What Trade Really Means to North Carolina

1. What Trade Really Means to North Carolina Dr. Andrew Brod, Director Office of Business and Economic Research Bryan School of Business and Economics University of North Carolina at Greensboro Email: AndrewBrod@uncg.edu Web: www.uncg.edu/bae/ober

2. First, a word from my sponsor, OBER • Main contact point at UNCG for economic-development research • Contract research • Economic-impact analysis • Surveys • Data mining… and more! • Public education

3. Emissaries for Trade • No need for me to preach to the choir! • But international trade is a tough sell in N.C. • Serve as emissaries for international trade • In N.C., the public and many politicians cling tightly to an array of trade myths • By debunking these myths, we can show our fellow North Carolinians what trade really means to the state’s economy

4. Some North Carolina trade myths • NAFTA is bad for North Carolina • Dumping is bad for North Carolina • The U.S. is the “good guy” in international trade • Outsourcing is bad for America • “Washington’s bad trade deals” are hurting North Carolina

5. “NAFTA is bad for North Carolina” • Repeated often and uncritically • To be sure, there have been many jobs lost in textile manufacturing, especially in apparel • But this trend started before NAFTA • Textile/apparel’s eternal search for cheap labor • N.C. was once the low-wage economy • In 1993-2000, N.C. exports grew 88% • Nationally, exports grew only 68% in that time

6. “Dumping is bad for North Carolina” • Originally designed to address market failures in exporting country • Monopoly, government subsidies • Now such issues are rarely mentioned • Low prices in U.S. are the prime evidence • Dumping is a legal, not an economic, concept • Having it both ways re cheap labor • The fallacy of predatory dumping • “Pricing to market” is capitalism at work

7. “Dumping is bad for North Carolina” • Review process is rigged in favor of anti-dumping petitioners • The weirdness of using third-country prices to infer dumping by “non-market” economies • The U.S. ranks #3 in recent years in dumping accusations against it • WTO and the Byrd Amendment • Anti-dumping actions are like trying to outlaw gravity

8. “The U.S. is the good guy in trade” • The U.S. is one of the worst offenders in agricultural subsidies • Impoverishes farmers in developing nations • Why do “social liberals” forget their principals when trade is the issue? • Why developing countries walked out of the 2003 Cancun trade talks • Impose our “luxurious” environmental and labor standards on the rest of the world?

9. “Outsourcing is bad for America” • Outsourcing is simply another kind of trade, in labor services • Outsourcing is a win-win overall • McKinsey study: Each $1 sent offshore  $1.13 of net benefit to U.S. (including $.46 in labor benefits) • Outsourcing is a drop in the bucket • Forrester Research: 3.3 million service-sector jobs to be outsourced in 2003-2015 • U.S. “loses” 10 times that many jobs each year!

10. “Washington’s bad trade deals hurt NC” • Confounding recession/post-recession effects, trade effects, and long-term transformation • In 1993-2000, N.C. exports grew 88%, as opposed to 68% for the U.S. • N.C. is now the 13th or 14th biggest exporting state (16th in 1993) • WTO/GATT has opened up foreign markets for N.C. agricultural products, notably poultry • Largest exports: electronics, chemicals

11. What could hurt N.C. • Protectionist subsidies price domestic jobs out of market • Tobacco quotas and N.C. farmers • Sugar subsidies and American candy manufacturers • Security fears shut off the flow of student visas • Human capital and the New Economy in N.C. • U.S. is acting as if it wants to establish Europe as the destination for foreign scientists

12. What Trade Really Means to North Carolina Dr. Andrew Brod, Director Office of Business and Economic Research Bryan School of Business and Economics University of North Carolina at Greensboro Email: AndrewBrod@uncg.edu Web: www.uncg.edu/bae/ober