Economists Have No Idea What Replaces Free Trade

One of the most interesting sessions I attended at last week’s American Economic Association meeting was a panel titled “Making global markets work for American workers.” The discussion, featuring economists Dani Rodrik, Kimberly Clausing and Josh Bivens, laid out the problems with free trade, the shortcomings of U.S. trade policy during the past few decades and some suggestions for improvement. But although the economists did a great job of critiquing the old free-trade consensus, there was no clear idea of what to replace it with.

Economists still tend to strongly back trade liberalization. But the cozy consensus in favor of removing trade barriers is eroding. The experience of the China shock, in which a sudden wave of import competition devastated the lives of many American manufacturing workers, was a wake-up call. The bipartisan backlash against trade agreements, which threatened to leave economists in the political wilderness, was another. Economists such as Rodrik and Bivens, who have criticized the free-trade consensus for a long time, are getting heard more, while free-trade defenders such as Clausing are forging more nuanced arguments.