Free Trade Increases Growth and Prosperity : Imports Grow GDP

Interesting to understand how imports actually benefit the growth of jobs and individual prosperity. Given how the domestic product rate has grown since the reduction of tariffs since WWII, one has to wonder why there is so much push back to the new trade agreements that is currently being fast tracked from the progressive left?

Surly, the progressives want prosperity and growth for the country, right? Elizabeth Warren, the presumptive new leader of the liberal left, seem intent on stopping any free trade agreement that congress or even Mr Obama has proposed.

Imports a Boon to the United States Economy
Source: Ryan Olson and Anthony B. Kim, "Congress Should Recognize the Dynamic Benefits of Imports," Heritage Foundation, May 11, 2015.

May 12, 2015

Imports are often misunderstood as being detrimental to economic growth and employment. But in practice, they provide invaluable benefits to American workers, consumers and producers. As demonstrated in numerous empirical studies, the following benefits from imports that accrue to the American economy are real and undeniable:

• Imports contribute to job creation on a large scale. The increased economic activity associated with every stage of the import process helps support American jobs. Historically, the highest levels of U.S. employment growth tend to have occurred during periods when U.S. imports exceeded exports.
• Imports provide key inputs for U.S. businesses. Not only do imports support American jobs, they also provide vital components to American businesses, particularly manufacturers. Currently, about half of all intermediate inputs are imported. Furthermore, between 1997 and 2006, these imported inputs enhanced manufacturing productivity significantly, accounting for 14 percent of overall labor productivity growth and 23 percent of manufacturing labor productivity growth.
• Imports give a greater purchasing power to American consumers. Imports from our trading partners also allow U.S. consumers to buy a wider variety of goods at lower prices. This raises real wages and helps families purchase more with their current incomes. As noted by the Council of Economic Advisors, trade "is especially important for middle-class consumers.… [They] gain an estimated 29 percent of their purchasing power from trade… [And] the reduction in U.S. tariffs since World War II contributed an additional 7.3 percent to U.S. GDP, or approximately $1.3 trillion in 2014.

A growing number of economists and advocates of free trade have established that imports provide choices and opportunities that increase individual and national prosperity. These benefits do not come at the expense of economic dynamism. Congress can best bolster the U.S. economy by moving away from protectionism and toward freer trade that takes full advantage of the benefits of imports.