Real Loss in Trade Deficit is Jobs for U.S. Workers

You can read the trade deficit in the jobless figures.

Since last August, according to the Bureau of Labor Statistics, there has been no growth at all in manufacturing employment, even though the economy has grown and total employment has risen.

At least two explanations stand out:

- The economy is becoming increasingly dominated by the service sector, which includes such industries as financial brokerage, insurance, accounting, advertising and the like, and by retail sales and construction.

- Manufacturing employment is being shipped abroad.

The latter factor helps explain why American legislators, unions and corporate managements are becoming so distressed about the trade imbalance, marked by warnings for Japan to open wider its markets to U.S. goods.

Those warnings include an “or else” clause, the meaning of which is to warn Japan that the United States might limit access to its own markets if U.S. goods aren’t given a fair shake in that country.

Can’t Ignore Numbers

What constitutes a fair shake may be interpreted differently in Japan and the United States, since Japan repeatedly has asserted that its markets are more open than Americans say they are. But the numbers cannot be ignored.

The United States is now buying more from foreigners than it is selling to them, and doing so at the rate of more than $100 billion a year, a rate that if maintained is universally thought to be undesirable and maybe even suicidal.

Suicidal because it eventually strips the importing country of the ability to pay for those goods, weakens its ability to protect its own infrastructure and creates pockets of unemployment wherever factories close.

More than one-third of that deficit is with Japan, which exports automobiles, electronics equipment and a great variety of other manufactured goods into the relatively free markets of the United States.

Without such imports, protectionists argue, those goods would have been made in the United States by American workers. The number of American jobless, they suggest, would be well below its current level of 8.4 million.

Others aren’t so sure, and that includes the White House.

There is much doubt among American manufacturers and trade officials, for example, that all those imports represent jobs denied to American workers. Cut off the imports, they say, and the total number of cars sold would decline.

Would Fuel Inflation

Moreover, to protect American markets from foreign competition almost certainly would mean greater domestic inflation. Lower priced imports have had much to do with the calm price structure over the past couple of years. Remove competition, history shows, and prices soon begin to creep higher.

Those who have studied international trade contend that limitations on free trade mean smaller markets for both exporter and importer, simply because free trade seems to be a catalyst in creating a higher level of economic activity.

President Reagan’s economic advisers restated it again this February in the White House economic report to Congress.

“Countries that have followed the least restrictive economic policies both at home and abroad,” they said, “have experienced the most rapid economic growth and have enabled the greatest proportion of their populations to rise above subsistence living standards.”

This thesis rests not on abstract economic reasoning, the White House economists contend in the report, “but from concrete historical comparisons of the achievements of free trade against those of protectionism.”

Equally concrete, however, are those unemployment numbers, and they add a dimension to the free trade versus protectionism argument that political figures cannot ignore.