Kimberly Clausing
114 μ¢¤³£ ¬μμ¬
That said, it is easy to overstate the stakes here. Even ideal trade
agreements would do little to address economic inequality and wage
stagnation, because trade agreements themselves have little to do
with those problems. Compared with other factors—the growth o
trade in general, technological change, the decline o unionization,
and so on—the details o trade agreements are nearly inconsequen-
tial. In fact, in the late 1990s, just after the adoption o £¬μ¡¬, the
United States saw some o the strongest wage growth in four de-
cades. As studies by researchers at the Congressional Research Ser-
vice and the Peterson Institute for International Economics have
shown, any disruption to the labor market caused by £¬μ¡¬ was
dwarfed by other considerations, especially technological change.
And even when trade has cost jobs, as with the China shock, the
eect did not depend on the particulars o any trade deal. There was
and is no U.S. trade agreement with China, just the “most favored
nation” status the country was granted when it joined the World
Trade Organization in 2001—a status that it would have been hard
to deny China, given the country’s massive and growing economy.
What really mattered was the mere fact o China’s emergence as an
economic powerhouse.
Critics o trade are also dead wrong when they argue that U.S.
agreements have expanded the trade deÄcit. In fact, it’s the result o
borrowing. As economists have long understood, trade deÄcits
emerge whenever a country spends more than it earns, and trade
surpluses arise whenever a country earns more than it spends. Trade
deÄcits and surpluses are simply the Áip side o international bor-
rowing and lending. Some countries, such as the United States, are
borrowers. They consume more o others’ goods than they send
abroad, and they pay the dierence in ¢s (which take the form o
foreign investment in U.S. stocks, bonds, and real estate). Other
countries, such as Germany, are lenders. They loan money abroad,
accruing foreign assets, but receive less in imports than they send in
exports. Which country is getting the better end o the deal? It is hard
to say. U.S. households enjoy consuming more now, but they will even-
tually have to repay the debt; German households get returns on their
investments abroad, but they forgo consumption in the present.
What this means is that i policymakers wish to reduce the U.S.
trade deÄcit—and for now, it is not alarmingly large—they should
reduce borrowing, which they can accomplish by shrinking the budget