NCPA - National Center for Policy Analysis

The United States Could See Massive Economic Gains from Trade

October 7, 2014

Sixty-four months into a recovery, the United States has yet to find itself on solid economic footing, as household income remains below pre-recession levels. According to the Census Bureau, median household income for 2013 was 8 percent lower than it was prior to the recession, at $51,939.

What's the solution? More jobs at higher wages. How to get there? Matthew Slaughter, professor at the Tuck School of Business at Dartmouth and former member of the White House Council of Economic Advisers, says the answer lies in trade. Were the United States to engage in pro-trade policies, Slaughter expects that the country could see 10 million new jobs. He explains:

  • Slaughter's own research, as well as that conducted by Andrew Bernard and Bradford Jensen, makes clear that employees of "globally engaged" companies earn much more than those working at purely domestic companies.
  • Employees of companies that export or import earn 15 to 20 percent more than companies that do not.
  • Employees of multinational companies earn 25 to 30 percent more than workers in domestic companies.
  • When it comes to manufacturing, trade also creates the largest gains for blue-collar workers. One Commerce Department study determined that companies that export yield gains that are 20 percent larger for those in blue-collar positions than in white-collar ones.
  • And job creation accrues to more than just the companies who export and import. Multinational companies purchased $9 trillion worth of inputs from other American companies in 2011.
  • Due to international trade, American incomes were $1.7 trillion higher in 2013 than they would have been without trade -- an addition of $13,600 per household annually.

Slaughter encourages policymakers to create pro-trade policies through Trans-Pacific Partnership and the Trans-Atlantic Trade and Investment Partnership. At the same time, he encourages expanding immigration to accommodate more high-skilled workers while reducing America's corporate tax burden in order to encourage large companies to invest in the United States.

Source: Matthew J. Slaughter, "The Free-Trade Way to Job Growth," Wall Street Journal, October 2, 2014.  

 

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