[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

Wrap-Up
INTERNATIONAL TRADE AND JOBS
Restricting imports as a way of creating jobs tends to be counterproductive.
It is the responsibility of macroeconomic policy, not trade policy, to maintain the
economy at full employment.
WAGES IN AFFECTED SECTORS
Beyond these short-run problems of transition and unemployment, long-run problems
may face workers in affected sectors. The United States has a comparative
advantage in producing goods such as airplanes and high-tech products that require
highly skilled workers. As the United States exports more of these goods, its demand
for these workers increases, driving up their wages. Similarly, the United States has
a comparative disadvantage in producing goods that require much unskilled labor,
such as lower-quality textiles. As imports compete against these U.S. industries and
their production decreases, the demand for unskilled labor decreases. As a result,
the wages of the unskilled workers are driven down.
This loss in income for unskilled workers is often blamed on imports from third
world countries like China, where wages are but a fraction of those in the United
States. The consensus among economists who have looked closely at the matter is
that international trade explains a relatively small part of the decline in wages—
perhaps 20 percent. Nonetheless, those who see their livelihood being threatened
are among the most ardent advocates of trade restrictions. Again, economists
argue that the appropriate response is not to restrict trade but to increase skills.
The workers gaining the skills are better off, as their wages rise commensurately
with the increase in their productivity. In addition, as more workers become skilled,
the supply of workers still unskilled is reduced; and the smaller supply of unskilled
workers leads to a rise in their real wages, offsetting the adverse effects of trade.
Wrap-Up
EFFECTS OF TRADE ON WAGES
International trade may lower wages of unskilled U.S. labor and those working in
industries where competition is limited.
International trade raises wages of skilled U.S. workers.
INCREASED COMPETITION
International trade also has other adverse effects in industries in which competition
is limited. Limited competition enables firms to enjoy monopoly or oligopoly profits.
442 ∂ CHAPTER 19 INTERNATIONAL TRADE AND TRADE POLICY