Evolving Trade Dynamics: Global Imports and Their Role in Supporting US Jobs
On Thursday, August 8, The Association of Foreign Press Correspondents in the United States (AFPC-USA) hosted an educational program in partnership with the Hinrich Foundation, an Asia-based philanthropy dedicated to promoting sustainable trade, that offered a comprehensive overview of the evolving landscape of US trade policy and its impact on manufacturing employment.
Recent educational programs have provided valuable insights into the impact of protectionist measures and evolving global trade dynamics. Both Republican and Democratic administrations have implemented actions to protect American industries from foreign competition, often citing national security and the goal of restoring blue-collar jobs. A key topic of discussion was the "China Shock," which led to a significant decline in US manufacturing employment. However, its impact has diminished over recent years. Interestingly, imports from other developing countries like Brazil, India, and Mexico have positively contributed to US manufacturing jobs, creating or supporting nearly half a million jobs between 2011 and 2019.
The program also emphasized the need to reassess protectionist policies, arguing that they may be outdated and rooted in past economic challenges. Instead, there’s a strong case for US policymakers to shift their focus toward enhancing the country's comparative advantage in services. Looking ahead, the program recommends that US policymakers adapt to new economic realities, fostering growth in the services sector and leveraging the nation's strengths in a modern global economy.
Our audience of foreign correspondents heard from two speakers. The first was J. Bradford Jensen, the McCrane/Shaker Chair of International Business at the McDonough School of Business at Georgetown University, a nonresident senior fellow at the Peterson Institute for International Economics, and a research associate of the National Bureau of Economic Research. Jensen currently serves as director of the Izmirlian Program in Business and Global Affairs. The second was his colleague, Nita Rudra, a Professor in the Department of Government, McDonough School of Business, and School of Foreign Service at Georgetown University. Rudra’s research focuses on the distributional consequences of globalization. Her books and research articles explore why technological innovation, reduced trade barriers, and foreign capital have enabled unprecedented economic prosperity.
Jensen, Rudra, and their colleague Niccolo Bonifai, a Ph.D. candidate in the Department of Government at Georgetown University faculty who joined the conversation later whose research examines the role of global businesses to explain the recent resurgence of economic nationalism, are all affiliated with the Georgetown Lab for Globalization and Prosperity
This educational program was moderated by Patrícia Vasconcellos, the White House correspondent for the Brazilian television network SBT. AFPC-USA is solely responsible for the structure and the development of the content of this program. Below, foreign correspondents will find a summary of some of the most important takeaways from the presentation.
RUDRA’S PRESENTATION
Rudra discussed the growing concern over the widening gap between the rich and poor in the US, highlighting how this issue has become a central focus for policymakers across the political spectrum. She pointed out that while inequality has always been high in the US, what's unique now is the decline in upward mobility, a concept essential to the American Dream. Drawing on the economist Raj Chetty's work, Rudra explained that the likelihood of children earning more than their parents has drastically decreased from 90% for those born in the 1940s to just 50% for those born in the mid-1980s.
Rudra emphasized that globalization and trade, particularly with China, have become the most resonant explanations. She noted how both Republicans and Democrats have targeted globalization and China in their rhetoric, with Trump, Clinton, and Biden all adopting policies to protect American jobs from foreign competition.
She said: “There's lots of reasons that research has shown why the American dream has been fading with this downward mobility. It's the tax structure in the US or it's rising inequality, it's student debt, it's housing costs. Yet the one explanation that really has resonated is this, that it's globalization, it's trade. This really took off during the 2016 presidential campaign
The "China Shock," as Rudra detailed, significantly impacted US manufacturing, leading to massive job losses and broader social issues like increased mortality rates. However, she questioned whether current US policies, which continue to focus on bringing back manufacturing jobs, are outdated. Instead, Rudra suggested that policymakers should consider shifting their focus to sectors where the US has a comparative advantage, such as services, to better address the challenges of today's global economy.
She posited: “Does that China shock persist today as politicians are developing policies as if it does? How have imports from other economies affected US manufacturing employment? And finally, should US policy policymakers maintain their focus on bringing back manufacturing jobs as the current policies are now dictating or should they redirect their focus towards enabling our comparative advantages in other sectors where we have a comparative advantage, which is services?”
JENSEN’S PRESENTATION
Nita Rudra
Jensen explored the ongoing effects of the China Shock on US manufacturing, questioning whether the impact is still as significant as policymakers seem to believe. He presented evidence that the negative impact of Chinese imports on US manufacturing employment has diminished since 2011. The decline in this impact started before the US initiated its trade war with China in 2016.
Jensen highlighted that many US industries that were previously affected by Chinese imports have since rebounded, indicating that factors like technological advancements, automation, and a shift towards more capital and skill-intensive manufacturing may now play a more significant role in shaping US manufacturing employment.
Jensen then emphasized that imports, rather than solely being seen as a threat, actually support US manufacturing jobs. He pointed out that a large portion of US exporters also engage in importing, which is crucial for maintaining global competitiveness. This interconnectedness between imports and exports suggests that imports are integral to the success of US manufacturers.
He noted that while the China Shock did cause economic disruption, imports from other developing economies have had a positive effect on US manufacturing employment, helping to offset some of the earlier losses.
Finally, Jensen argued that US policymakers should shift their focus from trying to revive manufacturing jobs to enhancing the country's comparative advantage in services. He explained that the US excels in business services like software, legal, and financial services, which constitute a much larger and rapidly growing sector of the economy compared to manufacturing.
Despite this strength, there are still significant barriers to services trade, particularly in developing economies, Jensen said. He concluded that US trade policy should prioritize reducing these barriers to better capitalize on the country's strengths in the global economy, rather than continuing to focus on outdated protectionist strategies.
“Advanced economies tend to have lower barriers to services. Trade developing economies tend to have higher barriers to services trade,” he said. “We think that this is an area where US policymakers should pay more attention in the trade agenda.”
ON WHY A MAJORITY OF AMERICANS BELIEVE THE GLOBAL ECONOMY IS HURTING THEM
Rudra responded to the question about why 80% of Americans feel that the global economy hurts them by first noting that the vast majority of the population has not been directly impacted by the China shock. The actual number affected is much smaller. For those who have been directly impacted, their feelings of “disillusionment" are understandable.
However, for the rest, Rudra attributes this widespread sentiment to "elite queuing." She explains that many Americans are not deeply engaged with the complexities of trade and globalization, but they are influenced by consistent messaging from political elites across the ideological spectrum.
At this point, Rudra and Jensen were joined by their co-author, Bonifai.
Bonifai highlighted that, beyond the US context, trade has become highly politicized in recent years, not only by anti-establishment parties but also by mainstream political groups. These parties have capitalized on the politicization of trade and globalization, leading many people to question these phenomena.
Bonifai emphasized that their research aims to shift the narrative and perspective on trade, demonstrating that trade can be “a success story, even for the average voter.”
ON WHY NOT EVERYONE IN AMERICA HAS BENEFITED EQUALLY FROM GLOBALIZATION
J. Bradford Jensen
Jensen acknowledges that certain industries and communities in the US have been significantly impacted by globalization, particularly manufacturing sectors that are geographically concentrated. When these industries suffer due to globalization, entire communities are disrupted.
He criticizes the US social safety net for failing to support these communities in their recovery and adaptation. Jensen believes that while globalization offers more opportunities than risks, there needs to be a better policy approach to both harness the benefits of globalization and mitigate its adverse effects on specific industries and communities. He emphasizes the need for a balanced strategy that captures the gains of globalization while minimizing its downsides.
He concludes that he doesn’t “think that there has been enough focus on that balance of how to capture the gains and mitigate the losses.”
Rudra argues for a “new paradigm” in addressing the impacts of globalization, moving beyond the traditional Washington Consensus, which focused solely on free markets without considering inclusive growth. She highlights that the US has historically been reluctant to mitigate the negative impacts of globalization.
Rudra calls for not just compensating those who have lost out due to globalization but also actively creating new opportunities for success. In the current technologically-driven global economy, basic manufacturing jobs now require some level of skill, even in developing countries. She goes on to stress the need for upskilling, which could take various forms, such as technical education, retraining, vocational training, or college education, depending on individual circumstances.
Rudra insists on changing the public narrative around globalization and skilling, stressing that secondary education needs to adapt to prepare people for success in a service-oriented global economy. She concludes that the new paradigm should focus on "inclusive globalization."
Bonifai supports Rudra’s perspective, emphasizing the need for "inclusive globalization." He agrees that the belief that only college education can lead to success in the US should be reconsidered.
Bonifai argues that with the right skills, high school graduates can still thrive in the modern economy. He highlights that there is substantial evidence showing that non-college education, when combined with relevant skills, can make workers highly mobile and employable in today’s global economy.
He goes on to suggest that alternative education pathways, such as online courses, apprenticeships, and skill-specific training, can provide significant opportunities for workers without a college degree, enabling them to succeed in a globally integrated economy.
ON HOW INDIVIDUALS OR BUSINESSES CAN REMAIN COMPETITIVE IN THE CURRENT ECONOMIC ENVIRONMENT
Jensen says that if the United States aims to remain competitive in today's global economy, it must leverage its strengths as a skill-abundant, capital-intensive, and intellectual property-intensive nation. He highlights that US firms, both in manufacturing and services, excel at identifying opportunities in areas where the country holds a comparative advantage.
To sustain this competitiveness, Jensen argues that educational opportunities must be expanded so that everyone can participate in these high-value industries.
He also stresses the importance of maintaining a supportive policy towards globalization. This includes both domestic policies, such as improving education and skill development, and outward-facing policies that keep the US open to trade.
Jensen notes that while the US has largely reduced trade barriers, especially in merchandise trade, there is still work to be done in reducing barriers in sectors where the US excels. He concludes by underscoring the need for policymakers to focus on both global engagement and creating domestic opportunities to ensure sustained competitiveness.
ON HOW IMPORTS CAN “ACTUALLY SUPPORT AMERICAN JOBS”
Niccolo Bonifai
Jensen explains how imports are essential for supporting American jobs, particularly in manufacturing. He illustrates this by describing how successful US manufacturing firms, which compete globally against firms from Europe, Asia, and South America, rely on access to low-cost intermediate inputs—such as components and assemblies—that might not be available domestically.
If US firms are unable to import these low-cost inputs, the final products they manufacture, whether it's jets or high-tech medical equipment, would become more expensive, Jensen adds. This would make them less competitive compared to their foreign rivals, leading to a loss of business and potentially shrinking these firms. Therefore, Jensen emphasizes that allowing US firms to import low-cost intermediate inputs is crucial for their success in both exporting and competing within the domestic market.
Rudra highlights the complexity of trade and the challenges in understanding its distributional consequences. She points out that a common but oversimplified belief is that imports are harmful while exports are beneficial. This simplistic view, which is prevalent among the general public and even some academics and policymakers, fails to capture the nuanced effects of trade.
According to Rudra, this kind of thinking can actually hinder economic growth and worsen economic opportunities. Her research aims to shift this narrative by demonstrating the more complex realities of trade and its impact on the economy.
The idea that “imports are bad and exports are good,” she says, is “just the easy shortcut to understand how to get out of our weakening economic opportunity situation, et cetera. And it's not as simple as that. In fact, that kind of logic hurts us. It prevents economic growth. So this is one of the narratives that we aim to change.”
ON THE IMPACT OF DOMESTIC EFFORTS TO REVAMP THE SEMICONDUCTOR CHIP INDUSTRY
Jensen says that while these efforts are complex, involving both national security and economic considerations, they have the potential to showcase opportunities in the semiconductor industry. If successful, these initiatives could demonstrate to young people that well-paying, stable jobs in manufacturing are available with the right training and skills, even without a college degree. This could encourage a renewed interest in and perception of manufacturing careers.
Bonifai appreciates the CHIPS Act for its focus on workforce development, including investments in community colleges, vocational schools, and research institutions. He values the inclusion of apprenticeships and on-the-job training, which are crucial for equipping the US workforce with the skills needed to excel in technology. However, he says that the CHIPS Act should prioritize workforce development over limiting imports.
Embracing imports and investing in education are crucial for advancing technology. This approach should also apply to other sectors, such as electric vehicles. Instead of imposing tariffs to address overcapacity issues in China, Bonifai advocates for investing in workforce development to make US electric vehicle manufacturing more competitive globally.
Rudra said that the CHIPS Act should be complemented by broader social support measures. She notes that the CHIPS Act aimed to stimulate industries like semiconductor production but highlights that this effort must be accompanied by investments in education, childcare, and paid family leave to be truly effective. Rudra expresses disappointment that the American Families Plan, which sought to address these supportive measures, did not pass.
ON BALANCING ECONOMIC NATIONALISM AND GLOBAL TRADE TO PROTECT LOCAL JOBS WHILE WELCOMING IMPORTS
Bonifai argues against economic nationalism that closes markets for domestic gain. He suggests that while past policies focused on market fundamentalism, modern approaches should include effective industrial strategies and enhanced educational opportunities. This will help both advanced and developing economies benefit from globalization. Rather than solely relying on social safety nets, he advocates for policies that help workers transition smoothly between sectors, allowing them to adapt and benefit from globalization.
“We don't want to keep on focusing on a narrative in which we would just be wanting to support the losers through social safety nets. What I think is really key is to focus on policies that allow even the traditional losers to benefit from globalization,” he said. “And that is exactly through policies that allow workers to be highly mobile and to move from one sector to another without having to face the losses as they transition from one sector to another.”
ON WHETHER FOCUSING ON BUSINESS SERVICES IN TRADE POLICY INCREASES DOMESTIC INEQUALITY BY FAVORING ELITE EDUCATED WORKERS
Jensen clarifies that the goal isn't to prioritize business services above other sectors but to ensure they are adequately represented in trade policy alongside manufacturing and agriculture. While business services may be more skill-intensive, they do not exclusively employ highly educated individuals. Many workers in these industries have only high school education, and growth in this sector can positively impact wages across the broader economy, benefiting a wider range of workers.
Rudra adds that their research is investigating whether tradable business services require a college degree or if skills can be developed through other means. Preliminary findings suggest that it may be possible for individuals without formal education to be successfully employed in these industries.
Jensen supports this by noting that while business services are generally more skill-intensive, around 50% of workers in these fields do not have a college degree. Thus, it is possible for people with less formal education to find employment in these sectors.
ON WHETHER A HIGH SCHOOL ECONOMICS CURRICULUM SHOULD FOCUS ON VALUE-ADDED GDP CALCULATION TO IMPROVE STUDENT UNDERSTANDING OF TRADE BENEFITS
To this, Jensen says the issue is rooted in the fact that traditional GDP calculations present imports negatively. However, he admits he is not immediately sure how to implement the value-added approach in teaching but encourages further exploration of the idea. Rudra herself said she will discuss it with students in future classes.
ON THE RECENT US JOBS REPORT AND ITS POTENTIAL CONNECTION TO TRADE
Jensen noted that the recent slowdown in job growth is likely due to the Federal Reserve's tighter monetary policy, which is intended to curb inflation by raising interest rates. This has led to slower economic activity and reduced employment growth. Concerns exist that the Fed might have acted too late in adjusting its policies.
Rudra highlighted that, while the immediate job data might not be directly related to trade, addressing protectionist policies is crucial for long-term job growth and economic stability.
ON WHETHER IMPORTS ARE HELPING US EMPLOYMENT
Jensen explains that imports enhance the competitiveness of US firms by providing access to cost-effective intermediate inputs. This, in turn, boosts US exports and supports manufacturing employment. The overall idea is that staying open to imports helps maintain competitiveness in the global market.
Rudra points out that the US. was a major proponent of the post-World War II economic order, which promoted trade and capital flows. The country now risks undermining this system that it helped establish and from which it benefited greatly. Turning away from open trade could have negative repercussions globally.
Bonifai discusses the rise of economic nationalism, noting that it's a response to past trade issues that no longer align with the current economic landscape. He says that imports are crucial for supporting the U.S.'s comparative advantage in services and technology, highlighting the need to adapt rather than revert to outdated manufacturing practices.
