May 22, 2016
The NYT had a piece assessing which of Donald Trump’s promises he would be able to keep if he got in the White House. When discussing trade the piece implied that most workers would be hurt by his efforts to reduce the trade deficit since it would mean higher prices for a wide range of imports. This is faulty logic.
To see the point, suppose that our “free trade” deals had been focused on subjecting doctors, dentists, lawyers, and other highly paid professionals to international competition instead of manufacturing workers. (Yes, there are tens of millions of smart people in the developing world who would be happy to train to U.S. standards and work in the United States for half of the pay of U.S. professionals. We just don’t allow this inflow of foreign professionals because our trade policy is designed by protectionists.) In this case, we would be paying much less for health care and other services provided by these professionals. (The savings from paying doctors European wages would be around $100 billion a year or around 0.6 percent of GDP.)
Suppose our trade deals had gone the route of free trade in professional services. Then Donald Trump promised to restrict the number of foreign doctors who could enter the country. The NYT would say that U.S. doctors would be hurt by this restriction since they would be paying more for health care.
Of course they would pay more for health care, just like everyone else. However their increase in pay would almost certainly dwarf the higher cost of health care.
The same would almost certainly be the case for manufacturing workers and likely a large segment of non-manufacturing workers whose wages have been depressed by competition by displaced manufacturing workers. The NYT is misrepresenting the story by implying that these workers would be losers in this scenario simply because they would have to pay more for imported goods.
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