Roots of the trade crisis - includes related articles on strong & effective trade legislation

AFL-CIO American Federationist, The, April 18, 1987

Roots of the TRADE CRISIS

The AFL-CIO has long been concerned with the effects of unregulated and discriminatory trade. Millions of workers have lost their jobs due to the absence of effective trade policies, the capriciousness of individual companies or the vagaries of U.S. economic policy. The fact that international trade can and has damaged U.S domestic production is widely ackhnowledged--an understanding no doubt triggered by the fourfold increase in America's trade deficit in just six years. Those who in the past denied the existence of a problem or counseled patience to the victims of trade have been largely silenced by the enormity of the shift in U.S. trade patterns.

The question now is what to do about it.

Last spring, the House of Representatives addressed this national crisis by passing, by a vote of 295 to 115, comprehensive legislation entitled the Trade and International Economic Policy Reform Act of 1986. While not perfect, the House bill, among other things, required the gradual reduction of U.S. trade deficits with certain countries, introduced the concept of worker rights and trade, modernized and streamlined U.S. trade remedy law, and expanded the coverage of unfair trade practice statutes. Unfortunately, the Senate didn't act. This bill has been reintroduced in the new Congress (H.R. 3) and the Senate has also begun consideration of various trade reform proposals.

In all probability, trade legislation will be enacted in 1987. Whether it will be sufficient to this country's needs remains the key question.

TRADE AND THE

U.S. ECONOMY

The U.S. trade deficit reached $170 billion last year, more than four times the 1980 total. Exports dropped slightly from 1980 to 1986, while imports mushroomed 51 percent.

Fuel imports put this country in the red during the late 1970s and early 1980s. But recently, manufacturing goods have accounted for the biggest chunk of the trade shortfall. Manufactured imports outpaced exports by about $145 billion last year, from an export surplus of $13 billion as recently as 1980.

The enormous U.S. trade deficit wiped out millions of jobs, devastated local communities, and pushed the U.S. economy into a risky, fragile condition. The trade gap has already made the U.S. the largest debtor in the world, placing a heavy burden on future generations, which are likely to have fewer good job opportunities and slower income growth.

The trade imbalance cost the United States 2.5 million jobs in 1986 alone. Saving those jobs would have meant a reduction in the unemployment rate from 7.0 percent to 5.0 percent.

Numerous well-paying and high-quality job opportunities in the middle tier of the nation's income structure are being forfeited, and with that, the living standard that made the U.S. the envy of the world is being undermined.

The impact on employment has been severe. The year 1986 was only one of ten post-World War II years with an unemployment rate above 7 percent, and six of those years were 1981 through 1986, the period when America's international trade position nosedived.

While total employment has grown in the last six years, that growth has taken place solely in service sectors. Employment in manufacturing has declined by some two million jobs. Further, even with the sharp growth in service industry employment, the rate of job growth in the last six years is 29 percent below average growth rates of the 1970s.

The upheaval within the manufacturing sector has been harsh and tempestuous, and imports are the source of most of the employment losses. Since peaking in 1979, the jobs in numerous manufacturing industries have plummeted. Among durable goods manufacturer, lumber, furniture, stone, primary and fabricated metals, machinery, motor vehicles and other transportation equipment have all suffered considerable job losses. In nondurables, employment is down from 1979 levels in food, tobacco, textile, apparel, paper, chemicals petroleum and leather.

In a study of displaced workers released in October 1986, the Bureau of Labor Statistics reported that between 1981 and 1986, years when the nation's trade deficit was growing dramatically, 13.1 million lost their jobs to plant closure, slack work or layoffs. More than five million of these displaced workers had been at their jobs for at least three years. Of these, the survey found that 18 percent remained unemployed and an additional 15 percent had left the workforce entirely. For those fortunate enough to find other jobs, 10 percent were working part-time, and of those securing full-time work, 40 percent were forced to accept lower pay. Not surprising, under that impact, average weekly earnings for U.S. non-supervisory production employees have declined about 9 percent from 1979 to 1986 after adjusting for inflation, and 60 percent of the new jobs created since 1979 paid less than $7,000 a year.

Many Lost Jobs Aren't Reflected

In Employment Data

The officially reported net job changes in various industries do not capture all of the jobs lost or show the job opportunities that would have been available if the nation's trade balance were better. For example, given the growth in the nation's economy and the demand for various goods and services, if trade had been balanced and demands were satisfied to a greater extend by domestic production, many domestic industries that lost jobs would have had job increases, and industries that posted net employment additions would have enjoyed even greater increases. And there are indirect effects on sales, jobs, and incomes that reverberate throughout the economy.