The price of free trade and our economic growth
By Dr. Antonin Rusek
Global Beat Syndicate
Selinsgrove, PA--Pennsylvania's Central Susquehanna Valley recently received bad news. The announced closing of Pennsylvania House Furniture manufacturing and warehousing facilities in Lewisburg, White Deer and Milton is estimated to cost the area about 425 jobs. The company is blaming the closings and layoffs on Chinese competition.
In a related development, in his recent speech at the Greater Susquehanna Valley Chamber of Commerce, U.S. Senator Arlen Specter called for a "fight against foreign competition" and accused The People's Republic of China of starting a trade war.
That people are dismayed and worried about the loss of jobs is understandable. The Pennsylvania House layoffs may be due to Chinese competition, but the other side of the coin is that, by and large, Americans benefit from the trade and globalization--even if the gains may be uneven and there are terrible financial reverses in individual cases.
As far as the loss of jobs is concerned, outsourcing--the loss of markets due to more efficient and more affordable foreign products--certainly plays some role. But on the national scale, we have lost more jobs due to technological advances than because of foreign competition. Cashiers in supermarkets lose their livelihood because of computerized self-service checkout machines, not because I take a weekly trip to a supermarket in China. Computerized airline ticketing, computerized hotel check-ins and check-outs, and Internet-based retail sales--buying "on line"--are just a few examples of these job-destroying domestic technological advances.
In contrast, trade is a large job creator in the United States. A study by the Federal Reserve Bank of Dallas points out that we are the biggest trading nation in the world, exporting $1.3 billion of goods and services annually--that is $4,626 for each man, woman and child living in the United States. It is also about 13 percent of overall U.S. output. Put another way, roughly 13 percent of U.S. jobs depend on the sales of goods and services abroad. In contrast, the European Union and Japan export only about 11 to 12 percent of their respective Gross Domestic Products annually--$3,350 per person in the European Union and $3,510 per person in Japan. In an underdeveloped country like China, the share of exports in the economy is difficult to determine. We do know that overall Chinese exports ($426 billion) are less than Japan's ($447 billion), which comes to only about $330 per person in China.
These trade numbers are reflected in employment and economic growth. Today, the U.S. unemployment rate is 5.6 percent, compared to over 9 percent in the European Union and over 15 percent estimated in China. The Japanese rate is 4.7 percent, but given Japanese labor practices, this number is not comparable with ours, due to a hidden 3 percent baseline. And in the last 12 years, U.S. economic growth (3.23 percent annual average) exceeded that of the European Union (2.04 percent annual average) by more than 60 percent and was three times as high as Japan's (1.09% annual average). Chinese growth over the same period was 8 to 8.5 percent annually, but the Chinese economy is less than 10 percent the size of ours.
Obviously, a long-term commitment to trade liberalization and financial globalization paid off for us. From the malaise of the 1970s, through the economic renaissance of the 1980s, to the economic superiority of today we can trace the legacy of free enterprise and a commitment to expanding free trade.
Certainly, the loss of over 400 jobs in a local community is a very serious blow. But our strength and future are in the "new" economy of creativity and innovation, facilitated by global financial markets.
And it is in this area that where we should seek solutions for future growth and job creation, with the regional business community perhaps joining forces with their academic communities--accounting, management, marketing, information technology--to find new jobs and companies to the area. The greatest, most dynamic economy in the world today has something for everybody. But we have to look to new ideas, not dwell on the past and the "way we were."
