Many Americans assume that imports are bad for economic growth, production, and employment, a “burden” we must bear to help other nations recover their economic health. In reality, the level of imports has no negative impact on total employment, and the vast majority of Americans work in sectors of the economy that do not face significant import competition.
Like technology, trade tends to shift resources to industries where worker productivity (relative to compensation) and returns on investment are higher compared with other domestic industries. The limited and temporary dislocation caused by import competition should not cause us to sacrifice the lasting benefits that competition creates.
The large majority of America’s nonfarm workers, about 85 percent, are employed in service-providing industries, construction, and government—sectors where import competition is minimal. To those workers, imports are an unambiguous blessing that spurs innovation, expands consumer choice, and raises real wages.
Even in the more tradable sector of manufacturing, import penetration is low in most industries. Based on an analysis of 1994 import, production, and employment figures, 2.2 million Americans work in manufacturing industries with an import penetration of 30 percent or more. Workers in trade-sensitive manufacturing industries thus account for only 12 percent of total manufacturing workers and less than 2 percent of total nonfarm workers.
Technological change and other non-trade factors account for most of the workers displaced from their jobs each year. In the three-year period from 1995 through 1997, three-quarters of the 8 million Americans displaced from their jobs were in sectors that by their nature are relatively insulated from import competition. Only 23 percent were in manufacturing, and 2 percent in mining and agriculture.