Exports Create Better Jobs, but Not Necessarily More Jobs

Much has been made of the increase in US exports last year and the jobs exports create. Export growth is a good thing. However, the impact of exports on jobs and gross domestic product (GDP) must be considered in conjunction with the accompanying increase in imports. In both the year as a whole and in December, imports increased more than exports, and the trade deficit increased, says Robert McTeer, a distinguished fellow with the National Center for Policy Analysis.

Exports generally create jobs at home; imports generally create jobs abroad.

Exports and imports tend to move up and down together through causation, not just coincidence; so, the net impact on jobs either way is minimal.

Furthermore, whether we have a small net gain or net loss as a result of international trade is not only hard to anticipate in advance, it's even hard to determine after the fact.

Even so, the net gain or net loss will be small because exports and imports move up and down together.

While international trade moves our jobs into more productive activities, takes advantage of our comparative advantage and makes our labour force as a whole more productive, it does not necessarily create more jobs than it destroys in the short term. Again, since imports and exports generally move up and down together, the impact on jobs will be roughly offsetting even in short time periods. In longer time periods, the pluses and minuses converge on equality.

Encouraging exports is not likely to be a source of net new jobs domestically because of the offsetting impact of more imports on jobs. However, the expansions of exports and imports that go together will be good for our standard of living. There are great benefits to trade – just not in the net number of jobs. Encouraging exports are good things if they are done by removing obstacles to exporting. They are not good if they involve government subsidies that distort market forces, says McTeer.

Source: Robert McTeer, Exports Create Better Jobs, but Not Necessarily More Jobs, Forbes, February 15, 2011.

For text: http://blogs.forbes.com/beltway/2011/02/15/exports-create-better-jobs-but-not-necessarily-more-jobs/

For more on Trade Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=42

First published by the National Center for Policy Analysis, United States

FMF Policy Bulletin/ 8 March 2011