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

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

Several organizations have studied these relationships and tried to trace the interconnections among industries involving trade, output, and employment. Such investigations uniformly demonstrate that the nation's trade deficit has had significant adverse effects on employment and production and that manufacturing industries and the regions dependent on manufacturing have suffered the most.

One detailed evaluation of employment impacts, based on the experience in 1984, was published by the U.S. Dept. of Commerce in January 1986. The United States suffered a $123 billion deficit in its merchandise trade in 1984. Using two different assumptions concerning the composition and size of the trade deficit, the Commerce Dept. estimated that employment was between 1.3 percent and 2.7 percent lower than it would have been if trade were balanced. This represents between 1.1 and 2.4 million jobs.

A third approach assessed trade within the context of the overall economic environment and yielded an estimated loss of 1.8 million jobs in 1984. This analysis assumed that the United States would undertake policies to bring about a trade balance. These policies included negotiations with other nations to reduce trade barriers and unfair trade practices along with agreements that key trading partners would implement government spending, tax, and monetary measures to boost their economies. The additional element in this phase of the Commerce Dept.'s analysis was the allowance for the feedback from such factors as interest rates and inflation when the pace of the economy quickened because of the trade deficit's decline. Simultaneously, employment and output were traced through the nation's industrial structure, as in the department's two other analyses.

Updating these estimates to 1986 to account for the 40 percent deterioration in the nation's trade balance over the last two years indicates that the United States had 2.5 million fewer jobs because of the trade deficit in 1986. The jobs shortfall in manufacturing was heaviest in the following industries: textiles, 631,000; electrical and electronic equipment, 475,000; the three metal industries combined (primary iron and steel, primary nonferrous, and fabricated metal products), 342,000; leather and leather products, 208,000; and motor vehicles, 171,000.

As is to be expected, the regions where trade-sensitive manufacturing industries are located have experienced the largest numbers of lost jobs. However, the damage has by no means been limited to the northeastern and midwestern industrial belt. Data Resources, Inc. (DRI), a private economic consulting organization, evaluated trade's influence on the nation's regional employment patterns in 1984. DRI found that many large industrial states, including Pennsylvania, Michigan, Ohio, and New York have had huge numbers of jobs evaporate because of the adverse effects of imports. But, when states are ranked by their job loss percentage, several Sunbelt states, including South Carolina, North Carolina, Georgia, Alabama, New Mexico, and Mississippi also show severe job losses.