International trade is complicated.
Some ideas worth understanding include:
* How both trade partners benefit due to comparative advantage.
* How having cheap imports is great for consumers. Why international trade is a form of technology, and provides the same benefits as efficiency-promoting technological advances.
* How imports and exports are strongly correlated, so that the jobs lost due to imports are roughly offset by jobs gained due to exports. If you restrict imports, the effect is to also reduce exports, so the net effect isn't as awesome for employment as you might expect.
* But "roughly offset" does not mean "exactly offset." There are trade imbalances. When we spend dollars buying Chinese goods, not all of those dollars are then spent by Chinese people buying American goods. Some of those dollars are spent by Chinese people buying American government bonds and stuff. (Investment in American capital assets can stimulate the economy and create jobs too, but the association is weaker than with buying American goods and services -- so there's a real sense in which trade deficits can put downward pressure on employment.)
* Trade imbalances are generally self-correcting, and to some extent are therefore not worth worrying about. If we import more from China than we export to them, dollars will be devalued on currency exchanges, which will make Chinese products less attractive to us (and American products more attractive to them).
* But "generally" doesn't mean "always." The Chinese may have manipulated their currency to avoid this natural exchange-rate response. (I've seen claims along those lines, but don't know whether they're true.) It is possible for sustained trade imbalances to exist, putting sustained downward pressure on American jobs.
* Keynesian stimulus spending may be a good antidote to that last point. And given all the benefits of international trade, it seems that free trade plus stimulus spending (when needed) is largely preferable to trade barriers of any sort.
* Of course, care must be taken to distinguish between actual free trade, on the one hand, and agreements touting "free trade" that have more to do with strengthening intellectual property protection (or other objectives) than with removing trade barriers, on the other. The TPP may be an example of the latter. (Again, I've seen claims along those lines, but don't know whether they're true.)
Taking this as a starting point, let's see if we can collectively arrive at a sensible comprehensive trade policy within a couple dozen pages.
Some ideas worth understanding include:
* How both trade partners benefit due to comparative advantage.
* How having cheap imports is great for consumers. Why international trade is a form of technology, and provides the same benefits as efficiency-promoting technological advances.
* How imports and exports are strongly correlated, so that the jobs lost due to imports are roughly offset by jobs gained due to exports. If you restrict imports, the effect is to also reduce exports, so the net effect isn't as awesome for employment as you might expect.
* But "roughly offset" does not mean "exactly offset." There are trade imbalances. When we spend dollars buying Chinese goods, not all of those dollars are then spent by Chinese people buying American goods. Some of those dollars are spent by Chinese people buying American government bonds and stuff. (Investment in American capital assets can stimulate the economy and create jobs too, but the association is weaker than with buying American goods and services -- so there's a real sense in which trade deficits can put downward pressure on employment.)
* Trade imbalances are generally self-correcting, and to some extent are therefore not worth worrying about. If we import more from China than we export to them, dollars will be devalued on currency exchanges, which will make Chinese products less attractive to us (and American products more attractive to them).
* But "generally" doesn't mean "always." The Chinese may have manipulated their currency to avoid this natural exchange-rate response. (I've seen claims along those lines, but don't know whether they're true.) It is possible for sustained trade imbalances to exist, putting sustained downward pressure on American jobs.
* Keynesian stimulus spending may be a good antidote to that last point. And given all the benefits of international trade, it seems that free trade plus stimulus spending (when needed) is largely preferable to trade barriers of any sort.
* Of course, care must be taken to distinguish between actual free trade, on the one hand, and agreements touting "free trade" that have more to do with strengthening intellectual property protection (or other objectives) than with removing trade barriers, on the other. The TPP may be an example of the latter. (Again, I've seen claims along those lines, but don't know whether they're true.)
Taking this as a starting point, let's see if we can collectively arrive at a sensible comprehensive trade policy within a couple dozen pages.
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