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1 1 (April 18, 2018)

handle is hein.crs/govzfw0001 and id is 1 raw text is: $ Congressional Research Service Informir g he I gislative debate sir ce 1914 Updated April 18, 2018 International Trade Agreements and Job Estimates Overview The Obama Administration engaged in negotiations on two mega-regional free trade agreements (FTAs): the Trans- Pacific Partnership (TPP) among the United States and eleven other Asia-Pacific countries and the U.S.-European Transatlantic Trade and Investment Partnership (T-TIP). TPP was concluded and signed, but required implementing legislation to become effective, while T-TIP negotiations were not concluded. Upon taking office, the Trump Administration withdraw from the TPP, but may be reconsidering under different negotiating objectives. Discussions on TPP, T-TIP and other FTAs, including during the recent election, 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 assumptions that are necessary to derive the results, but such assumptions reduce the reliability of the estimates. In addition, the economy as a whole is subject to a broad range of events, often unforeseen, that cannot be modeled ahead of time in generating trade estimates, but may affect economic performance, including job creation and job losses, in ways that may outweigh the impact of free trade agreements. Estimating Employment Related to Trade Most trade models do not estimate the number of jobs that could be associated with a particular trade agreement, in part because they do not contain the type of microeconomic data that would be required to make such an estimate. As a result, some groups have attempted to use proxy estimators. Some estimates of the relationship between trade and employment have used data developed by the Department of Commerce's International Trade Administration (ITA). These estimates use input-output data to estimate the average number of jobs that are supported (not created) by exports in the U.S. economy based on several factors: the average relationships between the value of goods and services in the economy relative to the average number of jobs that are required to produce that output for each industry, the value of inputs used in their production, and the value of transportation and other marketing services required to bring goods and services to buyers. The agency did not develop a similar methodology to estimate potential job losses due to imports. The ITA estimated that in 2016, U.S. exports of goods and services supported 10.7 million jobs - 6.3 million in the goods producing sector and 4.4 million in services, as indicated in Figure 1. Figure I. Jobs Supported by Exports in the Goods and Services Sectors of the U.S. Economy, 1998-2016 (in millions of jobs) - Total - Goods Services 12 10 a 6 4 2 Mf tO N Ch, r41 Mf t N MI r41 Mf 1 Source: International Trade Administration The ITA also projected that on average one billion dollars of merchandise goods exports supported 5,223 jobs, and one billion dollars of services exports supported 6,706 jobs, or an average of 5,744 jobs were supported by goods and services exports combined. Expressed differently, $191,461 in merchandise goods exports, $149,120 in services exports, or an average of $174,095 in goods and services exports, supported one job in each respective sector. ITA also estimated that jobs associated with international trade, especially export-intensive manufacturing industries, earn 18% more, on average, than comparable workers in other manufacturing industries, because industries with greater access to international markets invest heavily in technology and capital in those areas where the United States has an international comparative advantage. While views differ on this subject, others conclude that a number of factors could account for the observed relationships between trade and worker incomes, which make it difficult to estimate a direct cause and effect relationship. Trade Deficits and job Losses Some groups have equated bilateral trade deficits with a loss of employment. Most economists, however, argue that equating a trade deficit, whether on a bilateral basis or overall, with a specific amount of unemployment or job losses in the economy is questionable. In some cases, both opponents and proponents of trade and trade agreements have used the methodology developed by the ITA on exports and jobs supported in the economy to estimate the employment effects of FTAs. Sometimes, these data have

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