Religious people might name the arrival of a prophet. I might name the abolition of communes in China, or the abolition of slavery, or the defeat of the Nazis. Or perhaps positive innovations such as antibiotics, the Green Revolution, or the invention of cinema/TV.
It would be pretty hard to argue that China opening up to trade with the rest of the world doesn’t belong in the top 10, in any list of the best things that ever happened. Marcus Nunes directed me to this Noah Smith post:
Basically, opening up trade with poor countries such as China can be dangerous. But liberalizing trade with rich countries such as Japan, South Korea and those in Europe has very little potential downside.
The main danger from free trade is the so-called distributional effect. Opening up trade with China put U.S. workers directly in competition with Chinese workers who could do a similar job for much less money. That acted to the advantage of U.S. multinational companies that shifted factories to China, because U.S. companies were the ones with the capital to invest in new Chinese factories. But that hurt U.S. workers who were suddenly out of a job. Many manufacturing industries shifted to China and many laid-off U.S. workers were forced to take low-paying low-skill jobs, while others simply dropped out of the labor force. Trade with China has been great for rich Americans, but it’s been a disaster for much of the working class.
Is Smith suggesting that a policy that produced incredible gains to hundreds of millions of very poor non-white people is undesirable if it generates relatively small costs to a relatively small number of relatively affluent Americans? (Affluent by global standards.) I think so:
I find myself in an odd position right now. Having spent years criticizing the elite consensus in favor of free trade, I now am very reluctant to join the backlash.
One simple reason is that the backlash is being led, in part, by Republican presidential candidate Donald Trump and I’m disinclined to sign onto a movement of which he is a prominent leader.
But just as a stopped clock is right twice a day, there is a possibility that Trump is actually right on this issue.
Now to his credit, Smith goes on to indicate that he supports some recent trade proposals, but only because they would help relatively affluent Americans and relatively affluent Europeans, Asians and Australians. China is not involved. So he’s not as bad as Krugman. Nonetheless, any proposal that would massively improve the welfare of the people who most need economic development seems to be undesirable (in Smith’s view), as it would involve freer trade with very poor people.
Just to be clear, I do not accept the claim that China trade has done enormous damage to America’s working class. Contrary to widespread impression, the recent paper by Autor, Dorn and Hanson does not provide convincing data for a big net loss of jobs because of China trade. The job market did very well during the period they examined (1990-2007), indeed far better than in Germany (which had huge trade surpluses). In my view there has been little or no net loss in jobs in the US due to trade. Losses in some cities and gains in others. In addition, working class Americans (as a whole) have gained enormously from the lower prices resulting from Chinese imports.
But even if I were 100% wrong in my views of the positive effects (on the US) of China trade, I’d view opposition to China trade as morally indefensible. In the comment section, people will tell me that it’s the job of the US government to defend the interests of US citizens, and that we should not care about the welfare of the Chinese. I don’t accept that, and even if I did I’d still argue that China trade benefits the US. But these commenters are people with whom Smith would strongly disagree with on almost any other issue. He should think twice about whether he wants to be associated with people who don’t care at all about the welfare of hundreds of millions of poor Asians. Smith’s a liberal-minded person, and I’m sure he does care about the welfare of people in the third world. My guess is that this is just an oversight on his part.
Another possibility is that I misinterpreted his argument. (Surely the first time that has ever happened in the blogosphere!) I understand that Smith doesn’t explicitly advocate not trading with China, and that his post is forward-looking. But he’s relying on the claim of backward-looking studies (such as ADH) for his assertion that China trade hurt the US. I don’t see how you can rely on those studies, and still claim that your opposition to more China trade is merely forward-looking. Nonetheless if Smith wants to specifically suggest that previous trade with China was a good thing because it helped China develop, but he wants no more liberalization, I’ll amend this post. In that case I’d say his argument makes no sense at all, rather than being morally indefensible. Trump also says that our past trade with China has been a bad thing—at least that argument is consistent.