3 Trade: An Increasingly Connected World
Caroline Krafft
Where do goods come from?
Set down your reading for a moment and check the labels on your clothes. Where were your clothes made? My sweater was made in China and my shirt was made in the United States. The U.S. textile and apparel industry (including production of clothes in the U.S.) has a value of $64.8 billion as of 2023.[1] However, as looking at your tags will demonstrate, we do not wear only what is produced in the United States. An enormous amount of what we wear we import, meaning it is produced in other countries and we bring it to the U.S. As of 2023, the U.S. imported $121.6 billion dollars of textiles and apparel.[2] Much more clothing is imported to the U.S. than produced in the U.S. (and you probably have more tags with other country names than the U.S.). At the same time as we import textiles and apparel, the U.S. also exports, meaning goods produced here are sold to other countries. As of 2023, we exported $23.1 billion of textiles and apparel.[3] Why are we both exporting and importing? Why do we buy clothes made mostly abroad? What is the impact of all of this trade on the U.S. and other countries?
This chapter examines the state of global trade, including an understanding of why we trade goods and services with other countries. The chapter also examines some of the controversies around trade and its impact on our country and the world. Trade, trade deals, and trade policies are often controversial, as they can have enormous impacts on lives and livelihoods around the world. One concern with trade deals is that we might be “sending our jobs overseas.” Another concern is the environmental and human impact of trade between countries with unequal environmental and human rights protections. Both of these concerns are reflected in the controversy around the Rana Plaza collapse in Bangladesh. Bangladesh’s garment industry is enormous. It employs somewhere between 3.5-4 million people and contributes 12% of Bangladesh’s GDP.[4] In contrast, the U.S. textile and apparel industry employs 0.5 million people.[5] Among the U.S.’s $121.6 billion in clothing imports, $7.6 billion are from Bangladesh.[6]
A number of U.S. and European apparel companies order clothes from Bangladeshi factories. One such factory was Rana Plaza, an eight-story building near Dhaka, Bangladesh. The Rana Plaza garment factory collapsed in 2013, killing over 1,100 workers and injuring thousands more.[7] This collapse, the deadliest disaster to befall the garment industry, was due to poor construction and overloading the building with equipment. The collapse brought attention to the poor and often unsafe conditions garment workers (disproportionately women) face. Would the world be better off without trade? Our economic analysis, below, will ultimately show that, while overall countries gain from trade, there are distinct winners and losers from increasing trade.
Flows of goods
How much do we trade? Figure 3.1[8]