Foreign Trade Alternatives for Employment and Occupations, 2005

By Su, Betty W.; Chentrens, Carl A. | Monthly Labor Review, November 1994 | Go to article overview

Foreign Trade Alternatives for Employment and Occupations, 2005


Su, Betty W., Chentrens, Carl A., Monthly Labor Review


As the world turns increasingly into a global marketplace, the issue of foreign trade becomes more complex. U.S. trade with China has grown rapidly in recent years. New markets in Eastern Europe and in the former Republics of the Soviet Union are emerging. Perhaps the most important element on the trade horizon is the recently negotiated GATT (General Agreement on Tariffs and Trade) and the lately ratified NAFTA (North American Free Trade Agreement) among the United States, Canada, and Mexico.(1) Globalization of trade is an ongoing process that may be hastened or slowed, but chances are that it will not be stopped. The coming decade will likely see some major changes in the way products are produced and delivered to the consuming sector of the world economy.

The BLS projections of the U.S. economy to 2005, described in the November 1993 issue of the Monthly Labor Review,(2) offer three alternative views of potential growth to provide a range of future paths for final demand and employment. However, because those alternatives address only a few of the unknowns of the coming 13 years, special scenarios have been prepared which explore other areas of uncertainty in our economy.(3) This article focuses on the area of foreign trade, presenting an evaluation of the potential employment impacts of different levels of demand in this area.

To assess the impact of a U.S. economy which may be more or less competitive in world markets, the analysis of foreign trade presented here focuses primarily on the impacts on employment due to changes in exports and imports. The trade alternatives presented here do not attempt to portray the effects of any particular policy or trade agreement such as NAFTA. Rather, they are preared to evaluate the sensitivity of the economy to changes in foreign trade. Exports and imports are both important components of our economy and are projected to become even more important between now and 2005. Because exports and imports tend to balance in the long run, their employment impacts at the aggregate level generally balance out except in terms of relative differences in the productivity of the industries affected. However, some industries are sensitive to trade growth. This analysis demonstrates that the shifting structure of the global economy brings prospective employment changes in many industries, some closely associated with foreign trade and others not normally so associated.

Historical perspective

Trend in exports and imports. U.S. exports and imports of goods and services are the two components of gross domestic product (GDP) that have gained the most in importance over the past 25 years. Exports (in 1987 dollars) grew at an average annual rate of 7.1 percent between 1970 and 1980, and increased their share of GDP from 5.6 percent to 8.5 percent over the same period. Imports also grew strongly, at 4.0 percent per year over the 1970--80 period, increasing from 6.8 to 7.7 percent of GDP. (See table 1.)

[TABULAR DATA OMITTED]

Exchange rate fluctuations of the U.S. dollar relative to other currencies in the first half of the 1980's, combined with much stronger competition in export markets, led to declines in U.S. real exports of 0.7 percent per year between 1980 and 1985. Imports, on the other hand, continued to do well over this period, as the appreciated exchange rate favored foreign producers and many U.S. industries appeared to have difficulties competing with European and Japanese manufacturers. Imports continued to grow strongly, accelerating to 9.4-percent annual growth between 1980 and 1985.

After 1985, the exchange rate of the U.S. dollar relative to other currencies fell quite rapidly. The depreciated exchange rate made exports relatively cheaper than imports, leading to lower prices abroad for U.S. produced goods. At the same time, there seemed to be increasing demand for U.S. products, notably machinery, and exports grew more rapidly. …

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