Transcript Slide 1

TRADE, JOBS AND U.S. MANUFACTURING
The Effects of U.S. Trade and Investment
Deals on Trade, FDI, Employment, Wages,
and the Distribution of Income
IFPTE Legislative Conference
Tuesday, March 25, 2014
Robert E. Scott
Director of Trade and Manufacturing Policy Research
Economic Policy Institute
What do trade and investment deals do?
• U.S. trade deals, including the WTO agreements,
so-called “free-trade agreements” and bilateral
investment treaties have resulted in growing U.S.
trade deficits with low wage countries like China,
Mexico, Malaysia and Vietnam which has cost the
United States millions of jobs, most in the
manufacturing sector
• U.S. trade deals “facilitate offshoring, ban Buy
American provisions and erode manufacturing jobs,
utterly contradicting the president’s domestic
agenda (Lori Wallach, Public Citizen 2013)”
Effects of Trade and Investment Deals
1. The Deals
a. NAFTA
b. China’s entry into the WTO
c. KORUS
d. Trans-Pacific Partnership (TTP)
e. Transatlantic Trade and Investment Partnership (T-TIP)
2. The issues
a. Foreign direct investment (FDI), outsourcing & trade
b. Trade, jobs, wages and inequality
c. Multinational companies (MNCs), trade & jobs
Growth of Foreign Direct Investment has
propelled globalization process
• The growth of international capital flows has played a
key role in the globalization process. For the United
States:
• Real U.S. GDP growth averaged 3.2% per year
between 1980 and 2010
• U.S. – owned assets abroad increased 8.7% per
year, nearly three times as fast
• Real Foreign Direct Investment (FDI) by U.S.
Multinationals increased 6.1% per year, or twice as
fast as GDP
• Real FDI in the U.S. by foreign MNCs has increased
9.5% per year, three times as fast as U.S. GDP
North American Free Trade Agreement:
NAFTA
NAFTA took effect January 1, 1994
Effects of NAFTA on:
• FDI
• Trade
• Jobs
NOTE: World Trade Organization (WTO) took effect on
January 1, 1995
Foreign direct investment in Mexico
tripled after NAFTA, 1980–2007
3.0%
2.9%
FDI as a share of gross domestic product
2.5%
2.0%
1.5%
1.0%
1.0%
0.5%
0.0%
1980–1993
1994–2007
Source: IMF, International Financial Statistics and World Economic Outlook database, and Economic Policy
U.S.-Mexico trade before and after
NAFTA, 1989–2013
2013:
277.7
300
1994: NAFTA enacted
in billions of U.S. dollars
250
96.0
200
Imports
150
181.7
Trade balance
100
Exports
50
0
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
Source: Economic Policy Institute analysis of U.S. International Trade Commission Trade Dataweb
2011
2013
China’s Entry into the WTO: 2001
China entered the World Trade Organization on
December 11, 2001
Effects of China trade on:
• FDI
• MNCs
• Trade
• Jobs
• Wages & inequality
China in the WTO: FDI, MNCs,
U.S. trade & jobs
• After China entered the WTO in 2001, FDI in China
quadrupled between 2004 and 2010 alone, and China
became the 3rd largest recipient of FDI in the world
• Foreign invested enterprises in China were responsible for
52.4 percent of China’s exports and 84.1 percent of its trade
surplus in 2011
• The U.S. trade deficit with China increased 2.5 times with
China between 2001 and 2011, rising to $301.6 billion and
costing 2.7 million U.S. jobs in that period. 76 percent of the
jobs lost were in manufacturing.
Highly paid jobs displaced by China trade: Jobs lost to
imports paid more than jobs gained through exports
$1,800
$1,555
$1,600
$1,388
$1,400
$1,157
$1,200
$1,022
$1,000
$854
$800
$689 $694
$607
$873
$803
$791
$664
$600
$0
Exports
$200
Imports
$400
$391
Nontraded
$442 $446
Less than high school
High school
Some college
Bachelor's or more
Total
Globalization & the distribution of income
•
•
•
Using standard models to benchmark the cost of
globalization for American workers without a college
degree (Bivens 2013)
In 2011, trade with low wage countries lowered wages
by 5.5 percent—roughly $1,800 for all full time, full-year
workers without a college degree
100 million workers without a college degree total
transfer of $180 billion
Explains 90 percent of the rise in college wage
premium since 1995
C. U.S.-Korea Free Trade Agreement:
KORUS
KORUS took effect March 15, 2012
Effects of KORUS on:
• U.S.-Korea trade
• U.S. Jobs
U.S.-Korea Trade, 2012–2014*
70
After KORUS, March 15, 2012
57.0
60
42.5
39.3
38.9
40
Changes, billions of
dollars from
2011/2012–2013/2014:
Imports:
+$5.6
Exports:
-3.1
Trade Bal.: -8.7
20
10
-10
Trade
Bal.
0
Imports
30
Export
in billions of dollars
50
62.6
59.3
-20
-14.6
-20.3
-30
-23.3
Apr-2011 to Mar-2012
Apr-2012 to Mar-2013
Apr-2013 to Mar-2014
*Data are calculated over the periods from April to March. Data for February and March 2014 were estimated
based on the available year-to-date data for April 2013 to January 2014.
Source: Economic Policy Institute analysis of U.S. International Trade Commission Trade DataWeb
“The definition of insanity…”
What’s next?
d. Trans-Pacific Partnership (TTP) with: Australia,
Brunei, Canada, Chile, Japan, Malaysia, New
Zealand, Peru, Singapore, and Vietnam + ??? (South
Korea, China)
e. Transatlantic Trade and Investment Partnership
U.S. trade deficit with TPP countries is
large and growing, 2000–2013*
2013:
848
900
in billions of U.S. dollars
800
Imports
260
700
600
Trade deficit
588
500
400
Exports
300
200
100
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
*Annual data for 2013 estimated based on year-to-date trade through November 2013.
Source: EPI analysis of U.S. International Trade Commission, Trade DataWeb (2014)
2010
2011
2012
2013*
Goals of the TTIP (TAFTA)
Goals of MNCs in the TTIP?
• Wealthy markets of core countries
(Germany, France, Italy, Belgium etc.)
or
• Labor markets of east (Bulgaria,
Hungary, Poland, Romania, and
candidate members (Turkey, Balkans)?
What do Global Corporations do?
1. Trade flows associated with US MNCs investing
abroad, 1997-2010
2. Trade flows associated with foreign MNCs investing in
the United States.
Net trade balances of U.S. MNCs* direct investment
abroad, foreign MNCs direct investment in U.S., and
total MNCs, 1997–2011
200
in billions of U.S. dollars
100
0
-100
U.S. direct investment
-200
Foreign direct
investment in U.S.
-300
-400
-500
-600
1997
Total MNC trade
balance
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
*Multinational companies
Source: Bureau of Economic Analysis Direct Investment and Multinational Companies interactive tables
2010
2011
Net trade balances of U.S., foreign and total MNCs*
trade balances as shares of U.S. trade balance, 2005–
2011
90%
84.2%
78.2%
80%
74.3%
70%
63.8%
59.7%
60%
55.6%
54.5%
53.8%
48.4%
50%
41.6%
40%
36.1%
44.8%
37.3%
28.6%
0%
U.S
10%
17.7%
Foreign
Total MNCs
30%
20%
46.2%
17.2%
18.1%
29.8%
28.1%
19.0%
2005
2006
2007
2008
2009
2010
*Multinational companies
Source: Bureau of Economic Analysis Direct Investment and Multinational Companies interactive tables
2011
Where have 5.6 million jobs gone?
U.S. manufacturing trade balance and employment, 1989-2012
0
19
Trade balance ($ billions)
-100
Manufacturing employment
(right axis)
17
-200
16
15
-300
14
-400
13
Manufacturing trade balance
(left axis)
12
-500
11
-600
1989
10
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
Source: Bureau of Labor Statistics, U.S. international Trade Commission and author's analysis.
2011
Employment (millions)
18
The end
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(Supplemental data continues, below)
Foreign Direct Investment in China, 2004-2010