There is no doubt that international trade sometimes causes employment to increase in some sectors while decrease in others. But exaggerated fears of massive job losses due to imports are misplaced. Contrary to public belief, only a very small percentage of American jobs are at risk from imports.

According to the Joint Economic Committee of Congress report, Economic Indicators, April 1999, service workers accounted for 30% of the non-farm workforce, followed by the retail trade (18%), government (16%), manufacturing and mining (15%), finance, insurance and real estate (6%), wholesale trade (5%), transportation and public utilities (5%), and construction (5%) sectors.

According to Trade, Jobs and Manufacturing, of these categories, the 85% of all workers not in the manufacturing and mining sector are in industries that by their nature do not produce tradable goods or services, or where imports account for a very small to nonexistent share of domestic supply. And in the manufacturing and mining sector (the remaining 15%), only a small number of workers are in industries considered import-sensitive, defined as having an import penetration of at least 30%. How is this determined?

Of more than 450 separate four-digit Standard Industrial Classifications (SIC) manufacturing sectors, only 66 were identified by the Cato study as being import-sensitive. Employment in these 66 categories represented 12% of manufacturing workers in 1994 — or less than 2% of total non-farm workers — a surprisingly small figure!

In 1998, agricultural workers numbered 3.4 million and represented 2.6% of total U.S. employment. Stated in the Cato study, “Fear of imports looms large in some sectors of agriculture, such as dairy products, sugar, and peanuts, but for those who make their living in the larger export-oriented sectors such as wheat, corn, and soybeans, the chief worry is not rising imports but sagging exports caused by economic troubles abroad. Even in farm sectors most vulnerable to import competition, the potential job losses are minuscule in relation to the overall U.S. labor force.”

The Economic Report of the President, provided to Congress in February 2000, has come to the same conclusion and determined that “roughly 10% or less” of worker dislocation is attributable to trade. The Cato study concludes that the “lingering myth that imports cause a net decrease in jobs is refuted by the evidence of the last two decades. Since 1980, the annual volume of imports to the United States has more than tripled. During that same period, the number of Americans employed has increased by 31 million.” The report’s compelling evidence points to technological change as the real displacer of jobs.

The Cost of Protectionism Is High

Reducing the number of imports through the use of trade barriers only raises the costs of goods and services to consumers, and promotes higher inflation. According to the WTO, in 1988 it was determined that $3 billion a year is added to grocery bills of U.S. consumers to support sugar import restrictions.

According to Trade, Jobs and Manufacturing, if import barriers on sugar products were eliminated, imports would surge by almost 50% and domestic production would fall by 7.2%. The resulting job losses in sugar-related industries would total 2,290 out of 16,400 full-time industry jobs — “a small number compared to an average of 235,000 net new jobs the U.S. economy has created each month during the past seven years.”

In the late 1980s, U.S. trade barriers on textile and clothing imports raised the cost of these goods to consumers by 58%. When the U.S. limited Japanese car imports in the early 1980s, car prices rose by 41% between 1981 and 1984. The objective was to save American jobs. However, in the end it cost more jobs due to a reduction in the sale of U.S.-made automobiles, according to the WTO.

Technology Is the Real Displacer of Jobs

Scholars and leaders of industry alike have argued that even if a greater level of protectionism were implemented, low-technology jobs would still disappear. Robert Reich, former U.S. Secretary of Labor, stated that “Even if millions of workers in developing nations were not eager to do these [low-technology] jobs at a fraction of the wages of U.S. workers, such jobs would still be vanishing. Domestic competition would drive companies to cut costs by installing robots, computer integrated manufacturing systems, or other means of replacing the work of unskilled Americans with machinery that can be programmed to do much the same thing.”

There are many examples of technology eliminating jobs. According to Trade, Jobs and Manufacturing, “Technology shoves far more Americans out of jobs than do imports. In the last two decades, tens of thousands of telephone operators and bank tellers have been displaced from their jobs, not by imports, but by computerized switching and automated teller machines.”

Education Is Key to Future Success

As Thomas Friedman points out, “Every night the lion goes to sleep knowing that in the morning, when the sun comes up, if it can’t outrun the slowest gazelle, it will go hungry. Every night the gazelle goes to sleep knowing that in the morning, when the sun comes up, if it can’t outrun the fastest lion, it’s going to be somebody’s breakfast. But the one thing the lion and gazelle both know when they go to sleep is that in the morning, when the sun comes up, they had better start running. Unfortunately, not everyone is equipped to run fast.”

Today, one’s ability to run fast is often dependent on the level of education obtained. Thus, it is no secret that unemployment is commensurate with lack of education and skills. For example, in May 2000, the annual U.S. unemployment rate for the civilian labor force averaged 4.1%. However, of the civilian labor force age 25 years and older, the rate of unemployment was 6.1% for workers without a high school diploma. It declined to 3.7% for high school graduates, 2.9% for those with some college education, and 1.8% for college graduates.

Not surprisingly, the occupational groups projected to decline or be among the slowest growing are more likely to be dominated by workers who do not obtain education beyond high school. Conversely, occupations having the highest rates of growth are more likely to have workers with higher educational attainment.

According to the U.S. Department of Labor’s report, Futurework, “We are living in a new economy — powered by technology, fueled by information, and driven by opportunity on our side.” By 2050, the report indicates, the U.S. population is expected to increase by 50%. As the new economy emerges, it is essential that New York’s young population develop the skills needed tomorrow. It is very clear: as globalization creates opportunity, it generates more for those workers who are better educated. Because the uneducated could be left behind, life-long learning policies are essential in today’s economy and more so in tomorrow’s economy.

This section appeared in the report International Trade Benefits New York, published on behalf of goTRADE New York and the Business Roundtable, 2001.
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John Manzella
About The Author John Manzella [Full Bio]
John Manzella is a world-recognized author and speaker on global business, competitive strategies and the latest economic trends. He also is CEO of World Trade Center BN, chair of the Upstate New York District Export Council, and founder of The Manzella Report and Manzella Trade Communications Inc. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.




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