Is Trade the Problem?

The editorial board of the New York Times mulled over this big question yesterday. It's not an easy one to answer -- issues abound about how to measure trade in the first place and then how to isolate its impact on growth. But we do know that the trade causes worry and in some cases, very real disruptions of job and wage security. The Democratic presidential candidates have been quick to capitalize on this anger, the editorial asserts.

This editorial is worth a read as it addresses the major points made by trade's critics - that trade causes job losses; that trade drives down blue-collar wages; that trade contributes to growing inequality in pay; that cheap imports threaten U.S. production of similar goods.  The editorial concludes that "No matter how hard economists look for trade's fingerprints on these inequities, they find it plays only a bit part."

So what's going on, asks the Times? Well.... no surprise here.  The rising cost of college leads to a dearth of educated, skilled workers and outsized executive pay and "excesses" in the financial markets widen the income gap. The meat of the article comes at the end:

...blaming trade is not the right way to go. What the [Presidential] candidates need to do is respect the voters, and explan the economics and outline policies that will address the true problems.

That means expanding the social safety net to help workers displaced by trade.... The government has to invest more in education to help produce better-prepared, better-paid graduates. To help American companies compete, it must invest in better roads and ports and address the country's health care crisis. And it must move toward move progressive taxation to redistribute the spoils of growth.

And the kicker:

Blaming Nafta and other trade agreements for America's workers' pain may play well on the campaign stump. But it will not solve the country's economic problems. It will only make them worse.

For more information on NDN's work to develop a new economic strategy for America, check out Michael Moynihan's paper on investment in infrastructure; our series of papers on new skills for the 21st century economy (here and here); and Rob Shapiro's paper on globalization.