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Imports: FAQ and Talking Points

Published on Saturday, January 01, 2005

FAQ: Do imports put U.S. jobs at risk?

Talking Points:

International trade sometimes does cause employment to increase in one sector and decrease in another. But so do many other factors. Exaggerated fears of massive job losses due to imports are misplaced. Contrary to some claims, only a very small percentage of American jobs are ever put at risk from imports. And surprising to many, U.S. employment has been strong during periods of elevated imports.

Stated by the Progressive Policy Institute in June 2005, “What role do trade and the global economy play in job loss? Perhaps less than many people assume. Definitions of ‘trade-related’ job loss are unclear, reliable statistics are scarce, and the statistics which do emerge are rarely put in the context of total layoffs. But research seems to show that at most they account for about 5 percent of layoffs, and more likely between 2 percent and 3 percent.”

According to the Bureau of Labor Statistics payroll data, which does not include farm workers and some self-employed workers, in June 2005 goods-producing industries (manufacturing, mining, logging and construction) accounted for 22 million workers; service-providing industries accounted for the remaining 111 million workers. The workers not in the manufacturing sector are in industries that by their nature do not produce tradable goods or services, or where imports account for a very small to nonexistent share of domestic supply, according to Daniel Griswold, director of the CATO Institute’s Center for Trade Policy Studies. And in the manufacturing sector, only a small number of workers are in industries considered import-sensitive.

In 2004, agricultural workers numbered 2.2 million and represented approximately 1.6 percent of total U.S. employment, as reported by the U.S. Department of Labor. According to Griswold, some agricultural sectors (such as dairy products, sugar and peanuts) are more vulnerable than others (the larger export-oriented sectors such as wheat, corn and soybeans). “Even in farm sectors most vulnerable to import competition,” said Griswold, “the potential job losses are minuscule in relation to the overall U.S. labor force.”

FAQ: What is the impact of imports on consumers?

Talking Points:

Contrary to some claims, imports are good for the economy and consumers. Imports offer American consumers greater choices, a wider range of quality and access to lower-cost goods and services. They create competition, forcing domestic producers to improve value by increasing quality and/or by reducing costs. And since imports allow the American family to purchase more goods for less money—stretching the dollar—more disposable income is available for education, health care, mortgages, vacations, etc. Imports also help keep inflation down, which is one of the most important factors in raising our standard of living.

“Three out of four families living below the poverty line in America today own a washing machine and at least one car,” observe John Micklethwait and Adrian Wooldridge, authors of A Future Perfect. “Ninety-seven percent own a television; three out of four have a VCR. Thanks to all that terrible competition, many gadgets are much more affordable, particularly in terms of the number of work hours needed to acquire them.”

FAQ: Do imports hurt U.S. manufacturers?

Talking Points:

Imports not only afford American families a higher standard of living—a primary economic goal—but through the availability of lower-cost imported components and materials, U.S. producers are more competitive, which result in enormous benefits.

In 2004, more than half the $1.47 trillion in goods Americans imported were capital goods ($344 billion) and industrial supplies and materials ($412 billion). As stated by Daniel Griswold: “Such imports as petroleum, raw materials, steel and semiconductors are used directly by American producers to lower the cost of their final products. The lower costs in turn lead to increased sales at home and abroad, and in many cases, higher employment within the industry.”

According to the WTO, “Imports expand the range of final products and services that are made by domestic producers by increasing the range of technologies they can use. When mobile telephone equipment became available, services sprang up even in the countries that did not make the equipment. Additionally, because imports offer unique capabilities at attractive prices, they are proven to enhance worker productivity. And higher productivity leads to a host of benefits.”

Services: FAQ and Talking Points

Published on Saturday, January 01, 2005

FAQ: What impact do service exports have on the economy and jobs?

Talking Points:

For over three decades, the U.S. service sector has generated a trade surplus that has consistently reduced the trade deficit. For example, in 2004, U.S. services exports of $338.6 billion decreased the U.S. trade deficit by almost $50 billion, and the service export figure is probably severely underreported. Since 1980, U.S. service exports have grown almost twice as quickly as goods exports.

But more importantly, tremendous benefits are currently derived from—and huge potential is offered by—the service sector in terms of economic growth, personal income, employment and exports. This fact is not widely acknowledged. It is becoming increasingly likely that the telecommunications/digital infrastructure that is making the global sourcing of services possible today is the same infrastructure that will significantly support an even greater boost in service exports.

Major U.S. service exports include computer and data processing; wholesale, financial, transportation and communication services; architectural, engineering and surveying services; accounting, research and management services; and motion pictures. And it is anticipated that the export of business, professional and technical services (accounting, advertising, engineering, franchising, consulting, public relations, testing and training) will increase rapidly over the next several years.

When the delivery of services requires face-to-face contact, it is necessary to be present in the foreign market. To accomplish this, many U.S. companies sell their services through U.S.-owned foreign affiliates. U.S.-owned employment agencies operating in Europe, for example, interview hundreds of European candidates each day for local jobs. U.S.-owned insurance affiliates operating abroad, a fast-growing industry, account for a very large share of total U.S.-owned affiliate transactions.

FAQ: Do service jobs pay poorly?

Talking Points:

When some people envision the service sector, they think of employees flipping hamburgers. In reality, the U.S. service sector has become extremely advanced and internationally competitive. In turn, the sector’s wages have risen considerably. For example, in December 2002, January 2003 and February 2003, average hourly earnings for service production workers reached $15.49, $15.51 and $15.65, respectively, according to the Bureau of Labor Statistics. During these same months, average hourly earnings for U.S. manufacturing production workers were $15.48, $15.53 and $15.56. This indicates that hourly wages in the service sector have clearly caught up to the manufacturing sector.

With the recent introduction and availability of new and inexpensive technology—led by telecommunications, computers and the internet—millions of people and companies worldwide now have the ability to purchase more services from the United States. As a result, the U.S. service sector will continue to grow. Note: the number of workers employed in U.S. service producing industries has steadily climbed. In June 2005, it reached 111.4 million or 83.4 percent of total payroll employment.

Averting Disaster: The Future of Cargo Security and How Supply Chain Managers Must Prepare

Published on Saturday, January 01, 2005

After the tragedy of September 11th, U.S. Customs and Border Protection (CBP) and its government partners implemented several intermodal cargo security initiatives to defend against an attack that could devastate the U.S. economy. Chief among these initiatives is a system designed to pinpoint and inspect cargo containers that may pose a terrorist threat.

The system in place today, however, must strengthen inherent weaknesses and evolve to meet economic, geographic, and political challenges of the next decade that threaten to constrain federal capabilities. Accompanying this evolution will be major changes in the two burdens that container targeting places on business: the 24-Hour Rule and cargo inspections. Supply chain managers must consider how the system will change if they hope to plan effectively for safe and efficient trade in the coming years.

In the weeks following 9/11, CBP had to employ an “implement and amend” approach to supply chain security, forming regulations quickly and adapting them over time. That adaptation has only just begun. Targeting and inspection processes must cope with the fact that maritime trade is expected to double by the year 2020, if not much sooner. Port space, throughput, and security funding already face limits in the United States and abroad. And political battles over security program results and annual budgets cast a cloud of uncertainty over the CBP layered approach to security.

Meanwhile, how CBP chooses to address several system weaknesses could affect the entire targeting system and supply chain management. First, the 24-Hour Rule and maritime container targeting depend on the success of two related programs, the Container Security Initiative (CSI) and the Customs-Trade Partnership Against Terrorism (C-TPAT), both of which face implementation problems of their own. CBP must overcome limitations in its information technology, particularly the Automated Manifest System and the new Automated Commercial Environment, for more effective targeting. And CBP must incorporate additional information in its computer targeting beyond vessel manifests, which do not present the most precise picture of a container and its contents in real time.

American companies must take greater responsibility for individual supply chain security using sound risk management principles. In light of federal changes on the way and the need to mitigate supply chain disruptions, supply chain managers should 1) join C-TPAT to reduce inspection risk; 2) divert shipments to safer channels to reduce inspection risk; 3) adjust inventory management to prepare for inevitable trade disruptions; 4) prepare for shipment data reporting earlier in the supply chain; and 5) prepare for broader document and data reporting requirements.

Because U.S. and global trade are truly one and the same, the protection of U.S. supply chains going forward will have to involve a more international effort that is best led by free-market industry, in conjunction with customs authorities.

Manufacturing and Jobs: FAQ and Talking Points

Published on Saturday, January 01, 2005

FAQ: How is globalization impacting U.S. manufacturing?

Talking Points:

The integration of traditional manufacturing, new technologies, national markets and improved supply chain management—all spawned by globalization—is transforming American manufacturing. In the process, resources have shifted to sectors with competitive advantages. As a result, productivity has climbed to new highs, and due to the American ability to change and improve, innovation is flourishing. For instance, the use of muscle on the factory floor is a thing of the past. Today, self-directed workers operate in teams and apply more sophisticated skills to create and run new processes. Concurrently, competitive forces unleashed by globalization are forcing U.S. manufacturers to compete less on price and focus more on product design, branding strategies, productivity, flexibility, quality and responsiveness to customer needs. And companies must continue to push the envelope in terms of greater specialization.

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