
Free Trade with China Wasn't Such a Great Idea for the U.S - primodemus
http://www.bloombergview.com/articles/2016-01-26/free-trade-with-china-wasn-t-such-a-great-idea
======
nraynaud
I am very afraid about this narrow point of view about US worker, the real
questions is: "how many people had their life improved or worsened all over
the world." Maybe it improved the life of many more Chinese than it did worsen
that of people from the rest of the world, that would be a net gain. There is
a bright side: lower cost tool become accessible to poor countries, and China
is using its money to invest in abandoned Africa. (I'm not sure it's a net
gain, but looking at American workers is certainly not the way to evaluate the
situation)

~~~
carsongross
It is absolutely the right view to take _for US workers_ and _for the people
that politically represent them_.

~~~
mc32
Yes moreover, you can be assured workers in China (of any other offshore
workers in any other country) are not feeling sorry for the jobs blue collar
workers in the US lost.

They rightly feel they earned their jobs. And rightly Americans feel their
jobs were taken. Same coin, different sides.

------
aakilfernandes
> Ask any economist what issue they agree on, and the first answer you’re
> likely to hear is “free trade is good.” The general public disagrees
> vehemently, but economists are almost unanimous on this point.

I've never heard an economist claim free trade will lead to lower
unemployment. I've heard that it will lead to more efficient markets. But
efficiency != equality, and its completely possible the gains go to the top
while the losses go to the bottom.

~~~
andreasklinger
agree.

essentially it's not the job of market players to create fairness[1]. it's the
job of the society around it - may it be local or global

[1] i would even go as far and saying that the player's desire is even
unfairness (skewed in the players direction)

~~~
thatcat
fairness is subjective, free markets arnt inherently fair. they exclude
externalities like equality, environment, and other things that are valued by
individuals that are ignored in the markets models.

------
dharma1
I think the same effects will be seen when automation really starts hitting.
Net gains will go to a few while many people will end up unemployed, with the
overall effect on society being potentially negative due to higher
unemployment.

That's why initiatives like basic salary, pioneered now in Finland and also
seemingly by Y Combinator - are so important.

Also I think huge opportunities are missed by not focusing on retraining
people to industries where they can add value.

Freely available high quality education/(re)training across all age groups
will pay itself back many times over.

~~~
netheril96
MOOCs _are_ freely available high quality education.

~~~
dharma1
MOOCs are great, and will play a huge part.

Still there is much more that could be done, MOOC's are not the solution for
everyone.

------
3pt14159
You cannot make decisions in a vacuum. If the US did not engage in free trade
with China, and instead placed high taxes on Chinese manufactured goods then
Russia or the EU would have led the electronics and people-intensive
manufacturing companies. Can you imagine Apple trying to compete states side?
Impossible. Global US market share would have plummeted.

Did engaging in free trade with China negatively impact low-skill workers?
Absolutely. But the answer to that is not to try to stop competition, it's to
create more training programs and wealth redistribution. Furthermore, there
are _plenty_ of jobs China can't take (construction, fruit picking, etc) but
instead of wages for those jobs going up, America allowed Mexican workers
(illegals, temporary foreign workers, and low skill legal migrants) to compete
with an already over competing sector of the American workforce.

When farmers would remark that "Americans don't want these jobs" that is such
a load of bullshit. Of course Americans want those jobs. They just don't want
them at $5/hour. What should have been allowed to happen is that supply and
demand should have done their thing and there would have been many hard, but
good paying, low skill jobs in America.

~~~
mc32
If the minimum wage went up to $15 hr the beneficiaries would be low skills
Americans and you'd see a steady outflow of low skills foreign workers who now
take up that sector.

In addition you'd see much more in the way of automation as people become too
expensive.

------
socrates1998
Free trade is good for the collective world, but has negative effects locally
and regionally.

That's why free trade agreements are so hard to negotiate, they screw people
in one place while benefiting others in another place.

China, and the world, are better off, but tell that to the guy who has to feed
his family but he lost his job as a manager at a factory in New Jersey. Not
exactly easy to do.

~~~
CWuestefeld
In the general case, most of America is better off too. The downside would be
_very_ localized.

The research being cited here is very specific to the current situation with
China, and they recognize that themselves. The key difference (they believe)
is that the China is so huge and has transformed so rapidly.

In normal circumstances, things would have happened slower, and the employees
of affected industries would have had more time to seek alternatives, or to
retrain, and so the impact on them would have been less negative.

This whole thing should make you ask why America was at a disadvantage because
of the speed of Chinese transformation. In particular, what is it that's
slowing America's ability to pivot? I don't have specific evidence to answer
this question, but I believe the answer can be found by looking at our
regulatory load, and how the difficulty of jumping through regulatory hoops is
always increasing - compared to the Chinese, who in this respect have
additional degrees of freedom.

~~~
ConfuciusSay
This paper shows how there's negative affects from free trade with China, and
your conclusion is "oh it was negative with China, but all those other free
trade deals were positive"? Sorry, but NAFTA was a massive job killer. Just
ask anyone in Detroit.

Also, the idea that China has no regulation on business is ridiculous.
Obviously you've never worked there!

~~~
CWuestefeld
_but all those other free trade deals were positive_

In economics, "free trade creates additional wealth for all involved" is
closer to consensus among economists than is "the Earth is warming" is among
climatologists. The paper [1] that the OP references does itself say that
their conclusion is peculiar to the circumstances of China:

"While these results do not at all suggest that international trade is in the
aggregate harmful to nations--indeed, China's unprecedented rise from
widespread poverty bears testimony to trade's transformative economic power--
it makes clear that trade not only has benefits but also significant costs."

 _but NAFTA was a massive job killer_

As it happens, Don Boudreaux [2] just published something relating directly to
this:

"since NAFTA took effect Mexicans have invested more – 59 percent more, to be
precise – in manufacturing activities in the U.S. than Americans have invested
in manufacturing activities in Mexico."

Quoting Confucius again:

 _Obviously you 've never worked there!_

No, I haven't. But I've been there many times, and know many people who do
work there. What I've observed myself is that for the average person on the
street in Shanghai - say, someone making and selling pork buns, or a farmer
bringing in a cart of vegetables from the country - there seems to be a
significant laissez-faire attitude. At a larger scale - what we're talking
about for international trade - my perception is that while China may have
many barriers, knowing the right people and being able to "grease the wheels",
makes things proceed relatively easily. In America our regulations are taken
much more seriously - we don't have anything like their degree of corruption,
but we also don't have that as a means to get around onerous rules.

[1] [http://www.ddorn.net/papers/Autor-Dorn-Hanson-
ChinaShock.pdf](http://www.ddorn.net/papers/Autor-Dorn-Hanson-ChinaShock.pdf)

[2] [http://cafehayek.com/2016/01/which-way-flow-the-equity-
inves...](http://cafehayek.com/2016/01/which-way-flow-the-equity-investments-
in-manufacturing.html)

EDIT: formatting

~~~
ConfuciusSay
_In economics, "free trade creates additional wealth for all involved" is
closer to consensus among economists than is "the Earth is warming" is among
climatologists._

Except for, you know, the economists who penned the study that is the topic of
this thread, along with plenty of others. On top of which, whenever someone
spouts this falsehood, invariably it's economists who are looking at very
narrow definitions of free trade, or very narrow definitions of "creating
additional wealth". Is free trade good if the only gains in wealth go to a few
people while most workers lose their jobs? Maybe the GDP increased, but for
your average person it wasn't good.

The study does not say that the conclusion is peculiar to China, just that not
all trade agreements are in aggregate harmful. Yes, China benefitted, but if
it takes a population to be at starving level poverty to benefit from free
trade, then I think your average American would say "no thanks".

Investment is not the same thing as employment. Mexicans may invest in
American based companies, but those companies can outsource every last one of
their employees if they so desire. Not to mention he says himself _I realize
that 5 of 21 years is too small a portion of time from which to draw any
conclusions._ Conservative estimates of job losses from NAFTA are in the realm
of at least 700,000. It's pretty obvious that job losses are part of the deal
when the government created the NAFTA-Transitional Adjustment Assistance
Program to help people deal with losing their jobs as result of NAFTA!

There are many regulations in China. Sure there's more corruption there than
here, but you seem to be advocating for America to become a more corrupt
environment to improve America's "ability to pivot". Do you really think the
brown paper bag economy is the way to go?

------
jokoon
I once had an angry argument on reddit about the whole "globalization is
reducing world poverty" thing.

I find this argument to be a very weird one. How can you compromise your own
citizens for the sake of other countries, while you obviously have no power
over their course in history? What sort of government compromises the well-
being of its citizens and the health of its economy for the benefit of other
countries ? Since when does international trade regulations involve plain
altruism and sacrificing your own?

What shocks is how you can still find many videos of Milton Friedman defending
free trade, but to that point it almost sound like propaganda. I vividly
remember that video when he went into a big asian city while praising the free
market.

For example, seeing how much electronics are built in China, what is
preventing the Chinese government to put heavy tariffs on those exports? I
guess China doesn't have a monopoly on electronics, but I'm still a little
curious.

~~~
netheril96
> Since when does international trade regulations involve plain altruism and
> sacrificing your own?

International trade is not based on plain altruism. On both sides of the
trade, some people benefit and some lose, but the net gains at both sides are
positive. The article focuses on those hurt in US, but it does not mention how
the US capitalists, consumers and workers not competing with China benefit.

> what is preventing the Chinese government to put heavy tariffs on those
> exports?

Chinese governments not only do not place tariffs on their exports, but also
subsidies the exports. That is, the goods exported from China is cheaper than
those sold directly in China. They do it for their own self interests.

~~~
ConfuciusSay
Many proponents of free trade argue that we should be pro free trade because
it benefits the poor people in places like China. The OP is referring to that
argument.

As for why this study didn't focus on the benefits - maybe because there
weren't any? Or maybe it's because the benefits mostly went to the executives
of large multinational corporations who are lobbying for these deals?

~~~
netheril96
> maybe because there weren't any

The other comments have said plenty about the benefits, the most obvious being
how cheap your daily goods are nowadays, effectively boosting the purchasing
power of every American. In addition, had computers and smartphones not been
so cheap because of the Chinese workers, the whole Silicon Valley bubble
probably would never have come into existence.

> it's because the benefits mostly went to the executives of large
> multinational corporations

Why should the benefits of the executives be discounted? Perhaps you believe
that the rich should not be made even richer; rather, the poor should receive
the most benefits. Then why do you think that American workers, orders of
magnitude richer than the Chinese, should be made even richer?

~~~
jokoon
> Then why do you think that American workers, orders of magnitude richer than
> the Chinese, should be made even richer?

Because that's in the interest of their fellow citizens, since those citizens
can vote to influence decisions that concern them, not the chinese. I don't
think an american want a chinese to fail, but I don't think an american
citizen really holds the fate of chinese people, and I don't think anybody
should pretend otherwise. That's mainly about doing things that concerns you,
and things that you can reach. The state of the chinese economy is in the
hands of the chinese.

What I mean is that those decision are beyond the grasp or citizens and
politicians. People should care about their own first, others second. Trade is
fine, as long as there is no loss on your side. Maybe some want to believe
that the world is one uniform place, but the reality of politics say
otherwise. Sometimes you have to come back to basic strategy and realities.

------
wcummings
Mediocre article, and the authors tone is really unpleasant. Donald Trump
could have written this.

~~~
Houshalter
Here is the actual paper: [http://www.ddorn.net/papers/Autor-Dorn-Hanson-
ChinaShock.pdf](http://www.ddorn.net/papers/Autor-Dorn-Hanson-ChinaShock.pdf)

Here is some discussion on Marginal Revolution:
[http://marginalrevolution.com/marginalrevolution/2016/01/aut...](http://marginalrevolution.com/marginalrevolution/2016/01/autor-
dorn-and-hanson-on-what-we-know-about-china.html)

------
Symmetry
I don't think that anybody ever claimed that free trade was going to be a
Pareto improvement[1]. It is going to nearly always be a Kaldor-Hicks[2]
improvement, though, which means you _can_ make everybody better off by doing
free trade then taxing the free trade winners and giving the money to the free
trade losers.

[1][https://en.wikipedia.org/wiki/Pareto_efficiency](https://en.wikipedia.org/wiki/Pareto_efficiency)

[2][https://en.wikipedia.org/wiki/Kaldor%E2%80%93Hicks_efficienc...](https://en.wikipedia.org/wiki/Kaldor%E2%80%93Hicks_efficiency)

~~~
lumberjack
Did you miss the whole "it will be bad for the workers but good for the
consumers" then? Because it was repeated incessantly even though it is
immediately obvious to anybody that the average person, will be better off
having a good job than being able to buy cheap crap from China.

~~~
notahacker
It's also immediately obvious to anyone that the average person in America has
a job which is much better than the assembly line drudge work outsourced to
China, and the argument being made is that US economy has the additional funds
(if not the political will) to compensate the relatively small number of
people who are unable to find any work since their manufacturing roles were
outsourced, especially since the dollar can purchase an awful lot more
consumer goods than it used to be able to.

------
whack
Both the post's title and the linked article's thesis aren't supported by the
evidence. The article first proclaims the unanimous agreement among economists
about the benefits of free trade. It then dives into the details of _one_
study who seems to contradict this consensus, and then proclaims that no real
consensus exists, and even if it did exist, it's wrong.

2 things:

First, a couple of economists disagreeing with the mainstream, among the
thousands of economic researchers, does not break a consensus. If we were to
wait for unanimous agreement before embarking on any policy, we would never
get anywhere. As the author himself admitted, there is a very strong and
prevelent belief among economists that free trade is good for America and for
the world in general. That should be good enough, despite a few dissenters
believing differently.

Second, the study linked does not disagree with the consensus at all! All the
study claims, is that a small portion of the population has not benefited from
free trade. With any substantive public policy, this will _always_ be the
case. Imagine if California declared tomorrow that only people who've lived in
CA for 5 years can work as programmers. Such a policy would be horrendously
bad for Americans and Californians in general. But it sure would make life
great for a small number of unemployed programmers who are currently living in
California.

And so it is with free trade as well. It may benefit some and not benefit
others, but the overall economic benefits far outweigh the costs, both for
Americans and for the world in general. Even when considering those not
benefiting from globalization, we can and should help them better by using the
increased economic rewards that come from free trade, to build a better social
safety net and education/training program for the unemployed. That would the
positive step forward, not walking down the destructive path of protectionism.

------
randomgyatwork
Free-trade moved manufacturing over seas, but the types of industry that grew
domestically required fewer workers with greater skill sets.

Free trade has certainly caused problems, but domestic efficiency improvements
have exaggerated those problems.

------
paganel
This is pure bogus. Without free trade with China most of today's smartphones
would simply be too expensive, in the reach of only 1% of the people (yeah,
that number is taken out of my a.s, but you get the idea). With no smart-
phones there would be no "unicorns", there would be less profits for FB,
Google and Apple itself.

And there's also the fact that you cannot "price in" into any economic
equations the improvement in life conditions brought in to the general public
by the use of smart-phones.

Economics as a science needs a total re-think, or at least they should tone
down their end-of-the-world statements.

~~~
ConfuciusSay
Funny, there's other products like cars throughout the years that were
manufactured entirely in America and amazingly most people could afford to buy
them - not just the 1%.

The idea that without free trade with China only the 1% would be able to
afford smartphones is total nonsense.

------
brbrodude
Economists are frauds.

------
SixSigma
Free trade puts the benefit of corporations before the benefit of nations.

~~~
RyanZAG
Depends if you consider only your nation and your people important. If you
place more value in humanity itself, then free trade puts the benefits of
corporations _and humanity_ before the benefit of nations.

~~~
sirtaj
Only if free trade implies open borders. Capital mobility without labour
mobility is a severely imbalanced market and hard to pass off as a benefit to
humanity.

~~~
RyanZAG
We have free trade, but no open borders. Yet it has caused huge benefit to
humanity.

So I would change your statement as well.

Free trade is a huge benefit for humanity as a whole.

Open borders may or may not be a huge benefit for humanity, as we have not
tried it yet. The current economic migrant crisis will be a good starting
point for an investigation and we will see if they integrate well.

------
brightball
Article is interesting for the part it leaves out. Unions essentially inflated
the cost of labor so much that doing the work in another country and shipping
it across an entire ocean before redistributing it to various points across
the country was CHEAPER that manufacturing it closer to the central point of
domestic delivery.

That is the point that always gets left out. Cause and effect is a very real
thing.

EDIT: This was apparently controversial. Voted up quickly and voted all the
way back down at the same speed.

~~~
notahacker
Unions didn't create the cost of living differences between the US and China.
The average Chinese worker earns less than $5k per annum, and that's despite
unusually long work weeks and sustained wage growth over the last couple of
decades. The average US worker isn't a union member but couldn't live on $5k
per annum

~~~
bradleyjg
Cost of living differences are real but almost always overstated. It isn't as
though a family in China can live the same lifestyle as a middle class
American on $5k/year because everything there is so much cheaper. The average
Chinese worker is very poor by US standards, even after taking into account
cost of living differences. In fact, if you swapped a family with a cash
income of $5k/year from China to the US, in many way they'd be better off as
they'd have access to more and better socially provisioned goods and services.

When you make this sort of argument you are implicitly saying "Chinese people
don't mind being poor as much as Americans do" even if that's not what you
meant to say.

~~~
notahacker
I agree cost of living differences are complicated and even low paid Americans
expecting to drive a car to work, for example, plays a big role in pushing
salary expectations up at the bottom end. But I don't think there are many
parts of the US where you can comfortably rent a house and feed a family on
$5k per annum. And I don't think most assembly line workers in export
processing zones in China earn anywhere near that.

