The Paper on Free Trade That Will Get Disappeared

So this would seem relevant to millions of Americans, yet for some reason I don’t think you’ll hear much about it (boldface mine):

But a new working paper from the Fed’s Justin Pierce and Yale’s Peter Schott argues that the 2000 granting of permanent normal trade relations (PNTR) to China was the rare high-profile trade deal that really mattered. PNTR did not actually involve much in the way of new tariff reductions, but what it did offer was certainty. It suggested that previously eliminated tariffs on Chinese goods weren’t coming back anytime soon.

That reassurance, Pierce and Schott argue, mattered a great deal. All told, they argue that employment in the manufacturing sector in the United States was 29.6 percent lower than it otherwise would have been absent PNTR. That means that employment in that sector would have grown — by close to 10 percent, Pierce and Schott estimate — as opposed to shrinking considerably, as it actually did. It presumably would have grown even more in the absent of other, non-PNTR liberalizations, such as China’s admission to the World Trade Organization. The effect was four times as strong for production-line workers as for non-production workers, which is in line with the usual finding that the losers from trade tend to be low-skilled workers in rich countries.

In other contexts, pro-business advocates (that is, corporate shills) argue they need a constant regulatory environment to be able to plan. It appears that when you know that tariffs are going to be held constant, it’s much easier to figure out how to ship jobs overseas. Just saying.

Noah Smith asks “Why do people think economists are charlatans?” One factor is that many people have personally experienced losing a good job because the ‘suits’ decided they could make more money abroad. Mind you, the company could have been profitable–the workers are doing their part. Nonetheless, at what is basically a whim, these productive employees lose their jobs. It’s not only an economic cost to workers, but is also psychologically damaging due to the loss of agency. Right or wrong, people will ascribe motivation to the free trade position, since, from their perspective, it seems to justify greed and avarice at the expense of honest work.

Of course, the hoi polloi could be right.

Regardless, it’s safe to say that we won’t be hearing about this study on the weekend pundit round-ups.

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