Contrary to public opinion, imports are not bad for the economy or workers. In fact, the opposite is true. Imports allow American consumers greater choices, a wider range of quality, and access to lower-cost goods and services. They create competition, forcing domestic producers to improve value by increasing quality and/or by reducing costs. And, since imports allow the American family to purchase more goods for less money — stretching the dollar — more disposable income is available for education, healthcare, home mortgages, vacations, etc. And imports help keep inflation down, one of the most important factors in raising our standard of living.

“Three out of four families living below the poverty line in America today own a washing machine and at least one car. Ninety-seven percent own a television; three out of four have a VCR. Thanks to all that terrible competition, many gadgets are much more affordable, particularly in terms of the number of work hours needed to acquire them,” remarked John Micklethwait and Adrian Wooldridge.

Imports Help Local Companies Become More Competitive

Imports do more than afford American families a higher standard of living — a primary economic goal. Through the availability of lower-cost imported inputs, such as components and materials, U.S. producers are much more competitive, resulting in enormous benefits.

According to Trade, Jobs and Manufacturing, published by the Cato Institute’s Center for Trade Policy Studies, “In 1998, more than half the $919 billion in goods Americans imported were not final consumer goods but rather capital goods ($270 billion) or industrial supplies and materials ($203 billion). Such imports as petroleum, raw materials, steel, and semiconductors are used directly by American producers to lower the cost of their final products. The lower costs in turn lead to increased sales at home and abroad and, in many cases, higher employment within the industry.”

Additionally, according to the World Trade Organization (WTO), “Imports expand the range of final products and services that are made by domestic producers by increasing the range of technologies they can use. When mobile telephone equipment became available, services sprang up even in the countries that did not make the equipment.”

Protectionism Doesn’t Protect Jobs

Although protectionism may be beneficial in some instances to help fledgling industries for limited periods of time, numerous studies have indicated that this approach does have severe negative consequences.

Commenting on a report by the General Agreement on Tariffs and Trade (GATT), now the World Trade Organization, on the true costs to consumers of protectionism, Peter Sutherland, former Director General of GATT, said, “It is high time that governments made clear to consumers just how much they pay — in the shops and as taxpayers — for decisions to protect domestic industries from import competition. Virtually all protection means higher prices. And someone has to pay; either the consumer or, in the case of intermediate goods, another producer. The result is a drop in real income and an inability to buy other products and services.”

Mr. Sutherland continued, “Maybe consumers would feel better about paying higher prices if they could be assured it was an effective way of maintaining employment. Unfortunately, the reality is that the cost of saving a job, in terms of higher prices and taxes, is frequently far higher than the wage paid to the workers concerned. In the end, in any case, the job often disappears as the protected companies either introduce new labor-saving technology or become less competitive. A far better approach would be to use the money to pay adjustment costs, like retraining programs and the provision of infrastructure.”

This section appeared in the report International Trade Benefits New York, published on behalf of goTRADE New York and the Business Roundtable, 2001.

John Manzella
About The Author John Manzella [Full Bio]
John Manzella is a world-recognized author and speaker on global business, emerging risks, competitive strategies and the latest economic trends. He also is founder of the and Chief Strategy Officer of Ignition Life Solutions. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.

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