Trade and the Structure of American Industry

In the past two decades the proportion of U.S. gross national product that enters international trade has increased from four percent to over eight percent. This rapid growth of international trade, particularly U.S. trade with the more rapidly developing countries, has been an important source of vitality for the U.S. industrial sector. The growth of trade has necessitated some transfer of resources from one industry to another. The availability of foreign goods has also reduced the market power of U.S. industries and with it the power of resources in these industries to command rates of return higher than those earned in more competitive sectors. The magnitude of the former sort of adjustment has generally been overstated and the need for the latter sort strenuously resisted. Government policy has tended more to reduce the flexibility of the industrial structure than to enhance it. Administrative mechanisms that deal with trade matters reflect the mercantilist presumption that exports are the gains from trade and imports the costs. Because there is no administrative mechanism through which consumers or users of imports may put forward their interests, trade disputes very quickly become political issues.