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Economic Perspectives, 29, 2nd, No. 2, May 2005
Globalization and job loss, from manufacturing to services
The impact of free trade, and more generally globalization, is a ready source of public debate, and the reach of that debate is broadening. When the impact of increasing foreign competition was felt mainly by the manufacturing sector (call this “stage one” of the free trade/globalization debate), the view of many, if not most, economists was strikingly uniform: Trade generates large net benefits to national economies. The gains accrue to consumers from lower prices and to the overall economy in efficiency, leading to higher aggregate welfare. Within the economics profession, there is similar, if less visible, agreement that liberalized trade reduces incomes to some producers and workers. With (large) net benefits, a common professional view of the question of “free trade” is a distributional one—that the distribution of the benefits from free trade, across industries, occupations, regions, and ultimately individuals, is uneven.
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