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1/8
Those of us concerned about the cost to the US economy of unbalanced trade have to distinguish between imports driven by differences in manufacturing productivity and imports driven by lower labor costs (relative to differences in productivity). https://www.freep.com/story/money/cars/general-motors/2021/04/29/gm-invest-billion-build-ev-mexico-uaw-angry/7403340002/
Those of us concerned about the cost to the US economy of unbalanced trade have to distinguish between imports driven by differences in manufacturing productivity and imports driven by lower labor costs (relative to differences in productivity). https://www.freep.com/story/money/cars/general-motors/2021/04/29/gm-invest-billion-build-ev-mexico-uaw-angry/7403340002/
2/8
Because Mexican wages are in line with Mexican productivity, when GM offshores production to Mexico, the money Mexicans earn by exporting to the US is recycled through wages into an equivalent amount of imports, and these come either directly or indirectly from the US.
Because Mexican wages are in line with Mexican productivity, when GM offshores production to Mexico, the money Mexicans earn by exporting to the US is recycled through wages into an equivalent amount of imports, and these come either directly or indirectly from the US.
3/8
In that case higher US imports from Mexico are matched by higher US exports (either to Mexico or to some other country) and the net result is a shift in US manufacturing from less productive industries to more productive industries.
In that case higher US imports from Mexico are matched by higher US exports (either to Mexico or to some other country) and the net result is a shift in US manufacturing from less productive industries to more productive industries.
4/8
There is no net loss of jobs for American workers, just better jobs. This is how trade is supposed to raise global welfare: by allowing higher levels of specialization and by shifting demand from less efficient to more efficient producers.
There is no net loss of jobs for American workers, just better jobs. This is how trade is supposed to raise global welfare: by allowing higher levels of specialization and by shifting demand from less efficient to more efficient producers.
5/8
Offshoring is a problem, however, when American businesses offshore production to countries – like Germany, China, Japan, Sought Korea, etc. – whose “comparative advantage” is that their workers are paid less relative to their productivity than American workers.
Offshoring is a problem, however, when American businesses offshore production to countries – like Germany, China, Japan, Sought Korea, etc. – whose “comparative advantage” is that their workers are paid less relative to their productivity than American workers.
6/8
In that case global production isn’t made more efficient. It shifts to countries where workers get less of what they produce and business owners more. This, as @M_C_Klein and I explain in our book, worsens income inequality and reduces global growth.
https://yalebooks.yale.edu/book/9780300244175/trade-wars-are-class-wars
In that case global production isn’t made more efficient. It shifts to countries where workers get less of what they produce and business owners more. This, as @M_C_Klein and I explain in our book, worsens income inequality and reduces global growth.
https://yalebooks.yale.edu/book/9780300244175/trade-wars-are-class-wars
7/8
It's important that we don’t approach things like offshoring, imports, trade, etc. as good or bad in and of themselves. Under certain conditions they can be good for growth, and under other conditions bad for growth. Offshoring certain kinds of manufacturing to countries...
It's important that we don’t approach things like offshoring, imports, trade, etc. as good or bad in and of themselves. Under certain conditions they can be good for growth, and under other conditions bad for growth. Offshoring certain kinds of manufacturing to countries...
8/8
like Mexico (or Canada) is usually good for the US. It allows manufacturers in the US, Mexico and Canada to take advantage of the benefits of a larger North American market. The key is that none of the three countries compete by directly or indirectly lowering their wages.
like Mexico (or Canada) is usually good for the US. It allows manufacturers in the US, Mexico and Canada to take advantage of the benefits of a larger North American market. The key is that none of the three countries compete by directly or indirectly lowering their wages.
