Free Trade under Fire, Fourth edition

Book Preface

In his 2014 State of the Union address, President Barack Obama asked Congress to give his administration special authority to conclude agreements that would reduce trade barriers with the European Union and Pacific Rim countries. The next day Senate Majority leader Harry Reid, a Democrat from Nevada, announced his opposition to this request. “I think everyone would be well advised just not to push this right now,” he stated. A few days later, Nancy Pelosi, the Democratic minority leader in the House of Representatives, agreed, saying that the president’s request was “out of the question.”

In his 2015 State of the Union address, President Obama repeated his plea. “Look, I’m the first one to admit that past trade deals haven’t always lived up to the hype,” he said, “but 95 percent of the world’s customers live outside our borders, and we can’t close ourselves off from those opportunities.” Once again, Democrats in Congress demurred. Rep. Peter DeFazio (D- OR) said he couldn’t support “another job- killing, job- exporting free trade agreement identical to the ones pushed by [former Presidents Bill] Clinton and [George W.] Bush.” “These trade deals make it much easier for corporations to send American jobs overseas,” complained Rep. Rosa DeLauro (D- CT). Why have top Democrats in Congress been so dismissive of a request coming from a Democratic president?

This episode was a simple reminder that trade policy always and inevitably generates controversy. Simply put, free trade is always under fire. These congressional leaders were simply warning, correctly, that new efforts to expand world trade would generate significant opposition in the House and Senate. That has always been the case, but the nature of the controversy and the arguments about trade have nevertheless changed over time.

This book aims to introduce the reader to some basic economic principles and empirical evidence regarding international trade and trade policy so that we can better understand this controversy. The first edition of this book was published in 2002, shortly after huge anti- globalization protests rocked Seattle during the 1999 World Trade Organization (WTO) meeting there. Protesters demonstrated against the WTO and its potential impact on national sovereignty and environmental regulations, but the anti- globalization movement all but disappeared after the terrorist attacks of September 11, 2001. Then, in the mid- 2000s, the American public began to fear the offshoring of service- sector jobs to India and the loss of manufacturing jobs to China. Just as these fears were peaking, the global financial crisis of 2008 struck and the volume of world trade plummeted 12 percent in 2009. Economists and policymakers worried that the Great Recession could lead to a protectionist response like that seen during the Great Depression of the 1930s, but were surprised when trade policies remained relatively open. As world trade recovered, the issue of income inequality came to the forefront of public discussions. Consequently, the concern that trade with low- wage developing countries (such as China) has eroded the American middle class once again received attention.

This fourth edition of Free Trade under Fire has been updated to deal with a host of new developments, ranging from protectionism and the Great Recession to the latest evidence on trade, wages, and jobs. As noted in the first edition, this book draws upon the vast amount of economic research on international trade policy that lends insight into these issues. As before, I wish to acknowledge all of the scholars who have made contributions to this field in recent years. In addition to those mentioned in previous editions, I would particularly like to thank Chad Bown, Nina Pavcnik, and Robert Johnson for providing valuable advice on this edition. I am also indebted to Maha Malik, Andres Isaza, and Konrad von Moltke, my trustworthy Dartmouth research assistants, who helped with the preparation of this new edition. Thanks also go to Peter Dougherty and Seth Ditchik at Princeton University Press for their continued support of this ongoing project.