Using Common Sense When Talking About Trade

An article I read recently titled: Let common sense, not fear, dictate trade policy, talked about how people tend to let fear cloud their views on trade. The author, Deb Keller, talks about how people have been fed bad information about trade. She starts the article by listing three truths about trade: isolationist policies (autarky) never end well, agriculture has benefited from trade, and foreign governments don't always follow the rules. She then goes on to explain why the agriculture has benefited from free trade in the past, and why it would benefit from TPP (Trans Pacific Partnership).

According to Keller, incomes in America are 9% higher because of trade and that eliminating trade barriers would increase incomes by 50%. We have seen this in class, as free trade benefits the participating countries and increases wages in the winning sectors. While some industries lose, the gains outweigh the losses. With agriculture becoming a capital intensive industry recently, it benefits from being in a capital-abundant country. Free trade increases the return to capital and the return to land for farmers in the agriculture sector.

While reading the article, The politics and economics of offshore outsourcing, N. Gregory Mankiw and Philip Swagel talk about offshoring outsourcing and the effect on the United States. They gathered data, from about 1990 to about 2004, regarding the Bureau of Economic Analysis and comparing employment and income to United States and foreign corporations. 

In class, we learned that there are different industries that use offshore outsourcing and that both countries can gain, as a result, of this. Technology can also play a part in offshoring outsourcing because of the example used in last class and given that technology is ever changing. 

Following a Proven Model

           As talked about in class many times, we all know that Apple outsources the production of their phones and does not do it in house. Blackberry is soon to follow suit, also focusing on software as Apple has been doing. This can provide many benefits to the company that can lead to increased sales and a cut in production prices, but it also comes with a risk.
            In an article I read on Phys.org Outsource, the author explains how and why Blackberry has decided to outsource the production of its phones. "BlackBerry, which a decade ago was among the world's largest smartphone makers, has seen its global market share slip to less than one percent as Apple and Android devices have dominated." (Phys.org) I get the feeling that Blackberry is taking a good hard look at their business model and trying to pick apart the pieces that are leading them to their immanent failure. One of their moves is to bring outsourcing into the equation by enlisting Indonesia to complete that task.
          Blackberry doubled their software revenue in the last year which leads me to believe that that is why they want to make software the main focus of the company. Although, the risk associated with outsourcing the production can include a greater number of defects in the product or less skilled workers completing the good, they still feel that it is a necessary risk to take. This will be in the form of a contract and will surely reduce production costs across the board freeing up more money for factors such as research and development.
         On the other hand, this can have a negative viewpoint from a lot of Americans because they will see it as jobs going overseas. We know from class that this is a very complicated issue and doesn't just consist of a "lose a job here, gain a job overseas" approach. In the end, the company has to do what they believe is relevant in order to survive in a competitive market in which they are bringing up the rear. If the company goes out of business a lot more jobs would be lost including to those in the production plants.

Free Trade vs. Free Movement

When the British public voted to leave the European Union in June of this year, the principle debate waging amongst the Brits, was between the movement of people and free trade. Whilst Britain enjoys the benefits of the free trade with the larger economies on the continent - the likes of Germany and France - many in the UK begrudge the open border policy in Europe which allows large immigration from the smaller economies of Eastern Europe.
It is this issue which has dominated the exit negotiations as the Conservative government seeks to strike a compromise whereby they are allowed access to the single market, or at least the large economies within it, without accepting the open border policy which has seen British services pushed to breaking point. An article in todays Wall Street Journal talks about the negotiations in greater detail: http://www.wsj.com/articles/theresa-may-wants-continued-british-trade-with-eu-post-brexit-1477054148

My argument here is that the movement of people to the UK is probably not a price worth paying for the British economy. The Heckscher-Ohlin model essentially says that countries will export products that use their abundant and cheap factor(s) of production and import products that use the countries' scarce factor(s). An increase in the size of the labour force in Britain due to immigration will make labour a more abundant factor and thus drive down demand and price. Britain currently has one of the highest minimum wages in Europe and the lowest unemployment, they have a service based economy which is the 5th largest in the world. As labour becomes more abundant, the economy will begin to export labour intensive products which may be a step backwards for the British economy.

Capital Abundant Vs Labor Abundant

In class we have been looking at the Heckschler Ohlin Model. Part of this model is looking at countries that are either capital intensive or labor intensive. The article I found China VS The US economy the writer looks at the difference in the two economies of the two countries. The article talks about how China has a more labor intensive economy. although both countries have similar unemployment rates China's labor force is much larger than USA's due to size of China's population. It would therefore be safe to assume that China has the stronger economy. However the article then discusses how the USA is way ahead with its income over the Chinese and how quality of life is better for the individual in the US. USA are a more capital intensive economy and because of this its productively is high and its labor force is more specialized. Due to the huge population in China, the workers incomes there are very low due to the high supply. The US workers get a much higher income and this seems to link to an increase the productivity of its workers. Because of the income differences between the two countries the US labor force are much more willing to work than the Chinese and this can be seen in the increase in unemployment that China has seen in the last few years.  
    However the article talks about how China's economy is growing faster than the USA's and if the US are not careful China will soon be ahead. With China's labor force size, once they invest more into capital they could have a higher utilization of capital which will increase the countries productivity massively. At the moment it seems like being capital abundant is better for a countries productivity, yet if a country such as China was willing to put its huge number of workers to use on new capital and better technology it could easily dominate in productivity and trade.

Belgian's Influence on EU-Canada Trade Deal

I read an article on the BBC about why the Belgian province may sink the EU-Canada trade deal. Belgium’s government stats that it is likely to block the deal due to fears that “it could lead to a flood of cheap imports.” This relationship has a lot of influence on the United States because the failure of this legislation, CETA, could throw a spanner on ongoing negotiations for the US and Japan and can place some doubt on the post-Brexit Britain can negotiate a favorable and speedy deal with Europe. This deal puts heavy pressure on Canada as they are UK’s largest trading partner and puts them in an “unexpected quandary” says Christopher Sand of the Canadian Studies at John Hopkins University.

                I found this article very interesting because each week we have been able to build upon the idea of free trade benefits both countries. I find this article very interesting because in class we are not able to show ramifications of other counties negotiating trade deals or even say Brexit happening. However, it still baffles me when the article they state cheaper imports and make it sound like a bad thing. Belgian is afraid that by opening their country to Canada and allowing cheaper imports would harm and take away their manufacturing jobs. 

The American Trade Debate

In the article, Free Trade Vs. Balanced Trade by Raymond Richman, Howard Richman, and Jesse Richman, there is a debate between Hilary Clinton and Donald Trump regarding trade. The authors state that Hilary Clinton wants to support the expansion of free trade, whereas, Donald Trump wants to renegotiate trade agreements to balance trade. Our growth rate has been declining since around 1970 and has yet to bounce back, along with our trade balance. Both are seen on the graph, in the article, and Our trade balance is on a slow rise. Things that effect these include, the subtraction from demand for American products, loss of manufacturing jobs, less investment in new factories, less technological development, loss of economics of scale, and slow recoveries.

The article then goes into talking about mercantilism and how the American economic profession is ignoring trade deficits. The article ends by saying how Trump, and his chief economic advisor, want to put together a plan to balanced trade. On the other side of the argument, Hilary Clinton wants to keep trade free and Raymond, Howard, and Jesse think that the growth rate will continue to decline. Based on what we have learned in class, do you agree with their statements? Does Trump know what he is doing after all?, Does Hilary? What type of trade do you think we should be in, balanced trade or free trade? 

The Fallacies Behind Trade

The ordinary person may believe that trade is hurting our economy especially in regards to trades with China. This is a false statement that is said too many times in a day not to be addressed. Anyone who watches the presidential debates can clearly hear the candidates knocking the trade policies that we have with foreign countries insisting that we are getting swindled by these countries and it needs to stop. This couldn't be any further from the truth.
In an article I read called "Trade is Win-Win" click to find the truth it breaks down how these candidates and politicians alike are spreading lies in order to garner votes from the unknowing voter. In 1776 two very important things happened. The lesser known of these two is a publication by Adam Smith called "The Wealth of Nations" and the theories in this publication are still being used by economists today. The most dominant statement from this is that trade enhances the wealth of trading nations. How can this be? Does this mean that the candidates are lying directly to every citizen watching the debates?
It's almost simple logic if it's broken down. There has to be an agreement between each nation to trade. Why would a nation agree to trade its good if it's going to worsen the nations terms of trade? To me, it's cut and dry that if trades are occurring, both nations are benefiting from said trade.
The biggest issue arriving from the trade argument is that of American jobs. I can understand how one would assume that if we are importing a product from China that can be made in America it is putting a hard-working American citizen out of work. There are many factors that tend to lead to the diminishing manufacturing jobs in America. The least talked about one is the advances in technology. If a machine can produce what a human can, wouldn't the company rather have the machine do it? This way the company isn't paying a wage and benefits, but only a price to buy the machine and its upkeep. I'm all for generating more jobs in America, but the solution that the candidates have proposed is insane and almost surely to fail if implemented.

Donald Trump's planned return to Mercantilism

Watching Monday night's presidential debate whilst studying for the first International Economics exam of the semester, meant that Donald Trump's brash claims about the economy and particularly the need to address the trade imbalance which he calls "the greatest theft in the history of the world" seemed even more absurd than usual. Trump has talked throughout the campaign about the fact that "Foreigners are killing us on trade" because the rest of the world spends far less on American exports than the American public spends on foreign imports. In short, he believes that economic success and gains from trade are made when a nation sells more to it's competitors than it consumers of theirs. Mercantilism as trade policy has been outdated since Adam Smith's Wealth of Nations and goes against the last 200 years of western economic orthodoxy. In fact, Trump is the first Republican nominee in a century to call for higher tariffs as a defence against low-cost imports.
According to I.M Destler of the University of Maryland, the last time a Republican rose to prominence on such a trade policy was Herbert Hoover. Everything that we have learned so far in this class supports the idea that such policy was rightfully left behind. Mercantilists fail to understand the concept of comparative advantage and the Ricardian model. Despite the fact that such a trade policy has been debunked by Adam Smith, David Hume, John Locke, David Ricardo and countless other economic thinkers over the past two centuries seems to be lost on Trump and those who support him. If Trump wins the election in November and succeeds in implementing the trade policy he has proposed, it could definitely be a step backwards for the US economy.

Voters Fail to See the Benefits of Trade

I recently read an article titled, “WhyVoters Don’t Buy It When Economists Say Global Trade Is Good” by N. Gregory Mankiw, an economics professor at Harvard. The article starts by referencing a poll conducted by CBS News and the New York Times where only 35% of registered voters think that the US has gained from international trade. The thinking of the voters in this poll is in direct contradiction with what we have learned in class. We have learned that countries that move out of autarky and open themselves to trade end up gaining overall. Through trade, countries are able to produce more product and improve the overall welfare of their country by moving up to higher indifference curves. The same poll also showed that 55% of voters think that the US actually lost as a result of trade. From what we have learned so far in class, this is not true.

                The article also provides two hypotheses as to why those voters felt that way. The first hypothesis was that voters feel like they have not gained from trade because not everyone gains from trade. In class we learned that workers in certain industries lose from trade, but overall the gains outweigh the losses. The hypothesis is that the voters who lose from trade are going to oppose it.

                 The second hypothesis from Edward Mansfield and Diana Muntz dismisses the first one and then concludes that people oppose trade for three reasons. The three reasons they found was isolationism, meaning the US should stay out of foreign affairs, nationalism, thinking the US is “culturally superior to other nations”, and ethnocentrism, thinking that their own ethnic group is better than others. In the end, Mansfield and Muntz conclude that people base their feeling toward trade on their psychological worldview rather than their knowledge of economics.

                While it is hard to determine individual preferences, there is no denying that opening up to trade is better than autarky. Through comparative advantage, countries end up gaining from trade and improving the welfare of its citizens. Despite what voters may feel toward global trade, it is important that our politicians understand the benefits of international trade for the country and do not let the general public try to persuade them otherwise.

The Effects of Globalization on the World

                Through this week of class we have been able to see and understand the clear advantages of free trade in comparison with autarky. In the article Put Globalization to Work for Democracies, Dani Rodrik analyzes 5 principles of globalization that has affected democracies all over the world. Rodrik points out that differences in laws between countries can cause and adverse effect among nations who favor of a less democratic nation as their regulatory laws may not be as stringent as other nations. In class we have used labor as our factor of production to show comparative advantage, however other less developed countries have less regulations in term of not just labor but environmental impacts. Rodrik continues to point out China was able to push exports by placing barriers on imports which allowed them to protect their employment in state enterprises.

                While this strategy may work well for Chinese employees we learned through comparative advantage this may not be the most optimal way on a global scale, because other countries may be able to produce products at a most cost effective level. Additionally, Rodrik points out that the goal of globalization should be to enhance democracies around the world. Stating that more global governance on countries such as increased requirements on transparency, public deliberation, broad representation and accountability will help lead to devising norms that overcome these obstacles. While globalization has helped people all over the world, it is time to refocus it goals by aiming to not just work for democracies but improve them.                                   

Productivity Between The US and France

In class this week we have looked at the Ricardian Model. Part of this model looks at how the productivity of two countries compare with certain products. At the end of the last class we looked at the graph that compared countries productivity to the US. This graph showed us how the different labor forced compared. In the article Which Country Has the Most Productive Workers, I found that the US are third in productivity out of all the different countries labor forces. However the US workers are second to Korea for the longest hours worked. France were ahead of the US with their GDP to hours worked, and this is surprising because of the vacation time the French workers take. The article talks about how more vacation times lead to a happier workforce and how that improves the Frances productivity, also the diminishing returns for the US of working 40 hour weeks. However looking at the Ricardian model we found that not only do the French take more vacation time, but they will get higher wages due to the fact their productivity is higher, which is seen as a producer problem for the Ricardian Model, because he believed that wages needed to be the same in all sectors otherwise nobody would work in the lower paying sector. however in real life not everyone can more to France and Germany for the higher wages.
     Also because of the difference in productivity, it could be said the the French have an absolute advantage to most products compared to the US. However what we discussed in class is that the US will have certain products where they have the comparative advantage over France and this is why we have trade between these two countries. If we didn't look at the comparative advantage, we would assume the the French just wouldn't trade with the US.

Links for September 19-September23

Here are some links generally related to the class in some way. I'll try to link some articles each week. Read ones that you find interesting and leave the rest.

Dani Rodrik: Should we roll back globalization? A response (not rebuttal) by Chris Blattman.
Tyler Cowen: Internal globalization? This summary of academic work claims that internal globalizers globalized more externally over time.
WSJ on Trumponomics: Very bad things will happen. Don't get me started.
The effects of cheap oil: More consumption spending, less investment (especially in oil-related sectors)
A history of globalization.

China Threatens Britain with International Trade

Thursday, September 15, 2016

In the article Collateral damage, Britain has stated that it will leave the EU and some of Britain's counties are being effected by world trade. One specifically is Blackburn and they are getting a lot of imports from China, as seen on the map in the article. Britain is also facing a collapse in manufacturing employment, as a result of imported goods. I will be focusing on pareto optimal, export-biased growth and import-biased growth from last week's discussion. 

Is it possible for Britain to become pareto optimal? In the article, it states that Blackburn has had a decline in employment of about one-third. It also stats that the gambling rings and pawn shops are more dominant than restaurants and bars. Blackburn was also for leaving the EU, among other Chinese heavy traders, in Britain. After looking at these facts, I believe Britain can become pareto optimal. First, I believe Britain can try to generate more restaurants and bars in Blackburn’s center to get its employment back up. In order to accomplish this, they will need to follow through training employees and they need to make Blackburn a more attractive place to live and work. In this pareto optimal, Britain will become better off with its own economy. China will be getting hurt from this because they will not be trading as much with Britain colonies as it once was.

Is it possible for Britain to have an export-biased growth? As of now, Britain has been import-bias heavy because of China. Three colonies have already been become import-bias, two of which are near the water. Is it possible for Britain to become export-bias, or, will Britain become even more import-biased with even greater trade from China? I think Britain will become more export-biased because of their hurt economy, the immigrants that they keep accumulating, and their lack of trained workers despite all their “rapid response service.”

The Current Oil Market

         
          During class this past week we have discussed many topics that can be related to an article in the "Wall Street Journal" New Reality for Oil. These topics consist of terms of trade: maximizing a countries' welfare: small Vs. large countries and the welfare gains from trade. In the article it is said that it is now easier to stop and start production of oil regulating the risk of oversupply, much like what happened in 2014.
         What happens if their is an oversupply of oil? A variety of things could potentially take place. The first of which being the price for oil falls which would hurt the terms of trade of countries who export the oil such as Saudi Arabia who is the biggest oil exporting country. Is it safe to assume that the preferences concerning oil are monotonic? In terms of it being a commodity that does potentially have an end it would be in the best interest of everyone to have an oversupply on hand. Although, this may hurt the oil companies such as a car dealership who has too many cars on the lot that aren't selling. They don't stop or slow the production of cars, instead they offer discounts on the cars to free up space on the lot.
        If oil companies were to do this would that have an effect on the world price? As stated earlier there was an oversupply of oil in 2014 and by looking at this graph, you can see how that directly related to the world price of crude oil. This directly effects everyone in the oil market especially the likes of Saudi Arabia whom we can consider to be a large country.
        A large country can use its power to influence the terms of trade. In this instance, Saudi Arabia exports nearly sixty percent of the worlds crude oil. A decline in the world price of crude oil such like that that occurred in 2014 can have lead to deterioration in the terms of trade of the country exporting it. This can also contribute to export biased growth if the country exports an abundance of oil than the price of the oil may fall leading to a decline in the terms of trade. This can be directly tied to the marginal utility of that product.
        In the article it stated that economists believe that the oil price will stay steady at $47.02 for the next few months which is a significant cut from 2014 which was around a hundred dollars at that time. Is the oil market stabling out? Will our importing of oil help our terms of trade in the coming months? I suppose we will have to wait and see.

We have talked a lot this week about the gains from trade. A recent summary of new research by Nigai (2016) shows that differences in consumption across different consumers within a country are an important source of differences in public perceptions about the gains from trade. For example, in countries where many consumers may already spend large portions of their budget on food, trade involving large amounts of agriculture exports may have harmful consumption effects on poor households. The article uses a simulation technique (using theory-based predictions calibrated to observed data) to show that the gains from trade may vary greatly across the income distribution of a country, and the errors of assuming a "representative consumer" may vary across countries as well.
The article exposes two problems with common claims about the gains from trade that we have discussed in class. The first is that preferences can be easily aggregated. Even if preferences are not too different for different consumers, differences in income may result in differences in outcomes in terms of households' responses to price changes. This is because households' preferences are not homothetic, i.e. households do not spend a constant proportion of their income on primary goods (like food or energy) as they do on manufactured goods (like electronics or cars) - the poor tend to spend a lot higher proportion on food.
Even more importantly, since different consumers have different incomes, price changes impact them differently. We mentioned this with respect to the gains from trade: Households that spend a lot on the exported good will "lose" in their consumption (even if their income remains constant), where households that spend a lot on the imported good will "win" in consumption. The reverse is true for households involved with production of exports and imports. The worst case scenario, of course would be to consume a high proportion of your income with exported goods, but work in a sector that competes with imports.

In this Econtalk podcast, Russ Roberts interviews David Autor on the impact of trade with China on US workers. The interview discusses Dr. Autor's research showing that there are distributional consequences of trade with China.
It is important to stress that Dr. Autor supports free trade for the reasons we will discuss in the opening weeks of the class: it improves allocation of resources, it improves competition, it improves innovation, and so on.
The basic idea that these gains from trade are based upon is comparative advantage. For example, New England Patriots head coach Bill Belichik majored in economics, but his ability to coach football far exceeds his advantages in analyzing economic issues (and in fact he has applied economics to his coaching philosophy!).
Trade clearly creates winners and losers in the short run. Russ Roberts argues that even though some people lose in the short run, many people (even the losers) would take that trade because trade also leads to competition and innovation and growth that makes everyone better off in the long run (even if some groups might be relatively worse off). Autor Challenges this claim by arguing - and supporting with data - the view that trade has had dramatic long-run consequences. Importantly, he has shown that some groups have not only lost in the long run in relative terms, but also in absolute terms.
A policy implication of this is that when we look at things like trade adjustment assistance it might be the case that it would be unwise to make this assistance "temporary." More permanent wage subsidies may be more necessary to maintain the political feasibility of free trade. Whether taxpayers will foot the bill is an open question.

The Gains from Trade to Britain

The article, "Collateral Damage," from the Economist, reinforces the argument that the gains from trade are large to Britain, overall. A summary of the empirical evidence by Nick Crafts pegs the growth effects of the UK's membership in the EU estimates the growth effects of membership in the range of 8-10 percent. Importantly, these growth effects almost completely ignore the gains to consumers.
The article from the Economist also reinforces the flip side to trade, which is that the gains from trade are very unevenly distributed, and even leads to some regions, sectors, firms, and individuals losing out from trade. Most research supports the claim that employment and wages have suffered for manufacturing workers in the UK. Moreover, there have been impacts to mental health, and the UK has not done well to mitigate the effects of globalization through trade adjustment assistance. 
We will discuss in class how under certain "fairly reasonable" assumptions, free trade will lead to greater aggregate welfare than the alternative of highly restricted trade or autarky. However, the standard trade model we will start with, and even the Ricardian model we will continue with in Chapter 2 of the textbook, may mask the distributional consequences of trade. In Chapter 3 we will see some of the distributional consequences of trade in the short run with the "specific factors" model, and we will see how some of these consequences may persist in the long run with the Heckscher-Ohlin model in Chapter 4.

CAFTA turns 10 (...almost)

This coming June marks the 10^th year since the ratification of CAFTA. Branching off John’s post, I decided to write about the Central American Free Trade Agreement and how it has affected Central America. The countries included in CAFTA are the Dominican Republic, Costa Rica, El Salvador, Guatemala, Nicaragua, and Honduras. CAFTA was first crafted as an expansion of NAFTA. This agreement set out to eliminate most of the tariffs and barriers to investment between the United States and Central America and also to enforce labor regulations within Central America.

Prior to the ratification of CAFTA there were many mixed views on the topic. Some individuals, primarily Bush supporters, liked the agreement because they believed it would help minimize the United States’ trade deficit and create jobs for those in Central America resulting in fewer immigrants moving to the United States. On the other hand, there were also many individuals who strongly disagreed with the agreement. These individuals were worried about a list of things including American jobs lost to cheaper labor in Central America and the increased volume of trade putting a larger burden on the region’s already “critical” environmental status. Ten years later and the effects of CAFTA seem to have caused more harm to the economies of Central America than good. (Here's a link discussing the main issues swirling around CAFTA before it was ratified.)

In the article I have linked in the title, Congresswoman Marcy Kaptur and Research Director for Public Citizen’s Global Trade Watch, Ben Beachy, discuss the effects of CAFTA. Ben starts the discussion by quoting a previous Representative, Tom Davis, who encouraged listeners to pass CAFTA in order to “ebb the growing flow of immigrants from South America and fight the ever-more-violent MS-13 gang.” For the rest of the article Beachy provides arguments as to how CAFTA has not accomplished nearly anything it was created to do for Central America. “Gang and drug-related violence in Central America has reached record highs and the ‘growing flow’ of immigrants from Central America has surged.” Beachy makes it quite clear that the argument of CAFTA being solely responsible for the rise in gang violence and increased immigration to the U.S. cannot be made. However, discussing some of the changes in Honduras, El Salvador, and Guatemala might lead one to believe CAFTA has not really benefited Central America.

After CAFTA was ratified, imports in Honduras, El Salvador, and Guatemala rose 78%. Farmers in these countries didn’t have the technology, land, or subsidies to compete with American companies and, therefore, caused many farmers in Central America to lose their jobs. People in these countries were also promised to find jobs in the textile industry due to CAFTA but since its ratification textile exporting to the United States has dropped 40% causing less creation of jobs than anticipated. This kind of financial distress for families is thought to be one of the primary reasons for higher gang activity in communities. Finally, Central America was promised to experience a boost in economic growth after CAFTA but this has not happened. Average growth rates in Honduras, El Salvador, and Guatemala in the years since CAFTA was ratified have fallen below the overall growth rate in Latin America.

To conclude, CAFTA seems to have hurt countries in Central America more than help them progress globally. When constructing trade policy, the U.S. should try to take a better look at how the agreement will affect those in the partnering countries.

 

Trade, Poverty and Employment

I have read this very interesting working paper about the impacts of trading with China on Argentina's poverty and welfare. It is a bit of a long and difficult read but I learned a lot from it and it had some very interesting information and I would recommend reading it. I will be summing it up a bit and share my thoughts on this paper.

In class we talk about how there are winners and losers in trade but I believe in most cases the overall welfare in both countries went up so I thought this paper would be very interesting. This paper talks about how during the 90's Argentina increase it's trade with China greatly especially in industrial sectors. With this increased competitions there were some negative effects. There were slow lagged declines in industrial employment but the studies in this paper find that trade with China only had small impacts on this.

Based on household surveys and the amount of trade that was being done with China the authors of the paper were able to determine that trade with a low wage country in this case China, would sightly reduce poverty and there also is a slight reduction in inequality in a developing country like Argentina. The authors also go into the importance of looking at tariffs, price changes and trade reforms and how they can greatly influence the results. Unfortunately this paper only goes into trade with a low wage country like china and a developing country like Argentina but does not touch on if non developed countries were to trade with China.

I think this paper does a great job of showing how the country importing from a low wage country will see benefits even though some will lose their jobs like Argentinians working in the industrial sector in this case.