Commerce raises living standards, strengthens a nation’s standing in the world and makes lives better; yet unregulated commerce may lead to monopolies that damage the economy.
The Department of Commerce collaborates with businesses, universities and communities to encourage economic growth, sustainable development and enhanced standards of living. Through its important programs it assists companies expanding into global markets while supporting innovation.
Trade
Trade is an essential element of global economies, with nations trading goods and services across borders. In the US, numerous initiatives and programs support international commerce.
International commerce encompasses much more than trading financial instruments such as bonds and stocks; international trade allows businesses to take advantage of economies of scale and reduced production costs through global production networks – increasing profitability while simultaneously decreasing prices for consumers. International commerce also facilitates technology transfer between nations to advance research and development in science and engineering fields.
Governments impose various barriers to trade, such as tariffs and quotas, in order to shield domestic industries from foreign competition. While protection may increase employment within import-competing sectors in the short term, its overall effect tends to reduce employment by eliminating jobs from other areas of the economy.
Transportation and logistics costs also pose barriers to trade. Shipping companies provide this service via vast fleets of cargo ships, trucks, railroad cars and planes; while financial institutions such as banks provide loans, credit guarantees and insurance to mitigate risks such as currency fluctuations and payment default. Likewise, new technologies increasingly facilitate global trading through electronic networks and communications.
Investment
Commerce is essential to economic development. Capital markets provide entrepreneurs with access to funding needed for product development, infrastructure investment and job creation. Unfortunately, much of this capital investment can be wasted due to excessive regulation. Federal regulations often stifle innovation and long-term investment – a problem which must be addressed.
Unnecessary regulation limits individual agency, dissuading people from moving to areas offering greater liberty. At the same time, environment quality directly correlated to its level of regulation – just as pollution makes cities unpleasant to live in while an excessive burden of regulations inhibits economic development.
Mercatus Center at George Mason University conducted a study that examines the accumulated costs of regulation from 1977 through 2012 using an economic model and 22-industry dataset covering that time. Their researchers discovered that regulatory accumulation caused GDP growth to slow and $4 trillion more would have been available for American families had 1980 regulation levels remained in 2012! While no single solution exists when it comes to commerce regulation, reducing restrictions in each industry may stimulate investment and boost economic development.
Competitiveness
Commerce can increase a nation’s living standards and standing internationally if managed judiciously. Unregulated increases in commerce can result in large companies becoming monopolies that may not serve the best interests of society as a whole. The Department of Commerce is responsible for monitoring business and encouraging free competitive enterprise.
The Commerce Department offers many programs with this aim in mind, such as SelectUSA – an effort across federal bureaus that promotes America as a premier destination for foreign investment – while working closely with local governments and private-sector partners to leverage assets in regions or communities in order to attract business and create jobs.
National competitiveness depends on a range of factors, including productivity, technology, infrastructure and labor costs. Government policies like reducing unnecessary regulations or protecting intellectual property in order to promote innovation have direct ramifications on national competitiveness.
One key factor is a country’s export capability. Expanded trade opportunities help businesses realize economies of scale that reduce production costs. Furthermore, diversifying their markets protects them against local economic downturns.
Regulation
Research into the relationship between regulation and economic growth has produced mixed findings, with some studies finding a positive association and others finding excessive regulation to slow economic activity. Work by the Mercatus Center found that cumulative regulation growth had caused $4 trillion worth of lost GDP between 1980 levels and 2012 (had they stayed frozen).
However, it’s essential to recognize that spending more than zero does not automatically guarantee its productivity. Many rules impose “opportunity costs” that divert resources away from stimulating business and economic development – this includes time required to comply with new rules, costs associated with hiring specialists to track and interpret them and missed opportunities to realize market-driven economic benefits.
While governments and businesses claim to understand the full cost of their rules, they often underestimate them due to compliance costs being hidden – effectively acting like an invisible tax on society’s wealth and prosperity that impacts all areas of economy equally. Therefore, reforms that can reduce these compliance costs such as in the Netherlands, Canada, and Australia has adopted “one-in, one-out” rules to address them are key; one such reform requires reductions of existing regulations to fully offset any new ones that come into force.