This election season in the US there has been an extraordinary and disturbing trend at work: vilifying free trade as a "job killer". The main front runners in both political parties in this Primary season are all apparently questioning free trade as a way to garner more votes.
So although in January 2015 Ted Cruz said "I am a full-throated advocate of free trade. Free trade benefits America, produces jobs,
On the democratic side, Hillary Clinton also opposes the Trans Pacific Partnership (TPP), But probably the most vehement anti free trader in the Primaries has been Bernie Sanders. He has gone on record saying that "Let’s be clear: the TPP is much more than a “free trade” agreement. It is part of a global race to the bottom to boost the profits of large corporations and Wall Street by outsourcing jobs; undercutting worker rights; dismantling labor, environmental, health, food safety and financial laws; and allowing corporations to challenge our laws in international tribunals rather than our own court system".
So what is going on here? Why is one of the biggest trends of the last 3 decades now being questioned and vilified by our leading politicians? Well, there is plenty of analysis in the press (see here in the FT and here in the New York Times, for example), but we need to ask 4 basic questions here:
i) why is free (or freer) trade regarded as a good thing by economists?
ii) why is there now so much opposition to free trade among politicians?
iii) what would happen if we implement some of the suggestions coming from both ends of the political spectrum?
iv) what lessons can we as economists learn from this?
So first, why is free trade regarded as a good thing by economists?. As I explain in my Principles classes, the Ricardian theory of trade says if you have a comparative (relative) advantage in doing something, you should specialize and focus on doing exactly that thing. The unfortunate part of free trade is that if you don't have a comparative advantage in a specific good or service, then the theory says you should let someone else do it and import the good or service. The obvious implication is that people will lose their jobs. And that means that as barriers to free trade have come down over the past 60 years that we will lose jobs in certain industries. But that is not the end of the story - trade theory goes on to point out that in any country the gainers from trade could compensate those with losses from free trade, and we would still be better off. It is this second part that doesn't get taught in the textbooks or emphasized enough.
But what does this mean exactly? It means that from a macro perspective, the gains coming from the industries that can take advantage of comparative and expand to dominate international markets will make more income for the country than the loss in income from declining industries which will eventually be eliminated. Of course, that is the idea behind some of the government "adjustment programs" which usually accompany free trade deals: the government provides money to help workers transition out of an industry where the country does not have a comparative advantage into an industry where the country does have a comparative advantage. This extra transition spending should be temporary, as the dynamic adjustment to a new free trade deal causes workers to move from one industry to another. That is the theory at least.
So now we can answer the second question: why is there now so much opposition to free trade among politicians? One of the UK's leading politicians of the 1980s, Norman Tebbit coined an unfortunate phrase relating to the sectorally unemployed: "on yer bike". What he meant was simply if there isn't any work where you currently live, move to where there is work. The problem with this as relates to the economic theory is that workers often do not like to move - and particularly in a country as big as the US. The loss of social networks established over years, the uprooting of children from schools that they like, often the loss of property values as major parts of certain states see everyone trying to sell at once if the town or city is not industrially diversified, and the different cultural norms in different parts of the country, are all good reasons why we observe inertia in labor mobility. And much of this loss of jobs has come because by and large the US does not have a comparative advantage in manufacturing - that sector has been in long term decline, as it has in many developed countries.