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News :: Miscellaneous |
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Expanding Trade has Reduced Income for Most Americans |
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by Center for Economic and Policy Research
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12 Oct 2001
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CEPR Study Shows That Negative Redistribution Effects Have Outweighed Gains from Trade for Most People
Rep. Tim Johnson's co-sponsorship of Fast Track trade policies will mean even more econoimc losses for most of his constituents, but will likely lead to even bigger campaign contributions from his corporate sponsors. Whose side is he on? |
WASHINGTON - October 11 - The majority of Americans have actually lost income as a result of expanding trade over the last 20 years, as documented in a new paper by the Center for Economic and Policy Research entitled "Will New Trade Gains Make Us Rich? An Assessment of the Prospective Gains from New Trade Agreements."
These findings are sure to be noted in the current debate over fast track, or Trade Promotion Authority, which the Bush Administration is seeking for its negotiation of the Free Trade Area of the Americas (FTAA). Trade Promotion Authority would allow the Administration to negotiate this and other commercial agreements, subject only to an up-or-down vote by Congress.
The paper, by CEPR economists and co-directors Dean Baker and Mark Weisbrot, shows that for about three-quarters of the American labor force, the losses due to redistribution of income outweigh even the most inflated estimates of the gains from trade. This is true even ignoring the job losses suffered by workers who are displaced due to increasing trade (as most standard economic models do).
"This covers the whole range of estimates by economists," said Dean Baker. "Even if one believes that the gains from expanding trade are quite large, and trade's effect on inequality relatively small, most Americans have still lost out."
"Before Congress debates Trade Promotion Authority, it should at least have some estimate of how much expanded trade will cost the typical employee, and what the government is going to do to compensate the majority of Americans."
The CEPR study compares the income gains from expanded trade over the past two decades, with the losses—attributable to trade—for the approximately three-fourths of the labor force that does not have a college degree. Among the findings:
* Using a low estimate of the impact of trade on wage inequality from Princeton economics professor Paul Krugman, three-fourths of the labor force has seen a net reduction in hourly wages, attributable to expanded trade, between 1.6 percent and 2.4 percent.
* Using a higher estimate of the impact of trade on wage inequality by William Cline of the Institute for International Economics, the net reduction in hourly wages for these workers is between 9.4 percent and 10.1 percent.
* If Cline's estimate is adjusted to take account of indirect ways in which trade may lower wages—such as weakening unions' bargaining power—trade may have reduced the hourly wages of three-fourths of the labor force by between 12.2 percent and 12.6 percent.
Copies of the CEPR study are available at www.cepr.net. For more information, including interviews with the authors, contact Mark Weisbrot at (202) 746-7264 or at weisbrot (at) cepr.net |
See also:
www.cepr.net
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