Trade in the balance: Globalisation can make everyone better off. That does not mean it will”

The Economist; February 6, 2016

The past two decades have left working-class vot­ers in many coun­tries leery of glob­al­i­sa­tion. Donald Trump, the bil­lion­aire tele­vi­sion star who promises to slap a 45% tar­iff on Chinese goods if elected pres­i­dent of America, has partly based his can­di­dacy on this angst. Economists tend to scoff at such brash pro­tec­tion­ism; they argue, rightly, that trade does far more good than harm. Yet new research reveals that for many, the short-term costs and ben­e­fits are more finely bal­anced than text­books assume.

 

David Autor of MIT, David Dorn of the University of Zurich and Gordon Hanson of the University of California, San Diego, pro­vide con­vinc­ing evi­dence that work­ers in the rich world suf­fered much more from the rise of China than econ­o­mists thought was pos­si­ble. In their most recent paper, pub­lished in January, they write that sud­den expo­sure to for­eign com­pe­ti­tion can depress wages and employ­ment for at least a decade.