Mr. Jeff Ferry
Chief Economist emeritus
Coalition for a Prosperous America
Jeff:
I enjoyed our recent joint appearance on Perspectives Matter.
Coincidentally, a friend just shared with me a piece you wrote last February titled “Tariffs Have Strengthened the U.S. Economy.” You’ll not be surprised that I disagree with the bulk of it.
For example, you describe research on the so-called “China Shock” as uncovering “strongly negative impacts for the U.S. from trade with China.” This description is doubly inaccurate. First – and as you note elsewhere in your essay – the “China Shock” researchers looked only at the effects of increased trade with China on particular “commuting zones”; they did not look at the effects of this trade on the U.S. economy as a whole. Because no serious economist or informed free trader has ever claimed that free trade will not result in the economic decline of some locales (as it improves the economic prospects of other locales), your suggestion that the “China Shock” research challenges the foundational economic case for free trade is simply mistaken.
Second, the uppermost “China Shock” estimate of the number of jobs destroyed in these locales by trade with China is 2.4 million – or 15,385 per month, on average, during the 13 “China Shock” years. This number is minuscule compared to the total number of involuntary separations (of workers from their current jobs) in our huge, dynamic economy. The St. Louis Fed has data on monthly “layoffs and discharges” dating back to December 2000. These data thus include more than eleven of the “China Shock” years (which ended in December 2011). During this time, each month in America the number of workers who lost their particular jobs averaged 1.994 million. “China Shock” job losses, therefore, were a microscopic 0.8% of all job losses nationwide. The proposition that a disproportionately large number of American jobs were destroyed by increased U.S. trade with China collapses under the data.
But you commit your worst error when you criticize a study that examines the effects of tariffs nationwide. You write: “the study dilutes the effects of tariffs by looking at its effects across the whole country and across the entire employment base. Tariffs are by their nature targeted policies whose effects should be judged based on the targeted industries.”
You here err gravely. Every informed free trader, from Adam Smith forward, has recognized that tariffs can indeed benefit protected industries. The economic case against protective tariffs is that this protection both reduces the spending power of consumers and shrinks other domestic industries, with the total losses nationwide being larger than the gains to the protected producers.
For you to insist that attention to the effects of tariffs be limited to the effects that tariffs have on protected industries is akin to insisting that attention to the effects of burglary be limited to the effects that burglary has on burglars. You make no more sense to suggest that protectionism is justified because it enriches protected industries than you would make were you to suggest that burglary is justified because it enriches burglars.
Sincerely,
Don
