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Trade policy and job loss

Working Paper #289

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Advocates of free trade agreements, including the U.S. Chamber of Commerce, rely on deeply flawed projections for estimating the jobs impact of signing new free trade agreements (FTAs). As a result, these projections generally show that signing new FTAs will create jobs in the United States, when in fact doing so may destroy or displace jobs.

This Economic Policy Institute analysis examines the likely jobs impact of signing pending FTAs with Korea and Colombia. It shows, based on past experience, that these trade agreements will increase the U.S.’s trade deficit with both countries. Contrary to the Chamber’s projections, the EPI analysis then shows that the increased trade deficit per se will correspond to the loss of 214,000 jobs in the U.S. by 2015.

Depending on economic conditions, other factors may intervene to offset job losses, although they won’t change the fact that these jobs are displaced: The trade deficit per se will correspond to lost jobs in industries that compete with imports. While other factors could help spur job creation in other parts of the economy, for the factory worker who loses his or her job, this macroeconomic fact matters little. And given the weak U.S. economy, it’s unlikely that workers displaced from their jobs will find other employment quickly or easily.

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PowerPoint: Economic impacts of the KORUS-FTA

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