March 23, 2015
International Trade Agreements and Job Estimates
goods producing sector and 4.2 million in services, as
Overview
indicated in Figure 1.
The Obama Administration currently is negotiating two
Figure 1. Jobs Supported by Exports in the Goods and
comprehensive and high standard mega-regional free trade
Services Sectors of the U.S. Economy, 1993-2013
agreements (FTAs): the Trans-Pacific Partnership (TPP)
(in millions of jobs)
among the United States and eleven other countries and the
U.S.-European Transatlantic Trade and Investment
Goods
Services
Total
Partnership (T-TIP). During discussions of these and other
12
free trade agreements, academics and others have focused
attention on quantifying the impact of trade agreements on
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jobs in the U.S. economy.
8
Economists and others often use sophisticated economic
6
models to estimate the economic impact of trade
4
agreements on the economy, particularly the impact on jobs
and wages. The International Trade Commission (ITC), for
2
instance, provides estimates of the impact of FTAs on the
0
U.S. economy. Limitations of data and important theoretical
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
and practical issues make it difficult to derive precise

estimates of the impact of a particular trade agreement on
Source: International Trade Administration
the U.S. economy. Such models use a number of
assumptions that are necessary to derive the results, but
The ITA also projected that on average one billion dollars
such assumptions reduce the reliability of the estimates. In
of merchandise goods exports supported 5,408 jobs, and
addition, the economy as a whole is subject to a broad range
one billion dollars of services exports supported 5,931 jobs,
of events, often unforeseen, that cannot be modeled ahead
or an average of 5,590 jobs supported by goods and
of time in generating trade estimates, but may affect
services exports combined. Expressed differently, $184,911
economic performance, including job creation and job
in merchandise goods exports, $168,605 in services exports,
losses, in ways that may outweigh the impact of free trade
or an average of $178,891 in goods and services exports,
agreements.
supported one job in each respective sector.
Estimating Employment Related to
ITA also estimated that jobs associated with international
Trade
trade, especially export-intensive manufacturing industries,
earn 18% more, on average, than comparable workers in
Most trade models do not estimate the number of jobs that
other manufacturing industries, because industries with
could be associated with a particular trade agreement, in
greater access to international markets invest heavily in
part because they do not contain the type of microeconomic
technology and capital in those areas where the United
data that would be required to make such an estimate. As a
States has an international comparative advantage. While
result, some groups have attempted to use proxy estimators.
views differ on this subject, others conclude that a number
Some estimates of the relationship between trade and
of factors could account for the observed relationships
employment have used data developed by the Department
between trade and worker incomes, which make it difficult
of Commerce’s International Trade Administration (ITA).
to estimate a direct cause and effect relationship.
These estimates use input-output data to estimate the
average number of jobs that are supported (not created) by
Trade Deficits and Job Losses
exports in the U.S. economy based on several factors: the
average relationships between the value of goods and
Some groups have equated bilateral trade deficits with a
services in the economy relative to the average number of
loss of employment. Most economists, however, argue that
jobs that are required to produce that output for each
equating a trade deficit, whether on a bilateral basis or
industry, the value of inputs used in their production, and
overall, with a specific amount of unemployment or job
the value of transportation and other marketing services
losses in the economy is questionable. In some cases, both
required to bring goods and services to buyers. The agency
opponents and proponents of trade and trade agreements
did not develop a similar methodology to estimate potential
have used the methodology developed by the ITA on
job losses due to imports.
exports and jobs supported in the economy to estimate the
employment effects of FTAs. Sometimes, these data have
The ITA estimated that in 2013, U.S. exports of goods and
been used in reverse to argue that if a certain number of
services supported 11.3 million jobs – 7.1 million in the
jobs were supported by a billion dollars of exports, then that
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International Trade Agreements and Job Estimates
same number could be used to argue that a certain number
usually change at the same rate. In addition, the material
of jobs would be “lost” by a billion dollars of imports, so
and service inputs and the labor and capital inputs differ
that any net increase in imports associated with a trade
significantly across types of exports. For example, the labor
agreement would necessarily result in a loss of employment
requirements for an exported aircraft are significantly
for the economy. This approach also has been used to argue
different from those of an exported agricultural product or
that the U.S. trade deficit implies a net loss of jobs in the
an educational service.”
economy.
Ideally, estimates of changes in jobs that arise from changes
The ITA’s methodology, however, is unique to estimating a
in trade flows that are associated with changes in tariff
static number of jobs supported (not created) by exports.
reductions would be derived using figures that reflect actual
The composition of U.S. imports is fundamentally different
changes in employment (based on the mix of goods traded)
from that of U.S. exports. While some imports and exports
that would occur at the margin as a result of changes in the
represent clearly substitutable items, which may adversely
volume of goods traded. According to the ITA, though,
affect U.S. jobs, other imports represent inputs to further
such data do not exist. The only data that are available
processing, or are items that either are not available or are
reflect the estimated average number of jobs supported
not fully available in the economy. In addition, import-
across the U.S. economy by a given level of exports.
competing industries likely do not have the same mix of
During periods of slack business activity, increased output,
capital and labor in their production processes as do export-
such as exports, would tend to increase employment, lower
oriented industries so that demands on capital and labor
unemployment, and increase labor force participation.
markets could vary substantially across industrial sectors.
Conversely, during periods of high business activity, when
industries operate at or near full capacity and employment,
ITA Clarification and Disclaimer
increased output, including output for exports, would tend
to raise employment less—if at all—and instead likely
ITA has issued various statements indicating that using the
would mainly shift employment to industries that pay
data on jobs supported by exports to estimate any
higher wages.
relationship between imports and jobs is not appropriate. As
ITA has indicated, the employment estimate is a static
Issues for Congress
relationship, or it reflects a relationship at a point in time,
and is not a multiplier and should not be used to estimate
Trade agreements often are controversial for a number of
changes in jobs that are associated with changes in exports
reasons, including the estimated impact they might have on
or imports in a multiplier fashion to estimate the number of
jobs in the economy. In examining the impact of trade
U.S. jobs that have been lost or created as a result of trade
agreements on the U.S. economy, Congress may wish to:
agreements.
Assess the current state of data on trade and trade-related
In addition, ITA’s estimates relate to the average number of
employment to determine what if any action may be taken
jobs supported by exports across a broad section of the
to improve such data and the costs and benefits involved in
economy, which is not the same as estimating the number
doing so.
of jobs that would be added or lost as a result of a trade
agreement. Such an estimate would need to focus on
Assess the current state of data to determine if such data
estimating the change in the composition of employment
can be used to provide more informed estimates of the
that would be associated with a change in trade as a result
potential long-run impact on the economy as a whole and
of a trade agreement. Also, most trade agreements
on particular sectors within the economy of a trade
incorporate provisions governing trade in services,
agreement.
investment, nontariff barriers, and a broad range of other
trade-related issues that are not reflected in the ITA
Assess the role that such other factors as education, job
estimates.
training, and adjustment assistance programs have in
positioning the economy to be competitive overall and in
ITA argues that its estimate of the number of jobs supported
adjusting in a timely fashion to shifting trade trends.
by exports should not be used with projected changes in
trade to estimate potential employment effects from trade
More Information
agreements. It says: “Averages derived from IO [input-
output] analysis should not be used as proxies for change.
For more information see CRS Report RL33944, U.S.
They should not be used to estimate the net change in
Trade Concepts, Performance, and Policy: Frequently
employment that might be supported by increases or
Asked Questions and CRS Report R41660, U.S.-South
decreases in total exports, in the exports of selected
Korea Free Trade Agreement and Potential Employment
products, or in the exports to selected countries or regions.”
Effects: Analysis of Studies.
The ITA also indicated that, “The averages are not proxies
James K. Jackson, jjackson@crs.loc.gov, 7-7751
because the number of jobs supported by exports usually

does not change at the same rate as export value. The rate is
not the same because other factors, such as prices, resource
IF10161
utilization, business practices, and productivity, do not
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