International Trade and Investment

Introduction

   The United States derives substantial benefits from open trade and investment flows. Over many decades, increased trade and investment liberalization has been an important catalyst for greater productivity growth and rising average living standards in the United States.

   Trade liberalization and globalization remain controversial subjects because competition invariably raises both anxieties and opportunities. Reducing obstacles to trade can help economies grow more rapidly in the long run and create better, higher paying jobs. Increased competition, however, can lead to hardships for others in the short run. Constructive policies that help displaced workers train for and find new work and increase the portability of pension and health benefits can help to ease adjustment.

   The key points in this chapter are:

   1. Engagement in the global economy through increased trade has contributed to rising average living standards in the United States. Firms engaged in international trade are more productive, have higher employment growth, and are higher wage firms than domestically oriented firms. Looking ahead, international trade liberalization in services presents significant opportunities for U.S. workers, firms, and consumers.

   2. Foreign direct investment (FDI) flows into the United States benefit the U.S. economy by stimulating growth, creating jobs, and financing the current account deficit. FDI flows into the United States also stimulate investment in research and development in high-technology areas that promote innovation and competitiveness.

   3. U.S. direct investment abroad is an important channel of global market access for U.S. firms. U.S. multinational companies have contributed to productivity growth, job creation, and rising average living standards in the United States.