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**Trade: The US Performance and Added Perspectives**

**Trade, Jobs, and Economic Growth in the US**

Trade has become a contentious issue in the United States. The new President, as well as unions and the unemployed, have all expressed concerns about it. There are valid reasons for their concerns. When it comes to trade, jobs, and economic growth, the United States has not performed exceptionally well.

To understand the situation better, let’s examine the data and delve into the nuances. Simply making bold claims to reduce trade deficits and create jobs will likely overlook these complexities. Instead, we need to appreciate the intricacies of the economy while taking decisive action.

**The US Performance – Trade, Jobs, and Growth**

To gain an unbiased and authoritative perspective, we turn to various sources. For trade balances, we rely on the International Trade Commission (ITC) based in Switzerland. When it comes to US employment, the Bureau of Labor Statistics (BLS) provides reliable information. For overall economic data, we refer to the World Bank.

According to the ITC, the United States accumulated a merchandise trade deficit of $802 billion in 2015, the highest among all countries. This deficit surpasses the combined deficits of the next 18 countries. This deficit is not an isolated incident; the US has consistently maintained a merchandise trade deficit of around $780 billion over the past five years. In fact, the US has had a trade deficit for the past 15 years.

Specific sectors have been hit hard by this trade deficit. In 2015, consumer electronics had a deficit of $167 billion, apparel had a deficit of $115 billion, appliances and furniture had a deficit of $74 billion, and autos had a deficit of $153 billion. Some of these deficits have significantly increased since 2001, with consumer electronics rising by 427% and furniture and appliances increasing by 311%. In terms of imports to exports, apparel imports are ten times higher than exports, consumer electronics are three times higher, and furniture and appliances are four times higher.

There is a small silver lining in the auto industry, as the deficit increased relatively moderately by 56% in 15 years, equivalent to inflation plus growth. Imports in this sector exceed exports by a modest 2.3 times.

In terms of jobs, the BLS reports a loss of 5.4 million US manufacturing jobs from 1990 to 2015, a 30% decline. No other major employment category experienced such significant job losses. Notably, the “Belt” region, consisting of four states, collectively lost 1.3 million jobs.

The US economy has been struggling to grow. Over the past 25 years, real growth has averaged just above two percent. However, the income and wealth gains have mainly benefited the upper income groups, leaving a significant portion of Americans feeling stagnant and distressed.

These statistics paint a troubling picture. The persistent trade deficits have taken a toll on the US economy, causing manufacturing job losses and impeding economic growth. It seems that a solution may involve fighting back against the influx of imports.

**The Added Perspectives – Unfortunate Complexity**

Unfortunately, economics is rarely straightforward, and simple explanations often fail to capture the complex interactions that underlie these dynamics. So, let’s consider some additional perspectives.

While the US has the largest merchandise trade deficit, it does not hold the largest deficit as a percentage of Gross Domestic Product (GDP). Our country’s deficit amounts to approximately 4.5% of GDP. In comparison, the United Kingdom has a merchandise trade deficit equal to 5.7% of GDP; India has a deficit of 6.1%; Hong Kong has a deficit of 15%, and the United Arab Emirates has a deficit of 18%. India has experienced an average annual growth rate of over 6% in the last 25 years, while Hong Kong and the UAE have grown slightly above 4%. Approximately 50 countries, including Turkey, Egypt, Morocco, Ethiopia, and Pakistan, have merchandise trade deficits averaging 9% of GDP, but still manage to achieve a growth rate of 3.5% per year or better.

It’s essential to note that the trade deficit only refers to the merchandise trade. This includes tangible goods like automobiles, smartphones, apparel, and steel. Another category of goods, services, comprises intangible goods like legal, financial, copyright, patent, and computing services. In the services sector, the US actually has a trade surplus of $220 billion, the largest among all countries. This surplus partially offsets the merchandise trade deficit.

The trade deficit also masks the actual dollar value of trade. The trade balance is determined by subtracting imports from exports. While imports represent goods not produced domestically and can lead to job losses, exports indicate the value of goods that must be produced or offered, thus generating employment. The US ranks first in services exports and second in merchandise exports, with a combined export value of $2.25 trillion per year.

It is important to recognize these nuances to avoid oversimplification of the issue. Firstly, countries with larger trade deficits as a percentage of GDP than the US have experienced faster growth rates. Secondly, since exports play a significant role in US employment, reducing the trade deficit may inadvertently hinder exports, leading to more job losses. This is particularly true in sectors where the margin between imports and exports is smaller.

**Job Loss Nuances**

As mentioned earlier, the manufacturing sector has suffered substantial job losses over the past 25 years, with a 30% decline representing a loss of 5.4 million jobs. Certain industries have experienced even more significant proportional losses. Apparel, for example, has lost 1.3 million jobs, equivalent to 77% of its US job base. Electronics employment has dropped by 540,000 jobs or 47%, while the paper industry lost 270,000 jobs, amounting to 42% of its workforce.

However, when we examine the situation state by state, we uncover some interesting twists. Contrary to popular belief, no individual state in the “Belt” region (Pennsylvania, Ohio, Illinois, Indiana, and Michigan) has suffered the greatest manufacturing job losses. California, in fact, has lost more manufacturing jobs than any other state, with a significant loss of 673,000 jobs. Additionally, North Carolina lost a greater percentage of manufacturing jobs (8.6% of its total job base) compared to any of the five belt states.

So why do California and North Carolina often go unnoticed in discussions about manufacturing decline? The answer may lie in their ability to create large numbers of new jobs.

While the five belt states collectively lost 1.41 million manufacturing jobs in the past quarter century, they also generated 2.7 million new jobs, thus demonstrating resilience. Similarly, California, North Carolina, Virginia, and Tennessee lost a combined 1.35 million manufacturing jobs but created a net total of 6.2 million new jobs.

The belt states managed to grow 1.9 jobs for every manufacturing job lost, while the other four states achieved a ratio of 4.6 jobs per manufacturing job lost.

This pattern can be observed in other states as well. New York and New Jersey saw job growth to manufacturing job loss ratios of less than two, while Rhode Island had a ratio of less than one. Massachusetts, on the other hand, achieved a ratio slightly above two. Overall, the eight Northeastern states lost 1.3 million manufacturing jobs, equivalent to 6.5% of their job base, but only created 1.7 jobs per manufacturing job loss.

In contrast, seven states with significant manufacturing employment and losses, but located outside the belt, Northeast, and the CA/VA/TN/NC group, achieved a job growth rate of 4.6 jobs per manufacturing job lost. These states include Maryland, Georgia, South Carolina, Mississippi, Alabama, Missouri, and Arizona.

It is clear that imports have contributed to manufacturing job losses. However, states that fall into the latter two groups have exhibited stronger recoveries. Notably, North Carolina, once heavily reliant on furniture and apparel manufacturing, managed to bounce back despite losing 44% of its manufacturing jobs. This can be attributed to various factors such as favorable climates, lower taxes, affordable living costs, lower levels of unionization, less congestion, government policies, education levels, and population trends. For example, North Carolina benefits from having universities and research centers, moderately-sized cities with less congestion, mild winters, and other favorable factors.

Nevertheless, this does not diminish the hardships faced by individuals, families, and communities affected by manufacturing job losses. Furthermore, job growth in other sectors does not entirely compensate for the decline in manufacturing. Many higher-paying jobs in other sectors require college degrees or advanced education, which may not be accessible to those who lost manufacturing jobs.

However, it is essential to exercise caution in drawing conclusions. Even without considering trade, the
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Ihab Salloum