Updated October 13, 2021
International Trade Agreements and Job Estimates
Overview
goods producing sector and 4.4 million in services, equal to
The Obama Administration engaged in negotiations on two
that estimated for 2016, as indicated in Figure 1.
mega-regional free trade agreements (FTAs): the Trans-
Pacific Partnership (TPP) among the United States and
Figure 1. Jobs Supported by Exports in Goods and
eleven other Asia-Pacific countries and the U.S.-European
Services of the U.S. Economy, 1998-2019
Transatlantic Trade and Investment Partnership (T-TIP).
(in millions of jobs)
Upon taking office, the Trump Administration withdraw
from the TPP and the T-TIP. Discussions on TPP, T-TIP
and other FTAs, including during recent elections, have
focused attention on quantifying the impact of trade
agreements on jobs in the U.S. economy.
Economists and others often use sophisticated economic
models to estimate the economic impact of trade
agreements on the economy, particularly the impact on jobs
and wages. The International Trade Commission (ITC), for
instance, provides estimates of the impact of FTAs on the
U.S. economy. Limitations of data and important theoretical
and practical issues make it difficult to derive precise
estimates of the impact of a particular trade agreement on
the U.S. economy. Such models use a number of
Source: International Trade Administration.
assumptions that are necessary to derive the results, but
such assumptions reduce the reliability of the estimates. In
The ITA also projected that on average 1 billion dollars of
addition, the economy as a whole is subject to a broad range
merchandise goods exports in 2019 supported 4,670 jobs,
of events, often unforeseen, that cannot be modeled ahead
and 1 billion dollars of services exports supported 5,539
of time in generating trade estimates, but may affect
jobs, or an average of 5,095 jobs were supported by goods
economic performance, including job creation and job
and services exports combined. Expressed differently,
losses, in ways that may outweigh the impact of free trade
$214,153 in merchandise goods exports, $180,528 in
agreements.
services exports, or an average of $196,263 in goods and
services exports, supported one job in each respective
Estimating Employment Related to
sector.
Trade
Most trade models do not estimate the number of jobs that
ITA has estimated that jobs associated with international
could be associated with a particular trade agreement, in
trade, especially export-intensive manufacturing industries,
part because they do not contain the type of microeconomic
earn 18% more, on average, than comparable workers in
data that would be required to make such an estimate. As a
other manufacturing industries, because industries with
result, some groups have attempted to use proxy estimators.
greater access to international markets invest heavily in
Some estimates of the relationship between trade and
technology and capital in those areas where the United
employment have used data developed by the Department
States has an international comparative advantage. While
of Commerce’s International Trade Administration (ITA).
views differ on this subject, others conclude that a number
These estimates use input-output data to estimate the
of factors could account for the observed relationships
average number of jobs that are supported (not created) by
between trade and worker incomes, which make it difficult
exports in the U.S. economy based on several factors: the
to estimate a direct cause and effect relationship.
average relationships between the value of goods and
services in the economy relative to the average number of
Trade Deficits and Job Losses
jobs that are required to produce that output for each
Some groups have equated bilateral trade deficits with a
industry, the value of inputs used in their production, and
loss of employment. Most economists, however, argue that
the value of transportation and other marketing services
equating a trade deficit, whether on a bilateral basis or
required to bring goods and services to buyers. The agency
overall, with a specific amount of unemployment or job
did not develop a similar methodology to estimate potential
losses in the economy is questionable. In some cases, both
job losses due to imports.
opponents and proponents of trade and trade agreements
have used the methodology developed by the ITA on
The ITA estimated that in 2019, U.S. exports of goods and
exports and jobs supported in the economy to estimate the
services supported 10.7 million jobs – 6.3 million in the
employment effects of FTAs. Sometimes, these data have
been used in reverse to argue that if a certain number of
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International Trade Agreements and Job Estimates
jobs were supported by a billion dollars of exports, then that
The ITA also indicated that, “The averages are not proxies
same number could be used to argue that a certain number
because the number of jobs supported by exports usually
of jobs would be “lost” by a billion dollars of imports, so
does not change at the same rate as export value. The rate is
that any net increase in imports associated with a trade
not the same because other factors, such as prices, resource
agreement would necessarily result in a loss of employment
utilization, business practices, and productivity, do not
for the economy. This approach also has been used to argue
usually change at the same rate. In addition, the material
that the U.S. trade deficit implies a net loss of jobs in the
and service inputs and the labor and capital inputs differ
economy.
significantly across types of exports. For example, the labor
requirements for an exported aircraft are significantly
The ITA’s methodology, however, is unique to estimating a
different from those of an exported agricultural product or
static number of jobs supported (not created) by exports.
an educational service.”
The composition of U.S. imports is fundamentally different
from that of U.S. exports. While some imports and exports
Ideally, estimates of changes in jobs that arise from changes
represent clearly substitutable items, which may adversely
in trade flows that are associated with changes in tariff
affect U.S. jobs, other imports represent inputs to further
reductions would be derived using figures that reflect actual
processing, or are items that either are not available or are
changes in employment (based on the mix of goods traded)
not fully available in the economy. In addition, import-
that would occur at the margin as a result of changes in the
competing industries likely do not have the same mix of
volume of goods traded. According to the ITA, though,
capital and labor in their production processes as do export-
such data do not exist. The only data that are available
oriented industries so that demands on capital and labor
reflect the estimated average number of jobs supported
markets could vary substantially across industrial sectors.
across the U.S. economy by a given level of exports.
While some job losses associated with imports can be
During periods of slack business activity, increased output,
highly concentrated, imports also support a broad range of
such as exports, would tend to increase employment, lower
widely-dispersed service-sector jobs, including
unemployment, and increase labor force participation.
transportation, sales, finance, marketing, insurance, and
Conversely, during periods of high business activity, when
accounting.
industries operate at or near full capacity and employment,
increased output, including output for exports, would tend
ITA Clarification and Disclaimer
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,
Trade agreements often are controversial for a number of
and is not a multiplier and should not be used to estimate
reasons, including the estimated impact they might have on
changes in jobs that are associated with changes in exports
jobs in the economy. In examining the impact of trade
or imports in a multiplier fashion to estimate the number of
agreements on the U.S. economy, Congress may
U.S. jobs that have been lost or created as a result of trade
agreements.
Assess the current state of data on trade and trade-
related employment to determine what if any action may
In addition, ITA’s estimates relate to the average number of
be taken to improve such data and the costs and benefits
jobs supported by exports across a broad section of the
involved in doing so.
economy, which is not the same as estimating the number
of jobs that would be added or lost as a result of a trade
Assess the current state of data to determine if such data
agreement. Such an estimate would need to focus on
can be used to provide more informed estimates of the
estimating the change in the composition of employment
potential long-run impact on the economy as a whole
that would be associated with a change in trade as a result
and on particular sectors within the economy of a trade
of a trade agreement. Also, most trade agreements
agreement.
incorporate provisions governing trade in services,
investment, nontariff barriers, and a broad range of other
Assess the role that such other factors as education, job
trade-related issues that are not reflected in the ITA
training, and adjustment assistance programs have in
estimates.
positioning the economy to be competitive overall and
in adjusting in a timely fashion to shifting trade trends.
ITA argues that its estimate of the number of jobs supported
by exports should not be used with projected changes in
More Information
trade to estimate potential employment effects from trade
For more information, see CRS Report R45148, U.S. Trade
agreements. It says “Averages derived from IO [input-
Policy Primer: Frequently Asked Questions and CRS
output] analysis should not be used as proxies for change.
Report R44044, U.S. Trade with Free Trade Agreement
They should not be used to estimate the net change in
(FTA) Partners.
employment that might be supported by increases or
decreases in total exports, in the exports of selected
James K. Jackson, Specialist in International Trade and
products, or in the exports to selected countries or regions.”
Finance
IF10161
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International Trade Agreements and Job Estimates
Disclaimer
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https://crsreports.congress.gov | IF10161 · VERSION 10 · UPDATED