AS

International Trade and Jobs

  • Economists say that trade has no impact on overall number of jobs in an economy
    • Ex: a tariff on washing machines will create jobs in the domestic washing machine industry, but tariffs on washing machines will reduce the number of jobs elsewhere in economy
    • A tariff reduces the sales of foreign producers of washing machines
    • Workers in china want to be paid for their work (they are paid in US dollars)
    • Trade is about trading goods and services for other goods and services (people work to consume)
    • WE PAY FOR OUR IMPORTS WITH EXPORTS
  • If you want to consumer more, you must produce more
  • If we import less, we will export less
    • If we buy less from them, they will buy less from us
    • A tariff on our imports means fewer exports and fewer jobs in export industries
  • We pay for our imports with exports
  • Ex: US has a lot of highly educated, skilled workers, so the US is likely to have a comparative advantage in producing complex goods like entertainment, design and other services
    • China has a less skilled workers
    • China has a comparative advantage to the US in producing less complex goods like clothing and footwear
    • Increased trade with a country like China will shift US production towards design services and away from producing shoes and washing machines
    • Increased trade with China will also increase demand for skilled workers, driving up their wages, and it will decrease demand for unskilled workers driving down their wages