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Free-trade pact would help the US, not harm it

January 17, 2014 - 3:27pm

America’s increasingly skewed income distribution is finally getting the attention it deserves. The bad news is that some people might use the issue to justify otherwise unjustifiable policy agendas. Case in point: Opponents of a free-trade agreement among the United States and 11 Pacific Rim nations are claiming that it will destroy U.S. jobs, thus exacerbating income inequality in this country, just as previous deals, such as the North American Free Trade Agreement, allegedly did.

This is an old argument and, admittedly, plausible in theory: All else being equal, firms move where labor is cheapest. In practice, it is hard to isolate the degree to which the post-1979 surge of inequality is due to expanded trade with lower-wage nations such as China and Mexico rather than to, say, technology or education. Timothy Noah’s review of economic literature, reported in his recent book on inequality, “The Great Divergence,” produced an estimate of 12 to 13 percent.