I structured my talk around an unduly harsh WaPo editorial that showed up just a day or two before the discussion. A few annotations for clarity’s sake:
Slide 1: A lot of what follows is from the new State of Working America (SWA) published by the Economic Policy Institute. I haven’t read the whole thing yet, but the wages chapter, on which my first few slides are based, is an exceptional piece of work, a collection of all of the important arguments and evidence around wage issues, including trade, technology, inequality, and a lot more.
The slide points out the various channels through which we’d expect expanded trade, particularly with less-developed countries, to put downward pressure on the wages of production workers and upward pressure on the college wage premium, as shown in the second slide.
The rest is pretty self-explanatory, or you can watch the video from the first link above if you want to hear me clarify any of the points. The key arguments against the WaPo editorial are:
–Trade has benefits and costs, and our national trade debate is not helped by arguments that deny the reality of the cost side of the equation.
–Imbalanced trade in general and with China in particular (our goods trade deficit with China has grown from 0.8% in 2000 to 2% in 2011) has led to the loss of wages and manufacturing jobs.
–Currency management by countries to boost their exports and suppress their imports is leading to large imbalances and distortions in global markets. Economist Joe Gagnon argues that such tactics are responsible for a large part of the output gap here and thus significant job losses (see slide #7).
–Yet, the WaPo—and many in the multinational business community—argue that to go after the currency manipulators is to engage in “protectionism.” The opposite is true. To pushback against currency management is to pursue freer trade.
–In this regard, I support the bipartisan currency bill stuck in Congress along with other measures you see in slide #12 (“no reciprocity” means that country that tightly control their own capital, like China, won’t get to by currency from countries without such controls, like us).