In 1986, Vietnam was one of the poorest countries in the world. The aftermath of the decades-long Vietnam War and the mismanagement of the economy left the majority of the country in abject poverty, with per capita income below $100. Through drastic economic reforms, Vietnam’s government gradually decentralized the economy and opened it up to international business.
In the decades since, Vietnam’s per capita income climbed to $1,960 by 2013, and the percentage of people living in poverty dropped below 10 percent. Vietnamese exports have played an integral part in this remarkable economic turnaround. In 1986, exports accounted for only 7 percent of Vietnam’s GDP. In 2013, that number had risen to a remarkable 80 percent.
As a recent report by the Copenhagen Consensus would point out, Vietnam is just one example in a larger trend. Free trade is among the top five ways to encourage global development. Trade can radically transform the standard of living for the average person at a minimal cost to governments. Looking outside of Vietnam, one can point to China, India, Mexico and many others as proof of how trade can grant people economic opportunity.
With the Transatlantic Trade and Investment Partnership (TTIP) now in negotiations, this insight should not be lost in the U.S. and EU. TTIP is a proposed trade agreement that would create the largest trading zone in the world with more than 800 million consumers. The agreement would reduce the number of tariffs and promote regulatory cooperation that would greatly stimulate trade between these two economic blocs. The agreement represents a huge opportunity to facilitate trade and help people on both sides of the Atlantic.
Greater access to the European market will generate employment opportunities for the American workforce. Consider that in 2012, the U.S. exported $253 billion worth of industrial goods to the EU. With fewer restrictions on industrial exports, this figure will rapidly grow, contributing to the manufacturing renaissance that is already bringing high paying jobs back to America.
In Europe, the impact would be similar. Through TTIP, European business owners will have more opportunity to compete in the largest consumer market in the world. This would mean a more than $151 billion increase in the EU economy and an extra $630 per year for families of over 4 people, according to the Centre for Economic Policy Research.
It would also be a mistake to think that the benefits of TTIP would be isolated to the U.S. and EU. The amount of commerce generated through the agreement would reverberate throughout the world. The interconnectedness of the global economy means that growth in the EU and U.S. will seep into other markets, creating more opportunities for employment.
Making progress on TTIP will also build momentum for other trade deals, such as the Trans-Pacific Partnership (TTP). This agreement would foster trade and cooperation between 12 Pacific nations, including Australia, Japan and Vietnam. Similar to TTIP, this trade deal would create more high-paying jobs for American workers.
As the negotiations over TTIP continue, it is important that they not be derailed by subordinate concerns. While there are real issues that need to be negotiated and agreed upon, allowing them to halt would be a failure to recognize the greater good that could be accomplished through the agreement.
A recent Pew poll found that 53 percent of Americans favor TTIP. Considering that 72 percent of Americans favor greater trade with Europe, this is a political mandate that can and should be strengthened. Political leaders in the U.S. and Europe need to push to make TTIP and other trade deals a reality.
As we move further into the 21st Century, TTIP represents the type of smart thinking that will help strengthen the U.S. With minimal cost, it will place both the EU and U.S. in a globally competitive position.
Francisco J. Sánchez is the Chairman of CNS Global Advisors. Prior to CNS, he served as Under Secretary for International Trade at the U.S. Department of Commerce. During the Clinton Administration, Sánchez served as the Assistant Secretary for Aviation and International Affairs at the U.S. Department of Transportation. He previously served as a Special Assistant to President Clinton and as Chief of Staff to the Special Envoy to the Americas.