Three key points about trade

Three great points made by Patick Thomas!

1. Exports are great for boosting growth… but so are imports. With an understandable emphasis on exporting our way back to economic growth, it’s easy to forget that imports boost growth too. Trade improves economic efficiency, allowing us to buy cheaper stuff and consume more (or if you’re a company, buy cheaper inputs, lower production costs and export more competitively yourself). And global economic growth is not a zero-sum game. As we import more from developing markets, they get richer and can afford more of the stuff we make.

2. Trade deficits can be misleading. Trade analysts spend a lot of time worrying about bilateral trade deficits, though some of these worries may be misplaced. According to a recent WSJ article, for example, the iPhone adds $1.9 billion to the US’s deficit with China because of the way trade stats are calculated. But only about $6.50 worth of value in each iPhone is added there! If the figures were adjusted to show value-added, the United States’ trade deficit with China would be cut in half.

3. Trade is not a job-killer. Freer trade does eliminate jobs (though nowhere near as many as advances in technology), but it creates a lot of jobs too. Matthew Slaughter of the Dartmouth Business School has found that when companies outsource jobs overseas, they tend to increase their hiring and investment in the domestic market as well. A US Chamber study found that US free trade agreements support some 18 million jobs.