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By
Bryan Bezold
RCGA Director of Research and Chief Economist
St. Louis is part of the global economy, and over the last decade,
the pace of that globalization has increased rapidly. Often,
this is portrayed negatively. We’ve seen stories of jobs that
have been “offshored,” and heard of declining manufacturing
employment.
Trade with China and India has gotten an especially bad rap,
as those two countries are sometimes blamed for the slower than
expected job growth the U.S. has experienced over the last few
years. India is often blamed for the “loss” of IT and other
service jobs over the past five years, and China is blamed for
depressing global wages and manipulating its currency.
It is certainly true that global competition has cost some U.S.
workers their jobs. This is an unfortunate fact of life in the
business world. It’s also not a new phenomenon. Almost every
change that has allowed the broader U.S. economy to grow more
productive has at the same time negatively affected some industries.
Imagine if you had a business shoeing the horses that pulled
carriages a hundred years ago. The invention of the automobile,
which ultimately provided thousands of jobs and improved standards
of living for millions of people, would not have been good for
you. Similarly, imagine what being a typewriter manufacturer
would have been like as PCs became more and more common in the
work place. In both of those, and countless other, examples,
changes that were good for the economy came at a price to some
workers and industries. But that doesn’t mean that we should
have stopped or banned the development of the automobile or
computer in order to protect jobs in a few industries that were
negatively affected.
Increased international trade is a similar phenomenon. The costs
to those negatively affected are smaller than the benefits to
the rest of the economy. Now, this is not to say that the negative
affects aren’t real, or that there shouldn’t be some policy
to address them—like the Defense Adjustment program St. Louis
area economic developers collaborated on after the end of the
cold war during the 1990s.
The real costs of increased globalization, however, may not
be what they seem. It is true that manufacturing employment
in both St. Louis and the U.S. declined by roughly 15 percent
since 2001, and that the sector hasn’t recovered jobs as rapidly
as during other recoveries. But manufacturing job losses are
in part due to rapid productivity increases. True, some jobs
were probably lost due to increased international trade. But
even in the absence of international trade manufacturing employment
probably wouldn’t be expanding, because the output per hour
of work has increased more rapidly than the overall economy.
In fact, manufacturing productivity growth has outpaced the
broader U.S. economy growing by over five percent a year, for
the past four years.
The “Offshoring” of IT and other high wage services is another
supposed consequence of globalization. While it is true that
some IT and service jobs have relocated to lower wage countries,
it’s not true that U.S. employment in all of those industries
is declining. According to the U.S. Bureau of Labor Statistics
June 2006 employment report, U.S. employment, in a variety of
IT and technology-related services, has expanded over the last
year.1 Employment in the ISP & search portal industry is up
7,200 jobs over last year, computer systems design employment
is up by 72,500, scientific research & development employment
is up by 5,200, and management & consulting employment is up
by 39,500. So, clearly, the growth of IT and other service employment
in India has not kept IT and technology services industries
from expanding in the U.S.
There are also some measurable benefits associated with increased
globalization. One of those benefits is exports. As economies
in China and India grow, they create consumer markets that U.S.
firms can supply. There are also opportunities for exports of
capital goods to those economies.
Those exports have been growing, both nationally, and locally.
Export data isn’t available for metropolitan areas, so it’s
difficult to say for sure how St. Louis firms are doing. We
can, however, look at state-level data, and it suggests that
the St. Louis market may be doing quite well when it comes to
exports.
According to the U.S. international trade association, U.S.
exports of merchandise have grown from $692 billion in 1999
to 900 billion in 2004.2 Adjusted for inflation, that is an
increase of almost 18 percent. Merchandise exports from the
states of Illinois and Missouri also expanded, growing by 10
percent and 56 percent, respectively.
Manufacturing exports (merchandise less raw materials and farm
production) also expanded, with the U.S. up 16 percent, Illinois
up seven percent, and Missouri up 51 percent between 1999 and
2005. It’s worth noting that Missouri’s more rapid percentage
growth is due partly to the fact that it is coming off a smaller
base. In inflation adjusted dollars Illinois’ exports grew by
roughly $2 billion between 1999 and 2005, while Missouri’s grew
by $3 billion.
Manufacturing exports to China have grown even more rapidly.
Missouri manufacturing exports to China grew from $46 million
in 1999 to $329 million in 2005, while Illinois manufacturing
exports to China have grown from $415 million to $1 billion
over the same period. After adjusting for inflation, those figures
represent increase of 513 percent for Missouri and 112 percent
for Illinois.
The increasingly global nature of the St. Louis region’s economy
will no doubt have some negative impacts, but those shouldn’t
overshadow the larger benefits. Manufacturing exports from Missouri
and Illinois support jobs in both of those states, and economic
growth in places like India and China enlarges markets for Missouri
and Illinois businesses. Efforts to reduce trade in the misguided
hope of saving jobs in industries threatened imports by would
likely cost jobs in export oriented industries.
1 http://www.bls.gov/news.release/pdf/empsit.pdf
2 http://tse.export.gov/
Manufacturing Exports to China
Export data from the U.S. International Trade Administra-tion
(www.ita.gov),
adjusted for inflation with GDP exports deflator (www.bea.gov).
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