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“There are no solutions. There are only trade-offs,” economist Thomas Sowell writes his excellent Conflict of Visions.
And so it is with trade. Trade has trade-offs. But certainly most economists would agree with this recent statement in a blog post from Moody’s economist Adam Ozimek: “Trade increases aggregate welfare in the U.S. and past trade deals have benefited most Americans.”
In a 2012 IGM Forum survey of economists, 96% (weighted by confidence) agreed or strongly agreed that, “Freer trade improves productive efficiency and offers consumers better choices, and in the long run these gains are much larger than any effects on employment.” And 98% agreed, “On average, citizens of the U.S. have been better off with the North American Free Trade Agreement than they would have been if the trade rules for the U.S., Canada and Mexico prior to NAFTA had remained in place.” Likewise, a 2014 IGM survey found 93% agreed, “Past major trade deals have benefited most Americans.”
Most Americans, but not all. As I note in my new The Week column: “In their paper, ‘The China Shock,‘ economists David Autor, David Dorn, and Gordon Hanson find that some American communities where manufacturing jobs moved to Asia never really recovered. Economic models predicted labor markets would eventually adjust, but they didn’t. Unemployment rates remained elevated, worker incomes depressed.”
This is a good example of how benefits are broadly distributed, while the costs are concentrated. These folks are the losers from trade, and that downside should not be hand-waved away. Help for them would include an expanded safety net: wage subsidies, wage insurance, relocation assistance, and retraining are areas worth looking at and applying some creative policymaking.
Here is Ozimek on how we should not help workers who lose out:
One suggestion is to protect or subsidize existing manufacturers to try to prevent job losses in the first place. There are two problems with this. The first is the extensive research highlighted above showing that trade exposure has increased productivity and innovation. U.S. productivity growth overall has slowed, and the last thing we want to do is cut off this source of productivity and innovation. Protecting unproductive firms would risk doing just that.
Second, protecting manufacturers does not mean protecting workers. Manufacturing output in the U.S. has increased even as employment as fallen thanks to increased automation. If output is subsidized it does little to change the fact that robots increasingly replace workers and that low-skilled manufacturing workers who lose their jobs are struggling to be re-employed.
Let me also again refer to a post by AEI’s Derek Scissors, “The trade deficit does not cost us jobs.”