The timetable for votes on trade agreements set by the trade promotion authority legislation may be going out the window in a political tussle over the Colombia-US trade deal, as Congress isn’t really obliged to follow its own rules, Ben Muse reports.

Dave Weigel comes dangerously close to saying things we know are untrue in this Reason story:

The main selling point of Hillary Clinton’s campaign, ratcheted up after Barack Obama started scaring her up a ladder, had been her “35 years of experience,” along with a certain nostalgia for the 1990s, which both Hillary and Bill smugly described on the campaign trail as having been “pretty good.” The linchpin of that claim was the economic boom of the Bill years. Yet last fall Hillary began to soft-pedal or sweep under the carpet the very policies that made the boom possible…

It’s not a mystery how NAFTA is working, actually. America’s GDP and industrial production have grown about 50 percent since the trade pact took effect. Total U.S. unemployment was 6.9 percent in 1993, before NAFTA went into effect; today it’s 4.9 percent. Hillary Clinton once considered this an accomplishment.

The correct way to write that paragraph would have been:

But it’s hard to believe the doom and gloom. America’s GDP and industrial production have grown about 50 percent since the trade pact took effect. Total U.S. unemployment was 6.9 percent in 1993, before NAFTA went into effect; today it’s 4.9 percent. How much damage could NAFTA have done?

But Weigel didn’t write the paragraph to deny the claims of NAFTA opponents; he wrote it in a way that implies a causal relationship between NAFTA and overall US economic performance. Are we meant to believe that NAFTA is one of the policies that made the productivity boom possible? That an agreement that barely lowered trade barriers and was phased in over 15 years reduced unemployment by two percent?

THESE CLAIMS ARE NOT TRUE AND NO RESPECTABLE ECONOMIST HAS DEFENDED THEM. Paul Krugman has been debunking them since 1993: “NAFTA will have virtually no effect on the U.S. economy, good or bad.” Repeat after me: Trade affects the composition, not the number, of jobs. In theory, this is because trade economists very frequently assume perfectly competitive factor markets. In practice, this is because the Fed controls employment via monetary policy.

NAFTA opponents aren’t pretending that the agreement affects total employment, but Reason has printed three articles in the last seven months (Weigel in September, Steve Chapman in December) that imply that NAFTA had significant macroeconomic effects. Why is the magazine running stories about international trade that will mislead readers who don’t follow the issue?

In the World Economy, Simon Evenett provides some advice on surviving the trade policy jungle:

The rules of the trade policy arena differ from those in academia. How can an economic researcher survive, let alone thrive, in what may appear to be a trade policy jungle? The purpose of this paper is not just to offer guidance in this respect but also to think through the factors that determine the supply and demand for timely, relevant, policy-relevant insights into commercial policy matters. Understanding the latter provides much of the rationale for the former. Advice follows analysis, as it should do. Economic researchers have certain advantages that they can make immediate use of in the jungle and some baggage that they would do well to shed.

The article is a practical guide for academics.

Trade and Wages, Reconsidered

Paul Krugman
February 2008
This is a very preliminary draft for the spring meeting of the Brookings Panel on Economic Activity. Comments welcome.

The NYT‘s David Leonhardt writes that NAFTA has little to do with Ohio’s economic troubles. Dean Baker charges (as usual) that protectionism favoring low-skilled American workers is reviled while protectionism benefiting highly skilled workers is given a free pass, as US firms can’t hire Mexican professionals happy to work for lower wages than US skilled workers. The Economist objects, noting that “much of the world does not share Mr Baker’s opinion that immigration policy must be mentioned any time the subject of trade comes up.”

Perhaps, but that doesn’t address the pressing need for greater liberalisation of trade in services, which would increase the competition facing highly skilled workers. For an example, look at radiology: Hospitals rarely outsource reading x-rays to India because the Indians are required to have medical degrees from US universities.

Can a country outside the eurozone unilaterally adopt the euro as its currency? Iceland is considering precisely that.

In the LSE’s James Meade Memorial Lecture from June 2007, Paul Krugman discusses three trade topics on which he has been “chastened.” [90 min, 21 MB mp3]

The first topic is trade and growth. This is a masterful discussion, in which Krugman explores the relationship between economic theory, evidence, and economists’ gut instincts. It is a worthy successor to Anne O. Krueger’s 1997 AEA presidential address. In the same fashion that she tried to explain why import substitution industrialisation was approved by economists in the 1950s and ’60s, Krugman tackles the beliefs of economists who were overenthusiastic in translating economic theory about the gains from trade into supposedly “rigorous” support for claims that trade openness could boost easily boost growth by a few percentage points.

The second topic is trade and income inequality. Much of this is covered in Krugman’s Vox column that ran the day after the lecture. There are a few more details, such as Krugman’s insightful rebuttal to the fact that Stolper-Samuelson effects no longer bite once there is complete specialization. (The fragmentation of production processes enlarges the spectrum of tradables, extending that limit.)

The third topic (income inequality in developing countries) is not very interesting, partly because Krugman only comments briefly on the subject and partly because I think that growth matters more than equality in countries that are desperately poor.

Krugman thinks we really face a problem of political economy with regard to trade and inequality, rather than a purely economic one. Interesting, he is skeptical of labour standards and fair trade, as they don’t address the underlying economic forces (comparative advantage) that are driving the big trends.

A few of the questions from some of the heavyweights in the LSE audience aren’t bad either.

If you don’t have much time to spare, I recommend at least the first twenty minutes of the lecture.

In the LSE’s James Meade Memorial Lecture from June 2007, Paul Krugman discusses three trade topics on which he has been “chastened.” [90 min, 21 MB mp3]

The first topic is trade and growth. This is a masterful discussion, in which Krugman explores the relationship between economic theory, evidence, and economists’ gut instincts. It is a worthy successor to Anne O. Krueger’s 1997 AEA presidential address. In the same fashion that she tried to explain why import substitution industrialisation was approved by economists in the 1950s and ’60s, Krugman tackles the beliefs of economists who were overenthusiastic in translating economic theory about the gains from trade into supposedly “rigorous” support for claims that trade openness could boost easily boost growth by a few percentage points.

The second topic is trade and income inequality. Much of this is covered in Krugman’s Vox column that ran the day after the lecture. There are a few more details, such as Krugman’s insightful rebuttal to the fact that Stolper-Samuelson effects no longer bite once there is complete specialization. (The fragmentation of production processes enlarges the spectrum of tradables, extending that limit.)

The third topic (income inequality in developing countries) is not very interesting, partly because Krugman only comments briefly on the subject and partly because I think that growth matters more than equality in countries that are desperately poor.

Krugman thinks we really face a problem of political economy with regard to trade and inequality, rather than a purely economic one. Interesting, he is skeptical of labour standards and fair trade, as they don’t address the underlying economic forces (comparative advantage) that are driving the big trends.

A few of the questions from some of the heavyweights in the LSE audience aren’t bad either.

If you don’t have much time to spare, I recommend at least the first twenty minutes of the lecture.

In the LSE’s James Meade Memorial Lecture from June 2007, Paul Krugman discusses three trade topics on which he has been “chastened.” [90 min, 21 MB mp3]

The first topic is trade and growth. This is a masterful discussion, in which Krugman explores the relationship between economic theory, evidence, and economists’ gut instincts. It is a worthy successor to Anne O. Krueger’s 1997 AEA presidential address. In the same fashion that she tried to explain why import substitution industrialisation was approved by economists in the 1950s and ’60s, Krugman tackles the beliefs of economists who were overenthusiastic in translating economic theory about the gains from trade into supposedly “rigorous” support for claims that trade openness could boost easily boost growth by a few percentage points.

The second topic is trade and income inequality. Much of this is covered in Krugman’s Vox column that ran the day after the lecture. There are a few more details, such as Krugman’s insightful rebuttal to the fact that Stolper-Samuelson effects no longer bite once there is complete specialization. (The fragmentation of production processes enlarges the spectrum of tradables, extending that limit.)

The third topic (income inequality in developing countries) is not very interesting, partly because Krugman only comments briefly on the subject and partly because I think that growth matters more than equality in countries that are desperately poor.

Krugman thinks we really face a problem of political economy with regard to trade and inequality, rather than a purely economic one. Interesting, he is skeptical of labour standards and fair trade, as they don’t address the underlying economic forces (comparative advantage) that are driving the big trends.

A few of the questions from some of the heavyweights in the LSE audience aren’t bad either.

If you don’t have much time to spare, I recommend at least the first twenty minutes of the lecture.

Remember those NAFTA trucking provisions that were never implemented (and thus make fears of a North American Union or NAFTA Superhighway particularly ridiculous)? Ben Muse reports that the US Department of Transportation has moved to implement them during the last three months, despite the efforts of Congress to stymie the project.

Along related lines, recall that NAFTA’s sugar provisions might finally be implemented this year.