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 TRADE TOPICS
 Agriculture |  China | Corporate Sustainability | Import  | Poverty |  Security |  TPA/Fast Track

IMPORTS

Insourcing -- the opposite of outsourcing article February 2, 2004 about job creation in the U.S from foreign companies

Washington State Releases Landmark Study on Imports
Import Study Executive Summary
"The Road to Seattle: Creating a Domestic Climate for Trade Export" keynote address by Susan Aaronson, September 23, 1999

Council's Position

The Council fully supports free trade, believing it is an essential two-way exchange in which imports are as vital to the economy as exports. The open exchange of imports and exports has been and will continue to generate jobs for US workers and their children in the globalized world of the 21st century. Rather than something to fear, we believe imports are part of a powerful economic engine.
Despite public acceptance of the economic value of exports, imports have remained cloaked in confusion and controversy. Protectionists and isolationists call for restrictions to imports. We at the Council believe that view overlooks a simple truth: export potential is inextricably tied to import capability.

Background

Issues of ownership, control, and national origin are fading as quickly from the trade front as they are from every other aspect of the international business scene. Indeed, clear lines delineating imports from exports have all but disappeared. Furthermore, imported and foreign are by no means interchangeable in today’s realities of international trade. Isolationists and protectionists call for restrictions fearing imports will hurt American workers and fuel job loss and wage stagnation. Controversy reigns locally and nationally, no less at coffee breaks and living rooms than in the halls of Congress.

Significance

A few examples from the state of Washington, simple yet typical of the current market place, may help clarify the importance of imports.

• As part of its operations Union Bay Sportswear designs its garments in Seattle, manufactures them in Asia, then imports the finished products back to the US for distribution and sale. If any of the connections is cut, many workers will be jobless.* Almost 100 percent of Microsoft PC programs run on chips made in Asia.
  
• Boeing requires imports of bauxite to make aluminum for its aircraft.
  
• Washington State's ports, and the thousands of jobs they generate, depend on a balance of two-way trade.

Against whom are we protecting?

Clearly, protective decisions on imports will impact this state as severely as export barriers. Which raises a complex question. Against whom are we protecting? A few examples may illustrate the difficulty of finding an adequate answer and further illustrate the inextricable links between imports, exports and business in today’s global marketplace.

• The number of imports that come to the US from American-owned companies manufacturing overseas is increasing dramatically. The Commerce Department estimates that overall, some 40% of all US imports represent intracompany transactions by American-owned multinationals. Rather than help American firms, curtailing imports in today's market could well put our own companies at risk, and ultimately prove detrimental to American jobs and productivity.
• When foreign-owned Honda reached exports of 50,000 cars to Japan from its Ohio production base, it was making more cars on American soil than in Japan. The required imports are vital not only to the American consumer, but also to large numbers of employees.
• Imports also bring foreign investment, which has benefited the American economy. Our share of investments from the global marketplace show us benefiting disproportionately with about $1 in every $4 invested globally coming into the US. In 1996 the investment amounted to $85 billion.

Job Loss

One of the major arguments against opening the door to imports is job loss for American workers. Layoffs and displacement are the stuff of nightly news. From there, the connection to foreign competition and imports is easy.

A look at the facts does not show a negative correlation between imports and employment; Imports have increased, as has the employment rate. According to the 1995 Economic Report of the President, reviews of the past 15 years show increases in imports and American jobs have gone hand in hand. Even going back as far as 1962, each year the trade deficit increased because of larger amounts of imports, the unemployment rate dropped. Similarly, when the trade deficit fell, shortly thereafter unemployment rose. Stated differently, if import restrictions were a reasonable means to protect domestic jobs, high barriers and low unemployment would correlate. Even a quick glance at the industrialized countries of Europe shows this is not the case. In the last 10 years, more jobs have been created in the U.S. than in all the industrialized countries combined. Just at a time when we have been importing more than we have been exporting, employment has steadily climbed.

This is not to say that no one has ever lost a job because of imports. To understand this accurately however, a brief comparison to automation and technology, which account for most of the unemployment and dislocation in America today, is enlightening. New technology that makes life easier often hurts some producers. The same, on a smaller scale, can be said of free trade. Some companies making goods may suffer, at least temporarily due to lowering of trade barriers. No one suggests stopping technology because it hurts people producing outdated products. Nor should we turn away from openness for identical reasons. The challenge is in opening markets while providing access to the new education and skills needed to prosper in them.

"Blaming globalization and trade distracts policymakers and voters from implementing policies that would address the major causes of wage stagnation among less-skilled workers. The problem ...is not foreign competition. It is the mismatch between the skills that employers increasingly demand and the skills many young adults bring to the labor market."   Globaphobia

Consumers pay the price

Finally, the importance of imports to the consumer cannot be overemphasized. The alternative to open trade is protectionism, which hurts low-wage workers and low-income consumers most of all because they spend a disproportionate share of their income on clothes, food and shelter. Imposing higher tariffs on imports is another way of taxing the poor disproportionately by raising consumer prices. Liberalizing barriers and allowing imports permits Americans free choice at the most affordable rates.

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