Manufacturing employment declined more in countries with large trade surpluses than deficits

October 7, 2020
Manufacturing employment declined more in countries with large trade surpluses than deficits

Between 1995 and 2011, countries with the largest manufacturing trade surpluses experienced a slightly greater decline in manufacturing employment as a share of total employment than countries with the largest trade deficits.

Of 60 countries surveyed, those with the 10 largest manufacturing trade surpluses experienced an average decline in their share of manufacturing employment in total employment of 3.8 percentage points. Surprisingly, in the countries with the 10 largest manufacturing trade deficits, the share of manufacturing employment declined by only 3.3 percentage points. 

This finding suggests that industrial policies aimed at generating a manufacturing trade surplus will not necessarily revive manufacturing jobs. Trade surplus nations had higher productivity levels, creating larger trade surpluses but fewer jobs. By contrast, trade deficit nations had lower output per worker but smaller declines in spending on manufactured goods, leading to less manufacturing employment losses.

This PIIE Chart was adapted from Robert Z. Lawrence’s blog post, "Will smaller trade deficits bring back manufacturing jobs?”