saving. foreign capital inflows make up the gap. in this process, the foreign exchange value of the dollar plays an important equilibrating mechanism. if the domestic saving / investment imbalance is unchanged, then any reduction in the trade balance from higher trade barriers will be offset by lower exports. the domestic currency will appreciate to cause the trade deficit to widen to accommodate the desired capital inflows. thus, trade restrictions affect the composition of trade but not the gap between exports and imports, which is determined by the difference between domestic savings and investment. at the end of the day, the protectionist country would produce more goods in sectors protected by higher trade barriers but also fewer goods for export. the expectation that higher trade barriers would save jobs ignores these critical second - round effects. moreover, the story may not end there. what happens if another country that now faces higher trade barriers responds by raising its own barriers? that would push production even further out of high - value - added exports that are now deterred by the higher foreign trade barriers and into those exports that face lower trade barriers, or into the goods protected by the higher domestic trade barriers. raising trade barriers would risk setting off a trade war, which could damage economic growth prospects around the world. measures that raise trade barriers typically would protect lower - wage, import - competing jobs, but would also weigh on the prospects for jobs in the more efficient export sector, which tend to be higher - paying. the outcome would be countries producing more where they have a competitive disadvantage, and less where they have a competitive advantage — the exact opposite of what we should be aiming for. for example, in the united states, one of our largest manufacturing exports is aerospace parts ( which requires skilled labor ) and one of our largest imports is apparel ( which requires less skilled labor ). these second - round effects would also likely hurt productivity growth. scarce resources would be used less efficiently and trade protection would likely lessen the level of competitive pressure that helps drive innovation. moreover, lower productivity growth would likely lead to a slower improvement in a nation ’ s living standards over time. this negative consequence of higher trade barriers can be illustrated most starkly by the estimates of the costs per job saved through protectionist measures. researchers that have studied this closely estimate that the costs per job saved from protectionist measures in the united states typically run into the hundreds of thousands of dollars per year. to illustrate, consider the case of import restrictions on chinese tires. the cost

agreements, that does not mean they cannot be improved upon. i have no doubt some trade agreements could be enhanced or updated. some may not adequately address recent changes in the global economy — such as the rise of digital trade — and may need to be refreshed. and, important trade barriers still remain and should be addressed. in particular, from a u. s. perspective, the access of u. s. firms to some foreign markets and the protection of intellectual property rights are issues that deserve close attention. but, in addressing these issues, we should take care to preserve the vital benefits of trade to higher standards of living in both advanced and emerging market economies. our focus should be on further strengthening an open trade regime, and, as appropriate, amending and improving these agreements. 1 / 6 bis central bankers'speeches the pace of globalization to begin, let me briefly describe the pace of globalization as a reminder of what is at stake. global economic integration has increased dramatically in recent decades. trade, for example, has grown from nearly 40 percent of global gdp in 1990 to 57 percent in 2015. over the same period, the stock of foreign direct investment has increased from roughly 10 percent of global gdp to 34 percent. ultimately, economies have become more integrated and interdependent. 2 this rapid growth in trade reflects falling trade barriers, declining transport costs, and improved information and communication technology. these trends have enabled the development of complex global supply chains that allow companies to manage their production more efficiently. emerging market economies now make up a much larger share of global trade, the global economy and global growth. as an illustration, emerging market economies have accounted for 70 percent of global output growth since the crisis — double their share from two decades ago. 3 this growth has provided much - needed support to world economic activity, as advanced economies have recovered slowly from the crisis. rising economic integration is also very evident when we examine the trade relationship between india and the united states. bilateral trade flows have risen tenfold, from $ 11 billion in 1995 to almost $ 110 billion in 2015. in particular, half of u. s. imports of computer services are now sourced from india. in 2015, the stock of bilateral foreign direct investment in both countries was $ 37 billion, up from $ 4 billion in 2002. 4 the potential for further increases has been reinforced by the liberalization measures india announced last year to encourage greater foreign direct investment. benefits of open trade increased trade, through its longer - term impact