Very good fragments of sentences

…trade typically favors the poor, who concentrate spending in more traded sectors.

That is from Pablo D. Fajgelbaum and Amit K. Khandelwal, the full paper is here.

Comments

But perhaps those sectors are also the most regulated (logical since lawmakers typically like to make waves where most voters can see them), which might counteract the benefits of high volume trading. I don't have any research to back it up, but it's a thought to consider.

I can believe that trade in basics, food and simple consumer goods like textiles and clothing has a bigger impact than trade in more complex and expensive luxury goods.

I bet you find this if you look at the impact on consumers, but what about the negative impact on producers.

For example, US exports of corn help the urban consumer in Mexico but hurt the Mexican farmer.
So is the net result a positive or a negative for Mexico?
I don't know, but would like to think it is a positive.

Spencer,

Imported corn was (is) a massive negative for Mexico. Mexico is now a world leader in obesity and diabetes. See "
Diabetes in Mexico - Eating themselves to death" (http://www.economist.com/blogs/americasview/2013/04/diabetes-mexico). quote

"Your correspondent, having just arrived to live in Mexico City after more than a decade away, finds the increase in waistlines even more staggering than the increase in traffic. Mexico has become one of the most overweight countries on earth, even more so than the United States; a quarter of its men and a third of its women are obese. Indecorously, the country has even come up with figures on figures: the Mexican Diabetes Federation says that among women between 20 and 49, the average waistline is 91.1cm (35.9 inches), more than 10cm above the “ideal” size. Stores are now full of large- and extra large-sized clothing.

Time was, a prominent girth may have been enviable proof of relative prosperity. Now, it is a serious health risk. At a conference here on April 9th it was estimated that more than 10m Mexicans, or almost a sixth of the adult population, suffer from diabetes, largely because of over-eating and increasingly sedentary lifestyles. Mexico has the sixth most cases of diabetes in the world.

Diabetes is one of the top two causes of death in the country, alongside (and occasionally overlapping with) heart disease. The diabetes federation says that the illness kills 70,000 people a year. However, it gets far less attention than much less deadly diseases such as HIV/AIDS, not to mention organised crime (which is responsible for roughly 60,000 deaths in the past six years). “It could get to the point where we are literally eating ourselves to death,” says Jesper Holland of Novo Nordisk, a Danish health-care company that is a big supplier of insulin to Mexico"

The last thing Mexico needed to do was to adopt America's diet (or lack thereof). With the help of "free trade", Mexico did. The consequences have been terrible.

Presumably if we cured cancer we'd get some whiny piece from the Economist saying that all these extended lifespans have placed a serious burden on the [pick a sector]. It makes me want to quote Basil Fawlty during the fire drill: "Honestly, I don't know why we bother. We should just let you all burn."

Really? There's a compassion scarcity.

What a joke. We shouldn't export anything to Mexico because Mexicans are stupid and will make poor decisions and would be better off if they were unable to afford whatever we export? Mexicans can decide for themselves what they want to eat, blaming Mexican obesity on free trade is a farce and makes you look like a clown.

One of the best comments I've ever read.

One of the worst comments I've ever read...

C,

The question is not the merits of American corn exports, but Mexican corn imports (from the U.S. and elsewhere). To answer the obvious question, yes it was a tragic mistake for Mexico to abandon it marginal agricultural sector and turn to American food imports. Numerous sources make this point all to clearly.

1. The decision was Mexico’s, not America’s. NAFTA included agricultural trade liberalization provisions. Mexico abandoned import controls far faster than was required by the treaty. See “NAFTA Truth and Consequences: Corn”. Quote

“NAFTA provided for a 15-year phase-out of Mexican tariffs on imported corn.[3] The Mexican government decided to almost entirely liberalize the sector within three years instead of the allowed 15 years. This greatly exacerbated what would have been a serious to the rural economy if it had been phased in over the full 15 years. According to Mexican activists, a government advisory panel called the Committee to Evaluate Corn Imports was instrumental in the decision to import twice as much U.S.corn each year as the government had agreed under NAFTA.[4] Large-scale Mexican corn consumers (many of whom are substantially owned by U.S. agribusiness interests, two of which – Cargill and ADM – are responsible for fully two-thirds of all U.S.corn exports[5]) dominate this committee. Only recently was the government forced to give domestic corn producers some representation on this panel.”

2. Reforming NAFTA’s Agricultural Provisions

“Corn is emblematic of NAFTA’s problems. In Mexico corn (maize) is produced by a wide range of growers, including a small number of high-yield industrialized farms and some three million smallholders employing a wide range of farming practices and generally getting yields one-third (or less) of those of U.S. producers. Add to this already-vast asymmetry at the time of NAFTA’s implementation the high levels of U.S. corn subsidies and the Mexican government’s commitment to reduce its own extensive systems of support. When the Mexican government unilaterally liberalized corn markets, well ahead of NAFTA’s 14-year transition schedule, U.S. corn flooded the Mexican market. Over two million people have since left agriculture, a drop of more than 25 percent.1 With limited employment-generation elsewhere in the economy, many have added to the rising flow of migrant laborers.2″

3. “U.S. exports obesity epidemic to Mexico, says new study – Declining public health linked to NAFTA, and influx of low quality, processed foods

“MINNEAPOLIS – Trade liberalization policies that loosened rules to the benefit of agribusiness and food companies may be partly responsible for epidemic obesity and declining public health throughout Mexico as more low-quality, calorie-dense foods are imported from the United States, according to a new study published in the latest issue of the Journal of Occupational and Environmental Health.

The study notes that the increase of obesity and overweight in Mexico—a rise of 12 percent between 2000 and 2006—coincides with the implementation of the North American Free Trade Agreement (NAFTA). The resulting increased consumption of snack foods, soft drinks, processed dairy and meat products, combined with increased foreign direct investment (FDI) of U.S. corporations all along the food supply chain—from production and processing to restaurants and retail—has changed the Mexican food environment and contributed to rising obesity rates nationwide.

“We’ve known for years that NAFTA hurt small-scale farmers in Mexico and contributed to job losses on border. The realization that NAFTA’s rules on trade and investment may be partly responsible for creating an unhealthy ‘food environment’ in Mexico, mirroring that in the U.S., is new,” says Karen Hansen-Kuhn, a study co-author and program director with the Institute for Agriculture and Trade Policy (IATP).”

4. Mexico: Public Health, Rising Obesity and the NAFTA Effect

“In 2011, Mexicans consumed 172 liters per capita of Coke, compared to the 1991 pre-NAFTA level of 69 liters per capita. According to the UN Food and Agriculture Organization (FAO), the consumption of animal fat in Mexico increased from about 34.7 grams per capita per day in 1991 to 46.9 grams per capita per day in 2009. A recent study linked these and other resulting dietary changes with an unsettlingly high 12 percent increase in obesity in Mexico between 2000 and 2006. Though obviously an unintended consequence of NAFTA, this shows that trade can actually impact public health.”

5. “Free trade: As U.S. corn flows south, Mexicans stop farming”

“SAN JERONIMO SOLOLA, Mexico — Look around the rain-fed corn farms in Oaxaca state, and in vast areas of Mexico, and one sees few young men, just elderly people and single mothers.

“The men have gone to the United States,” explained Abel Santiago Duran, a 56-year-old municipal agent, as he surveyed this empty village in Oaxaca state.

The countryside wasn’t supposed to hollow out in this way when the North American Free Trade Agreement linked Mexico, Canada and the U.S. in 1994. Mexico, hoping its factories would absorb displaced farmers, said it would “export goods, not people.””

6. NAFTA, Corn, and Mexico’s Agricultural Trade Liberalization

“Even well before NAFTA, successive Mexican governments embraced free trade with remarkable zeal. Beginning with its membership of the General Agreement on Tariffs and Trade (GATT) in 1987, Mexico has signed more trade agreements than any other country in the world. In 1994, Mexico joined the Organization for Economic Cooperation and Development (OECD) and that same year NAFTA was implemented. Although academic experts are divided on the merits of trade liberalization 1 , the Mexican state continues to view it as a panacea for poverty and underdevelopment. The evidence, however, suggests that free trade agreements in general, and NAFTA in particular, have exacerbated the problems facing the rural poor in Mexico.”

One of the key differences between the successful developing nations in Asia and Latin America is farm policy. In Asia governments have been intensely protectionist to keep agricultural prices high and support rural incomes. As a consequence, migration from rural to urban areas has been driven by the actual availability of jobs, not just rural desperation and the joys of living next to an urban garbage dump.

Japan provides a good historical example of how well such a policy worked. Japan fiercely resisted U.S. rice imports and maintained domestic rice prices far (very far) above world levels. The rural population prospered and moved to Japan’s cities only as industrial growth created actual jobs. Japan never developed the favelas that dominate Latin America’s urban areas and doesn’t have them now.

By contrast, Mexico (and much of Latin America) adopted “free trade” policies that devastated the rural population. At the same time, the “free trade” policies utterly failed to create replacement jobs anywhere else. As a consequence, rural areas have been depopulated with their former residents ending up in barrios on both sides of the border.

A policy of failure.

@ Peter, the Economist describes the problems of a relatively rich urban area. People has the freedom to experience white guilt while watching fat mexicans eating awful white bread and drinking soft drinks, no discussion on that. However, the reality for almost 20 million mexicans or 16% of the population is food poverty. Corn imports are good for those 20 million people whose income is not enough to buy food and many millions more just little above food poverty line. Before NAFTA and corn imports, local corn production was not enough and the price was higher than today. Mexico has a rich history on hyperinflation.

Someone said it here on MR http://marginalrevolution.com/marginalrevolution/2007/04/corn_prices_in_.html

"Tyler seems to miss the point when he does not distinguish between corn/tortilla producers and tortilla consumers. The latter group is much more numerous and would benefit from quota removal, and the poorest consumers would benefit more from cheaper imported corn to make cheaper tortillas. "

Ps. on the original topic.....yes the poor benefit on the most traded goods, like corn.

Have a look at Ward-Perkins' "The Fall of Rome and the End of Civilization": he demonstrates that uber-elite luxury continued in the Dark Ages (see, for example, the Sutton Hoo treasure) but that the traded goods that had made life much better for the peasantry vanished.

This is the opposite of the truth. Roman villas had central heating, hot baths, ample imported luxury goods like silks and spices and dyes. But these luxuries were lost completely after the fall of the Roman Empire. Winston Churchill pointed out that central heating systems existed in Roman villas in ancient times, but were not reinvented in Britain again until the 20th Century.

While the Roman elites lived in luxury, the slaves and other poor people in Roman times were gravely malnourished (as can be told from their skeletons). Signs of widespread malnourishment and starvation actually decrease after the collapse of Rome. The lives of ordinary people actually improved in the so-called Dark Age.

Justin Millar - you make some good points, but I have read from extremely reliable sources that the height of worldly felicity in Western civilization, for the elites, was pre-revolutionary France, and I know enough about English history to know that if the elite French were able to enjoy some aspects of life the elite English could not have been far behind in every one of those aspects. (By the way, I understand the "but they lacked modern medicine" argument but there are tens of millions (or more) of English and French people with non-life-threatening diseases now in 2014 who would have been happier in 1720 or so in some alternate universe where they were free of the disease(s) they are stuck with now , and who would gleefully trade a lack of modern medicine for a chance at a simple luck of the draw in not having the particular illness they have now in 2014.) Moving semi-stochastically to my point, Dearieme is a frequent commenter on this and similar blogs, and his atheism, over-educated technocrat English parochialism, and anti-new-World-ism often lead him astray, but he never, as far as I know, has stated the "opposite of the truth", and I sort of trust him on the obscure subject of Dark Ages luxuries.

"This is the opposite of the truth" Rubbish - read his evidence.

And there was nothing "so called" about the Dark Ages. Read him.

I have to come down somewhere in the middle between these extremes. There's no doubt elite living standards fell by a lot, and the Sutton Hoo treasure actually confirms that - it shows an early medieval king who had a big treasure hoard but lived with far fewer comforts than upper-middle-class Londinium residents a few centuries earlier. Sadly one of the reasons Roman ruins aren't better excavated and preserved in many non-European countries is that the people living on the spots now are worse off and their governments are embarrassed to demonstrate the contrast.

Other classes also saw a huge loss of living standards, and though the poorest Roman subjects arguably had nothing to lose in terms of living standards, they did have their lives to lose, and millions did lose them in the wake of the collapse as agricultural output plummeted.

Except those poor people who have jobs in the losing side of the trading sector.

Obviously we are talking about poor people overall. If we only allow things that increase the wealth of all people, we will all be living in utter squalor in short order.

Everyone is better off in an economic model.

Would that imply that immigration is more likely to favor the well-off, who concentrate their spending in labor-intensive services?

The specific results of the paper depend on the historical or technological period of history in which we find ourselves. The correcter the authors are, the happier I am. Trade raises the wages of laborers in poor countries and lowers the wages of laborers in rich countries as an impact effect. To the extent that trade promotes growth, the wages of all rise. That makes me even happier.

The corollary to that would be....trade hurts the poor, who are more likely to work in more traded sectors and thus face elevated levels of competition......

Maybe, but that only considers one side of the ledger :)

Yes, of course the poor don't waste their scarce income on nontradables like housing, education, healthcare, groceries or transportation....

They just aren't visible or tangible like the plastic geegaws and chintzy textiles that float in 40 ft containers into the local Walmart.

I like trade and all, but must we overstate the case?

The paper might very well be excellent, but if the fragment is to be great it should stand on its own.
Or did I miss some Marginal Irony due to my own Gross Density?

In a very similar way, immigration favors the rich, who concentrate spending in less traded sectors.

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