8 ms·

Free Trade with China Wasn't Such a Great Idea for the U.S

43 points by primodemus 11y ago

randomgyatwork 11y ago
Free-trade moved manufacturing over seas, but the types of industry that grew domestically required fewer workers with greater skill sets. Free trade has certainly caused problems, but domestic efficiency improvements have exaggerated those problems.
SixSigma 11y ago
Free trade puts the benefit of corporations before the benefit of nations.
- RyanZAG 11y ago
  Depends if you consider only your nation and your people important. If you place more value in humanity itself, then free trade puts the benefits of corporations and humanity before the benefit of nations.
  - sirtaj 11y ago
    Only if free trade implies open borders. Capital mobility without labour mobility is a severely imbalanced market and hard to pass off as a benefit to humanity.
    - RyanZAG 11y ago
      We have free trade, but no open borders. Yet it has caused huge benefit to humanity. So I would change your statement as well. Free trade is a huge benefit for humanity as a whole. Open borders may or may not be a huge benefit for humanity, as we have not tried it yet. The current economic migrant crisis will be a good starting point for an investigation and we will see if they integrate well.
- vezzy-fnord 11y ago
  Corporations exist only because of the legal fiat of "nations" (nation states, anyway). But, certainly not. Mercantilism benefits corporations much more strongly. Diseconomies of scale can be mostly inhibited through a strategically designed trade and fiscal policy. Slower falling unit production costs and opportunities for price fixing abound, as the "nation" (well, non-aristocratic taxpayers, anyway) bears these costs. Nor do tariffs necessarily reduce unemployment. The mercantile firm may well decide to keep its selling prices stable at a markup (especially given its lower customer base) and just lay workers off in event of supply shocks or other. Protection is a Faustian gambit for more rapid growth today at the expense of hulking inefficient corporations tomorrow. Corporations that would not exist without it.
- norea-armozel 11y ago
  Well trade is free in name only when you consider the fact that the various treaties where its proponents claim it opens markets there are provisions/regulations that either protect specific industries or make it easier to litigate for one party but not others. Every nation tries to press their thumb on the scale in their favor. China does it with its steel industry. The US does it with IP. European nations do for their own industries and so forth. No one plays by the same rules nor are held accountable for their subterfuge. Everyone just flashes their fake smile, shake hands, and look good while everyone on Main Street lives on less so Wall Street can get its shareholder value. Mind you, I don't believe that economics is a zero sum game. It's just that economists refuse to acknowledge their ideological biases which muddies the discussion. Ideologies are fine if you're willing to state your position and defend it with facts. But that's not how economists seem to be working (orthodox and heterodox schools all do it) an angle to insert their favored ideology into the political machine through fraudulent means (by avoiding public discourse and popular referendum). So the rest of us who aren't at Harvard or the University of Chicago pay the price for their reindeer games. All I have to do is look at my home town of Wichita to see the causalities of all this.
3pt14159 11y ago
You cannot make decisions in a vacuum. If the US did not engage in free trade with China, and instead placed high taxes on Chinese manufactured goods then Russia or the EU would have led the electronics and people-intensive manufacturing companies. Can you imagine Apple trying to compete states side? Impossible. Global US market share would have plummeted. Did engaging in free trade with China negatively impact low-skill workers? Absolutely. But the answer to that is not to try to stop competition, it's to create more training programs and wealth redistribution. Furthermore, there are _plenty_ of jobs China can't take (construction, fruit picking, etc) but instead of wages for those jobs going up, America allowed Mexican workers (illegals, temporary foreign workers, and low skill legal migrants) to compete with an already over competing sector of the American workforce. When farmers would remark that "Americans don't want these jobs" that is such a load of bullshit. Of course Americans want those jobs. They just don't want them at $5/hour. What should have been allowed to happen is that supply and demand should have done their thing and there would have been many hard, but good paying, low skill jobs in America.
- mc32 11y ago
  If the minimum wage went up to $15 hr the beneficiaries would be low skills Americans and you'd see a steady outflow of low skills foreign workers who now take up that sector. In addition you'd see much more in the way of automation as people become too expensive.
aakilfernandes 11y ago
> Ask any economist what issue they agree on, and the first answer you’re likely to hear is “free trade is good.” The general public disagrees vehemently, but economists are almost unanimous on this point. I've never heard an economist claim free trade will lead to lower unemployment. I've heard that it will lead to more efficient markets. But efficiency != equality, and its completely possible the gains go to the top while the losses go to the bottom.
- andreasklinger 11y ago
  agree. essentially it's not the job of market players to create fairness[1]. it's the job of the society around it - may it be local or global [1] i would even go as far and saying that the player's desire is even unfairness (skewed in the players direction)
  - thatcat 11y ago
    fairness is subjective, free markets arnt inherently fair. they exclude externalities like equality, environment, and other things that are valued by individuals that are ignored in the markets models.
nraynaud 11y ago
I am very afraid about this narrow point of view about US worker, the real questions is: "how many people had their life improved or worsened all over the world." Maybe it improved the life of many more Chinese than it did worsen that of people from the rest of the world, that would be a net gain. There is a bright side: lower cost tool become accessible to poor countries, and China is using its money to invest in abandoned Africa. (I'm not sure it's a net gain, but looking at American workers is certainly not the way to evaluate the situation)
- js8 11y ago
  > Maybe it improved the life of many more Chinese than it did worsen that of people from the rest of the world And maybe not. China is not exactly a free trade zone. There was a book written about it: http://www.amazon.com/Kicking-Away-Ladder-Development-Perspective/dp/1843310279 http://www.amazon.com/Kicking-Away-Ladder-Development-Perspe...
  - netheril96 11y ago
    If it shouldn't be called free trade between China and US, then the whole premise of this article falls apart.
- Retric 11y ago
  Considering conditions in China it may have been worse for workers. Remember economically if 1 person gains 1 billion and 999,999 people lose 1,000$ that's considered a net gain. (ed: in many macro economic models.)
  - netheril96 11y ago
    The living conditions of Chinese workers have been vastly improved over the last decade.
    - Kinnard 11y ago
      Could you cite some sources?
wcummings 11y ago
Mediocre article, and the authors tone is really unpleasant. Donald Trump could have written this.
- Houshalter 11y ago
  Here is the actual paper: http://www.ddorn.net/papers/Autor-Dorn-Hanson-ChinaShock.pdf http://www.ddorn.net/papers/Autor-Dorn-Hanson-ChinaShock.pdf Here is some discussion on Marginal Revolution: http://marginalrevolution.com/marginalrevolution/2016/01/autor-dorn-and-hanson-on-what-we-know-about-china.html http://marginalrevolution.com/marginalrevolution/2016/01/aut...
brightball 11y ago
Article is interesting for the part it leaves out. Unions essentially inflated the cost of labor so much that doing the work in another country and shipping it across an entire ocean before redistributing it to various points across the country was CHEAPER that manufacturing it closer to the central point of domestic delivery. That is the point that always gets left out. Cause and effect is a very real thing. EDIT: This was apparently controversial. Voted up quickly and voted all the way back down at the same speed.
- notahacker 11y ago
  Unions didn't create the cost of living differences between the US and China. The average Chinese worker earns less than $5k per annum, and that's despite unusually long work weeks and sustained wage growth over the last couple of decades. The average US worker isn't a union member but couldn't live on $5k per annum
  - bradleyjg 11y ago
    Cost of living differences are real but almost always overstated. It isn't as though a family in China can live the same lifestyle as a middle class American on $5k/year because everything there is so much cheaper. The average Chinese worker is very poor by US standards, even after taking into account cost of living differences. In fact, if you swapped a family with a cash income of $5k/year from China to the US, in many way they'd be better off as they'd have access to more and better socially provisioned goods and services. When you make this sort of argument you are implicitly saying "Chinese people don't mind being poor as much as Americans do" even if that's not what you meant to say.
    - notahacker 11y ago
      I agree cost of living differences are complicated and even low paid Americans expecting to drive a car to work, for example, plays a big role in pushing salary expectations up at the bottom end. But I don't think there are many parts of the US where you can comfortably rent a house and feed a family on $5k per annum. And I don't think most assembly line workers in export processing zones in China earn anywhere near that.
brbrodude 11y ago
Economists are frauds.
dharma1 11y ago
I think the same effects will be seen when automation really starts hitting. Net gains will go to a few while many people will end up unemployed, with the overall effect on society being potentially negative due to higher unemployment. That's why initiatives like basic salary, pioneered now in Finland and also seemingly by Y Combinator - are so important. Also I think huge opportunities are missed by not focusing on retraining people to industries where they can add value. Freely available high quality education/(re)training across all age groups will pay itself back many times over.
- netheril96 11y ago
  MOOCs are freely available high quality education.
  - dharma1 11y ago
    MOOCs are great, and will play a huge part. Still there is much more that could be done, MOOC's are not the solution for everyone.
jokoon 11y ago
I once had an angry argument on reddit about the whole "globalization is reducing world poverty" thing. I find this argument to be a very weird one. How can you compromise your own citizens for the sake of other countries, while you obviously have no power over their course in history? What sort of government compromises the well-being of its citizens and the health of its economy for the benefit of other countries ? Since when does international trade regulations involve plain altruism and sacrificing your own? What shocks is how you can still find many videos of Milton Friedman defending free trade, but to that point it almost sound like propaganda. I vividly remember that video when he went into a big asian city while praising the free market. For example, seeing how much electronics are built in China, what is preventing the Chinese government to put heavy tariffs on those exports? I guess China doesn't have a monopoly on electronics, but I'm still a little curious.
- CWuestefeld 11y ago
  I don't understand why I should prefer the comfort of some guy 2,000 miles away from me that I've never met over somebody on the other side of a border that some guy drew on a map a couple hundred years ago. Both of these people are abstractions to me; why should I prefer the Californian to the Chinese person? Even more to the point, why should I prefer the Californian when (in the general case, apparently not in this specific case, as cited by the OP) trading freely with the Chinese person will tend to improve the welfare of those around me to a greater degree?
  - ConfuciusSay 11y ago
    Because a Californian individual and a California based company pays federal taxes which leads directly to a more stable financial situation for the country you live in, not to mention a higher likelihood of tax cuts etc. Also, what evidence do you have that trade with Chinese will improve the welfare of those around you?
    - netheril96 11y ago
      > Because a Californian individual and a California based company pays federal taxes The jobs mostly affected by the free trade are low skill and therefore low wages jobs. Those jobs barely pay any income taxes.
Symmetry 11y ago
I don't think that anybody ever claimed that free trade was going to be a Pareto improvement[1]. It is going to nearly always be a Kaldor-Hicks[2] improvement, though, which means you can make everybody better off by doing free trade then taxing the free trade winners and giving the money to the free trade losers. [1]https://en.wikipedia.org/wiki/Pareto_efficiency https://en.wikipedia.org/wiki/Pareto_efficiency [2]https://en.wikipedia.org/wiki/Kaldor%E2%80%93Hicks_efficiency https://en.wikipedia.org/wiki/Kaldor%E2%80%93Hicks_efficienc...
- lumberjack 11y ago
  Did you miss the whole "it will be bad for the workers but good for the consumers" then? Because it was repeated incessantly even though it is immediately obvious to anybody that the average person, will be better off having a good job than being able to buy cheap crap from China.
  - notahacker 11y ago
    It's also immediately obvious to anyone that the average person in America has a job which is much better than the assembly line drudge work outsourced to China, and the argument being made is that US economy has the additional funds (if not the political will) to compensate the relatively small number of people who are unable to find any work since their manufacturing roles were outsourced, especially since the dollar can purchase an awful lot more consumer goods than it used to be able to.
socrates1998 11y ago
Free trade is good for the collective world, but has negative effects locally and regionally. That's why free trade agreements are so hard to negotiate, they screw people in one place while benefiting others in another place. China, and the world, are better off, but tell that to the guy who has to feed his family but he lost his job as a manager at a factory in New Jersey. Not exactly easy to do.
- mc32 11y ago
  Yep, this is the cause of people bemoaning the demise of the blue collar middle class. The one borne by Henry Ford and the idea workers earn enough to buy into the middle class which existed up to the sixties in the US and Europe but declined with the ascent of Japan and other regions which had lagged for various reasons ( there was a lot of parity in the early XX century, Mexico, Norway, Cuba, Poland were not far from ach other economically). But you still hear the reverberations of people wondering where the blue collar middle class went. It went to other countries and made the desperately poor there into local middle class. Still globalization is demonized when it has lifted millions of people from poverty. On the other hand economically mature nations have not prepared their workforce for these transitions by providing training and "insurance" during the decades long transition, as sectors change.
- CWuestefeld 11y ago
  In the general case, most of America is better off too. The downside would be very localized. The research being cited here is very specific to the current situation with China, and they recognize that themselves. The key difference (they believe) is that the China is so huge and has transformed so rapidly. In normal circumstances, things would have happened slower, and the employees of affected industries would have had more time to seek alternatives, or to retrain, and so the impact on them would have been less negative. This whole thing should make you ask why America was at a disadvantage because of the speed of Chinese transformation. In particular, what is it that's slowing America's ability to pivot? I don't have specific evidence to answer this question, but I believe the answer can be found by looking at our regulatory load, and how the difficulty of jumping through regulatory hoops is always increasing - compared to the Chinese, who in this respect have additional degrees of freedom.
paganel 11y ago
This is pure bogus. Without free trade with China most of today's smartphones would simply be too expensive, in the reach of only 1% of the people (yeah, that number is taken out of my a.s, but you get the idea). With no smart-phones there would be no "unicorns", there would be less profits for FB, Google and Apple itself. And there's also the fact that you cannot "price in" into any economic equations the improvement in life conditions brought in to the general public by the use of smart-phones. Economics as a science needs a total re-think, or at least they should tone down their end-of-the-world statements.
- ConfuciusSay 11y ago
  Funny, there's other products like cars throughout the years that were manufactured entirely in America and amazingly most people could afford to buy them - not just the 1%. The idea that without free trade with China only the 1% would be able to afford smartphones is total nonsense.
whack 11y ago
Both the post's title and the linked article's thesis aren't supported by the evidence. The article first proclaims the unanimous agreement among economists about the benefits of free trade. It then dives into the details of one study who seems to contradict this consensus, and then proclaims that no real consensus exists, and even if it did exist, it's wrong. 2 things: First, a couple of economists disagreeing with the mainstream, among the thousands of economic researchers, does not break a consensus. If we were to wait for unanimous agreement before embarking on any policy, we would never get anywhere. As the author himself admitted, there is a very strong and prevelent belief among economists that free trade is good for America and for the world in general. That should be good enough, despite a few dissenters believing differently. Second, the study linked does not disagree with the consensus at all! All the study claims, is that a small portion of the population has not benefited from free trade. With any substantive public policy, this will always be the case. Imagine if California declared tomorrow that only people who've lived in CA for 5 years can work as programmers. Such a policy would be horrendously bad for Americans and Californians in general. But it sure would make life great for a small number of unemployed programmers who are currently living in California. And so it is with free trade as well. It may benefit some and not benefit others, but the overall economic benefits far outweigh the costs, both for Americans and for the world in general. Even when considering those not benefiting from globalization, we can and should help them better by using the increased economic rewards that come from free trade, to build a better social safety net and education/training program for the unemployed. That would the positive step forward, not walking down the destructive path of protectionism.

43 points by primodemus 11y ago

Free-trade moved manufacturing over seas, but the types of industry that grew domestically required fewer workers with greater skill sets. Free trade has certainly caused problems, but domestic efficiency improvements have exaggerated those problems.

SixSigma 11y ago

Free trade puts the benefit of corporations before the benefit of nations.

RyanZAG 11y ago
Depends if you consider only your nation and your people important. If you place more value in humanity itself, then free trade puts the benefits of corporations and humanity before the benefit of nations.
- sirtaj 11y ago
  Only if free trade implies open borders. Capital mobility without labour mobility is a severely imbalanced market and hard to pass off as a benefit to humanity.
  - RyanZAG 11y ago
    We have free trade, but no open borders. Yet it has caused huge benefit to humanity. So I would change your statement as well. Free trade is a huge benefit for humanity as a whole. Open borders may or may not be a huge benefit for humanity, as we have not tried it yet. The current economic migrant crisis will be a good starting point for an investigation and we will see if they integrate well.
vezzy-fnord 11y ago
Corporations exist only because of the legal fiat of "nations" (nation states, anyway). But, certainly not. Mercantilism benefits corporations much more strongly. Diseconomies of scale can be mostly inhibited through a strategically designed trade and fiscal policy. Slower falling unit production costs and opportunities for price fixing abound, as the "nation" (well, non-aristocratic taxpayers, anyway) bears these costs. Nor do tariffs necessarily reduce unemployment. The mercantile firm may well decide to keep its selling prices stable at a markup (especially given its lower customer base) and just lay workers off in event of supply shocks or other. Protection is a Faustian gambit for more rapid growth today at the expense of hulking inefficient corporations tomorrow. Corporations that would not exist without it.
norea-armozel 11y ago
Well trade is free in name only when you consider the fact that the various treaties where its proponents claim it opens markets there are provisions/regulations that either protect specific industries or make it easier to litigate for one party but not others. Every nation tries to press their thumb on the scale in their favor. China does it with its steel industry. The US does it with IP. European nations do for their own industries and so forth. No one plays by the same rules nor are held accountable for their subterfuge. Everyone just flashes their fake smile, shake hands, and look good while everyone on Main Street lives on less so Wall Street can get its shareholder value. Mind you, I don't believe that economics is a zero sum game. It's just that economists refuse to acknowledge their ideological biases which muddies the discussion. Ideologies are fine if you're willing to state your position and defend it with facts. But that's not how economists seem to be working (orthodox and heterodox schools all do it) an angle to insert their favored ideology into the political machine through fraudulent means (by avoiding public discourse and popular referendum). So the rest of us who aren't at Harvard or the University of Chicago pay the price for their reindeer games. All I have to do is look at my home town of Wichita to see the causalities of all this.

3pt14159 11y ago

You cannot make decisions in a vacuum. If the US did not engage in free trade with China, and instead placed high taxes on Chinese manufactured goods then Russia or the EU would have led the electronics and people-intensive manufacturing companies. Can you imagine Apple trying to compete states side? Impossible. Global US market share would have plummeted. Did engaging in free trade with China negatively impact low-skill workers? Absolutely. But the answer to that is not to try to stop competition, it's to create more training programs and wealth redistribution. Furthermore, there are _plenty_ of jobs China can't take (construction, fruit picking, etc) but instead of wages for those jobs going up, America allowed Mexican workers (illegals, temporary foreign workers, and low skill legal migrants) to compete with an already over competing sector of the American workforce. When farmers would remark that "Americans don't want these jobs" that is such a load of bullshit. Of course Americans want those jobs. They just don't want them at $5/hour. What should have been allowed to happen is that supply and demand should have done their thing and there would have been many hard, but good paying, low skill jobs in America.

mc32 11y ago
If the minimum wage went up to $15 hr the beneficiaries would be low skills Americans and you'd see a steady outflow of low skills foreign workers who now take up that sector. In addition you'd see much more in the way of automation as people become too expensive.

aakilfernandes 11y ago

> Ask any economist what issue they agree on, and the first answer you’re likely to hear is “free trade is good.” The general public disagrees vehemently, but economists are almost unanimous on this point. I've never heard an economist claim free trade will lead to lower unemployment. I've heard that it will lead to more efficient markets. But efficiency != equality, and its completely possible the gains go to the top while the losses go to the bottom.

andreasklinger 11y ago
agree. essentially it's not the job of market players to create fairness[1]. it's the job of the society around it - may it be local or global [1] i would even go as far and saying that the player's desire is even unfairness (skewed in the players direction)
- thatcat 11y ago
  fairness is subjective, free markets arnt inherently fair. they exclude externalities like equality, environment, and other things that are valued by individuals that are ignored in the markets models.

nraynaud 11y ago

I am very afraid about this narrow point of view about US worker, the real questions is: "how many people had their life improved or worsened all over the world." Maybe it improved the life of many more Chinese than it did worsen that of people from the rest of the world, that would be a net gain. There is a bright side: lower cost tool become accessible to poor countries, and China is using its money to invest in abandoned Africa. (I'm not sure it's a net gain, but looking at American workers is certainly not the way to evaluate the situation)

js8 11y ago
> Maybe it improved the life of many more Chinese than it did worsen that of people from the rest of the world And maybe not. China is not exactly a free trade zone. There was a book written about it: http://www.amazon.com/Kicking-Away-Ladder-Development-Perspective/dp/1843310279 http://www.amazon.com/Kicking-Away-Ladder-Development-Perspe...
- netheril96 11y ago
  If it shouldn't be called free trade between China and US, then the whole premise of this article falls apart.
Retric 11y ago
Considering conditions in China it may have been worse for workers. Remember economically if 1 person gains 1 billion and 999,999 people lose 1,000$ that's considered a net gain. (ed: in many macro economic models.)
- netheril96 11y ago
  The living conditions of Chinese workers have been vastly improved over the last decade.
  - Kinnard 11y ago
    Could you cite some sources?

wcummings 11y ago

Mediocre article, and the authors tone is really unpleasant. Donald Trump could have written this.

Houshalter 11y ago
Here is the actual paper: http://www.ddorn.net/papers/Autor-Dorn-Hanson-ChinaShock.pdf http://www.ddorn.net/papers/Autor-Dorn-Hanson-ChinaShock.pdf Here is some discussion on Marginal Revolution: http://marginalrevolution.com/marginalrevolution/2016/01/autor-dorn-and-hanson-on-what-we-know-about-china.html http://marginalrevolution.com/marginalrevolution/2016/01/aut...

brightball 11y ago

Article is interesting for the part it leaves out. Unions essentially inflated the cost of labor so much that doing the work in another country and shipping it across an entire ocean before redistributing it to various points across the country was CHEAPER that manufacturing it closer to the central point of domestic delivery. That is the point that always gets left out. Cause and effect is a very real thing. EDIT: This was apparently controversial. Voted up quickly and voted all the way back down at the same speed.

notahacker 11y ago
Unions didn't create the cost of living differences between the US and China. The average Chinese worker earns less than $5k per annum, and that's despite unusually long work weeks and sustained wage growth over the last couple of decades. The average US worker isn't a union member but couldn't live on $5k per annum
- bradleyjg 11y ago
  Cost of living differences are real but almost always overstated. It isn't as though a family in China can live the same lifestyle as a middle class American on $5k/year because everything there is so much cheaper. The average Chinese worker is very poor by US standards, even after taking into account cost of living differences. In fact, if you swapped a family with a cash income of $5k/year from China to the US, in many way they'd be better off as they'd have access to more and better socially provisioned goods and services. When you make this sort of argument you are implicitly saying "Chinese people don't mind being poor as much as Americans do" even if that's not what you meant to say.
  - notahacker 11y ago
    I agree cost of living differences are complicated and even low paid Americans expecting to drive a car to work, for example, plays a big role in pushing salary expectations up at the bottom end. But I don't think there are many parts of the US where you can comfortably rent a house and feed a family on $5k per annum. And I don't think most assembly line workers in export processing zones in China earn anywhere near that.

brbrodude 11y ago

Economists are frauds.

dharma1 11y ago

I think the same effects will be seen when automation really starts hitting. Net gains will go to a few while many people will end up unemployed, with the overall effect on society being potentially negative due to higher unemployment. That's why initiatives like basic salary, pioneered now in Finland and also seemingly by Y Combinator - are so important. Also I think huge opportunities are missed by not focusing on retraining people to industries where they can add value. Freely available high quality education/(re)training across all age groups will pay itself back many times over.

netheril96 11y ago
MOOCs are freely available high quality education.
- dharma1 11y ago
  MOOCs are great, and will play a huge part. Still there is much more that could be done, MOOC's are not the solution for everyone.

jokoon 11y ago

I once had an angry argument on reddit about the whole "globalization is reducing world poverty" thing. I find this argument to be a very weird one. How can you compromise your own citizens for the sake of other countries, while you obviously have no power over their course in history? What sort of government compromises the well-being of its citizens and the health of its economy for the benefit of other countries ? Since when does international trade regulations involve plain altruism and sacrificing your own? What shocks is how you can still find many videos of Milton Friedman defending free trade, but to that point it almost sound like propaganda. I vividly remember that video when he went into a big asian city while praising the free market. For example, seeing how much electronics are built in China, what is preventing the Chinese government to put heavy tariffs on those exports? I guess China doesn't have a monopoly on electronics, but I'm still a little curious.

CWuestefeld 11y ago
I don't understand why I should prefer the comfort of some guy 2,000 miles away from me that I've never met over somebody on the other side of a border that some guy drew on a map a couple hundred years ago. Both of these people are abstractions to me; why should I prefer the Californian to the Chinese person? Even more to the point, why should I prefer the Californian when (in the general case, apparently not in this specific case, as cited by the OP) trading freely with the Chinese person will tend to improve the welfare of those around me to a greater degree?
- ConfuciusSay 11y ago
  Because a Californian individual and a California based company pays federal taxes which leads directly to a more stable financial situation for the country you live in, not to mention a higher likelihood of tax cuts etc. Also, what evidence do you have that trade with Chinese will improve the welfare of those around you?
  - netheril96 11y ago
    > Because a Californian individual and a California based company pays federal taxes The jobs mostly affected by the free trade are low skill and therefore low wages jobs. Those jobs barely pay any income taxes.

Symmetry 11y ago

I don't think that anybody ever claimed that free trade was going to be a Pareto improvement[1]. It is going to nearly always be a Kaldor-Hicks[2] improvement, though, which means you can make everybody better off by doing free trade then taxing the free trade winners and giving the money to the free trade losers. [1]https://en.wikipedia.org/wiki/Pareto_efficiency https://en.wikipedia.org/wiki/Pareto_efficiency [2]https://en.wikipedia.org/wiki/Kaldor%E2%80%93Hicks_efficiency https://en.wikipedia.org/wiki/Kaldor%E2%80%93Hicks_efficienc...

lumberjack 11y ago
Did you miss the whole "it will be bad for the workers but good for the consumers" then? Because it was repeated incessantly even though it is immediately obvious to anybody that the average person, will be better off having a good job than being able to buy cheap crap from China.
- notahacker 11y ago
  It's also immediately obvious to anyone that the average person in America has a job which is much better than the assembly line drudge work outsourced to China, and the argument being made is that US economy has the additional funds (if not the political will) to compensate the relatively small number of people who are unable to find any work since their manufacturing roles were outsourced, especially since the dollar can purchase an awful lot more consumer goods than it used to be able to.

socrates1998 11y ago

Free trade is good for the collective world, but has negative effects locally and regionally. That's why free trade agreements are so hard to negotiate, they screw people in one place while benefiting others in another place. China, and the world, are better off, but tell that to the guy who has to feed his family but he lost his job as a manager at a factory in New Jersey. Not exactly easy to do.

mc32 11y ago
Yep, this is the cause of people bemoaning the demise of the blue collar middle class. The one borne by Henry Ford and the idea workers earn enough to buy into the middle class which existed up to the sixties in the US and Europe but declined with the ascent of Japan and other regions which had lagged for various reasons ( there was a lot of parity in the early XX century, Mexico, Norway, Cuba, Poland were not far from ach other economically). But you still hear the reverberations of people wondering where the blue collar middle class went. It went to other countries and made the desperately poor there into local middle class. Still globalization is demonized when it has lifted millions of people from poverty. On the other hand economically mature nations have not prepared their workforce for these transitions by providing training and "insurance" during the decades long transition, as sectors change.
CWuestefeld 11y ago
In the general case, most of America is better off too. The downside would be very localized. The research being cited here is very specific to the current situation with China, and they recognize that themselves. The key difference (they believe) is that the China is so huge and has transformed so rapidly. In normal circumstances, things would have happened slower, and the employees of affected industries would have had more time to seek alternatives, or to retrain, and so the impact on them would have been less negative. This whole thing should make you ask why America was at a disadvantage because of the speed of Chinese transformation. In particular, what is it that's slowing America's ability to pivot? I don't have specific evidence to answer this question, but I believe the answer can be found by looking at our regulatory load, and how the difficulty of jumping through regulatory hoops is always increasing - compared to the Chinese, who in this respect have additional degrees of freedom.

paganel 11y ago

This is pure bogus. Without free trade with China most of today's smartphones would simply be too expensive, in the reach of only 1% of the people (yeah, that number is taken out of my a.s, but you get the idea). With no smart-phones there would be no "unicorns", there would be less profits for FB, Google and Apple itself. And there's also the fact that you cannot "price in" into any economic equations the improvement in life conditions brought in to the general public by the use of smart-phones. Economics as a science needs a total re-think, or at least they should tone down their end-of-the-world statements.

ConfuciusSay 11y ago
Funny, there's other products like cars throughout the years that were manufactured entirely in America and amazingly most people could afford to buy them - not just the 1%. The idea that without free trade with China only the 1% would be able to afford smartphones is total nonsense.

whack 11y ago

Both the post's title and the linked article's thesis aren't supported by the evidence. The article first proclaims the unanimous agreement among economists about the benefits of free trade. It then dives into the details of one study who seems to contradict this consensus, and then proclaims that no real consensus exists, and even if it did exist, it's wrong. 2 things: First, a couple of economists disagreeing with the mainstream, among the thousands of economic researchers, does not break a consensus. If we were to wait for unanimous agreement before embarking on any policy, we would never get anywhere. As the author himself admitted, there is a very strong and prevelent belief among economists that free trade is good for America and for the world in general. That should be good enough, despite a few dissenters believing differently. Second, the study linked does not disagree with the consensus at all! All the study claims, is that a small portion of the population has not benefited from free trade. With any substantive public policy, this will always be the case. Imagine if California declared tomorrow that only people who've lived in CA for 5 years can work as programmers. Such a policy would be horrendously bad for Americans and Californians in general. But it sure would make life great for a small number of unemployed programmers who are currently living in California. And so it is with free trade as well. It may benefit some and not benefit others, but the overall economic benefits far outweigh the costs, both for Americans and for the world in general. Even when considering those not benefiting from globalization, we can and should help them better by using the increased economic rewards that come from free trade, to build a better social safety net and education/training program for the unemployed. That would the positive step forward, not walking down the destructive path of protectionism.