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Local Jobs Depend on Global Trade

Published on Tuesday, March 01, 2005

International trade is a primary generator of business growth in Western New York. And a tremendous number of jobs are dependent on it.

How do we know this?

New York state is the third-largest exporter of manufactured goods compared to all other states. Based on U.S. Census Bureau calculations, more than 280,000 New York jobs are directly dependent on merchandise exports, which pay 13 percent to 18 percent more than the national average wage. And a tremendous number of jobs are dependent on New York’s service exports, as well as indirect exports.

Trade is also essential to our region.

In the Buffalo-Niagara Falls metropolitan area, the manufacturing sectors with the largest employment are also among the state’s top merchandise export industries. What does this mean?

Take the local transportation equipment industry for instance. It is Buffalo-Niagara’s largest manufacturing employer and New York’s second largest merchandise export. It stands to reason: As Ontario auto producers (one of our principal customers) buy more auto parts from local manufacturers, we benefit.

Jack Davis, the outspoken trade protectionist who attempted to unseat Rep. Tom Reynolds in the 26th Congressional district last November, has made trade the scapegoat of virtually all our economic problems. Although his intentions are good, his trade policy recommendations, if implemented, would be disastrous for Western New York. If Davis had his way, he would raise import barriers in an attempt to isolate producers from foreign competition. In response, foreign countries would retaliate by keeping U.S. products out. This would have an enormously negative impact on New York State, especially local auto parts producers who heavily rely on Ontario auto factory orders.

Overall, we would lose more jobs than gained.

According to a U.S. International Trade Commission study, if all U.S. trade barriers had been eliminated in 1999, 175,000 full-time American workers would have been displaced (representing only one one-hundredth of 1 percent of the labor force), but 192,400 full-time jobs would have been created. The result: a net gain of nearly 17,400 jobs. Plus, total output would have increased by $58.8 billion.

If trade is not causing manufacturing jobs to decline, what is? New technologies and innovation, which have significantly boosted U.S. productivity, are primarily responsible. This has enabled fewer workers to generate much more output than ever before.

Nevertheless, Mr. Davis advocates protectionism to prop up failing manufacturing industries. This would only make the situation worse. Federal Reserve Chairman Alan Greenspan has repeated that creeping protectionism must be thwarted and reversed.

Consider this: Would we have wanted to stop rising productivity in the U.S. agricultural industry that caused the number of farm jobs to fall from 9.5 million in 1940 to 2.2 million today?

Currently, U.S. agricultural output can virtually feed the world. America did not “lose” 7.3 million farm jobs: They shifted to emerging industries. As a result, we became more efficient and prosperous.

Trade is not the cause of Western New York’s economic ills. It’s one of the few bright spots on our economic horizon.

Are Anti-Terrorist Regulations Trumping Commerce in North America?

Published on Tuesday, March 01, 2005

Are the U.S. government’s new antiterrorism policies and regulations for cross-border commerce serving, in effect, as non-tariff barriers? If so, are they trumping the long-standing objective of maintaining a relatively open and easily crossed international border between the U.S. and Canada?

What are the principal costs involved in complying with the new security mandates? And, what are the likely strategic responses of American and Canadian companies to these new security regulations when it comes to decisions related to supply line logistics, direct investments, and the location of production?

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Are U.S. Deficits Bad? The Surprising Relationship Between Deficits and Economic Growth

Published on Tuesday, March 01, 2005

Many Americans fear an increasing U.S. deficit and believe it will ultimately lead to economic crisis. The facts, however, may surprise you.

By the most basic measure of economic performance—the change in real gross domestic product (GDP)—the U.S. economy performs best when current account deficits (which largely consist of the trade deficit) are high.

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Protectionist Policies Would Be Disastrous

Published on Thursday, February 17, 2005

Jack Davis, the isolationist who attempted to unseat Rep. Tom Reynolds last November, blames trade for virtually all our economic problems. Although his intentions are good, his trade policy recommendations, if implemented, would be disastrous.

In attempt to isolate producers from foreign competition, Mr. Davis would raise import barriers. In response, foreign countries would retaliate by keeping U.S. products out. This would significantly damage the transportation equipment industry, Buffalo-Niagara's largest manufacturing employer that heavily relies on sales to Ontario auto factories.

Other important industries would also suffer. Why? Buffalo-Niagara's largest manufacturing sectors are among the state's top export industries. And trade in New York, the third largest exporting state, directly supports more than 280,000 higher-paying jobs, according to the Census Bureau. Plus, a tremendous number of jobs are dependent on service exports. If state exports decline, local jobs will be lost.

Higher tariffs would also hurt local families by making imported consumer products more expensive. In turn, less income would be available for education, health care, rent or mortgages. And local factories that incorporate foreign components in their products would have to raise prices or absorb the difference.

Lowering tariffs, on the other hand, would actually help. According to the U.S. International Trade Commission, if all U.S. trade barriers had been eliminated in 1999, more jobs would be gained than lost—a number representing only one one-hundreth of 1 percent of the labor force. Plus, total output would have increased by $60 billion.

New technologies and innovation, which have significantly boosted productivity, are primarily responsible for the loss of manufacturing jobs—not trade. As a result, fewer workers can produce much more than ever before. Surprising to many, manufacturing production has rapidly increased, not decreased, over the last 50 years, according to the Federal Reserve.

Consider this: would we have wanted to stop rising productivity in the U.S. agricultural industry that caused the number of farm jobs to fall from 9.5 million in 1940 to 2.2 million today? Would we want to go back and save buggy maker jobs at the expense of auto workers, dump ATMs because they eliminated bank teller positions or destroy voice mail because it replaced receptionists?

Since 1970, the U.S. economy produced 60 million net new jobs. And from 2002 through 2012, the Labor Department projects a net increase of another 21.3 million, with 96 percent in the service sector. Surprising to many, average hourly earnings for service production workers have already caught up to those in manufacturing, according to the Bureau of Labor Statistics.

In his December 2004 op-ed entitled, What Would John Wayne Do?, Jack Davis applies John Wayne-era solutions to today's challenges. This is part of the problem.

Today, technological advances, the fall of Communism and globalization are shaping a new world. In response, we can elect representatives who recognize this and take actions to improve the region's competitiveness or chose policymakers who hope the world of John Wayne returns.

Trade is not the cause of our economic ills. It's one of the few bright spots on our economic horizon.