I checked out my closet to see where my clothes were made. My shirts were made in Vietnam, China, Peru, Honduras, Nicaragua, El Salvador, Dominican Republic, Mauritius, Singapore, Thailand, and Turkey. My Levi jeans were made in Bangladesh, India, and Mexico. I couldn’t find any clothing made in America. Maybe I didn’t look hard enough. At Costco you can get a very nice all cotton t-shirt made in Peru for $12.
Think about all the jobs lost because of these cheap imports. If Costco was truly patriotic why don’t they buy American made clothing? Wouldn’t that keep jobs in America? Trump says that China and Mexico are stealing American jobs.
Cheap imports have led to a decline of textile mills and employment in America’s textile industry. Since 1990 employment in textile mills has declined from 503,000 to 111,000 in 2017 (BLS data). The anti-free trade protectionist lobby makes the argument that we need to protect jobs here from “unfair” competition. They want the government to put big tariffs on imports to protect American (i.e., union) jobs.
The truth is that t-shirts are still made in America, but, apparently, you won’t buy them. You are the problem because you want the best products for the cheapest price. China and Peru and all the rest supply us with what we want because they can do it more efficiently.
Here is a question you should ask before you rally for tariffs against imports: if a flood of cheap imports are ruining America, why have jobs increased at the same time?
Look this chart from the St. Louis Fed (via economist Don Boudreaux at George Mason University): from 1975 to the present both imports and U.S. employment have gone up, almost in synch (blue = jobs; red = imports):
This is the opposite of what the opponents of free trade tell us.
It’s a fact that when we buy cheaper imported goods some workers in America will lose jobs. But competition among companies, whether foreign or domestic always causes economic disruption and job losses. Trade cause disruption. Commerce causes disruption. Technology causes by far the most disruption and job losses—a recent study estimates that 90% of manufacturing jobs were lost because of technological innovations (productivity gains created by capital investment in machinery and computer technologies). Those poor workers in the music industry who churned out, distributed, and sold CDs lost their jobs because of iTunes, Spotify, Pandora, and Amazon Music. No one seems to care about them. You can’t freeze time. This is the nature of the market economy where people are free to buy whatever they want.
Yes, tariffs can protect some union jobs, but it will be at the expense of the other 310,000,000 Americans who end up being poorer because they will have to pay more for union made consumer goods. With less to spend and fewer choices, we will buy fewer goods, and that leads to declining growth and lost jobs for other Americans. It’s a win-lose for union members and lose-lose for American consumers.
Trump gained many supporters because he claimed cheap imports from China and Mexico were destroying American manufacturing. The facts there are also quite different: over the last 20 years of cheap Mexican and Chinese imports, American manufacturing output has increased by 40% and value added to products by American manufacturers have reached $2.4 trillion, an all-time high.
NAFTA, Trump’s much reviled free trade treaty with Mexico, has been a boon for the country and especially Texas. Texas alone exports $92 billion of goods to Mexico (2015). It is estimated that this trade has created 382,000 new jobs in Texas. The U.S. Department of Commerce says that Texas’s exports support more than 1,000,000 jobs in America. Cancelling NAFTA would be a disaster for America.
There is another side of free trade that protectionists fail to mention. Free trade competition has allowed other countries produce things for us more efficiently than we can. That has allowed American manufacturers to focus on what they do best. Apple designs products here and lets Chinese factories assemble them. Capital and resources flow away from inefficient companies into more productive ones. New technologies, new ways to manufacture, new ways to market, new ways to distribute = new American jobs.
For example, in 2014 the economy lost 55.1 million jobs but created 57.9 million jobs, a gain of 2.8 million jobs. Economist Joseph Schumpeter called this “creative destruction.”
Let China produce the shoes, t-shirts, toys and assemble iPhones. We produce and export high value products like “pharmaceuticals, plastics, fabricated metals, machinery, computers and other electronics, motor vehicles and other transportation equipment, and aircraft and aerospace equipment.” Free trade deals like NAFTA have given American manufacturers access to world markets where they can compete and thrive.
Despite what President Trump says, we have a dynamic, growing economy, and a standard of living equal to none. And free trade has been a major contributor to our prosperity. No American consumer wants to have fewer choices and pay $30 for $12 Costco t-shirts.