This is a good interview on trade with the always-intelligent @ProfSteveKeen. The problem with global trade isn’t trade itself. It is persistent trade imbalances, and most proponents of free trade simply don’t understand the difference. They believe... https://braveneweurope.com/steve-keen-does-protectionism-kill-growth

...that persistent trade imbalance are the natural consequence of free markets, but that is not only untrue, it is idiotic. Persistent trade imbalances don’t arise from differences in production efficiency but rather mainly from badly-distributed income in the surplus...

...country, whose beggar-thy-neighbor income policies reduce global demand while allowing it to take a larger share of this lower demand.

Consider that the average German produces roughly 70-75% as much GDP as the average American, and 110-115% as much as the average...

...English, and yet is paid less than 60% of what the average American earns and roughly the same as the average English. This is partially mitigated by the fact that income inequality is higher in the US and the UK than in Germany, but it shows that the real source of German...

...competitiveness is not German production efficiency but rather its low wages relative to productivity, and that its highs savings rate is not the result of household thrift but rather of high business profits. The same is true of China, whose workers are roughly 15% as...

...productive as the average American worker, and 20-25% as productive as the average English, but whose income is roughly 10% of the average American and 15-20% of the average English.

If it weren't for this wage difference, the Germans and Chinese could export whatever they...

...were relatively efficient at producing, but their higher consumption would mean that these exports would be matched by importing foreign goods rather than exporting higher savings. Trade would broadly balance.

For many people, the solution is obvious: the US and the UK...

...should either raise productivity or lower wages, but of course “the fact that factories and information can flash around the world; that people can move money around in the blink of an eye”, as Bill Clinton explained in 1993 when he signed the revised NAFTA agreement, means...

...that the only real solution is to lower wages.

But there is another solution. If we stop capital from moving around so easily, it becomes impossible for surplus countries to maintain their competitiveness through lower relative wages, and they will be forced...

...to raise wages to keep domestic demand strong enough to absorb what they produce. In that case countries can continue trading with each other, but now trade will lead not to persistent trade imbalances and downward pressure on wages, but rather to upward pressure on...

...productivity. Businesses, as Keen points out, spend to improve productivity mainly in response to high wages, not low wages.

Matt Klein and I discuss this is our book.

https://yalebooks.yale.edu/book/9780300244175/trade-wars-are-class-wars