Trade, protectionism, and the us economy

Trade, protectionism, and the us economy - FING PAPER TRADE...

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September 16, 2008 No. 28 The expansion of international trade has provided considerable benefits to the United States and its trading partners. Yet the growth of trade also raises concerns about its impact on domestic firms and their workers. This study surveys the economic research on the causes of expanded inter- national trade, the benefits of trade, the impact of trade on employment and wages, and the cost of international trade restrictions. The findings include the following: Incomegrowthaccountsfortwo-thirds of the growth in global trade in recent decades, trade liberalization accounts for one-quarter, and lower transporta- tion costs make up the remainder. Trade expansion has fueled faster growthandraisedincomesincountries that have liberalized. A 1-percentage- point gain in trade as a share of the economy raises per capita income by 1 percent.Global elimination of all barri- erstotradeingoodsandserviceswould raise global income by $2 trillion and U.S.income by almost $500 billion. Competition from trade delivers lower pricesandmoreproductvarietytocon- sumers. Americans are $300 billion better off today because of the greater product variety from imports. Internationaltradedirectlyaffectsonly 15 percent of the U.S. workforce. Most job displacement occurs in sec- tors that are not engaged in global competition. Net payroll employment in the United States has grown by 36 millioninthepasttwodecades,along- side a dramatic increase in imports of goods and services. Expandingtradedoesnotexplainmost of the growing gap between wages earnedbyskilledandunskilledworkers. The relative decline in unskilled wages is mainly caused by technological changes that reward greater skills. Tradebarriersimposelarge,netcostson the U.S. economy. The cost to the economy per job saved in protected industries far exceeds the wages paid to workers in those jobs. Trade, Protectionism, and the U.S. Economy Examining the Evidence by Robert Krol Executive Summary Robert Krol is a professor of economics at California State University, Northridge. FING PAPER • TRADE BRIEFING PAPER • TRADE BRIEFING PAPER • TRA DE BR
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Introduction America’s trade with the rest of the world expandedsignificantly afterWorldWarII. U.S. goods(exports plus imports)increasedfrom9.2 percent of gross domestic product in 1960 to 28.6percentin 2007.Thisexpansionof interna- tional tradehas benefitedthe UnitedStatesand its trading partners considerably.The benefits include a higher standard of living, lower prices for consumers, improved efficiencyin produc- tion, and a greater variety of goods. The expansion of international trade raises concerns about the impact on domestic firms. In particular, many people fear that interna-
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This note was uploaded on 04/08/2011 for the course POLS 305 taught by Professor Zhou during the Spring '11 term at University of Hawaii, Manoa.

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Trade, protectionism, and the us economy - FING PAPER TRADE...

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