Those hated Chinese imports? They help reduce inequality
The Kansas City Star
Both candidates in the recent election engaged in a “tougher than thou” contest over China, an exercise that has become the norm in presidential politics. Politicians do this because the effect of imports on American jobs is far more visible than the beneficial effects of imports on living standards generally.
All too often, we end up penalizing the many to protect the few. Classic example: The temporary steel tariffs erected by the Bush administration. They curried favor with steel producers and workers in swing states, but raised prices — and undermined — steel-using industries, which employ many more people.
As usual, the benefits were concentrated and visible, while the costs were widely diffused.
At NRO, Patrick Brennan cites a 2008 study by two University of Chicago scholars to remind us that a major effect of imports is to hold down prices for consumers. And if you’re talking Chinese imports, that’s especially helpful for low-income families because they rely on inexpensive Chinese consumer products to a greater extent than other income groups.
This price break has helped alleviate the inequality that’s dominated much of the political debate in the last few years.
Brennan: “[I]ncreased imports from China, it turned out, reduced the implied increase in inequality by one-third between 1994 and 2005.” How? Prices for the non-durable consumer goods favored by low-income families fell relative to prices for the more expensive consumer brands favored by the rich.
That’s something to keep in mind in the ongoing trade debate. Crimping off Chinese imports would doubtless help workers in particular industries. But it would be a real economic hit for low-income families.