Trade matters for you
What has trade done for you?
Quite a lot, actually.
Trade has long been growing faster than global economic output, in effect pulling economies towards greater productivity and innovation. This has clear benefits for both economic growth, employment and the price of essential and popular products used every day.
Research shows quite clearly that open economies grow faster than closed ones. To take just one example, World Bank research shows that developing countries which opened up to international trade in the 1990s grew more than three times faster than those that maintained a high degree of protection to international competition.
An even more tangible benefit of open trade is the range of products and services we enjoy every day—from affordable coffee sourced from Ethiopia or Colombia to raw imports like steel or lumber on which many manufacturers depend. Open trade increases the productivity and competitiveness of an economy and lowers prices for consumers. In the United States, for example, economists Robert Lawrence and Lawrence Edwards estimate that trade with China alone puts US$250 a year into the pocket of every American.
The relationship between trade and employment is somewhat more complex. It’s well known that trade can cause changes in labour markets—such as where new jobs that are created replace more traditional roles and skills. That’s why it’s important for governments to put in place coherent policies that help facilitate structural adjustments and address associated social concerns. Nevertheless, trade isn’t a zero sum game when it comes to employment: many jobs depend on both imports and exports. Imported inputs are increasingly used in local value-added production, with the output often destined for export markets. Take the Boeing 787 Dreamliner, the production of which involves 43 suppliers spread over 135 sites around the world collaborating for their mutual benefit.
In times of economic difficulty, closing markets to international competition might sound like a good way to “protect” jobs. But experience has shown that such policies are often counterproductive: temporarily saving jobs in vulnerable sectors often at the expense of higher paying jobs in competitive sectors of the economy. For example, one study of the quantitative restrictions in autos, steel and textiles in the US in the mid-1980s put their annual cost at almost a quarter of a million dollars per protected job.
Many pleasures of our daily routine are intimately linked to continuing success of the international trading system, from our morning coffee, to the avocados in our lunchtime salads, to the evening film we choose to watch. Share why trade matters for you.