. companies export and 95 percent of the world's consumers live outside the United States. The infallible logic here is that there is huge opportunity for new markets for small- and medium-sized businesses. By delaying ratification of these trade agreements Washington places our nation at a further competitive disadvantage and will cost the U.S. GDP billions.

The most effective way to increase American exports is through free trade agreements, or FTAs. According to the U.S. Chamber of Commerce, total trade of U.S. exports worldwide were $462.7 billion higher than they otherwise would have been because of the FTAs currently in place. The current FTAs support 5.4 million jobs, and products made in the United States exported to FTA partners grew nearly three times as rapidly as did our exports to the rest of the world between 1998 and 2008. FTAs are dramatically beneficial to medium and smaller businesses which in turn create new jobs.

Alabama's engagement in the global marketplace has accelerated over the past decade with significant results. That said, very much like the challenge from the U.S. Dept. of Commerce's National Export Initiative on a national level, Alabama needs a focused export strategy to be one of the best export performers in the nation.

We have dedicated trade professionals and two renowned trade services -- the Alabama State Port Authority and the Port of Huntsville. According to a recent Alabama Trade Center report, state exports of manufactured goods rose to $15.5 billion in 2010 -- an increase of nearly 26 percent over 2009.

In aggregate, more than 35,000 Alabama jobs are directly supported by exports, according to the US Chamber. Alabama ships to more than 180 countries with the top destinations being Canada, China and Germany.

With the more than 360 foreign-based companies located in Alabama, the level of exports and the number of companies investing in Alabama are directly correlated.

The U.S. Chamber Foundation's recent Enterprising States report points out that of the top 10 export performers in the nation, five are neighboring Southern states. Alabama ranks 27th nationally and remains 10th among Southern states in terms of total export volume.

What can we learn from other states and how can we improve? State policymakers must look at best practices, investment, future trends and develop new strategies to accelerate Alabama's worldwide presence through export capabilities.

Advancing free trade creates economic activity that encourages continual innovation, which leads to better products, new markets and greater investment. Bottom line is that every $1 billion in exports will create 15,000 jobs for Alabama workers.

Adam Smith got it right -- the global marketplace is a challenging reality for all nations. Is Alabama ready to go from good to great? As a state we have proven ourselves good when it comes to trade and marketing in the global economy. The next few years are critical in our efforts to become great. Unleashing Alabama's potential in the global economy by doubling our exports in the next five years needs to be one of the cornerstones of solutions for our economy and creating jobs.

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