November 10, 2015 | Commentary on Free Trade Agreements, Global Economy, Economic Growth

In Praise of Imports

Last week the Obama administration released the text of the proposed Trans-Pacific Partnership — a trade pact between the U.S. and 11 other Pacific Rim countries. Advocates of such deals traditionally focus on the benefits of opening new markets to U.S. exports. But good trade agreements also reduce self-destructive U.S. trade barriers.

Politicians often mischaracterize imports as detrimental to economic growth and employment. But, in practice, imports — no matter what their country of origin — provide huge benefits to American workers, consumers and producers. They lead to more opportunities, greater choices, more affordable goods and a better quality of life.

It's been said that the most powerful lies often contain a grain of truth. That's certainly true for the protectionist argument that free trade "ships U.S. jobs overseas." Competition from imports has led to some lost jobs here at home. But these horror stories don't give a complete picture of free trade — because they omit mention of all the positive economic effects of imports.

The increased economic activity associated with every stage of the import process helps support American jobs. One Heritage Foundation study, for example, found that imports of clothes and toys from China alone support more than a half-million American jobs. These jobs arise in virtually every economic sector, from wholesale and retail trade to transportation, construction and finance.

Furthermore, imports are vital to the operation of many American businesses that produce finished goods. According to the Bureau of Economic Analysis, between 1997 and 2006 imported parts and material significantly enhanced U.S. productivity, accounting for 14 percent of overall labor productivity growth. Imports were particularly valuable in the manufacturing sector, accounting for 23 percent of labor productivity growth in that sector.

A 2013 analysis published by the Federal Reserve Bank of St. Louis also highlights the dynamic and value-adding role played by imports. The study presents strong evidence that "imports have played a critical [and] positive role in boosting manufacturing output in the United States — much more so, in fact, than exports." Indeed, intermediate and capital goods imports are the lifeblood of U.S. manufacturing.

Imports give our foreign trading partners dollars to buy U.S. exports or to invest in our economy, supporting millions of American jobs.

But perhaps the biggest beneficiaries of imports are the middle-class families who can now enjoy more affordable goods and higher incomes. Imports from our trading partners allow U.S. consumers to buy a wider variety of goods at lower prices. This raises real wages, helping families purchase more with their current incomes. As noted recently by the Council of Economic Advisers, "[Trade] is especially important for middle-class consumers [who] gain an estimated 29 percent of their purchasing power from trade."

Higher incomes and economic growth, when combined with cheaper, more plentiful products, are the essential building blocks for a high quality of life and a strong middle class that can afford modern amenities. As Nobel Prize-winning economist Milton Friedman insightfully observed: "Exports are the cost of trade, imports the return from trade, not the other way around."

Indeed, free trade and importing enrich our lives and lifestyles daily. For example, imports give Americans year-round access to healthful fruits and vegetables, affordable clothing, fresh flowers for Mother's Day and cellphones more powerful and plentiful than supercomputers once were. When combined with the jobs that imports support, the benefits compound. Jobs, rising wages and falling prices are a surefire formula for enhancing Americans' quality of life.

Imports provide choices and opportunities that increase both individual and national prosperity. Expanded economic activity due to trade in both directions adds jobs. Policymakers serious about bolstering the U.S. economy should take full advantage of the power of free trade — coming as well as going.

-Bryan Riley is the Jay Van Andel Senior Analyst in Trade Policy at The Heritage Foundation's Center for Trade and Economics. Senior policy analyst Anthony Kim is research manager for the Index of Economic Freedom.

About the Author

Bryan Riley Jay Van Andel Senior Policy Analyst in Trade Policy
Center for Trade and Economics (CTE)

Anthony B. Kim Research Manager, Index of Economic Freedom, and Senior Policy Analyst
Center for Trade and Economics (CTE)

This piece origianlly appeared in the Washington Times