As trade has become a more and more integral part of the global economy, accepted economic wisdom has asserted again and again that overall, free trade is a good thing. Because trade brings so much in the way of competitive pricing and opportunities to buy and sell goods on a more massive scale, the drawbacks that come with it—job losses and declining wages for instance—are often thought to be outweighed.
Further, there’s a belief that some of these downsides aren’t even the direct consequences of trade. Proponents of free trade argue that the decline of American manufacturing jobs isn’t the result of increased trade, but of a larger shift in the nation’s economy toward higher-skilled jobs. They also point out that the growth of wage inequality hasn’t corresponded perfectly with the expansion of global trade. At any rate, whatever their cause, the drawbacks of trade are regarded as not so severe that they can’t be overcome; it’s assumed that workers who find themselves in a region whose jobs are vulnerable to foreign competition could simply move and find a job somewhere else.
But a new paper from the National Bureau of Economic Research suggests that workers’ ability to relocate may be overstated, and that the negative impacts of large trade deals may be more significant than previously thought. To illustrate just how persistent the ill effects of trade could be, the authors, M.I.T.’s David H. Autor, UCSD’s Gordon H. Hanson, and the University of Zurich’s David Dorn of the University of Zurich, examine what happened to workers in certain parts of the U.S. after China’s massive trade expansion.