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Impact of Free Trade

U.S. Jobs Gained and Lost through Trade: A Net Measure

“We have two main findings. First, we determine that the offshoring of jobs has been a limited phenomenon: Our comprehensive estimate of the number of jobs embodied in U.S. net imports is small relative to total employment in the United States1—2.4 percent of the total, at the most—both historically and in recent years. Moreover, this estimate is sometimes positive and sometimes negative, suggesting that international trade does not necessarily mean a loss of jobs for the United States.

Second, we find no evidence to support the claims that a surge in offshoring played a large role in the jobless recovery. Jobs embodied in net imports did not grow at an accelerated pace after the 2001 recession. In fact, the increase in U.S. jobs sent abroad has averaged about 30,000 per month since 2001—a deceleration from the monthly average increase of 45,000 jobs during the period from 1997 to 2001.

More broadly, our results show no clear or necessary relationship between a pickup in jobs lost to trade and weakness in the U.S. labor market. A case in point is the 1997-2001 acceleration in offshoring, which occurred when U.S. payrolls were expanding steadily.”

Are We Underestimating the Gains from Globalization for the United States?

“In this edition of Current Issues, we examine how the availability of new goods and varieties through international trade has affected the welfare of U.S. citizens. While the benefits of free trade have traditionally been associated with declines in the price of existing products, recent trade theory suggests that the introduction of new imported goods constitutes another important gain from trade. Our task in this article is to provide a measure of this gain over the past three decades.

To do so, we first estimate the increase in global varieties from 1972 to 2001. We then estimate how the change in import prices over this period—a standard gauge of consumer welfare—would be affected if this increase in variety were taken into account. Using our results, we determine what consumers would be willing to pay to access the wider range of goods available in 2001 than in 1972.

Significantly, we find that global varieties grew more than threefold over the 1972-2001 period. When we adjust import price growth for the increased variety, we find that import prices in this period fell markedly faster—by about 1.2 percentage points per year—than the conventional, or unadjusted, import price index would suggest.1 Taking our calculations one step further, we conclude that consumers would be willing to pay $260 billion, or roughly 3 percent of GDP in 2001, to avail themselves of the expanded range of goods on the market. This sizable sum indicates that U.S. consumers see increased choice in goods as an important benefit of international trade.”