THE TRADE DEFICIT AND JOBS

The idea that job losses can be blamed on the trade deficit is simplistic and wrong

The Wall Street Journal reports that the

"U.S. trade deficit unexpectedly narrowed for the first time in four months in August, with exports rising to their highest level of the year and imports easing despite higher oil prices."

Given how trade skeptics often argue that job loss can be ascribed directly to the trade deficit, this might be a good moment to reflect on the relationship between the trade deficit and jobs:

• Between 1993 and 2007, the U.S. economy created 26 million new jobs, net; this is one of the greatest job creation booms in American history.
• During the same period, the trade deficit swelled from 1 percent of gross domestic product to 6 percent of GDP.
• Since 2007 the trade deficit as a percentage of GDP has fallen by half, to about 3 percent of gross domestic product (GDP) today; but the U.S. economy has shed 6 or 7 million jobs.

Did the growth in the trade deficit create 26 million jobs? No.

Did the collapse of the trade deficit cause the loss of 6 or 7 million jobs? No.

But what these recent experiences have done is exploded the simplistic myth that job losses can be blamed on the trade deficit.

[Recall: we only run deficits because the consumer - that would be 100% of us - feel they're getting a better deal on imported goods. And unlike exports, every dollar saved on less expensive but acceptable goods by consumers - that would still be all of us, without exception - is 100% profit - dramatically more beneficial to our collective standard of living than artificially supporting a comparatively few union jobs because they've bribed politicians to do so.

We claim to be a consumer-based society for good reason. What's best for the average consumer should be our strongest and nearly sole guide in setting related policy - starting with the win-win benefits of free trade.]

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