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Who doesn’t like fresh thinking or novel ideas? Certainly the last decade of economic tumult offers opportunity for deep reflection on our priors.
Still, what to make of this assertion from venture capitalist Peter Thiel, who said the following in a speech the other day:
The sheer size of the US trade deficit shows that something has gone badly wrong. The most developed country in the world should be exporting capital to less developed countries; instead, the United States is importing more than $500 billion dollars every year. That money flows into financial assets; it distorts our economy in favor of more banking and more financialization; and it gives the well- connected people who benefit a reason to defend the status quo. But not everyone benefits, and Trump voters know it.
If nothing else, Conservatives agree that the purpose of government is to conduct a foriegn policy that is in the best interest of its citizens. This imperative is so strong, that it’s often permissible to cause the deaths of innocent foreigners as long as the government is carrying out its citizen’s interest in a reasonable manner. Where […]
Canada and the European Union have been negotiating a free trade agreement (CETA) for the past few years. However, on Friday Canada’s negotiator walked out of talks with the Walloon region of Belgium. This article from the National Post newspaper explains some of the challenges: Perhaps CETA might yet be salvaged. There has been a […]
One of my impressions of the Presidential debate was Trump’s disappointing, but unsurprising, opening salvo against free trade. Trade is a major issue for me in this election, because it is the only major area in which I strongly disagree with Trump’s apparent position. Going back and reading the transcript, I see that Trump didn’t […]
One of my persistent criticisms of Donald Trump the candidate is his protectionist stances on trade. There is no economic merit to propping up outmoded or inefficient domestic industries and businesses at the expense of international trade that permits production of goods and services at their lowest opportunity cost. Note the words “economic merit.” There […]
For the past couple days I’ve been attending GenCon, the largest gaming convention. This has been a wonderful experience, from seeing people play Robo Rally with actual LEGO robots to acquiring a rare, out-of-print expansion for a game of mine in the dealer hall. Wonderful things, but if you want to hear more about them […]
One motivation for Brexit which I hadn’t read before: the UK had recently overtaken France as the fifth-largest economy in the world, and is expected to surpass Germany within the next two decades.: But until Brexit, Canada [and other non-EU nations] was shut off from this economic powerhouse, our only path to profitable U.K. trade wending […]
Where do I go to find a Venn diagram of the overlap between people a) who claim to be pro-free-trade and anti-protection in the anti-Trump sense, and b) support the Ex-Im bank and other such abominations? Preview Open
The free movement of goods, services, and investments has an inescapable moral dimension. Yes, most economists agree that decades of trade deals have benefited most Americans. Which is great. But it’s always worth reminding of the impact of trade on reducing global poverty.
As The Economist put it:
One of the hardest things to do is to be happy for other people. The founding document of Western Civilization tells of one brother killing another (Cain and Abel). Then Isaac and Ishmael go their separate ways, followed by Jacob and Esau who stop just short of violence. Joseph is sold into slavery by his […]
Life is complicated. There are trade-offs. And unintended consequences — good, bad, neutral.
Example: Take Donald Trump’s idea of banning remittances unless Mexico pays for his proposed border wall. From a NY Times op-ed:
There are a number of logistical problems with this plan, including political realities, legality and the feasibility of stemming the flow of these informal payments. But even assuming this policy was possible, the economic implications would be felt as much in the United States as in Mexico.
So Bernie Sanders did a sit-down chat with the New York Daily News. The interview led off with some questioning on trade. Now I’ve been pretty critical of Donald Trump’s protectionist stance on trade. And frankly Sanders is no better. Read it for yourself, but I want to focus on this bit:
Daily News: Another one of your potential opponents has a very similar sounding answer to, or solution to, the trade situation — and that’s Donald Trump. He also says that, although he speaks with much more blunt language and says, and with few specifics, “Bad deals. Terrible deals. I’ll make them good deals.” So in that sense I hear whispers of that same sentiment. How is your take on that issue different than his?
Sanders: Well, if he thinks they’re bad trade deals, I agree with him. They are bad trade deals. But we have some specificity and it isn’t just us going around denouncing bad trade. In other words, I do believe in trade. But it has to be based on principles that are fair. So if you are in Vietnam, where the minimum wage is 65¢ an hour, or you’re in Malaysia, where many of the workers are indentured servants because their passports are taken away when they come into this country and are working in slave-like conditions, no, I’m not going to have American workers “competing” against you under those conditions. So you have to have standards. And what fair trade means to say that it is fair. It is roughly equivalent to the wages and environmental standards in the United States.
There has been plenty of upside for America from more free and open trade. A new Economist piece cites many of them: For consumers, lots of things — including clothes and home furnishings — cost the same as they did 30 years ago. Overall, China trade specifically boosts spending power by $250 a year for the average American, with lower-incomers benefiting more. Offshoring and outsourcing low-wage assembly have also boosted the productivity and wages of high-skill workers, with the design (right here) and manufacturing (over there) of many Apple products being the classic example.
But there have been downsides, too. New research finds that some American communities whose manufacturing jobs moved to Asia never really recovered. Jobless rates stayed high, worker earnings depressed. Many displaced workers never moved or found work in less-trade affected sectors as economic models had predicted. They just got stuck. But if you listen to some presidential candidates, you would think that trade has been the primary driver of the decades-long decline in manufacturing employment. If they are right, then reversing course might bring jobs back. But that economic assumption appears wrong. From The Economist:
The sharp decline in American manufacturing employment began in 2000, just as Chinese imports took off. Yet on the extreme assumption that every dollar spent on imports replaced a dollar spent employing an American, Mr Lawrence calculates that between 2000 and 2007 Chinese imports caused, at most, 188,000 of 484,000 annual manufacturing-job losses. A recent, more detailed, estimate by Daron Acemoglu, David Autor and others chalks up about 1m of 5.5m manufacturing jobs lost between 1999 and 2011 to Chinese competition (with similar-sized job losses in other industries).
Over at NRO, Michael Tanner of the CATO Institute writes one of those “The Economy Is Just Skippy, Free Trade Is Awesome” columns that is peculiar to people who work in Think Tanks and have little contact with blue collar working class people. I won’t take issue with his thesis that America actually has a […]
Often missing — or underplayed — in the current debate about trade is what a one-off the China trade shock was. The most populous nation on earth, abundant with low-skill labor, suddenly coming online, to sustained negative effect in some US communities, is documented in “The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade,” by David Autor, David Dorn, and Gordon Hanson.
While trade was always understood by economists to have trade-offs in theory, it hadn’t really worked out that way in the postwar era. There wasn’t much evidence trade hurt low-skill workers in the long-term, Autor notes in a must-listen EconTalk podcast with Russ Roberts. Much of the decline in manufacturing employment was driven by technology, not globalization. And trade was pretty much happening among advanced economies. High-skill workers competing with high-skill workers. Then came China.
Autor in the podcast:
The wedge issue of the 2016 primary campaign is the rising hostility to free trade—and, specifically, to the Trans-Pacific Partnership. On the Republican side, establishment candidates like Jeb Bush, Scott Walker, and Marco Rubio have failed or fallen behind, while Donald Trump maintains a commanding lead going into Florida and Ohio thanks, in large part, to his protectionist rhetoric. On the Democratic side, Hillary Clinton has been veering leftward to fight off a determined challenge from Vermont’s democratic socialist Bernie Sanders, another unapologetic protectionist.
There are of course major difference between the insidious Trump and buffoonish Sanders. The former, for example, favors low taxes and the latter confiscatory ones. Still, the real selling point of each boils down to one issue: In the indecorous language of the pollster, Pat Caddell, Americans feel “they have been screwed” by free trade. Caddell writes as if this virulent falsehood is an undisputed fact. What is undisputed, however, is that Adam Smith’s defense of free trade is in retreat as protectionism becomes the common thread across the both political parties. It is as though the economic unwisdom of the 1930 Smoot-Hawley Tariff Act is back. The question is why protectionism is having a political moment.
One answer is that things have not gone well in the United States. Standards of living have been static at best, and people feel economically insecure. In this environment, it is easy to blame the obvious culprits, like the tide of imports and the systematic movement of American jobs overseas to locations where the regulatory environment is more favorable and where the cost of labor is cheaper.
“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.”
From ETWN News: [….] Last month, a new federal law was enacted to prohibit importation of goods made with forced labor into the U.S., a big boost in the fight against labor trafficking.Since the 1930 Tariff Act, which prohibited such importation, one clause exempted this prohibition for when “consumptive demand” required such goods be imported. […]