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Sources · Free trade and workers

This house believes free trade has been good for working people.

Fact bank v1 · 12 cards

  1. FTW-01Mostly true

    “Free trade has helped lift more than a billion people out of extreme poverty.”

    Mostly right. The World Bank says economic growth, helped by better trade, has lifted more than 1 billion people out of poverty since 1990. But trade was one part of a bigger story of fast growth, mostly in East Asia and South Asia.

    The World Bank counts people living on less than $3 a day as extremely poor. Their number fell from about 2.3 billion in 1990 to an estimated 837 million in 2026. The World Bank says this fall came mostly from strong growth in East and South Asia, and that better trade helped that growth. Trade did not help everyone the same, though. When India opened up to trade in 1991, poverty fell more slowly in country areas where local industries faced the most new competition.

    “Economic growth, underpinned by better trade practices, has helped lift more than 1 billion people out of poverty since 1990.”
    World Bank·Trade: OverviewIntergovernmental body · 23 Jul 2026 ↗

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  2. FTW-02Mixed

    “Cheaper imports help poorer families the most, because they spend more of their money on goods that are traded.”

    Partly right. A study of 40 countries found that cheaper imports usually help poorer shoppers more than richer ones. But a later, more detailed US study found that rich and poor American families spend about the same share of their money on imports, so they gain about equally.

    The 40-country study said poorer families spend more of their money on things like food and clothes, which are traded a lot. Richer families spend more on services, which mostly are not. It found that if trade stopped completely, people poorer than 9 in 10 others would lose about 63% of what their money can buy, on average. People richer than 9 in 10 others would lose about 28%. It used trade data from 2005 to 2007. The 2021 US study used detailed spending and customs records instead. Both studies are about prices in the shops, not jobs or wages.

    “We find that trade typically favors the poor, who concentrate spending in more traded sectors.”
    National Bureau of Economic Research·Measuring the Unequal Gains from Trade (NBER Working Paper 20331)Independent research institute · 1 Jul 2014 ↗

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  3. FTW-03Mostly true

    “Exporting firms pay their workers more than firms that only sell at home.”

    Mostly right. In US factories in 2002, exporters paid about 6% more than non-exporters in the same industry. But exporting firms tend to be stronger firms to begin with, so the gap does not prove that exporting itself raises pay.

    Studies in many countries find that exporting firms are bigger, more productive and pay higher wages. These differences are there even before the firms start exporting. So the extra pay may say more about which firms export than about what exporting does. Exporting is also rare. In 2000, only 4% of the 5.5 million firms in the US exported.

    “exporting firms have been shown to be larger, more productive, more skill- and capital-intensive, and to pay higher wages than nonexporting firms”
    American Economic Association·Firms in International Trade (Journal of Economic Perspectives)Peer-reviewed research · 1 Sept 2007 ↗

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  4. FTW-04Mostly true

    “Countries that trade more with the world end up richer.”

    Mostly right. A well-known 1999 study found that trading more raises income per person by a lot, though the result is less certain than its size suggests. The World Bank says opening up to trade adds 1.0 to 1.5 percentage points to growth on average.

    Rich countries might trade more just because they are rich. So the 1999 study used facts about geography, which affect how much a country trades, to tell cause from effect. It found trade raises income, but the statistics behind that were only fairly strong. The World Bank says opening up can mean 10 to 20% higher income after ten years. These are averages for whole countries. They do not show who gets the gains, and other research finds some workers and towns lose out.

    “trade has a quantitatively large and robust, though only moderately statistically significant, positive effect on income”
    American Economic Association·Does Trade Cause Growth? (American Economic Review)Peer-reviewed research · 1 Jun 1999 ↗

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  5. FTW-05Mixed

    “Robots and automation, not trade, are the real reason factory jobs disappeared.”

    Partly right. Research finds that both trade and new technology cut US factory jobs, and it is hard to say exactly how much each one did. It is not one or the other.

    A 2018 study of detailed US data found support for both explanations. Another study found that each extra robot per 1,000 workers cut the share of people in work by about 0.18 to 0.34 percentage points, from 1990 to 2007. In one version of its analysis, Chinese imports cut the share in work in an average area about three times as much as robots did. In another version, the China effect was too small to be sure of. So blaming only robots, or only trade, leaves out part of the picture.

    “These data provide support for both trade- and technology-based explanations of the overall decline of employment over this period”
    American Economic Association·New Perspectives on the Decline of US Manufacturing Employment (Journal of Economic Perspectives)Peer-reviewed research · 1 May 2018 ↗

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  6. FTW-06True

    “Competition from Chinese imports cost the US around 2 million jobs.”

    Confirmed: a major study estimated that rising imports from China caused net job losses of 2.0 to 2.4 million in the US between 1999 and 2011.

    The count includes jobs lost in factories that competed with Chinese goods. It also includes knock-on losses, such as at suppliers and other local businesses. US imports from China sped up after 2000. The figure is an estimate for the US only. Researchers still argue about how many new jobs US exports created over the same years.

    “net job losses of 2.0 to 2.4 million stemming from the rise in import competition from China over the period 1999 to 2011”
    National Bureau of Economic Research·Import Competition and the Great U.S. Employment Sag of the 2000s (NBER Working Paper 20395)Independent research institute · 1 Aug 2014 ↗

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  7. FTW-07Mixed

    “New export jobs have made up for the jobs lost to imports.”

    Partly right. One study found that US exports created about 4.24 million factory jobs from 1991 to 2011, roughly matching the 4.22 million lost to Chinese imports. But other researchers found that the new jobs that should have made up for the losses had not yet appeared.

    For 1991 to 2007, the same study found exports made up for all but about 0.2 to 0.3 million of the lost jobs. Another team found that US industries facing more imports lost jobs, while matching gains in other industries had yet to show up. Even when the totals balance, it matters who gets the new jobs. Workers hit by import competition changed jobs more often and earned less over their lives.

    “job gains due to changes in US global exports were slightly less than job losses due to Chinese imports”
    National Bureau of Economic Research·US Exports and Employment (NBER Working Paper 24056)Independent research institute · 1 Nov 2017 ↗

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  8. FTW-08False

    “Workers who lose their jobs to imports soon find new ones, so the damage is short-lived.”

    False, based on the best US evidence. In US areas hit by Chinese imports, wages and the share of people working stayed low, and unemployment stayed high, for at least ten years. Some of the harm was still there in 2019.

    Many people did not move away to find work. Instead, many stopped working. Only people born abroad and US-born adults aged 25 to 39 moved away in bigger numbers. Brazil saw something similar after it cut its import taxes. In regions that faced bigger cuts, the harm to earnings after 20 years was three times as big as after 10 years. Trade can still bring wider gains, but for some places the costs last a long time.

    “Adjustment in local labor markets is remarkably slow, with wages and labor-force participation rates remaining depressed”
    National Bureau of Economic Research·The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade (NBER Working Paper 21906)Independent research institute · 1 Jan 2016 ↗

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  9. FTW-09Mixed

    “NAFTA was a disaster for American workers.”

    Partly right. For most US workers, NAFTA's effect on pay was probably close to zero. But blue-collar workers in the industries and towns most exposed to Mexican imports saw much slower wage growth in the 1990s.

    NAFTA was the trade deal between the US, Canada and Mexico. One study looked at workers who did not finish high school. In industries that had the most protection from import taxes and lost it quickly, their wage growth from 1990 to 2000 was 16 percentage points lower than in industries that were never protected. In the hardest-hit towns, even people working in diners felt it. Another study estimated NAFTA's tariff cuts made the US as a whole only slightly better off, by 0.08%, while Mexico gained 1.31%.

    “dramatically lowering wage growth for blue-collar workers in the most affected industries and localities”
    National Bureau of Economic Research·Looking for Local Labor Market Effects of NAFTA (NBER Working Paper 16535)Independent research institute · 1 Nov 2010 ↗

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  10. FTW-10Mostly false

    “Tariffs on imports bring factory jobs back and protect workers.”

    Mostly wrong, based on the 2018-2019 US tariffs. A 2024 study found these tariffs neither raised nor lowered jobs in the industries they were meant to protect. Other countries' tariffs in reply cut US jobs, mostly in farming.

    A tariff is a tax on imports. Some tariffs do create a few jobs, but at a high price. US tariffs on washing machines in 2018 pushed washer prices up by nearly 12%, and dryer prices rose about as much. Reports said about 1,800 jobs were added. That works out at over $815,000 a year for each job, paid by shoppers. Payments to US farmers only partly made up for the harm from other countries' tariffs.

    “import tariffs on foreign goods neither raised nor lowered US employment in newly-protected sectors”
    National Bureau of Economic Research·Help for the Heartland? The Employment and Electoral Effects of the Trump Tariffs in the United States (NBER Working Paper 32082)Independent research institute · 1 Jan 2024 ↗

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  11. FTW-11False

    “When the US puts tariffs on imports, foreign countries pay them, not Americans.”

    False, according to studies of the 2018 US tariffs. Foreign sellers did not cut their prices, so the price of taxed imports went up by the full amount of the tariff. American shoppers and businesses paid it.

    One study found the tariffs cost US buyers of imports $51 billion, or 0.27% of the economy. After counting the tariff money collected and gains to US companies, the country was still $7.2 billion (0.04%) worse off. Another study estimated that what Americans' income could buy fell by $1.4 billion a month by the end of 2018. Countries that hit back with their own tariffs saw the same pattern, so the trade war made them poorer too.

    “we find that the full incidence of the tariff falls on domestic consumers”
    National Bureau of Economic Research·The Impact of the 2018 Trade War on U.S. Prices and Welfare (NBER Working Paper 25672)Independent research institute · 1 Mar 2019 ↗

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  12. FTW-12Mostly false

    “In rich countries, globalisation is the main reason workers now get a smaller share of the economy's income.”

    Mostly wrong. The IMF found technology was the biggest cause in rich countries, explaining about half of the fall in workers' share. Global trade links played a part, but only about half as big as technology's.

    Workers' share means the slice of a country's income paid out as wages, rather than going to owners as profits. In rich countries it started falling in the 1980s. The IMF says it is hard to fully separate the effects of technology and trade. In poorer and middle-income countries, it found that global supply chains were the main cause. Other researchers link the fall to a few giant 'superstar' firms taking more of each market, which trade or technology could both help cause.

    “In advanced economies, about half of the decline in labor shares can be traced to the impact of technology.”
    International Monetary Fund·Drivers of Declining Labor Share of Income (IMF Blog)Intergovernmental body · 12 Apr 2017 ↗

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