Thoughts on the complexity of trade

 This is Joseph.

Matt Yglesias talks about the free speech implications of the U.S.-Chinese economic integration:

That being said, it seems really clear at this point that the original premise of U.S.-Chinese economic integration got one important point backward. Rather than trade and development allowing for some spread of American liberal norms into China, it is doing the reverse, and western multinationals’ commercial interests in China are inducing them to impose Chinese speech norms on the West. And we ought to try to do something about it

I think that this is an inevitable part of trade and integration -- if you create this type of tight connection then you end up dealing with the good and bad of your trading partner. 

But the part that I also think we need to consider is how the gains from this trade arrangement have been distributed in the United States. It is definitely true that both sides are better off after a trade deal. But the distribution of gains may vary. Not only did we create legitimacy for a totalitarian regime, but we shifted resources to groups like silicon valley (the same groups Matt Yglesias is worried are vulnerable to trade pressure) by allowing for inexpensive manufacturing. If we had taxed and invested these gains in the rust belt, then we'd probably have fewer billionaires and more social cohesion.

The short version of this thoughtlet is that trade is complicated and very simple mental models of how complicated transactions will work out (Read more...)