Saturday, November 18, 2006

Free Trade and Distributional Politics

The Blue Crab directs us to a by-the-numbers Opinion Journal article that claims that protectionist policies are incoherent when advanced by champions of the blue collar. The Crab sums it up for us:
I have seen a number of left wing bloggers touting the protectionist agenda as a good thing. But like the isolationist tendencies they have, these are bad ideas. But exactly like the anti-Wal-Mart jihad, it is doing the bidding of the unions at the expense of the poor.
I'm a full stop supporter of free trade (that's one thing Clinton Dems and economic conservatives can agree on: we're all liberals in the classical sense).

That said, the gains from free trade are not unambiguously good: the gains are spread broadly, and the losses are concentrated within sectors in which we no longer have a comparative advantage vis-a-vis our domestic markets. So it's no surprise that states with sectors that are getting rocked by globalization (the carolinas w/ textiles; the rust belt w/ manufacturing) are retreating to protectionism in the absence of policies that can take those broad gains and distribute them in such a way that even people in those regions hit the hardest by trade can support trade. (there was a small flurry of posting on this topic in the liberal blogosphere about a month ago, but I can't seem to find the links).

It's isn't surprising, and it isn't irrational: the point of regional support of protectionism is to reduce the small-but-broad gains made in states that win on free trade in order to prevent the localized-but-deep losses in those states that lose on free trade. That's perfectly rational - in fact, it may very be the definition of rationality (in the economic sense).

Curiously, for an editorial board of a paper centered economics, the Opinion Journal suggests that unions started opposing free trade in the '60s because of their political support for democrats, rather than the obvious economic reason that the '60s were the last time America enjoyed comparitive advantage in industries that unions represented.