Synopses & Reviews
Synopsis
This volume finds that, in fact, the United States and other developed countries terms of trade in manufacturing have been improving strongly since the mid-1990s and China in particular is not in direct competition with US exports. Conversely, oil imports are a source of declining US terms of trade.
Lawrence argues that while the prices of manufactured imports from developing countries are driving the terms of trade improvements, these price declines are concentrated in computers and electronics--highly skill-intensive sectors. Contrary to assertions that these price declines are causing wage inequality, they are actually a source of wage equality. Finally, the book examines competitiveness. Lawrence finds a one-time, downward shift in the US export function in the recession of 200002. This volume provides an in-depth examination of the underlying components that affect overall levels of US competitiveness and offers fresh insights into how the U.S. can address this issue.
Synopsis
In 1963, US President John F. Kennedy said that "a rising tide lifts all the boats. And a partnership, by definition, serves both parties, without domination or unfair advantage." US international economic policy since World War II has been based on the premise that foreign economic growth is in America's economic, as well as political and security, self-interest. The bursting of the speculative dot.com bubble, slowing US growth, and the global financial crisis and its aftermath, however, have led to radical changes in Americans' perceptions of the benefits of global trade. Many Americans believe that trade with emerging-market economies is the most important reason for US job loss, especially in manufacturing, and is detrimental to American welfare and an important source of wage inequality. Several prominent economists have reinforced these public concerns.
In this study, Lawrence Edwards and Robert Z. Lawrence confront these fears through an extensive survey of the empirical literature and in depth analyses of the evidence. Their conclusions contradict several popular theories about the negative impact of US trade with developing countries. They find considerable evidence that while adjusting to foreign economic growth does present America with challenges, growth in emerging-market economies is in America's economic interest. It is hard, of course, for Americans to become used to a world in which the preponderance of economic activity is located in Asia. But one of America's great strengths is its adaptability. And if it does adapt, the American economy can be buoyed by that rising tide.