Paul Krugman on International Trade

Paul Krugman on widening the labor gap.
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TRANSCRIPT

Topic: Widening the labor gap

Paul Krugman: International trade is one of my core areas.  We know that growing trade with Third World countries probably has some effect in widening the gap between highly skilled and less skilled workers in this country.  When you import . . .  When you export airplanes and import shirts, you’re reducing the demand for less skilled workers and you’re increasing the demand for engineers. . .  But the estimates – my own estimates – of the size of that effect were fairly small, but they’re also about 10 years out of date.  And there’s really been a tremendous shift not only on the increase in the amount of trade, but a reorientation.  We used to think that Japan was the big competitive threat.  Now, of course, it’s China.  And Japan is a country which is high skill, high wage.  It’s really quite similar to us in terms of economic orientation.  China is a huge economy, but still a very poor one with low wages, relatively low skill work force.  At least initial indications are we really need to mark up those effects.  So I’m not...It’s . . .  I just want to say look we . . .  For some reason this whole field of trade and inequality hasn’t kept up with the surge in trade with China and, to a lesser extent, Mexico that’s taken place over the last decade.