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The Moral Impact Of Global Trade

September 23, 2016

Spot on!

Let me concur with the author that economists haven’t done a particularly good job of pinning down the virtues of trade.  The fact remains that the nominees of both major parties for president this fall have also simply not constructively engaged the electorate on the virtues of free trade and why it matters to this nation and others around the world.

A young Canadian economist at Wilfrid Laurier University, Brian McCaig, studied what happened in Vietnam immediately after the United States slashed tariffs on goods from that country in 2001 — a bilateral trade agreement similar to many others before and since that have opened up the United States to manufactured goods from Asia. He found that over the next three years, as the value of apparel and clothing accessories going to the United States from Vietnam rose by 277 percent, the poverty level in Vietnam fell to 19.5 percent from 28.9 percent, twice as fast as it had fallen in the preceding four years and enough to lift about seven million people out of poverty. This wasn’t American food-stamp poverty those Vietnamese were escaping; it was malnourished, dollar-a-day poverty.

McCaig does not claim that these changes were produced solely by the surge in exports to the United States. By his estimate, only about 250,000 jobs were created in export-based manufacturing in Vietnam during those two years. But those jobs, which were better-paying than almost anything else available before, had an enormous ripple effect: Every new factory position led to several other new jobs nearby. In general, the more specialized a region was in producing exports, the faster poverty declined.

But when I spoke with David Autor, he told me that whatever the virtues or costs in the United States, they pale in comparison with the basic humanitarian benefits that people in places like China and Vietnam have experienced as a result of trade with the United States. “The gains to the people who benefited are so enormous — they were destitute, and now they were brought into the global middle class,” Autor says. “The fact that there are adverse consequences in the United States should be taken seriously, but it doesn’t tilt the balance.”

Autor told me that he does not hold out hope that American politicians will bring this sort of calculus to the election debate. But if the rest of us want to consider trade in moral and humanitarian terms, not just as a political and economic matter, it seems important to contemplate how to assign and compare the values of a new job to someone who would otherwise be stuck in dire poverty and a lost job for someone with at least some version of a safety net, which Americans have compared with many of the poor people in the developing world. Undoubtedly there are ways to soothe the hardship on both sides, and we should try to figure them out. But trade inevitably involves some trade-offs. If we want to determine if they are worth it, we can’t just look at one side of the transaction.

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