Robert Samuelson Thinks We Don't Give Trade Enough Credit

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Monday, 01 April 2013 03:47

Following in the footsteps of his colleague at the Post, Dylan Matthews, Robert Samuelson devoted a column to a new book on trade by Robert Lawrence, complaining that we don't give enough credit to trade. I won't rehash the basic points that Samuelson gets wrong. However it is probably worth going through the basic story as to how trade can lead to overall gains to the economy and yet hurt large groups of workers.

Suppose that we diverted 6 percent of the current flow of immigrants so that instead of being farmworkers and custodians they were doctors trained to U.S. standards. After a decade we would have an additional 800,000 doctors, roughly doubling the current supply. Let's imagine that this cut their (service adjusted) average pay in half to $125,000 a year.

In this story, we would save $100 billion a year in what we pay doctors. This would imply an enormous benefit to the economy in the form of lower health care costs.

Even doctors would benefit from having to pay less for health care for themselves and their families. Of course their savings on health care costs would be swamped in its impact on their living standards by their reduction in pay. (Maybe we could get some economists and economic columnists to tell the doctors that they are stupid for opposing trade agreements because of the huge savings they see on health care, just as they tell manufacturing workers that they are stupid for not appreciating the benefits of low cost imported manufactured goods.)

Anyhow, this is the basic story on trade in the U.S. over the last three decades. It has been designed to put non-college educated workers in direct competition with their counterparts in the developing world, while largely protecting the most highly educated workers. The predicted and actual result from this structure of trade is to reduce their wages, redistributing income to corporate profits and highly educated professionals.