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Friday, April 22, 2016

Paul Krugman: “Protectionism Reduces World Income, But…”

But We Need to Stop Talking about It?

Buried in a recent Paul Krugman blog post is this statement:

Protectionism reduces world income.

This is correct, and is pretty much all you need to know about protectionism. Which approach to eliminating protectionism – unilateral, trade agreement, etc. – works best can be debated, but there should be no question we should get rid of it due to its impact on incomes.

Yet somehow for Krugman there is still a question. In the rest of the column, and various other recent ones, he comes up with contrived justifications for why we should not bother with protectionism. For example, he says:

If you want to make the case that trade liberalization has been the principal driver of growth, or anything along those lines, well, the models don’t say that.

Is trade liberalization the “principal driver of growth”? I don’t know if it is the “principal driver of growth.” But I do know that it “reduces world income.” Isn’t that enough?

And a while back, he said this:

In fact, the elite case for ever-freer trade, the one that the public hears, is largely a scam. That’s true even if you exclude the most egregious nonsense, like Mitt Romney’s claim that protectionism causes recessions.

Look, I don’t know if every tiny bit of protectionism anywhere will cause a recession (and Romney’s statements were much more nuanced than what Krugman implies). But regardless, if we agree that protectionism “reduces world income,” isn’t that enough?

As for jobs, he said:

What the models of international trade used by real experts say is that, in general, agreements that lead to more trade neither create nor destroy jobs.

I think that’s pretty much right: Trade is not about the total number of jobs, but rather about incomes. As for incomes, recall that protectionism “reduces world income”!

Obviously, Krugman has policy priorities other than trade right now, and he’s trying to push people away from the trade issue. Which is a shame, because it could be helpful to have someone like him on board to counteract the uninformed rhetoric of many leading politicians, who seem to believe, based on emotions rather than evidence, that they can use protectionism to “make America great again” or something.

  • Simon Lester is a trade policy analyst with Cato’s Herbert A. Stiefel Center for Trade Policy Studies.