3rd Quarter 2010

(Click on graph for larger view.)

the FTA difference? export growth in FTA and non-FTA markets

titanium dioxide preparations



Tennessee and FTAs

"The Early Returns" [continued]

by Steven G. Livingston

Yet a second examination of the question provides more support for the importance of FTAs. If we create an index that compares Tennessee's exports to the combined FTA markets to the state's other markets, the more rapid growth of the FTA markets becomes clear. In fact, the gap is considerable.2 If exports to the non-FTA markets had grown at the same rate as they did to the FTA markets (excluding NAFTA), Tennessee businesses would have had more than $4 billion in additional foreign sales in 2009.

If we examine the impact of FTAs by industry, we observe the same variegated performance. Most of the state's larger export sectors do not exhibit overwhelming evidence of an FTA effect. Yet the balance suggests there is an impact, and that it is growing. The charts of the titanium dioxide, whiskey, and plastics industries show perhaps the strongest impact among the larger exporters. Note that the impact is most clear in the most recent years. This is true across many industries. This provides evidence that FTAs are becoming a more significant, and positive, contributor to the state's export growth.

Because only a minority of the state's trade is within an FTA framework, and because most of the agreements are less than a decade old, these are just "the early returns." The evidence is not without qualifications, but it is on balance quite positive. It is no surprise that the nations for which the impact is the largest are those that had the most barriers (probably the reason for the ambiguous evidence for Singapore and Australia). This tells us that the most difficult FTAs to negotiate are probably the ones with the greatest value to our exporters!

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2 The FTA markets shown in the chart are adjusted to take into account the different years that the FTAs came into force.