Why Trade Should Be Free

In the section above, I stated that people often think that “there’s a special problem when we buy from people in other countries.” In a sense, that’s true. If you buy a low-end toaster, chances are that it’s made in China. Buying one from China means that you’re not buying one made anywhere else, including in America. So, Americans who might have produced toasters here, admittedly at a much higher cost, don’t get those jobs.

But there are three important responses to that point. First, workers who don’t produce toasters here produce other goods or services. Our current unemployment rate, U-3, which is a measure of people who are out of work and looking for work, is a low 4.1 percent. Moreover, the ratio of the number of job openings to the number of unemployed workers is 1.1.  There are more jobs vacancies than there are unemployed people.

Second, there is nothing special about the fact that the toaster is produced in another country. If I buy GAF shingles produced in Baltimore, Maryland, rather than Owens Corning shingles made in Portland, Oregon, I help to employ someone in Baltimore instead of someone in Portland. But we don’t hear a lot of upset about that.

You might say that’s because at least either way I’m employing a worker in America. So, it comes down to jobs. But then go back to my first point. American residents who don’t have jobs producing toasters do get jobs producing other things.

The third point is that most people exaggerate the number of jobs lost to imports and fail to understand the number of jobs lost to technological innovation. Our manufacturing output is only 6.4 percent below its all-time high, which was in 2007. We aren’t “deindustrializing.” Instead, our industrial sector, due to improved technology, is becoming more productive. Manufacturing employment is 33.9 percent below its peak in 1979. Moreover, manufacturing employment as a percent of all employment, which hit its peak in December 1943 at 38.7 percent and its postwar peak in September 1948 at 31.9 percent, is now 8.1 percent.

This is from David R. Henderson, “Why Trade Should Be Free,” Defining Ideas, October 30, 2024.

Read the whole thing. Be aware that it’s longer than my usual article. I had a lot to cover.

Thanks to Don Boudreaux for giving comments and suggesting data sources.