If all you knew about trade came from President Donald Trump’s Twitter feed, you might just conclude that our trading partners have been blindly ripping off the United States for decades.
After all, we run a trade deficit so we must be worse off for the exchange, right?
But if that were true, one should wonder how per capita GDP has grown significantly over the past 40 years even as we’ve consistently run trade deficits. For the record, the U.S. Census Bureau reports that the last time the United States ran a trade surplus was 1975. And in our mind, there is no reason to want to go back to the 1970s.
Trade is under fire for very real reasons, starting with the fact that many types of manufacturing jobs have been disappearing for decades. While other countries have been opening factories, towns across this country have watched as facilities were boarded up or repurposed into things that don’t employ hundreds of local workers.
That’s tough to watch, and exceedingly difficult to deal with for millions of Americans. One hard fact in that story is that trade both creates jobs as well as fuels the dynamic that changes the makeup of the national economy.
Consider a few details about trade. In the 1960s, the value of U.S. exports was about 9 percent of the national gross domestic product. Today, it’s 30 percent.
So this country — and its workers — have been gaining a lot from selling its goods and services abroad.
But there is another dynamic to this story, and that is the importance of trade is increasing in our economy. By some estimates, approximately 41 million jobs in the United States — roughly 1 in 5 — are linked to trade. A few decades ago, about 1 in 10 American workers had jobs linked to trade.
What is happening on a massive scale is what economists call specialization. Many people realize that some countries are better at producing certain goods and services than others. But what is happening now is an increasing specialization across international borders in component parts.
In other words, companies are increasingly finding specialists in a variety of countries to make one part or another of what will eventually be assembled into a final product for consumers. The United States is exceedingly good at producing highly specialized goods and leads the world in several areas. But increasingly, the economy in the U.S. depends on keeping trade flows open in part to support jobs tied to international trade.
The takeaway from all of this is that the trade deficit exists — last year it was $566 billion — but it isn’t a deficit in the normal sense. It reflects the fact that Americans buy more goods from other countries than they buy from us. That’s not killing the U.S. economy; in many ways, it reveals our dynamic growth.
— The Dallas Morning News