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Trade Agreements Can Cause Jobs

While the loss of jobs due to rising trade deficits is the most visible effect of globalization, its impact on wages is a problem for even more workers. Even if trade flows begin to balance and there are fewer job losses in the future, integrating the U.S. economy with that of its low-wage partners will reduce the wages of many U.S. workers and contribute to the steady increase in income inequality in the U.S. economy. Take China and the United States. Removing trade barriers allows everyone to specialize in what it makes more efficient, and this specialization generally translates into domestic profits for both countries, i.e. increased efficiency, global production and total consumption. This is essentially chapter one of the trade manuals. Finally, for those who are more convinced by calls for authority on the issue of trade and wages, are down, second, many low-skilled American workers have service jobs that cannot be replaced by imports from low-wage countries.

For example, lawn care services, moving and transportation services or hotel women cannot be imported from remote people such as China or Bangladesh. Competition from imported products is not the main determinant of their wages. Other workers may have even less attractive alternative jobs, perhaps waste or prostitution. The real problem for Ahmed and many other low-income countries is not that globalization has made their lives worse, but rather that they have so few good alternatives. The United States experienced similar situations during the 19th and early 20th centuries. Four per cent do not look so big, but to put it in some perspective, the wages of non-graduate workers increased by only 2% over the entire period 1973-2006. Without the impact of trade, the increase in wages for this group could have been 100% greater. The presidents of both parties, from Clinton to Obama, have sold free trade agreements based on export growth.

But free trade agreements have a much greater impact than exports — they increase imports and promote outsourcing, which means fewer U.S. jobs.