Paul Krugman has not had much to say about trade (that I've seen) in his op-ed columns, but today he writes:
For the world economy as a whole — and especially for poorer nations — growing trade between high-wage and low-wage countries is a very good thing. Above all, it offers backward economies their best hope of moving up the income ladder.
But for American workers the story is much less positive. In fact, it’s hard to avoid the conclusion that growing U.S. trade with third world countries reduces the real wages of many and perhaps most workers in this country. And that reality makes the politics of trade very difficult.
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So am I arguing for protectionism? No. Those who think that globalization is always and everywhere a bad thing are wrong. On the contrary, keeping world markets relatively open is crucial to the hopes of billions of people.
But I am arguing for an end to the finger-wagging, the accusation either of not understanding economics or of kowtowing to special interests that tends to be the editorial response to politicians who express skepticism about the benefits of free-trade agreements.
It’s often claimed that limits on trade benefit only a small number of Americans, while hurting the vast majority. That’s still true of things like the import quota on sugar. But when it comes to manufactured goods, it’s at least arguable that the reverse is true. The highly educated workers who clearly benefit from growing trade with third-world economies are a minority, greatly outnumbered by those who probably lose.
As I said, I’m not a protectionist. For the sake of the world as a whole, I hope that we respond to the trouble with trade not by shutting trade down, but by doing things like strengthening the social safety net. But those who are worried about trade have a point, and deserve some respect.
To some extent, it doesn't seem like he's saying anything new here, but rather just stating the obvious. It is clear that imports do not help everyone, as they hurt those in import-competing industries. The argument for free trade is not that everyone benefits, but rather that the benefits to consumers outweigh the harms to these workers.
But perhaps he does go further when he says: "when it comes to manufactured goods ... [t]he highly educated workers who clearly benefit from growing trade with third-world economies are a minority, greatly outnumbered by those who probably lose." This strikes me as misleading. Everyone benefits from low-priced imports, not just "highly educated workers." In fact, this group probably benefits the least. Rich people don't notice lower prices very much because this is such a small percentage of their income, whereas poor people find lower prices much more beneficial, allowing them to buy things they might not otherwise have been able to. Elsewhere in the article he criticizes lower prices at Wal-Mart as insufficient compensation, but it seems to me he is underestimating these benefits.
Also, his distinction between the sugar quota and manufactured goods strikes me as odd. It's not as though "manufactured goods" are subject to a uniform tariff. Rather, there are hundreds of tariff lines, each with a different tariff. If the sugar quota is bad, why is a high tariff on a particular manufactured good any less bad?
It's hard to delve fully into this issue without some detailed statistics, but I thought I'd offer some general thoughts anyway.
Oh, and one more thing. Keeping out imports from poor countries can't be very good for those countries!
ADDED: When Paul Krugman talks, people listen. Some reactions from the blogosphere: Dani Rodrik, Greg Mankiw, Angry Bear, Don Boudreaux, the Economist's Free Exchange blog, Tyler Cowen.
