Free Trade Boogyman

I don't have much patience with the anti-free trade crowd. At worst it says "I'm rich and I don't want to have to share it via open borders with the poor". But most on the left dress it up as a question of sweatshop labour and a fair playing field. I'm all for that, but not if it is used as a club to beat back the third world from economic access to markets in the first world. What I'm in favour of is a fast track to getting everybody a decent life through good wages. I think that is best done by opening borders. I enjoy Dean Baker's "Beat the Press" blog because he points out that most of the upper middle and upper class are all for "free trade" but only for manufactured goods. They are not for allowing in doctors and lawyers and other professionals freely to compete in the first world. Well, I'm all for free trade in everything and open border for everything. I think we get to a better world best by this, the direct route, which is a kind of democracy of the feet and ballots via the pocketbook. Here's an article by James Surowiecki in The New Yorker that points to surprising aspects of free trade:

It’s an understandable view: how, after all, can it be a good thing for American workers to have to compete with people who get paid seventy cents an hour? As it happens, the negative effect of trade on American wages isn’t that easy to document. The economist Paul Krugman, for instance, believes that the effect is significant, though in a recent academic paper he concluded that it was impossible to quantify. But it’s safe to say that the main burden of trade-related job losses and wage declines has fallen on middle- and lower-income Americans. So standing up to China seems like a logical way to help ordinary Americans do better. But there’s a problem with this approach: the very people who suffer most from free trade are often, paradoxically, among its biggest beneficiaries.

The reason for this is simple: free trade with poorer countries has a huge positive impact on the buying power of middle- and lower-income consumers—a much bigger impact than it does on the buying power of wealthier consumers. The less you make, the bigger the percentage of your spending that goes to manufactured goods—clothes, shoes, and the like—whose prices are often directly affected by free trade. The wealthier you are, the more you tend to spend on services—education, leisure, and so on—that are less subject to competition from abroad. In a recent paper on the effect of trade with China, the University of Chicago economists Christian Broda and John Romalis estimate that poor Americans devote around forty per cent more of their spending to “non-durable goods” than rich Americans do. That means that lower-income Americans get a much bigger benefit from the lower prices that trade with China has brought.