November 25, 2017

MOOTING SMOOTS:

A historian on the myths of American trade : Douglas Irwin agrees that trade policy is important. But all manner of powers are wrongly laid at its door (The Economist, Nov 23rd 2017)

TRADE-policy wonks are gluttons for punishment. In good times, their pet topic is dismissed as dull. In bad, they find trade being faulted for everything. As Donald Trump blames America's economic woes on terrible trade deals, one geek is fighting back. In "Clashing over Commerce", Douglas Irwin of Dartmouth College tells the history of American trade policy, showing that trade is neither dull nor deserving of the attacks on it. [...]

Readers may wonder whether 700 pages of debunking--some of them a slog--are worth it. But Mr Irwin does think that trade policies have consequences, just not the ones usually trumpeted. Such policies transfer wealth, sometimes by sizeable amounts. In 1885 an average tariff of 30% reshuffled around 9% of America's GDP from foreign exporters and domestic importers to domestic producers and the government. Trade policies also generate costs. In 1984, economists found that consumers were forking out more than $100,000 in the form of higher prices for each job protected in the clothing industry, where the average wage was around $12,000 per year.

The other reason to persist with Mr Irwin's tome is for protection against the foes of trade who have populated America's history and are in their pomp again. In 1824, Henry Clay, one of America's great senators, proposed an "American system" of tariffs, a national bank and "internal improvements" like roads and canals to strengthen the economy of the young country. He saw tariffs as a no-lose deal: raising money from foreigners, promoting American industry and creating a balanced, self-sufficient economy. The tariffs passed, but Clay failed to deliver on infrastructure, or on a plan for American industry. It is hard to see his rather less illustrious successors pulling off this tempting but difficult trick.

Of all the clashes Mr Irwin describes, the most important today is not between political parties, or between friends and foes of trade. It is between policymakers and the forces such as technology reshaping the global economy, in the process destroying many manufacturing jobs. At most, protectionism could shelter some of those jobs temporarily. But those jobs already lost are unlikely to come back.

Posted by at November 25, 2017 12:46 PM

  

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