Trade Issues | |
Trade Myths and Realities |
Many people believe that the United States should increase its
protection of domestic manufacturing from foreign competition
by higher taxes or greater restrictions on imported goods. A
new report provides some facts regarding claims about free trade
vs. protectionism.
Claim: Free trade has destroyed America's manufacturing
base.
Fact: Today, manufacturing measured as a percentage of
the U.S. economy is about the same as it was in 1967 -- 21 percent
of gross domestic product.
Claim: Quotas on imported cars from Japan saved American
jobs.
Fact: After import quotas were imposed, domestic and imported
car prices rose by about $2,000, costing consumers $17 billion
in higher prices. Since new car prices rose 41 percent from 1981
to 1984 -- almost twice the rate of all consumer prices -- consumers
bought a million fewer cars and the auto industry reduced employment
by 50,000.
Claim: Restrictions on the import of textile and apparel
products saved jobs.
Fact: Americans pay 58 percent higher prices for textile
and apparel products because of quotas, amounting to $11 billion
to $15 billion a year. Protectionism in the 1980s cost Americans
$4 million per job saved in the textile and garment industries.
Claim: Trade deficits cost jobs and lower the standard
of living.
Fact: On average, unemployment drops as trade deficits
rise, and in every year the U.S. trade deficit has increased since
1962, unemployment fell. Based on real purchasing power parity,
the U.S. has a per capita income of $25,860, while Japan has a
per capita income of only $21,350.
Claim: Countries like Japan have protected markets, while
the U.S. has open markets, putting the U.S. at a disadvantage.
Fact: Our markets are about equally open. Japan is the
United States' largest overseas export market, and per capita,
Japan buys $444 worth of U.S. goods compared to U.S. per capita
purchases of $441 worth of goods from Japan.
Source: Bryan T. Johnson, " The Myths and Realities of Trade
Protectionism," Backgrounder No. 1077, April 8, 1996, Heritage
Foundation, 214 Massachusetts Avenue, NE, Washington, DC 20002,
(202) 546-4400.
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