Trade with Emerging Markets Benefits U.S., Study Says

Rapid economic growth in emerging economies benefits the U.S. economy by expanding markets for U.S. exports and providing U.S. producers and consumers with cheaper and more varied goods, according to a new study.

The study, Rising Tide: Is Growth in Emerging Economies Good for the United States?, published March 20 by the Peterson Institute for International Economics, challenges the view held by some U.S. economists and part of the general public that trade with China and other emerging market countries is responsible for U.S. economic ills, including the declining number of manufacturing jobs and wage inequality.

Robert Lawrence, who co-authored the study with Lawrence Edwards, said job losses and related dislocations of people and communities caused by trade are “a myth.”

Over 2002–2011, less than 3 percent of U.S. job losses were due to imports, the study says. All developed countries, including those with large trade surpluses, have experienced job losses in their manufacturing sectors in the last four decades, mostly due to the advance of information and other modern technologies, the related rise in productivity, and a shift in consumer demand away from goods to services, the study says.

In reality, the study says, growth in emerging market countries creates more opportunities for U.S. exporters and provides U.S. producers and consumers with access to cheaper and more varied inputs and consumer goods. Companies from emerging market countries, the study says, rarely compete directly with U.S. companies in export markets because the two groups have specialized in different products and processes, and U.S. producers tend to export more advanced goods than their competitors from China, Brazil or India. The study estimates the U.S. gains from trade with emerging economies at $500 per person, of which about half is due to trade with China.

At the study’s presentation, Lawrence said he and Edwards don’t play down short-term disruptions in the U.S. labor market caused by trade. They also acknowledged that erasing the U.S. trade deficit would help create some jobs in the United States. But this would not counter the general trends that cause disruptions in the U.S. labor markets. So U.S. trade and investment strategies that encourage growth in emerging market economies will continue to benefit the United States and its trading and investment partners for the foreseeable future, the study concludes.

More information is available on the Peterson Institute website.

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