Link Between Trade Deficit, Jobs Debated : Some Economists Say Imports May Have Created More Work
During a recent Senate hearing on legislation designed to protect the jobs of U.S. textile workers from foreign competition, Sen. Slade Gorton (R-Wash.) turned up to express his fervent opposition.
The bill, as Gorton pointed out, would affect not only sweaters and trousers but also stuffed animals and toys, which are imported into this country in vast numbers through the Port of Seattle. He warned that the bill, which has since cleared the House and Senate in different forms, would require Hasbro Industries in his home state to lay off 500 packers and distributors.
The prospect that protecting jobs in Georgia and the Carolinas would trigger layoffs in Seattle provides an object lesson in the difficulties of coping with the impact of the nation’s soaring trade deficit on the jobs of millions of Americans.
Organized labor says 3 million jobs have been lost to foreign countries so far this decade as a direct result of an annual trade deficit that threatens to reach a record $150 billion this year. Such is the political appeal of that argument that a flood of protectionist bills, including the textile bill passed by the Senate this week, is washing through Congress.
7 Million More Jobs Since 1981
Yet many economists find the interplay between the trade deficit and jobs to be far more complicated. They suggest that imports may actually have spurred the creation of more jobs than they have destroyed.
The economy, these analysts point out, has added 7 million jobs since 1981--the last year in which the United States ran a trade surplus. More than 60% of all adult Americans are now employed, the highest share ever.
If imports cost the jobs of auto and textile workers, these economists argue, they also create jobs in distribution and retailing--witness the teddy bears moving through the Port of Seattle. Imports of raw materials such as oil and chromium create jobs in such fields as petrochemical manufacturing and specialty steel manufacturing.
Even foreign manufactured goods can contribute to domestic employment. Michael Gadbaw, a Washington lobbyist for the semiconductor industry, says U.S. manufacturers of computer chips have gone overseas, where labor is cheap, for the painstaking but low-skilled work of assembling many of the chips.
Those low-cost chips, shipped back to the United States, in turn become the raw materials for thousands of American jobs in the manufacture not only of computers and computer-related equipment but also of the burgeoning number of products--automobile carburetors and transmissions, automatic telephone dialers and answering machines, microwave ovens and washing machines, to name a few--that use microprocessors as an integral part of their design.
To organized labor, these arguments ignore today’s basic economic miseries: the 7% unemployment rate and 8 million unemployed job-seekers.
Without the trade deficit, labor says, unemployment would be much lower, and the AFL-CIO subscribes to the rule of thumb that 25,000 jobs are exported for every $1 billion by which the nation’s imports exceed its exports.
By this logic, it takes 25,000 people working a year to make $1 billion worth of goods--$40,000 of output per job, close to the nation’s ratio of gross national product to total employment. A trade deficit of $120 billion--about last year’s level--would cost 3 million Americans their jobs.
“You can argue how many million jobs have been lost,” admitted Mark Anderson, the AFL-CIO’s chief economist on trade and international issues. “But it is unarguable that, in the absence of a trade deficit, we’d have higher employment. You’d have to have your head in sand or else totally caught up in free-trade dogma if you’re going to deny that impact.”
Manufacturing Sector Hurt
Anderson points out that the U.S. manufacturing sector, which has absorbed the brunt of the trade deficit, has lost 1.8 million jobs since peaking in 1979, a loss that he attributes entirely to foreign competition.
“It takes only a modest jump in logic to find another 1.2 million jobs that would have been here if there were not the $100-billion trade deficit in manufactured goods,” he said.
At the labor federation’s biennial convention last month, AFL-CIO President Lane Kirkland charged that President Reagan and his “business and banking allies” have developed a “studied policy to buy foreign and fire Americans. . . . Much of America has suffered devastation as a consequence of our surrender to the aggressive mercantilism of other nations.”
Nevertheless, most economists agree that the relationship between jobs and trade is dynamic and complicated, in no way reducible to a simple rule of thumb.
The Labor Department’s Bureau of Labor Statistics, home of many of the most respected statistical analysts in the government, threw up its hands in the early 1970s and no longer even tries to measure the impact of trade on employment.
The Commerce Department and the International Trade Commission, an independent agency that investigates import practices, are working on major studies of the relationship between trade and jobs, but economists involved in both studies foresee no easy sailing.
“You can’t just do a simple accounting of the labor needed to produce imported goods,” said Lester A. Davis, of the Commerce Department’s International Trade Administration.
“What it means for labor is a real rat’s nest,” said Donald J. Rousslang, an ITC economist. “There’s real iffy stuff going on.”
The Commerce Department and the ITC independently estimated in 1982 that every $1 billion worth of U.S. exports generated 25,000 American jobs. But Rousslang argues that no such connection can be made between imports and potential U.S. jobs. If $1 billion of imports had instead been manufactured in the United States, he says, no one can say how many Americans might have been employed.
Robert Z. Lawrence of the Brookings Institution points out that, if the domestic economy operated near full throttle and could not fill the entire U.S. demand for goods, “we would import, and that would become a trade deficit. How then could you say we had lost jobs through trade?”
Such reasoning is cold comfort to regions in industrial decline.
“If an industry like shoes loses to imports, clearly jobs are lost,” AFL-CIO spokesman Murray Seeger said. “People live in their communities where they work. This has a specific impact that goes far beyond those disembodied structures economists talk about.”
Steel and textiles, perhaps the two most prominent examples of declining American industries, owe much of their job loss to increased productivity as manufacturers have automated their plants to remain competitive in world markets. Nevertheless, organized labor argues that protectionist legislation would help preserve jobs in such industries, as well as keep expanding sectors of the economy from shipping jobs overseas.
For example, Motorola said in its annual report this year that the overvalued dollar, import barriers in Japan and Europe and the growing cost of capital and labor in the United States make it impractical to produce goods in the United States for sale abroad.
“There is no viable alternative to offshore deployment,” reported the company, about 30% to 35% of whose employees are overseas.
Motorola’s overseas sales may be good news for Motorola, said the AFL-CIO’s Anderson, but they don’t do much for U.S. workers.
“If global trade interdependence means that the manufacturing will be done offshore with the supervision done here, we think that bodes ill for the economy down the road,” he said.
Digital Equipment, the second-largest U.S. computer company after IBM, maintains 30% of its employees overseas. Michael Aisenberg, a Digital representative in Washington, said: “We find both suppliers and buyers in a global marketplace.”
The company makes memory chips abroad, which in turn generates other jobs at domestic Digital operations involved in the manufacturing of computers. The company says it would suffer if Congress blocked or limited imports of those chips.
To this argument, the AFL-CIO’s Anderson replies: “We’re not against progress. It’s a question of how to manage that progress and deal with the people left behind, and whether the U.S. as a nation sees value in maintaining production here. That’s a very real question that will have a greater impact over time.”
