A Big Picture of International Trade and the U.S. Economy (updated Feb 2016)

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1. Trade keeps the US economy growing. Since 1960, trade in the US on average has grown at double the rate of growth of the economy as a whole. Exports of goods and services—produced by businesses employing millions of Americans—are fourteen times what they were six decades ago.

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2.Trade pushes countries to produce and export what they are relatively more efficient at making. This is called comparative advantage. The US has abundant skilled-labor and has become one of the world’s leading exporters of high-tech machinery, electrical equipment, vehicles and other capital goods. The same can be said for US exports of business, professional and technical services. The chart shows the trend of higher average earnings in manufacturing industries that export more per worker. More broadly, workers producing US exports are higher paid on average, by 16 to 18 percent more than other workers. And by all metrics, exporting industries are generally more productive than non-exporting industries.

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3.Imports are essential to US production and exports! Export competitiveness relies on access to high-quality, low-cost imports. US production processes rely on multiple countries forming parts of the supply chain.

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4. U.S. public opinion on trade has long been divided, although in recent years Americans appear to be more persuaded that the potential gains outweigh the costs. The unequal benefits from growing international trade, loss of manufacturing jobs and the downward pressure on wage level remain the top concerns of trade skeptics.

References:

  1. Council on Foreign Relations (2016) Trading up: U.S. Trade and Investment Policy
  2. Peterson Institute for International Economics (2015). Why International Trade and Investment Are Good for the US Economy: A Story in Eight Charts
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Author: Sheng Lu

Professor @ University of Delaware

7 thoughts on “A Big Picture of International Trade and the U.S. Economy (updated Feb 2016)”

  1. I don’t think people will ever see eye to eye on the positive and negatives of trade. The facts show that trade is necessary and is helping our economy as it continues to grow rapidly, however, there will always be people that will be harmed from its effects. The overall outlook on trade is all relative to your personal role in society and the economy. Obviously manufacturers of high-tech machinery, electrical equipment, vehicles and other such products in the US will thrive from the export of these items while people in the textile and apparel industry may feel left behind while production of these particular goods thrive in oversea locations. It is inevitable that people disagree about whether trade is beneficial or not, yet, regardless of the controversy, it will always be necessary to import and export goods between borders to maintain the highest efficiency and profitability for all countries involved.

    1. good thinking! I agree that trade will always be an on-going debate. But on the other hand, government sometimes has to take a side on trade and find a way to implement its policy despite divided views in the general public. This is why textile and apparel is heavily involved with trade politics, which we will discuss later in the course.

  2. I found the chart “Americans are again positive about trade” in the looking ahead section very interesting. The chart shows 2000 – 2015 and right in the middle was when Americans had the worst attitude toward trade. This was also during the recession when many American had lost their jobs. I think that overall when the economy is good, people tend to support trade more than they do when unemployment is high.

  3. I found the article “US Manufacturing Industries : Average earnings and exports per worker, 2012” to be very interesting because the jobs that earn the least are in apparel and textiles, and the jobs that earn the most are in computer technology and chemicals. The reason I find this interesting is because the most common types of imports are in regards to textiles and apparel, and chemicals and technology is usually more common to be domestic than abroad. The jobs that are done abroad are more commonly jobs that have less earnings.

  4. I found this article very interesting and informing. Trade pushes countries to produce and export what they are relatively more efficient at making. Trade has helped our economy, but many people are still against it. This article alone proves that trade is only helping our economy to grow, so hopefully in the near future everyone will be more open and feel more positive about trading. I thought it was especially interesting when it talked about how the United States has abundant skilled- labor and has become one of the world’s leading exporters of high- tech machinery, electrical equipment, vehicles and capital goods.

  5. I think this article expresses all the positive things about international trade. The article says, “Trade pushes countries to produce and export what they are relatively more efficient at making. This is called comparative advantage. The US has abundant skilled-labor and has become one of the world’s leading exporters of high-tech machinery, electrical equipment, vehicles and other capital goods.” I think oftentimes when people think about trade in the textile and apparel industry they think only of the loss of jobs being sent overseas to produce garments and forget to think about all the expensive machinery and technology we export to other countries for our and their benefit. I do not think people will ever see eye to eye when asked the question “does trade help or hinder Americans?” In conclusion, there will always be pros and cons when exporting and importing goods. People will just need to decide whether or not the cons are worth the pros!

    1. Excellent comment! the first sentence of your comment is particularly true~ some articles in the media can focus on all negative aspects of trade as well. Hopefully after being exposed to both sides of the story, students can have a bigger picture and more balanced view on trade.

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