NYT On the War Path for Bush-Clinton-Bush Trade Agenda

The NYT really really likes trade deals like NAFTA, CAFTA, and the deal with Colombia currently being pushed by President Bush. This is the only thing that readers can conclude based on a largely incoherent editorial devoted to trade.

Among the comments that could leave readers wondering is the dismissal of an estimate that trade with poor countries increased the gap between college and non-college educated workers by 7 percent in the last quarter century, because "but the wage gap has widened by more than six times that amount over that period." Assuming half on each side, this estimate implies that trade with poor countries lowered compensation for a typical full-time non-college educated workers by more than $1,400 a year (3.5 percent of $40,000). Does the NYT have a policy that would give every non-college educated worker another $1,400 per year? If so, I'm sure that many readers would be anxious to see it. (It is also important to note that the estimate cited from Josh Biven does not include the impact of trade with rich countries, nor secondary effects like the impact of trade on unionization rates.)

The article also trivializes the 400,000 jobs a year lost to trade over the last decade by pointing out that the economy loses 15 million jobs a year. Okay, the 400,000 jobs lost is a NET number. This is the total jobs lost to trade after netting out the total number of jobs created due to increased exports. The 15 million job loss figure is a GROSS number. The NYT editorial writers must know the difference between the two and they must know that the comparison is completely bogus. If they want a net number to which to compare the jobs lost to trade, the NYT can use total job creation. This has averaged just under 1.3 million annually. In other words, the jobs lost to trade are equal to more than 30 percent of job creation over the last decade. Does that seem trivial?

To really top matters off, the NYT tells us that: "According to economists at the Peterson Institute for International Economics, increased trade since World War II has added about 10 percent to American national income." It is not clear what this estimate has to do with the issues at hand. No one is advocating that the United States not trade. The vast majority of the gains in this estimate are attributable to patterns of trade that have nothing to do with NAFTA, CAFTA, and other recent trade deals, so why does the NYT drag it into this debate.

The NYT seems to support these trade agreements much more as a matter of religion rather than based on any serious assessment of their economic impact. It is true that many people have exaggerated the impact of these deals; the over-valued dollar has probably done more to depress the wages of non-college educated workers than 100 NAFTAs. But the basic story, that the pattern of trade promoted by recent presidents has had a negative impact on the living standards of large segments of the U.S. population, is undoubtedly true. The only real question is the size of the impact.

This doesn't mean that simply reversing these trade deals is the best route to pursue, although a continued decline in the value of the dollar would be extremely helpful. I have argued that the best path going forward is to remove the barriers that protect highly educated workers like doctors, lawyers, and journalists from international competition. This would lead to both more economic growth and greater equality in the distribution of income.

Unfortunately, the NYT refuses even to discuss free trade in highly paid professional services. Like the last three administrations, the NYT supports selective protectionism, not free trade. Basically, the current trade agenda is about favoring the people who hire nannies (and construction workers, painters, gardeners etc.) against the people who work at those jobs. We could easily construct trade agreements, even "free trade" agreements, that favored less educated workers. But the folks calling the shots, including the NYT editors, want to preserve their protection.

--Dean Baker