Careful
policy-making harnesses the job-creation powers
of freer trade
This is a difficult subject to tackle in simple terms. There is strong
evidence that trade boosts economic growth, and that economic growth
means more jobs. It is also true that some jobs are lost even when
trade is expanding. But a reliable analysis of this poses at least two
problems.
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First,
there are other factors at play. For example, technological
advance has also had a strong impact on employment and
productivity, benefiting some jobs, hurting others.
Second,
while trade clearly boosts national income (and prosperity), this
is not always translated into new employment for workers who lost
their jobs as a result of competition from imports.
The
picture is not the same all over the world. The average length of time a
worker takes to find a new job can be much longer in one country than
for a similar worker in another country experiencing similar conditions.
In
other words, some countries are better at making the adjustment than
others. This is partly because some countries have more effective
adjustment policies. Those without effective policies are missing an
opportunity.
 There
are many instances where the facts show that the opportunity has been
grasped — where freer trade has been healthy for employment. The EU
Commission calculates that the creation of its Single Market means
that there are somewhere in the range of 300,000–900,000 more jobs
than there would be without the Single Market.
Often,
job prospects are better in companies involved in trade. In the United
States, 12 million people owe their jobs to exports; 1.3 million of
those jobs were created between 1994 and 1998. And those jobs tend to be
better-paid with better security. In Mexico, the best jobs are those
related to export activities: sectors which export 60 per cent or more
of their production, pay wages 39% higher than the rest of the economy
and maquiladora (in-bond assembly) plants pay 3.5 times the Mexican
minimum wage.
The
facts also show how protectionism hurts employment. The example of the
US car industry has already been mentioned: trade barriers designed to
protect US jobs by restricting imports from Japan ended up making cars
more expensive in the US, so fewer cars were sold and jobs were lost.
In
other words, an attempt to tackle a problem in the short term by
restricting trade turned into a bigger problem in the longer term.
Even
when a country has difficulty making adjustments, the alternative of
protectionism would simply make matters worse.
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