Scott Lincicome devotes the latest National Review cover story to looking beyond the campaign rhetoric on trade issues.
Imports have inarguably affected U.S. manufacturing companies and workers — no serious free-trader argues otherwise. But criticism of trade and its impact on American workers has acquired a sharper edge in the Age of Trump, bolstered in part by a recent study from labor economists David Autor, David Dorn, and Gordon Hanson that found that the recent surge in Chinese imports to the United States has inflicted pronounced harms on the wages and labor-force participation of U.S. workers in local markets (e.g., mill towns) that face direct competition with those imports. Trump fans and longtime trade skeptics on both the left and the right have seized on this study as the final “proof” that free trade — in particular, trade with China — has been a disaster for the United States and its workers, and that a heavy dose of protectionism, through Trump’s tariffs or export subsidies, could produce a manufacturing renaissance in America.
Reality, however, begs to differ.
First, even assuming Autor et al. are entirely correct about the harms of Chinese imports — a conclusion about which George Mason University economist Scott Sumner has raised legitimate questions — there remains no evidence that imports are the primary driver of U.S. manufacturing-job losses, or that the U.S. manufacturing sector is actually in decline. In fact, American manufacturers began slowly and steadily shedding workers as a share of the U.S. work force in the late 1940s and in sheer numerical terms in 1979 — long before the North American Free Trade Agreement existed or Chinese imports were more than a rounding error in U.S. GDP. By contrast, the United States has gained about 54 million jobs since 1980, 30-plus million of which came after the creation of NAFTA and the World Trade Organization in the mid 1990s.
Meanwhile, it is a myth that the United States “doesn’t make anything anymore” or that trade agreements have caused a “giant sucking sound” as investment and jobs go elsewhere. Our manufacturers continue to set production and export records, and the United States is the world’s second-largest manufacturer (17.2 percent of total global output) and third-largest exporter. America also remains the world’s top destination for foreign direct investment ($384 billion in 2015 alone) — more than double second-place Hong Kong and almost triple third-place China. Much of this investment went to U.S. manufacturing assets, as shiny new BMW, Toyota, and other foreign-owned plants across the American South attest.
