NCPA - National Center for Policy Analysis

IS TRADE THE PROBLEM?

April 30, 2008

Americans are angry about trade and a lot of politicians are eager to capitalize on it.  However, the country would be far better served by a serious, discussion of what is causing the dislocations in American workers' lives and how much trade is to blame, says the New York Times.

While trade can hurt some workers, most economists believe it plays a modest role compared with other forces in the economy.  Suppose the four million manufacturing jobs lost over the last decade were displaced by cheap imports and factories moving overseas:

  • Those lost manufacturing jobs -- an average of 400,000 a year -- amount to less than 3 percent of the 15 million jobs lost each year across the economy.
  • Meanwhile, about 17 million jobs were created annually, which is why the unemployment rate at the end of 2007 was not much different than it was at the end of 1997.

Critics say trade drives down all blue-collar wages, making it more difficult for companies that compete with cheap imports to increase pay while the greater competition for remaining jobs can lower wages.  Economists have other explanations for the stagnation of middle incomes and the mushrooming income gap:

  • A big part of the problem is a shortage of educated, skilled workers at a time when demand for them keeps rising.
  • High school graduation rates are flat, and there has been a slowdown in the growth of college graduation rates, partly because of the rising cost of college.

None of this denies that American workers are hurting.  But blaming trade is not the right way to go, says the Times.

Source: Editorial, "Is Trade the Problem?" New York Times, April 27, 2009.

For text:

http://www.nytimes.com/2008/04/27/opinion/27sun1.html 

 

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