Good Article

Folks,

Here is an intersting article on whether imports hurt USA jobs... (it doesn't
much... it is in
exporting we are losing jobs, something I blame on subsidies, restrictions and
particularly
the subsidy/restiction combo punch of patents) Check it out...

http://www.forbes.com/2005/11/10/trade-jobs-economy-cx_1110mckinsey.html

or...
Don't Blame Trade For U.S. Job Losses
McKinsey Quarterly, 11.10.05, 3:45 PM ET

The U.S. recession officially ended in late 2001, and ever since, despite recent
gains,
aggregate job creation has been extremely weak--weaker even than during the
"jobless
recovery" that followed the 1990 to 1991 recession. Contributing most to the
overall number
of U.S. jobs lost since 2000 has been the manufacturing sector, which shed 2.85
million of
them from 2000 to 2003, notwithstanding the relatively mild nature of the recent
downturn
in the economy as a whole.

Many people in the U.S. have looked at the enormous trade deficit, and
concluded that a
flood of imported goods from China and the offshoring of services to India are
to blame for
the loss of jobs. CNN's Lou Dobbs has called the problem "a clear call to our
business and
political leaders that our trade policies simply are not working." The issue
isn't the concern
solely of U.S. policy makers: The same fears about trade are rampant throughout
Europe and
Japan, while protectionist sentiment is rising around the world.

But trade, particularly rising imports of goods and services, didn't destroy
the vast majority
of the jobs lost in the U.S. since 2000. We analyzed detailed trade and industry
data to
estimate the extent of job dislocation due to offshoring in the manufacturing
and service
sectors from 2000 to 2003. This work was the first complete analysis of how the
economic
downturn, imports, exports and global competition interact--directly and
indirectly--to
affect employment.

Our research shows that, in fact, only about 314,000 jobs (11% of the
manufacturing jobs
lost) were lost as a result of trade, and that falling exports--not rising
imports--were
responsible. Service sector offshoring destroyed even fewer jobs. These figures
are tiny
relative to the millions of positions lost and created every year in the U.S. by
normal market
forces.

The real causes of job losses were weak domestic demand, rapid productivity
growth and the
dollar's strength, which dampened U.S. exports. It is vital that policy makers
understand the
forces at work, for otherwise there will be a temptation to apply quick fixes,
such as
protectionism, that won't restore employment, because they do not address the
underlying
problems. The real solutions--stimulating domestic demand, cutting the budget
deficit and
pushing countries with artificially cheap currencies to let them appreciate
against the dollar--
are harder to implement but more likely to boost employment.



The Decline Of Manufacturing Jobs

Manufacturing's share of total U.S. employment has been falling for at least
half a century--a
trend that is typical not only of developed economies but also of many
developing ones. In
the 1990s, manufacturing employment was fairly stable. From 2000 to 2003,
however,
payroll employment in manufacturing fell by 16.2%--the largest decline since the
end of
World War II and a steeper drop than the declines experienced by other sectors.

While the job losses were concentrated among producers of capital goods and
apparel, every
major manufacturing sector saw payrolls fall. The bursting of the high-tech
bubble resulted
in the loss of a half-million jobs in computer and electronics production. Other
large declines
occurred in machinery, fabricated-metal products and textiles.

For many observers, trade was the obvious culprit. Since 1992, the U.S. has run
an
increasingly large trade deficit, which reached $403 billion in 2003. The size
of this deficit
and its pervasiveness across economic sectors make it tempting to believe that
trade played a
major role in the manufacturing recession. What these observers have missed is
the subtle
relationship among productivity growth, domestic demand, exports and imports. It
is this
interplay that leads us to the counterintuitive conclusion that the influence of
trade has been
minor.



The Role Of Trade

During the late 1990s, trade wasn't a significant cause of job losses, because
the U.S. enjoyed
full employment. A shortage of labor, not unemployment, was the problem of the
day. The
trade deficit in part reflected the fact that the country was producing less
than it was
consuming.

After 2000, as the economy fell into recession, U.S. exports fell. We estimate
that more than
3.4 million manufacturing workers were producing goods for export in 2000; by
2003, this
number had fallen below 2.7 million. All told, the export slump destroyed
742,000 U.S.
manufacturing jobs.

On the import side, though, the picture was very different. It isn't true that
manufactured
goods flooded into the U.S. after 2000. In fact, growth in manufactured imports
was quite
sluggish from 2000 to 2003. And as we will explain, this weakness in imports
actually
boosted manufacturing employment in 2003 by some 428,000 jobs.

Overall, then, trade accounted for a net loss of no more than 314,000 jobs (a
reduction of
742,000 because of weak exports and an increase of 428,000 owing to weak
imports),
representing only 11% of the total manufacturing job loss of 2.85 million. The
other 2.54
million jobs disappeared because of the economy's cyclical downturn, which
dampened
domestic demand for manufactured goods.



The Effect Of Productivity Growth

How did imports boost U.S. employment from 2000 to 2003? The answer lies in the
rapid
growth of productivity in the U.S. To understand how this dynamic played out, we
will first
explore the more intuitive link between productivity and the jobs generated by
domestic
demand and by exports. We then turn to the relationship between productivity and
imports.
Some economic mechanisms can allow productivity increases to boost output and
employment--for example, by making companies and industries more competitive.
But from
a purely arithmetical standpoint, if productivity (output per employee) is
rising, output must
increase at least as fast to keep employment from falling. After 2000, domestic
U.S. demand
grew much less than productivity, so companies needed fewer workers to fill
their domestic
orders. It was a similar story with exports: They fell sharply in 2001, declined
again in 2002
and rose only slightly in 2003. With rising productivity and reduced orders,
exporters could
meet demand using far fewer employees.

In the case of imports, the impact of productivity is actually reversed,
because imports
displace U.S. jobs rather than create them. The higher the productivity of U.S.
industries that
compete with imports, the smaller the number of jobs displaced by a given volume
of
imports. We estimated the number by figuring out how many U.S. workers would
have been
employed had the same products been made in the U.S. When we examined statistics
on the
productivity of industries that compete with imports, we found that it increased
so rapidly
from 2000 to 2003 that the number of jobs displaced by imports actually
declined.

Excerpted from The McKinsey Quarterly

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