NCPA - National Center for Policy Analysis


April 21, 2008

Presidential candidates Hillary Clinton and Barack Obama suggest that should they become president, they will restrict trade agreements, but there are a few key points we should consider, says Walter E. Williams, a Professor of Economics at George Mason University.

The United States is the world's largest recipient of foreign direct investment:

  • In 2004, foreigners owned $5.5 trillion in U.S. assets and had $2.3 trillion in sales.
  • They produced $515 billion of goods and services, accounting for 5.7 percent of total U.S. private output, and employed 5.1 million workers.

Between 1996 and 2006, about 15 million jobs were lost each year and 17 million created.  That's an annual net creation of 2 million jobs. Some of the gain in jobs is a result of "insourcing":

  • Foreign companies such as Nissan, Honda, Nokia and Novartis set up plants, hire American workers and pay wages higher than the national average.
  • Insourced jobs pay 32 percent higher than the U.S. average says Matthew Slaughter, a professor at Dartmouth College.

If outsourcing is harmful to the United States, says Williams, it must also be harmful to European countries and Japan.  Would anti-trade forces advise them to take their jobs back home?

There's great angst over the loss of manufacturing jobs.  The number of U.S. manufacturing jobs has fallen and it's mainly a result of technological innovation.  This is a worldwide phenomenon, says Williams:

  • U.S. manufacturing employment between 1995 and 2002 fell by 11 percent, says Daniel W. Drezner, professor of political science at the University of Chicago.
  • Globally, manufacturing job loss averaged 11 percent; even China lost 15 percent of its manufacturing jobs during this time.
  • However, manufacturing output rose 30 percent globally during the same period, and 100 percent in the United States from 1987 to today.

Source: Walter E. Williams, "Better Off From Free Trade? Absolutely," Investor's Business Daily, April 16, 2008.


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