Monday, January 8, 2007
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A few good trade links
A few if the saner things written about trade in the past few weeks:
1) William Overholt, "Globalization's Unequal Discontents," washingtonpost.com, December 21, 2006:
Some manufacturing workers in the United States -- such as those who labored in huge factories making basic steel -- have suffered as they've seen their jobs leave America for low-wage countries. But for workers as a whole, the truth about globalization and inequality is the opposite of what the protectionists claim. There are three caveats to the steel worker's story and two larger perspectives on inequality.2) Jagdish Bhagwati, "Technology, not Globalisation, Drives Wages Down," Financial Times, January 3, 2007:
Lou Dobbs of CNN, the labour groups’ think-tank Economic Policy Institute and nearly all the Democrats newly elected to Congress believe that globalisation has much to do with the economic distress of the working and middle classes. Therefore they have coherence on their side when they want to lean on the door – even to close it – on trade with poor countries and occasionally on unskilled immigration from them.One slight cavil -- that last paragraph by Bhagwati strikes me as a bit of a stretch. I have to think that globalization is one of the drivers for greater technical change.
3) Susan Aaronson, "Labor Rights Not Optional," TomPaine.com, January 5, 2007:
[Both] the Democratic alternative and the current Bush administration approach do little to bolster the demand in developing countries for strong labor protections. Neither approach facilitates the ability of citizens in our trade partners to participate in and monitor labor rights enforcement. In countries such as Oman, a U.S. free trade partner, workers cannot easily influence their government or obtain due process in administrative procedures. In addition, some of America’s free trade agreement partners do not provide their citizens with full information about their labor rights under the law. As a result, it is difficult for activists to monitor their government and hold it accountable.UPDATE: Brad Setser protests in the comments about the Overholt piece -- which reminds me that I should have linked this post of his from last week. posted by Dan on 01.08.07 at 09:00 AM
I can't believe this statement: "Lower prices due to imports from China alone -- ignoring all other similar results of globalization -- probably raise the real incomes of lower income Americans by 5 to 10 percent. That's something no welfare program has ever accomplished." The poor spend most of their income on food, shelter, utilities, and public transportation, very little of which is imported from China. Any ideas of where the figure came from?posted by: Bill Harshaw on 01.08.07 at 09:00 AM [permalink]
I second Bill Harshaw's comments.
Plus, isn't it disingenuous to look at areas where China's intergration into the global economy lowered prices but not to look at areas where it has raised them (oil, commodities). And then there is the difficult question of China's impact on housing prices --it clearly has helped push them up, tho its impact on rents/ mortgage int. costs is more ambiguous. With imports from China 2-3%% of US GDP and maybe 4-5% of total US consumption, getting a 5-10% overall fall is rather hard, n'est pas?
And if low priced goods from China are such a boon why hasn't there been stronger growth in real wages (median) and real compensation (Median). both have lagged productivity growth. I don't think we yet know why, and perhaps this is changing now, but it there is little doubt that the recent surge in corporate profits stems in no small part from a broad economic environment wage growth that has lagged productivity growth (combined with soaring profits in the financial sector/ resource sector).
The past few years have been far better for those holding financial assets than for those selling their labor to buy goods and services -- falling real prices for manufactured goods have been offset by rising real prices for commodities. The extent to which China has contributed to this is debatable, but it is hard to make a case that China has been good for the median worker when the median worker's share of national income is slipping ...posted by: bsetser on 01.08.07 at 09:00 AM [permalink]
I should add that many welfare programs have increased real income of their target population by much more than 10 percent. Certainly food stamps, TANF, and EITC would all qualify.
It looks to me as if Mr. Overholt forgot his own admonition to avoid emotion (third from last paragraph) in his zeal to wage the good fight for free trade.posted by: Bill Harshaw on 01.08.07 at 09:00 AM [permalink]
So GM avoiding bankrupcy is a BENEFIT of globalization??? I was under the impression that foreign competition is the main reason that GM is having problems in the first place.
Also, arguing over the loss of manufacturing jobs is beside the point. The reason for the screaming over globalization is the loss of white collar jobs. It may well be that there are new, high-paying jobs in their place, but I don't know what they are.
Finally, it's true that globalization has lifted hundreds of millions of people out of poverty, but they're in Asia, and I'm not so sure that's as important to me as my family.
None of this is to suggest that I am anti-free-trade. I am 100% in favor. But there is a price and we need to talk about it plainly.posted by: OpenBorderMan on 01.08.07 at 09:00 AM [permalink]
"...The worst inequality is between families whose breadwinners have jobs and those who don't. Globalization minimizes that problem...."
I happen to be working in Michigan this week, and this is bull. Light and medium manufacturing has been offshoring since about 1995, and now the crashing auto industry (much self-induced) is making this worse.
I just can't believe all of these econ pinheads trying to deny any significant damage from offshoring and globalization. It reminds me of the Kristin Forbes (MIT) cheap sneakers argument (so what if you lose a big chunk of your income, you can now buy cheap sneakers at Wal-Mart).
If the intelligensia continues to ignore reality you will have more Sherrod Brown types in Congress and that will not bode well for trade.posted by: save_the_rustbelt on 01.08.07 at 09:00 AM [permalink]
STR, Globalization DOES reduce the inequity between those with jobs and those without --- by lowering wages. I don't know if that is the point that the original author intended.
"...Some manufacturing workers in the United States -- such as those who labored in huge factories making basic steel -- have suffered as they've seen their jobs leave America for low-wage countries...."
Just a thought, but the steel workers largely lost their jobs two decades ago, it is light and medium manufacturing that has been devastated in the past decade.
So just how credible is this author anyway?posted by: save_the_rustbelt on 01.08.07 at 09:00 AM [permalink]
OBM - yes, unfortunately
and dittos to Brad Setser
Real wages are lagging here because $18 an hour jobs are being destroyed and $8 an hour jobs are being creaated - it takes a lot of investment banker bonuses to offset that trend in the real income numbersposted by: save_the_rustbelt on 01.08.07 at 09:00 AM [permalink]
I was under the impression that foreign competition is the main reason that GM is having problems in the first place.
Only insofar as the foreign competition are declining to make a product that sucks more than the GM product.
GM's problems are ultimately attributable to GM's management making bad decisions, not to it's competitors making good decisions. The 'foreign' aspect is a red herring.posted by: rosignol on 01.08.07 at 09:00 AM [permalink]
It'd probably be politically difficult, but why don't the Democrats combine the populist attitudes with the aim of eliminating protetictionist barriers like the ones for professionals, as Dean Baker has described them?posted by: Brian on 01.08.07 at 09:00 AM [permalink]
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