The Brief: Law School News and Events

Economist Debunks Link Between Free Trade and Lost Jobs

Renowned Columbia University economist Jagdish Bhagwati has heard all the arguments against free trade and he doesn’t buy them.

During the Holt Lecture last October, Bhagwati said there is no evidence that trade undermines wages and destroys jobs. He said stagnant wages over the last 25 years and the availability of cheap labor in India and China stoke economic fears.

He said the real culprits are competition from rich countries and technology which eliminates manufacturing jobs, both of which create a sense of job volatility that leads to protectionism.

Bhagwati’s interest in the issue was piqued when he attended a World Trade Organization meeting in 1999. He found that young activists were concerned about such issues as child labor and equal pay, which had “nothing to do with whether trade was good or bad” in terms of aggregate national income. The experience led him to write the book “In Defense of Globalization,” which concludes that trade is actually “good for social agendas.”

Bhagwati found, for example, that when the Indian government lifted export controls on rice, peasants increased their earnings, and used the additional income to move children from the fields to schools.

A registered Democrat, he disapproves of his party’s attempts to undermine trade. He accused Democrats of trying to improve working conditions in other countries not out of concern for workers, but to raise production costs and make countries less competitive with America.

The financial crisis, he said, has renewed anti-free trade rhetoric, with critics advocating throwing out “the trade baby with the financial bathwater.”

Nonetheless, he said he expects the Obama administration to continue free trade policies.

Although Barack Obama understands that “free trade is a good thing,” he supports fair trade because he has to “throw some bones at his constituency” and contend with pro-fair trade Democrats in Congress.

Bhagwati said he is optimistic about Obama’s ability to listen and “work against his party skepticism towards trade.”