The Exaggerated Impact of Trade

Let our journalists help you make sense of the noise: Subscribe to the Mother Jones Daily newsletter and get a recap of news that matters.


I just stumbled on an old paper from the Center for Economic and Policy research arguing that the gains from trade liberalization are often overstated. One major reference, for instance, had indicated that trade liberalization by rich countries would lift 540 million people out of poverty worldwide. But as it turns out, the calculations here were slightly askew. The CEPR researchers find that the gains here are much more marginal: most of the people “lifted out of poverty” would see their incomes rise from just below $2 a day to just above that level.

Now that’s not nothing, and the arguments in favor of trade liberalization are still quite good: the paper’s not saying that it would be harmful for rich countries to reduce their barriers. What it does imply, though, is that this isn’t a goal worth doing anything under the sun to pursue. Many liberal opponents of the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA)—me, for instance—have noted that the benefits from the trade provisions in the bill are often swamped by the harmful effects due to the various intellectual property protections—for instance, the restrictions on generic drugs that would make AIDS medication more costly—and the weakening of labor standards. (Not to mention the fact that the agreement gives serious trade protection to American sugar producers.) Indeed, economists like Richard Freeman have often argued that trade just isn’t all that consequential in the grand scheme of things: certainly not as important as immigration, capital flows, or technology transfers. That applies to CAFTA too.

Now some free-traders acknowledge that those are bad aspects of CAFTA, but think we should just ignore those objections because the upside to reduced tariffs is so high. But if CEPR’s figures are right, the upside to reduced tariffs, while decent, isn’t that high, and piling on concessions to the pharmaceutical and telecommunications industry really do, on average, make the bill a net negative. This applies to the recently-signed US-Australia free trade deal, which had a lot of harmful non-trade provisions, and it’s going to continue to happen so long as people believe that liberalization is such a good deal for poor countries that it should be pursued at all costs.

IT'S NOT THAT WE'RE SCREWED WITHOUT TRUMP:

"It's that we're screwed with or without him if we can't show the public that what we do matters for the long term," writes Mother Jones CEO Monika Bauerlein as she kicks off our drive to raise $350,000 in donations from readers by July 17.

This is a big one for us. It's our first time asking for an outpouring of support since screams of FAKE NEWS and so much of what Trump stood for made everything we do so visceral. Like most newsrooms, we face incredibly hard budget realities, and it's unnerving needing to raise big money when traffic is down.

So, as we ask you to consider supporting our team's journalism, we thought we'd slow down and check in about where Mother Jones is and where we're going after the chaotic last several years. This comparatively slow moment is also an urgent one for Mother Jones: You can read more in "Slow News Is Good News," and if you're able to, please support our team's hard-hitting journalism and help us reach our big $350,000 goal with a donation today.

payment methods

IT'S NOT THAT WE'RE SCREWED WITHOUT TRUMP:

"It's that we're screwed with or without him if we can't show the public that what we do matters for the long term," writes Mother Jones CEO Monika Bauerlein as she kicks off our drive to raise $350,000 in donations from readers by July 17.

This is a big one for us. So, as we ask you to consider supporting our team's journalism, we thought we'd slow down and check in about where Mother Jones is and where we're going after the chaotic last several years. This comparatively slow moment is also an urgent one for Mother Jones: You can read more in "Slow News Is Good News," and if you're able to, please support our team's hard-hitting journalism and help us reach our big $350,000 goal with a donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate