Because of the massive size of the American economy, the country has a significant impact on global trade. When the American economy is expanding, it can prompt growth in other nations. However, when the U.S. economy contracts, it usually initiates parallel declines in other countries. Imports of foreign goods have helped keep prices low and meet consumer demand in the United States. The volume of these imports has resulted in a record $447 billion trade deficit, but foreign investment in the country has underwritten this deficit and provided new capital for the economy to expand. Exports in 2000 stood at $776 billion, while imports stood at $1.223 trillion.
In 2000, the country's main export partners were Canada at 23 percent of trade, Mexico at 14 percent, Japan at 8 percent, the United Kingdom at 5 percent, Germany at 4 percent and both France and the Netherlands at 3 percent each. The nation's main import partners are Canada at 19 percent, Japan at 11 percent, Mexico at 11 percent, China at 8 percent, Germany at 5 percent, and both the United Kingdom and Taiwan at 4 percent each. During the 1990s, trade with Canada and Mexico expanded as a result of trade agreements. Meanwhile, consumer demand for electronic products and automobiles led to increases in Japanese imports. At the same time, trade with Europe grew more slowly and even declined in certain markets.
The country's closest trade relationship is with Canada. On average, $1 billion worth of goods and services cross the border between the United States and Canada each day. Trade with Canada exceeds the volume of trade between the United States and all of South America or the European Union (EU). The volume of trade that moves between Michigan and the Canadian
|Trade (expressed in billions of US$): United States|
|SOURCE: International Monetary Fund. International Financial Statistics Yearbook 1999.|
province of Ontario is itself equal to the country's trade with Japan. While close trade relations have existed for 2 centuries, this interdependence began to be formalized in 1965 with the Auto Pact between the 2 nations, which removed restrictions on the automobile trade. In 1964, the 2-way trade in automobiles was $715 million, but with the Auto Pact it increased to $104.1 billion in 1999. This accord was followed in 1989 by the Free Trade Agreement (FTA) which removed trade restrictions on most goods and services. As a result, trade increased by 50 percent between the 2 countries. These open trade patterns between Canada and the United States were expanded to include Mexico in 1994, through the North American Free Trade Agreement (NAFTA). NAFTA established the largest free-trade area in the world with more than 380 million consumers.
American exports of services have doubled since 1989, rising from $118 billion that year to $255 billion in 1999. The United States is one of the world's leading suppliers of financial services. In 1997, U.S. firms had foreign insurance sales of $47.2 billion. Meanwhile, U.S. banking and financial service companies had $13.9 billion in direct sales and American-owned firms based in foreign nations had sales of $13 billion. The success of American service products in foreign markets has helped stimulate the export of other U.S. products to support these companies. For instance, U.S. firms that set up offices overseas usually select American telecommunications equipment and computers. This helps get these products into overseas markets.
The United States has signed a number of foreign trade agreements. In 1934, the nation signed its first reciprocal trade accord, which lowered tariffs on goods and services. Since then, the country has consistently promoted free and open trade. This includes efforts to establish trade relationships with individual countries and attempts to develop international trade organizations. In the 1990s, the United States signed more than 300 trade agreements with both specific countries and international groups. Individual trade agreements between the United States and individual countries in the Caribbean and South America are coordinated through the Caribbean Basin Economic Recovery Act (CEBRA) and the Andean Trade Preferences Act (ATPA).
On a global level, the United States has been responsible for much of the growth in free trade. In 1944, the United States sponsored the foundation of the Bretton Woods economic system. This global system created 3 institutions. The first was the World Bank, to provide loans to countries to rebuild or establish their economies and industry. The second was the International Monetary Fund (IMF), which helped regulate currency and aid countries with financial crises. The third was the General Agreement on Tariffs and Trade (GATT), which promotes free trade by establishing rules for its member states. The United States still provides about 25 percent of the funding for the World Bank and the IMF. In 1994, the World Trade Organization (WTO) replaced the GATT. The United States has used the WTO to its advantage to open trade with nations and to settle trade disputes. The United States is the most frequent user of the WTO Dispute Settlement system and used this to resolve 48 economic disputes between 1996 and 1998.
The WTO forms the main international trade agreement of the United States. The nation is also pursuing the establishment of regional trade agreements such as NAFTA. It is currently a member of the Asia-Pacific Economic Cooperation Forum (APEC) and has proposed the creation of a Free Trade of the Americas Agreement (FTAA), which would include all of North and South America, not just the NAFTA nations. The United States has also proposed the establishment of a Transatlantic Economic Partnership (TEP) which would open trade between the United States and the EU.