… is from pages 123-124 of Paul Krugman’s excellent May 1993 American Economic Review essay “What Do Undergrads Need to Know about Trade?”, as it is reprinted in Krugman’s indispensable 1996 collection, Pop Internationalism (original emphasis):
What we should be able to teach our students is that the main competition going on is one of U.S. industries against each other, over which sector is going to get the scarce resources of capital, skill, and, yes, labor. Government support of an industry may help that industry compete against foreigners, but it also draws resources away from other domestic industries. That is, the increased importance of international trade does not change the fact the government cannot favor one domestic industry except at the expense of others.
Implication: Changes in trade patterns have distributional consequences. But so, too, does protectionism.
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