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  • Morning Bell: Shocking News! Trade with China Supports U.S. Jobs

    The presidential debate yesterday moved to trade with China, with the usual rhetorical suspects—including “outsourcing” and the “trade deficit”—taking center stage. President Obama announced that his Administration had filed a complaint against China with the World Trade Organization. But a groundbreaking new report from Heritage proves that importing goods from China supports American jobs here at home, completely turning political wisdom on its head.

    Importing clothes and toys from China helps to support more than half a million American jobs, the report reveals—in stark contrast to claims that trade with China costs jobs.

    Heritage’s Derek Scissors, Charlotte Espinoza, and Ambassador Terry Miller analyzed data in a completely new way, showing that “the value added to imports from the time of entry into the country to the time of final purchase by consumers can be used to estimate how many jobs are being supported by imports.”

    When we import goods, Americans are employed in every stage of the chain that brings those goods into consumers’ hands, from unloading cargo at the port to ringing up a sale at the store counter. Imports support jobs in fields like transportation, wholesale, retail, construction, and finance.

    Scissors, Espinoza, and Miller conclude:

    The belief that more imports equals less employment at home is false. It follows directly that the idea that trade deficits lead to higher unemployment is also false. Concern over the size of the U.S. trade deficit, and particularly its impact on jobs, is based on a misconception of the way trade affects economic activity.

    Trade with other countries does affect U.S. employment. In short, more trade promotes jobs. A greater flow of trade—both in and out of America—should be the goal, because both exports and imports support jobs. It doesn’t make sense to focus on whether imports or exports are larger (whether there is a trade “deficit” or “surplus”) when both are having a positive impact.

    As the authors put it, “The idea that millions of American jobs have been lost to China relies on bad trade numbers, bad economics, and a completely fictional view of the world.”

    This doesn’t even address all the important effects of imports—they also expand consumer choices and affect the economy in many other ways—but it corrects the wrong ideas about the overall impact of imports on jobs.

    The policy implications of these findings are clear:

    [E]xpanded economic activity due to trade in both directions adds jobs. Congress and the Administration should not be fooled by claims of jobs lost due to imports. The government can best bolster the U.S. economy, and increase employment, by moving away from protectionism and toward trade liberalization.

    Trading with China doesn’t make the American economy a loser. On the contrary, following a policy of protectionism makes everyone a loser—including Americans in need of jobs.

    Read the full report here.

    Quick Hits:

    • “Al Qaeda’s affiliate in North Africa urged Muslims in the region to kill U.S. government representatives,” according to a statement posted today.
    • Ships from 30 countries are sweeping the Persian Gulf for mines in a warning to Iran.
    • Following a series of insider attacks by Afghan forces against American troops and allies, the U.S. has temporarily suspended most joint operations with Afghan forces.
    • After championing federal subsidies for U.S. automakers, the Obama Administration filed a complaint against China yesterday for subsidizing Chinese automakers.
    • Nearly half of all Americans don’t pay income taxes, and according to The Heritage Foundation’s Index of Dependence on Government, most of that population receives federal benefits of some kind.
    Posted in Economics [slideshow_deploy]

    24 Responses to Morning Bell: Shocking News! Trade with China Supports U.S. Jobs

    1. Raymond Thomson says:

      While it is true that all of these jobs are required by imports, this overlooks all of the jobs that are eliminated in the manufactoring end. Every one of the job fields mentioned are also required by goods made here, (with the sole exception of those required to unload ships), but US production adds many more jobs in that every manufacturer must have raw materials, sub assemblies, machinery, quality control, etc.

    2. jgalt says:

      The reason to have goods made in China is simply lower labor cost. The argument that it takes US jobs away translates to 'it undercuts union wages and puts pressure on the labor movement in the US'. Going offshore is not always smart, as there are many hidden costs of doing so: transportation, long inventory cycles, component lifetime issues, etc. Excellence in design-for-manufacture and design-for-test allow you to make in the US without high labor cost by simply using less labor content. Blatant government promotion of inflated labor content and labor cost should be exposed and eliminated. Right-to-work shd be nationwide.

    3. Kenneth W. Chilton says:

      This article on the benefits of trade is very helpful but it is an uphill battle to win the minds and hearts of the American people. It is even more difficult to stop political candidates from promoting anti-trade sentiment during a major election cycle. Keep the faith and keep trying to inform the debates over trade policy.

    4. jlb says:

      Trade with China is like going to the local casino. The money tends to end up in the hands of the casino and China is the house that wins. We trade with China and China has prospered not the US. The trade balance favors the house because they have control of the game. They only way the US can win is by paying the bank with phoney money-oh my, we are doing that already.

    5. timpclimber says:

      Thank you for providing some data to support my long held view that international trade is a two way deal. I came to this view point after studying the effects of the Silk Road ont the countries it ran through during the Middle Ages, every country benefited. The complexity of the impacts of modern trading with China range from reducing air pollution in U.S. and raising it in China to internet wars. Now we have a President trying to show he is a tough trader by filing a legal action against China. He may have graduated from Harvard but consistently shows the business smarts of a freshman.

    6. jlo says:

      The bottom line is that sending manufacturing work overseas costs American jobs – not all jobs – but many jobs. Sure, imports employ some Americans – especially in the low-paying transportation and retail sectors – but those same jobs would also be supported if the goods were manufactured here. US-made products still need to be transported and ultimately sold. More importantly, US-made products support additional high paying jobs designing, constructing, and operating factories; in banking and finance; and in all of the other domestic occupations that are supported through the paychecks of US manufacturing workers (housing, healthcare, food, child care, etc.). Consequently, loss of manufacturing jobs overseas and our huge trade deficit still result in net losses of jobs in the US, and some of these are high-paying jobs. It's unclear to me why Heritage is manipulating the facts to suggest otherwise! What gives?

    7. Sally B says:

      Once again it looks like our support jobs generated are service type jobs and not production jobs. Therefore we look like we are only a service nation and not a producer of goods..

    8. roytimothy says:

      “The idea that millions of American jobs have been lost to China relies on bad trade numbers, bad economics, and a completely fictional view of the world.”
      Having grown up in the South & watching, umm a million or two jobs go to Mexico & China, I believe the premise is disingenuous, not completely false, as any trade creates jobs, but the idea that outsourcing has not hurt America is false. See umm, Bain Capital, et al.

    9. Ben Lowsen says:

      This sounds like a sensible report making an important case for freer trade, but we also have to acknowledge the difficulty of changes in our economy. The net effect of trade might be more jobs, but that doesn't change the effect of economic shifts on current workers who are forced to adapt. In that sense, jobs – especially in the manufacturing sector – have in fact been "lost to China" (among other places and reasons). If the economy doesn't produce real opportunities for these folks as it evolves, it will lead to the sort of political instability we're seeing in which both candidates feel compelled to take a hard line on China.

    10. David Humphrey says:

      Why are the jobs added by imports so much less paying than the manufacturing jobs they replaced? and what is the impact of that tradeoff? Is American pay settling down toward the rate of pay of 2nd world countries? Are we dissociating into a two-class society?

    11. Gordy says:

      Wouldn't the supply chain jobs exist regardless of the source of goods and services, and more jobs be created if they were made in the USA?

    12. Rachel says:

      I understand the premise that importing goods supports jobs. Well played. I would comment that the issue of the loss of manufacturing in the states is of significance and the manufacturing business supports jobs as well in a different industry. We need them both. The goods from China and places like it are commonly inferior and the US has the experience and will to make superior products. That has to have its own value! I am not a proponent of unions so I don't believe that's what makes a manufacturing company viable. I would do away with manufacturing unions as we know them and replace with something more accountable. If people see Busniess as greedy they are blind to organized labor. I say make smarter decisions about imported goods and set a higher standard.

    13. Ron Naumann says:

      If the way this was figured to create jobs from imports that were putting employees to work in China, how many more would have jobs if the same were manufactured in the USA. I can not see that there would be less jobs from transportation, finance, or at the cash register. Businesses would have more money for expansion and even more jobs would be created in the construction world without even considering other manufacturing that would supply material for expansion. I guess my being born in rural America disqualifies me from being a little smart on how trade works. Anytime there is jobs sent oversea it takes away from jobs here. If big business chooses to send our work out then we should buy from those that are loyal to the homeland and let them sell their wares to China, or any other country they are supporting.

    14. Southern Girl says:

      Amy, your analogy makes sense. I think the argument regarding losing jobs overseas relates to companies closing down U.S. factories and moving them overseas. Obama is way off base as usual threatening to limit trade with China. While we all would prefer to "buy American", the fact of the matter is that there's just not much you can buy now that is made in America. In addition, does he really want to tick off China when we owe them so much money and will probably borrow more under this administration?

      • Preston Hay says:

        Right! We should not offend the great provider or he will quit sending us stuff. Or not take our money.
        Our economy has been declining since we started this global trading fiasco. How about high unemployment, crippling deficit, low morale, minimal economic growth, and enormous trade balance. This was hidden by the Information Revolution, the stock market bubble and the real estate bubble, but the decline is here to stay as long as we have a half a triliion in trade balance.
        And you are right Obama is off-base, but that doesn't mean that the GOP has a plan to get us out of this.
        Well, I gotta go hide under my bed,,because the importers are going to be mad with me for suggesting that we fix our trade balance. We can do that you know.

    15. republicando says:

      It is encouraging to hear about the number of jobs created by import / export activities. But do they really compare to the labor involved in producing the same products? How about wage comparisons?

    16. Chad says:

      To say "Imports support jobs in fields like transportation, wholesale, retail, construction, and finance." is a moot point. Regardless of where the product comes from these jobs already exist and benefit from bringing local or foreign products to market. It is the loss of manufacturing and all the supporting jobs that are missing from our economy. I agree that a global trade system is a good thing but we are missing half of the jobs/revenue when other countries don't trade fair. If we did not import products from China we wouldn't just go without. Whether made here or somewhere else the products would still get to market.

    17. jini craft says:

      Most of the jobs created by trade with China, except for perhaps the longshoremen's jobs, are minimum wage clerking jobs. The jobs lost to China and India, etc., were manufacturing jobs and the like. We made the best products, and brought home a decent paycheck. Did we have such high unemployment when we were the manufacturing giants of the world?

    18. Mary P. says:

      My concern with Chinese imports is that the manufacturing process is suspect. The products aren't as safe as those from more developed countries.

    19. Raymond Williams says:

      The problem is not the loss of net jobs but the loss of manufacturing jobs (usually higher paying). There is also the issue of China subsidizing manufacturers in China to artifically compete with American companies.

    20. Bob Hux says:

      It would seem to me that the type of jobs created would have been important as it relates to this article.

    21. Gail says:

      I don't buy this. I learned this in college and didn't buy it then. It also doesn't account for the pollution created by ships transporting goods. And while we have all these laws to protect the consumer and workers, how is it good to import goods that are made by and with labor and materials that do not meet our own standards? And most of all, we are dependent on questionable countries for goods vital to our national security and well-being. I cant believe this is from The Foundry!

      • Gail says:

        The jobs left (service jobs) pay less so ultimately, Americans will not have the money to purchase discretionary items. The support jobs will be lost too.

    22. Kat says:

      no matter who takes office, our world is going to hell along with it's sad government and lousy economy.

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