Keeping Straight the Facts About Trade

by Don Boudreaux on November 11, 2007

in Trade

Todays edition of the Boston Globe has these two very good letters on trade:

CONTRARY TO  what Adrian Boutureira writes in "The hidden costs of free trade"
(Op-ed, Nov. 5), the loss of manufacturing jobs in Massachusetts has
nothing to do with the North American Free Trade Agreement. In the four
years prior to the implementation of NAFTA (1990-1993), Massachusetts
lost 80,000 manufacturing jobs, while in the 13 years since 1994, the
loss has been 120,000.

The loss of manufacturing jobs
is mainly due to technological progress. The long-term growth of
manufacturing jobs in the United States came to a halt in 1969, and the
decline started in 1979. While between 1993 and 2006 the number of
manufacturing jobs in this country has declined by about 2.7 million,
the index of industrial production has risen by 62 percent, and the
value of manufacturing output in constant prices has increased by 54
percent.

NAFTA has been a bipartisan project. President George
H.W. Bush signed the agreement in 1992, and Congress passed it at the
urging of President Bill Clinton in 1993.

KAMRAN DADKHAH
Boston

The writer is an associate professor of economics at Northeastern University.


ADRIAN BOUTUREIRA
asserts that we have seen the "devastating effects of the North
American Free Trade Agreement in Massachusetts," citing the loss of
more than 100,000 manufacturing jobs in the last decade. This assertion
is highly misleading at best.

The number of manufacturing jobs
has declined in virtually all industrialized countries, regardless of
their membership in free-trade agreements. At the same time, the number
of jobs in other sectors, notably services, has increased enough to
more than compensate for manufacturing job losses, in Massachusetts and
nationally.

In addition, Boutureira and others are often quick to
blame trade for the increase in income inequality, but rarely give it
credit for the increase in average incomes, as for example measured by
gross domestic product per capita. That is what provides scope for
policies alleviating inequality and helping those who are displaced,
whether by trade, technology, or other factors. These are policies we
need to pursue, not restricting trade.

ANDREAS WALDKIRCH
Waterville, Maine

The writer is assistant professor of economics at Colby College.

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  • Luis Oliveira
  • Luis Oliveira

    Hi Don,


    Maybe you would find it interesting to take a look at this stuff from Oxfam:


    "Milking it: Small farmers and international trade. A global citizenship resource. Teachers notes"


    http://www.oxfam.org.uk/coolplanet/milkingit/pdf/economics_for_beginners.pdf


    The anonymous author twists and misrepresents the basic facts of economic science to arrive at the obviously pre-ordained conclusion that


    "The rules of the global trading system are unfair to poorer countries, who

    are effectively forced to open their markets to competition from the


    industrialised countries, while continuing to have very restricted access to the


    markets of those countries."


    Maybe you would like to get him straight.

  • John Dewey

    rustbelt: "If no one addresses the distributional effects of trade then workers will address this at the polls. "


    You can really see how free trade has inflamed voters. Note how much election day success these free trade opponents have had:


    John Kerry, January 26, 2004 : “I will order an immediate 120-day review of all trade agreements to ensure that our trading partners are living up to their labor and environment obligations and that trade agreements are enforceable and are balanced for America's workers.”


    Dick Gephardt, September 25, 2003: “Most everybody here voted for NAFTA, voted for the China agreement. I did not. I led the fight against it.”


    Dick Gephardt:, May 3, 2003: “When I'm president, I will try to adjust or change trade treaties that are on the books. Labor, human rights, and environmental concerns need to be in trade negotiations and trade treaties.”


    Pat Buchanan, 1998: “"Behind a tariff wall built by Washington, Hamilton, Clay, Lincoln, and the Republican presidents who followed, the United States had gone from an agrarian coastal republic to become the greatest industrial power the world had ever seen -- in a single century. Such was the success of the policy called protectionism that is so disparaged today."


    Ross Perot,: “NAFTA is not the way. The present deal must be scrapped and negotiators put to work to develop a long-term economic relationship between Mexico, Canada, and the US that is in our mutual interest.”


  • Chris

    Save_the_Rustbelt:


    That's a good point, but there are exceedingly few Bill Gates out there. A closer look at the statistics doesn't seem to bear this out.


    In the past year, the US lost about 200,000 manufacturing jobs, paying (on average) $17.66/hr. At the same time, we gained 580,000 education & health service jobs, paying $18.19/hr. Sounds like a good trade-off to me.


    The interesting thing is that the average pay for those education & health service jobs has risen by about 60 cents/hour in the past year. Note that these are "non-supervisory" positions, so it's unskewed by multi-million-dollar CEO salaries.


    The real hit was in construction jobs, where we lost about 106,000 jobs (mostly from residential construction) paying an average of $21.23/hr. These were only partially made up for in higher-paying jobs in utilities, media & telecom.

  • save_the_rustbelt

    "but rarely give it credit for the increase in average incomes,"


    This reminds me of a lecture I heard in grad school, something like "how to mislead people with averages."




    bad economics joke:


    Bill Gates takes 9 homeless guys to a bar and buys them a drink.


    Greg Mankiw drops by, calculates that the ten men have an average net worth of $5 billion each, and calls George Bush.


    George Bush drops in, declares that the homeless guys are paying too much taxes because they are rich, and proposes more tax cuts.


    Gates, Mankiw and Bush leave and stiff the waitress (or was that Hillary).




    If no one addresses the distributional effects of trade then workers will address this at the polls. Imagine a Senate full of Sherrod Browns. The proponents of trade need to get over their rigidity.



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