Free trade divide


Phil’s blog re: China and India are poor links to some really interesting public opinion polls. One poll showed that only 27% of Americans believe that international trade has helped the economy, while 44% believe it has hurt the economy (results are backed by several different polls).

Economists, meanwhile, tend to be overwhelmingly favorable to free trade. Economists’ views on free trade range from luke warm to steaming hot. The prevailing mantra is: free trade is efficient and facilitates growth, and anyone who thinks otherwise is crazy!

The disconnect on free trade between the people and the experts surfaced recently when an Obama adviser allegedly assured a Canadian diplomat that Obama’s anti-NAFTA posturing was empty rhetoric. In an effort to become President, both Clinton and Obama have been strong NAFTA critics, even though Clinton has been a proponent of free trade and Obama would likely become one if called upon to make serious trade policy decisions.

So how can there be such a disconnect? Are the economists out of touch? Should we blame the media for scare-mongering? Are Americans just afraid of change? Yes, yes, and yes. 

Some economists have been overwhelmingly zealous, without recognizing that there can be large groups of people within a country that can lose because of free trade. Paul Krugman, an economist from the “luke warm” camp, writes eloquently about the negative consequences of free trade for large numbers of American workers. Too many economists ignore these distributive effects and “subtleties,” which can increase inequality and poverty.

Then there’s the media. Lou Dobbs is full of lies, most of which derive their power from xenophobic fears and knee-jerk patriotism. Shame on you, Lou Dobbs.

And lastly people are afraid of change. While many will win in a globalized world, many have also lost, and that’s scary. The politicians and economists must be sensitive to public concerns to build consensus and bridge the ideological gap on free trade.


3 Responses to “Free trade divide”

  1. NK Says:

    So while I procrastinate from writing followup emails from India, I’m wondering has any group come out with a plan to help those screwed over by globalization?

    For example, say company A outsources 100 jobs, saving $10,000 per employee over the first year alone, saving them $1mm. Now what if they had to pay an “outsourcing fee” of $250k or 25% that would be used towards job training and job placement for the 100 people that just got screwed and need new skills to get a new job, since their old job no longer exists in the US.

    While I’m sure the corporation would find a way to say they only saved $5,000 per employee and there would be some bloated gov’t agency to manage the program, wouldn’t that “soften” the blow of globalization and allow people to adapt to hopefully get better jobs?

  2. Sam Says:

    Retraining does not work this way in the U.S. The federal government does give some assistance to workers who lose their jobs to outsourcing(costing about $200 million per year). The number of people affected is in the low hundreds of thousands and doesn’t include millions more whose wages are depressed due to foreign competition (see

    Your proposed idea raises the question: should the business be responsible for the retraining? On the one hand, the business’s decision has created the problem of the lost jobs, and perhaps they should incur that cost. On the other hand, the neo-classical economist should be quick to point out that we don’t want to tax behavior that is realigning resources and production processes in a more efficient way.

    I’m not sure if I think the government or the businesses should bear the burden.

  3. Re free trade divide: economists taking note « The Invisible Hand, in your pants Says:

    […] free trade divide: economists taking note Just days after The invisible hand posted on the free trade divide, the ultra-conservative and influential Harvard economist Gregory Mankiw published on the subject […]

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