CHAPTER: APPLICATION: INTERNATIONAL TRADE
If I walk around my house, picking up items as I go, I find shoes made in Vietnam, a hat sewed in China, a computer assembled in Mexico, and chess pieces carved in Romania. Imported items are everywhere. Some people wonder whether such imports are detrimental to the U.S. economy. Don’t imports take jobs away from American workers?
That is a reasonable question. The United States has a vast array of resources: a highly productive workforce; millions of acres of arable land; a staggering quantity of capital; and many of the world’s most entrepreneurial businessmen and women. Why do we need to buy goods from abroad?
In fact, there are many goods that U.S. consumers enjoy that would be expensive to produce here, goods such as coffee, petroleum, and – in the winter months – fresh fruits and vegetables. Thanks to international trade, we can buy those goods more cheaply from other countries in exchange for goods that we produce efficiently here in the United States.
Trade also gives U.S. consumers more variety. When you shop for your next car, you’ll be able to choose from imported brands like Honda and BMW, in addition to American brands. With more choices, each consumer can find a product that better suits his or her preferences.
U.S. companies can also benefit from trade. Many intermediate goods, like computer memory chips and engine parts, are available less expensively from foreign suppliers. So trade can reduce production costs of American firms.
Trade also gives U.S. firms a larger market in which to sell their products. In 2001, U.S. firms sold about $7 billion worth of goods to Eastern Europe, and over $160 billion worth of goods to Canada alone.
But the jobs issue is a tricky one. It’s true that international trade reduces the demand for workers in industries that compete with imports. At the same time, however, it increases the demand for workers in export industries. There is no reason to think that trade reduces employment overall. The U.S. economy has become much more open over the past half-century, yet there is no upward trend in unemployment.
Of course, that fact may not be reassuring to those particular workers who have lost their jobs because of imports. Some of these displaced workers may have trouble finding comparable jobs in other industries. Like most economic policies, free trade creates both winners and losers. Yet, rather than shutting off trade, it makes far more sense to welcome the imports, and to help the displaced workers take advantage of the job opportunities that trade creates in other parts of the economy.