October 12, 2011

Reasons for Optimism Amidst New Trade Deal

Bruce Yandle

Distinguished Adjunct Fellow

In anticipation of the possible Colombia, South Korea, Panama trade agreement, government studies done in association with the proposed deal and comments by the U.S. Trade Representative's office indicate there will be a net increase in U.S. employment along with an expanded global market for U.S. goods and services. 

Generally speaking, expanded trade opportunities create new wealth and that in itself generates more employment.

Clearly, different U.S. industries will be affected in different ways, though.

The U.S. advantage lies in durable goods manufacturing and financial and engineering services, while the U.S. disadvantage is associated with labor using nondurable goods manufacturing. The textile industry, for example, will face new competitive challenges.

Jobs aren’t the only aspect of the economy we’re likely to see impacted by a trade deal, though.

The tendency should be for us to see lower prices on consumer goods, even if wages in most industries will not be affected. Indeed, they may rise as U.S. workers become even more productive due to increased global competition.