Trade matters. International commerce accounts for almost one-fifth of the U.S. economy’s gross output. And by finding foreign markets for their goods, U.S. manufacturers provide jobs at home — even while competition from cheaper foreign goods may dampen domestic employment. Indeed, it is not a stretch to say that economics as a separate discipline was born from the observations of David Ricardo and Adam Smith on trade. But trade matters beyond its impact on national income. It affects domestic workers and firms that face foreign competition, and as a result, it is a recurrent topic of public discussion.
We often hear stories about some developing country offering a product at half the price of a made-in-America equivalent and sending a domestic industry into disarray and its workers into unemployment. Or politicians debate the fairness and impact of China’s trade policy on the U.S. economy. Indeed, China is the perfect example of a country “making the leap” through trade, catching up with the latest technology and being able to compete in global markets. And going further back in time, but much closer in space, the cotton trade was instrumental in the development of the U.S. economy in the 19th century.
This article appeared in the First Quarter 2014 edition of Business Review. Download and read the full issue.