Saturday, December 8, 2012

Why Trade Liberalization Is Not The Road To Job Creation

David Ignatius argued that trade liberalization might enable the US to rebalance its budget, and create jobs through growth in exports.  Paul Krugman quashes that argument in this article.  In the first place there are few barriers today in international trade.  There is not much left to do that would expand trade.  Moreover,  we have lots of wasted resources in the US that are not the result of inefficiency at the micro-economic level.  We need a macroeconomic response to high unemployment.  He also reminds us that further trade liberalization will also lead to more imports.  We can't create enough new jobs through export growth, that would compensate for jobs lost through import growth, to bring the economy back to full employment.

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