TIDE OF IMPORTS BENEFITS MOST US WORKERS

TIDE OF IMPORTS BENEFITS MOST US WORKERS

Most of the recent news reports about America's rising trade deficit assume that imports raise unemployment and drag down economic growth. Imports are portrayed as a burden we must bear to help other nations regain their economic health. But for a large majority of American workers, the rising tide of imports to the United States is nothing but good news.

So far in 1999, the value of goods imported into the United States is up more than 10 percent from the same period last year, matching the double-digit growth of imports in 1998. Yet the U.S. unemployment rate has fallen to 4.2 percent, its lowest level in almost three decades.In fact, since 1980, the annual volume of imports to the United States has tripled, while the number of Americans employed has increased by 31 million.

Imports are an economic blessing to the United States. They raise the real wages of American workers by keeping prices down, spur domestic industries to be more innovative and efficient, and reduce input costs for U.S. companies trying to compete in international markets.

In fact, more than half of the goods imported to the United States last year were not final consumer goods but capital equipment, raw materials, and intermediate components such as computer chips and steel.

The number of Americans who do have reason to worry about imports is surprisingly small, even in the more tradable sector of manufacturing, according to a study just released by the Cato Institute's Center for Trade Policy Studies.

The large majority of Americans, about 85 percent, work in construction or service-producing sectors such as retailing, wholesaling, insurance, finance, real estate, transportation, utilities or other services. Those sectors by their nature tend to be insulated from import competition. For these workers, imports mean nothing but lower prices, better quality and wider purchasing variety.

Even in manufacturing, most workers are employed in industries where domestic producers dominate the U.S. market. Based on an analysis of 1994 import and production data (the latest available), only about 12 percent of U.S. manufacturing workers were employed in industries where imports accounted for more than 30 percent of the supply of goods for sale.

Industries with the highest import penetration include knitwear, men's and boys' furnishings, women's and misses' outerwear, other apparel, leather and leather products, jewelry, and rubber footwear.

More than 40 percent of the workers in high-import-penetration industries were employed in high-tech areas such as computers and electronic components, where export levels are also high. While some of these workers may experience job insecurity or even layoffs because of import competition, they also reap the benefits of free trade because of high demand for their products overseas. These sectors typically import and export a high share of production because of the international sourcing of inputs.

The experience of the 1990s demonstrates that imports are not a threat to most manufacturing jobs or to America's manufacturing base.

Between 1991 and 1998, the value of manufactured goods imported to the United States more than doubled. During that same period, domestic manufacturing output rose by a healthy 40 percent, with production of durable goods, including motor vehicles, machinery and appliances, up a robust 65 percent. Meanwhile, domestic employment in manufacturing during that time actually climbed by 366,000.

Since mid-1998, a net 400,000 domestic manufacturing jobs have been lost, but the dip has been caused almost entirely by a drop in exports, not by a surge of imports. The growth in imports during the last 18 months has actually slowed slightly compared with 1997, when the U.S. economy added more than 300,000 manufacturing jobs.

But after growing more than 12 percent in 1997, manufacturing exports from the United States rose a paltry 0.7 percent in 1998 and have actually declined 1.5 percent in the first six months of 1999. American workers are not being hurt by a long-predicted flood of imports from distressed East Asian economies, but by a collapse in demand for our exports. The problem, in short, is not too much international trade but not enough.

Technology shoves far more Americans out of jobs than do imports. According to the Bureau of Labor Statistics, three-quarters of the workers displaced from their jobs in 1995-97 were working in those sectors of the economy that by their nature are largely insulated from import competition. Those workers were displaced not by imports, but by new technologies and changing domestic market conditions.

The fact that such a small percentage of American workers are employed in manufacturing industries with high import penetration only confirms that free trade delivers net benefits to far more workers than it could possibly harm.

Presidential and congressional candidates who talk about ''saving jobs'' by raising barriers to imports are really talking about dragging down the real incomes of the vast majority of Americans for the temporary benefit of a small fraction of workers.