An honest and intelligent debate about the impact of trade and investment liberalization on the United States requires the separation of fact from fiction.

MYTH: Liberalization undermines environmental protection laws and harms the environment.

TRUTH:

• Trade agreements do not dictate U.S. environmental law or undermine U.S. environmental laws. International trade agreements require the United States only to apply the same standards to imported products that it applies to domestic products. Trade agreements do not prevent other countries from applying the same environmental standards to U.S. goods that they apply to their own goods.
• To achieve environmental sustainability, countries need good environmental laws and effective enforcement of those laws. Liberalized trade produces higher incomes and economic growth that make it possible for countries to improve their environmental laws and law enforcement.
• The U.S.-Singapore and U.S.-Chile Free Trade Agreements require the governments of the United States, Chile and Singapore to (1) effectively enforce environmental laws, (2) ensure that they do not weaken their environmental laws to encourage trade or investment, and (3) ensure that violations of their respective environmental laws are subject to sanctions by legal procedure.
• Liberalized trade helps improve environmental protection by lowering the barriers to the sale of environmental technologies; enabling new investments in environmental infrastructure; and making it easier for environmental scientists, engineers and technicians to provide services to developing countries.

MYTH: Liberalization undermines protection for labor.

TRUTH:

• Trade agreements do not require the United States to change its labor laws or undermine U.S. laws protecting labor rights.
• Trade liberalization does not undermine worker rights. In fact, the opposite is true. In a study of 44 developing countries that engaged in significant trade liberalization, the Organisation for Economic Co-operation and Development (OECD) found that “there was notably no case where the trade reforms were followed by a worsening of association rights” and that freedom-of-association rights improved in 32 of the countries after trade liberalization.
• The U.S.-Singapore and U.S.-Chile Free Trade Agreements require the governments of the United States, Chile and Singapore to (1) effectively enforce labor laws, (2) work to ensure that International Labor Organization (ILO) principles are protected by their domestic laws, (3) ensure that they do not weaken their labor laws to encourage trade or investment, and (4) ensure that legal proceedings are available to sanction violations of labor laws.

MYTH: Trade agreements undermine U.S. sovereignty by giving international bureaucrats the power to strike down U.S. laws.

TRUTH:

• Only the U.S. Congress and the U.S. president can make U.S. law, no international institution or foreign country can change U.S. laws.
• Decisions by the World Trade Organization (WTO) and the North American Free Trade Agreement (NAFTA) dispute panels cannot override U.S. law. Those panels can only issue recommendations, and these recommendations have no force in the United States. Only the Congress and the president can decide whether to implement a panel recommendation. They can (1) revise U.S. law, (2) compensate a country harmed by a U.S. law through reductions in tariffs or other trade barriers, or (3) do nothing — and accept the risk that the other country may retaliate by raising tariffs or other barriers to U.S. exports.
• The United States may withdraw from the WTO, NAFTA, free trade agreements and all other trade agreements at any time.

MYTH: Trade liberalization increases U.S. trade deficits.

TRUTH:

• The United States had trade deficits before the WTO existed and would have them if there were no WTO. The merchandise trade deficit generally grows when the economy grows and shrinks when the economy shrinks.
• The trade deficit is a result of American prosperity. The strength of the U.S. economy means U.S. consumers are able to purchase a wide variety of goods and services, including imports.
• Imports help keep inflation low by ensuring that U.S. consumers have access to a variety of competitively priced goods and that producers have access to low-cost inputs.

MYTH: Trade liberalization causes good U.S. jobs to move overseas.

TRUTH:

• Trade creates good jobs in the United States. Ten percent of all U.S. jobs (approximately 12 million) depend on exports. One in five factory jobs depend on international trade. Jobs that depend on trade generally pay about 13 to 18 percent more than the average U.S. wage.
• U.S. plants that export increase employment 2 to 4 percent faster annually compared to plants that do not export. Exporting plants also are less likely to go out of business.
• U.S. firms that are deeply integrated in worldwide markets are more likely to succeed in generating good jobs at home. Such jobs pay an average wage in the United States of $15,000 more than jobs in firms that are less globally integrated, or $50,000 versus $35,000.
• Contrary to the predictions of a “giant sucking sound,” NAFTA has created good jobs in the United States. In the first eight years of NAFTA, the number of U.S. jobs supported by merchandise exports to Mexico and Canada grew from 914,000 to 2.9 million. Between 1993 and 2000, U.S. employment grew by 20 million. Real hourly compensation in the U.S. manufacturing sector increased by 14.4 percent in the 10 years following NAFTA implementation, as compared to 6.5 percent in the 10 years prior to NAFTA.