Pinelopi Koujianou Goldberg, "The Unequal Effects of Globalization" (MIT, 2023)
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Welcome to the New Books Network. Hello, and welcome to New Books and Economics. I'm Peter Lawrenson, Associate Professor of Economics at the University of San Francisco. My guest today is Penny Goldberg, the Elihu Professor of Economics and Global Affairs at Yale University. Among her many accomplishments, she has served as President of the Econometric Society, Editor-in-Chief of the American Economic Review, and as Chief Economist of the World Bank.

Her research focus is on international trade and development, and today we'll be talking about her new book, The Unequal Effects of Globalization. Penny, welcome. Roz, hi. So to start out, why don't you tell us about the age of hyperglobalization, what that era was and what were sort of the factors driving it before we get into some of the changes in more recent years?

Yes, so the book, as you mentioned, is titled "The Unequal Effects of Globalization", so it focuses on the effects that globalization has on different countries and different groups within the population.

It particularly focuses on the three decades that we characterize as the era of hyperglobalization. And this period starts around 1989 with the fall of the Berlin Wall and ends approximately with the financial crisis or the aftermath of the financial crisis, so around 2010.

So this period is characterized by very fast trade growth. So trade grows and it grows faster than GDP. This is usually measured as the ratio of world exports over GDP. So this ratio has been growing steadily since World War II, but during these three decades it grows particularly fast. And at the same time we see the emergence and growth of global value chains.

then dismantling of trade barriers. So all these developments together are characterized as hyper-globalization. Okay, why don't you... So I know global value chains play an important part in both this period and in the...

changes in trade in recent years. So why don't you explain more about what, you know, maybe give an example of a global value chain and how these differ from just sort of, you know, bilateral trade between two countries. Right. So traditional trade, the way we think about it when we, let's say, when we teach trade in undergraduate courses is trade in final goods. So a country produces a certain product and exports it to another country.

More recently, people have also thought about intermediate inputs. So you actually export a particular intermediate product or perhaps a raw material, raw materials that are then used in the production of final goods and used either in the importing country or in some other country.

Global value chains take this idea of important intermediates to another level. So think of it as being intermediate inputs on steroids. So the idea is you take a product, a relatively complex product like an automobile or a chip, a semiconductor product,

and then you break it up into components, into parts. And rather than trading the final product, you can trade the parts. Similarly, you can trade the services that go into producing this product. And what's interesting is this can lead to trade back and forth between countries. So you can export, let's say,

tires or brakes for a car to another country or engines, then this is combined to some intermediate product that then may go back to the original country, processed again, then re-exported and so on. So this is the idea behind global value chains to fragment the production into many different parts and these parts or these intermediate products are traded back and forth.

And that has two implications. One is mechanical. This leads to an explosion in trade because trade is measured in gross terms, not in net value terms. So this breakup of production means that in the statistics we see an explosion of trade. So someone might say, well, why should we think this is a big deal? This is just a mechanical effect. It turns out this mechanical effect has important implications.

For two reasons. One is that the fact that these goods cross borders multiple times means that trade barriers, the effect of trade barriers can be amplified. So think of tariffs. Tariffs can have a multiplicative effect if they go back and forth. If the good goes back and forth between borders and vice versa, if you have trade liberalization, this can have huge effects.

Another implication is, especially for developing countries, is that it makes it easier for countries to participate in trade and to participate in manufacturing. So take a country like Mexico,

it might not have had the capabilities to enter the automobile value chain at the beginning. There are too many steps involved, too much knowledge involved. But through global value chains, a country can enter by participating in some activities. These can be low-skill activities or activities that are more tailored to the particular capabilities of a developing country.

And little by little, this country can climb up the value chain when things go well. And third, and this is something that's emphasized more in the sociological literature than the literature in economics, is that global value chains are associated with relation-specific investments.

they involve relations between firms and these relations, these firm-to-firm relationships facilitate the flow of knowledge. And this is incredibly important when we think about development in the long run. So this sharing of knowledge across firms located

in different countries can be quite important as countries try to go up the value chain. So all this is happening during this era of hyper-globalization. Global value chains truly explode during that time. So, right. So I guess the, so when you say the sharing of knowledge, that'd be like if you, you know, you couldn't build a whole automotive manufacturing business in Mexico, but you could, you

assemble some part or machine one particular component there. And that might be then an investment by an American company into Mexico to develop this machine. But then also there'd be sort of a learning by doing in the process of, you know, setting up the factory, then the people in Mexico would then get a broader set of skills that might then be applied to other areas. Is that

That's right. That has happened in some settings. It doesn't always happen. But this is something many countries aspire to. So what they're trying to avoid is getting stuck in low-value activities. So doing something mechanical, something menial year after year. What most countries try to do is use that as a stepping stone and climb up the Biden chain. Does that... So I feel like the...

You know, some literature is from maybe especially from the sort of 50s, 60s and 70s, there was a lot of concern with sort of, you know, they'd call it neocolonialism or something like that. And the idea is that the Western companies would come in and set up some factory and take advantage of low cost labor to do whatever. But they would keep that kind of component of the value chain isolated and the people would never kind of graduate beyond that. So.

Do we have a sense of how common kind of the more pessimistic scenario is versus the one where there is actually valuable learning and increasing of skills and well-being among developing countries? Yeah, I mean, my first reaction to your point is, as John Robertson famously said, that the only thing that's worse than being exploited is not being exploited.

And I think she got exactly these cases in mind where there is this risk. There's definitely this risk, but still countries want the opportunity to get a chance. One thing that has been striking in the last few decades is that the success stories outnumber the failure stories. And the success stories tend to be concentrated in East Asia.

So if you think about China famously, but also other countries, including Korea, Vietnam, Malaysia, these are all cases

countries that benefited from foreign direct investment and trade. And it's an interesting question how exactly they managed to do it. In the case of China, one might say that what makes China special in this context is its market size. So China had an almost bargaining power, and that allowed it to take advantage of the positive aspects of global value chains. So there's a lot of evidence that it engaged in these quid pro quo arrangements. You come here, you invest.

In return, you get access to our huge market. Other countries did not have the same bargaining power. So when we think of Korea or Vietnam, but Korea especially was considered a U.S. ally. In many cases, U.S. companies volunteered sharing of knowledge. And so at the same time, the countries...

undertook the necessary investments in order to climb up the value chain. So for example, investments in education. So these are all cases of success stories. Now, someone might say, if we look at Latin America, the picture is more nuanced.

We have the maquilladoras in Mexico. But Latin America, Latin American countries in general did not have as successful global value chain participation as countries in East Asia. And there are many reasons for that, including the fact that they didn't have consistent policies towards global value chains the way Asian economies had. So in many cases, they pushed back.

But I would say that overall, if you look at this era of hyperglobalization, this is when the success stories dominate.

So what were the main drivers of that era, of the hyperglobalization process? One main driver was technology. And by technology, I mean the sharp decline of trade costs. So this was partly through the reduction of tariffs, but also through the reduction in communications costs and transportation costs, etc.

the use of containers that happened actually a little earlier, but all this contributed to a sharp decline of trade costs. So that's part of the story. The other part that I actually emphasized in the book is trade policy and more generally the global trade architecture. Many multilateral agreements and in recent years the

the role that the World Trade Organization played. And what many trade economies see as the biggest benefit of these trade agreements, including the World Trade Organization, is that they provided an environment of predictability and stability, which was very important

for the investments required for global value chains. So global value chains, by nature, operate in different countries. They cross many borders, many regions. So even regional trade agreements may not be sufficient. And they require huge investments. And for these investments to be profitable,

firms need to have some sense that they're going to be there for the long run. So this is the main advantage that people associated with these institutions. There were also other benefits, for example, the reduction of tariffs, which was not a major issue in countries like the United States or Europe, where the tariffs were already low, but in many developing countries, this was a big thing.

So a big change, a big policy change. So this combination of technology and policy changes clearly contributed to this hyper-globalization. And at the same time, we also had a philosophical shift, which these days is characterized as neoliberalism, but I would say more generally neoliberalism.

I have a different view of this era, which is perhaps if you want a more positive, which is that economic considerations dominated political or national security concerns. So countries engage with each other, even if they had very different political regimes. So the United States engaged with China, for example.

based on economic benefit. And that's one of the reasons that companies, the private sector, were willing to share knowledge or to make investments that these days we are much more suspicious of. So this was a time where this thinking of trade or welfare as a zero-sum game disappeared. And

Clearly, you know, that all this philosophical shift, this focus on economic incentives contributed

to the explosion of trade.

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Okay. So that kind of leads up to, like you said, around 2010 after the financial crisis. But since then, there's been something of a backlash of globalization. And to be fair, there was...

Well, maybe at least in the popular discourse, there are certainly complaints about globalization and the WTO and everything kind of throughout this period, different groups being concerned about, you know, in the 80s and early 90s, they were worried about Japanese imports. And then in the 90s, there was, you know, protests in Seattle and all these things. But you're saying that

In terms of actual, I guess, impact of trade being more restricted, that kind of started around 2010. Why did that happen and what are the reasons you see for that? Around 2010, as you mentioned, there were always tensions. It's not always a rosy picture. There were many aspects of the WTO that were criticized by many, including myself. For example, the trade-related intellectual property rights protection, the so-called TRIPS agreement.

But despite all these protests, trade and multilateralism was going strong. During the financial crisis, at first trade collapses for a couple of years, but then it comes back. However, it never grows as fast as it used to. So that's why people mark the financial crisis as the end of the hyper-globalization, not necessarily globalization because trade keeps growing.

What's important, though, to keep in mind is that despite the financial crisis, there is not a backlash at that time against globalization. There's a lot. There is backlash against finance, against capitalism, against Wall Street.

but not necessarily against globalization. And then the economy recovers and trade again goes strong, not as strong as it used to until we reach the year 2016. And that's when we start seeing in the actual developments and in the data, big shifts. So the first one that came as a surprise to everyone is Brexit. And next comes, you know, the election of the president

President Trump, who had advocated tariffs. Now, this by itself doesn't mean much because many presidential candidates take a protectionist stance, but then once they get elected, they depart from it. In the case of the Trump administration, he actually kept his word and imposed tariffs on China, which was a big departure. So we see big changes in policy.

In the United States and in Britain, these were the two bastions of free trade. But at the same time, we see an increase of skepticism in many countries, again, mostly in the United States, in Britain, but also in Europe, skepticism towards globalization, trades, immigration. So, yes.

a sort of disbelief in the idea that open borders are beneficial for all countries in the world. And as we know by now, this has gained momentum. So, little by little, it has evolved

to an important anti-globalization sentiment. Okay. And so your book is titled The Unequal Effects of Globalization. So you trace a lot of this anti-globalization sentiment to sort of the differential impacts that it's had on different groups in society, even during the Holocaust.

globalization period. Why don't you talk us through like what, I don't know, there's been debates among economists about measuring each of these things and exactly how important they each are, but what are sort of the key issues that people have looked at? That's right. So first, let me say that the book was written around 2020, 21. It was published in 2023. So actually, the analysis was based on the period prior to COVID.

And the premise of the book is that what has led to this backlash against globalization is mainly the fact that the effects of globalization had been unequal both across countries and within countries. Now, this is nothing new to a trade economist because anyone who has been exposed to trade theory knows that this is rooted in trade theory. That's how we teach trade. We say trade is...

Good in the aggregate for the economy as a whole, but there are winners and losers. This is an important theoretical insight. However, this is often not emphasized in policy circles because we traditionally trade economists and economists more generally did not want to give ammunition to protections.

So one question that I ask in the book is, why do we see this backlash around 2016? So by 2016, the U.S. economy is doing quite well by several metrics. So there is full employment. The stock market is going very strong.

There is no inflation at the time. So by this aggregate metrics, the economy is doing very well. It's not like the Great Depression when we had the smooth holiday times where people were hurting. There was no hurting at the time. So it comes a little bit of a puzzle that this rhetoric resonated with people. And the obvious explanation is that not everyone had benefited from globalization. Before I go into the details,

I should add that in the meantime, there have been new arguments in favor of protection and against globalization. Some of these arguments emerged during the COVID pandemic. So these are arguments related to resilience of supply chains, of global value chains. And as I have argued elsewhere, these arguments are counterfactual. They are not supported by the evidence.

After COVID, after the end of COVID, we have the invasion of Ukraine by Russia. And then again, we have new arguments. Again, it's about resilience, but this time it's resilience to geopolitical risk and natural security concerns. And these are arguments that are potentially much more serious.

So in the book, I don't deal with this, but still one has to ask, why did all these arguments regarding resilience resonate with people as much as they did? And my answer would be

The root of the cause is earlier, is during the early years, 2016 to 2020, when there is this rising discontent with the effects of globalization, and in particular with the unequal effects of globalization. So coming now to the unequal effects of globalization, I focus on two types of effects, the effects across countries and the effects within countries. And across countries,

There has been an increasingly strong perception that the U.S. is losing while China is gaining. So the developing countries I talked about before, especially in East Asia, have managed to lift themselves out of poverty at the expense of the United States, and in particular at the expense of the United States worker. There is a lot of evidence that

strongly suggestive evidence that trade played a very important role, especially global buying chains, a very important role in raising these economies out of poverty. The statement that this was at the expense of the American worker is more controversial. If you look within countries,

There again, you can distinguish between two types of effects. There's a question of how globalization affected people as workers. There's the question of how it affected people as consumers. And as economists, we often point out that consumers have benefited enormously from globalization through more variety, through lower prices. Inflation was kept in check for many years despite expansive monetary policies.

Globalization had something to do with all of these. But then when it comes to workers, there is mounting evidence that the trade with low wage countries had adverse effects on the US labor markets. And these effects are complex in the sense that they were not easily seen when people focused on traditional metrics such as the skill premium.

industry wages, occupational premium. They became very apparent when people focused on one particular dimension of inequality, and this is spatial inequality. So in particular, looking at how some regions that were exposed to import competition were doing relative to other regions that were not affected by import competition. So this is where we see the big disparities.

And so that contributed both to the rise in sentiment against globalization and ultimately, I think, to what happened with Brexit and also what's happened since then in the United States with protections.

So specific. So even though if you looked at kind of, uh, you know, the way we certainly do in introductory courses and even in most discussions, if you look at sort of national level statistics and we could say, everything seems fine, you know, on average, everyone's better off. There's, uh, you're saying in specific regions that were, you know, very focused on industries that were very susceptible to competition. They were the ones that, that really suffered. Uh, exactly. And so these are particular regions, uh,

that had a high exposure to input competition from China. This is what people have come to call the China shock or the China syndrome. China matters by virtue of its size. But it's not just China. It's, you know, from a research point of view, from an intellectual point of view, is that

In the work trade economies have done in the past, they had focused mostly on the so-called skilled premiums. So the difference between the compensation that skilled versus unskilled workers receive, where skilled means here education, whether you have a college degree or not.

And if you look at that level, you couldn't find any big effects that trade has had on the U.S. market. There are many people who have looked at this, including myself, and in the 90s, in the 2000s, there were statistically significant effects, but the effects were never large, quantitatively. It was very hard to make the case that trade was the main driver of inequality in the United States. And then what changed after 2000?

One, after 2002, it's not just that China entered the world trading system. It's also that economists have started focusing on this patient dimension, on how some areas, some communities in the United States that were exported, that were exported to the import competition from China, how they were doing relative to other areas in the United States. And that's where we found big effect.

So that was the main insight that came from research that all these effects were playing out in the spatial damage. And this has clearly very important political consequence because of our political system. And the same was true, by the way, in Britain with Brexit. It was the same story where one might argue that trade and immigration benefited Britain in the aggregate. But again, there are specific communities that were very adversely affected.

So, so I guess, yeah, in our normal, like, basic framework of thinking of the country as a unit, this doesn't come up like, but wouldn't the argument be then that people, you know, if they're in a, you know, if they're working at a factory in some region, and that factory closes down, then they should just move somewhere else. So what, why is, why do people get stuck in these, these economically hard hit regions, and not just leave?

That's exactly the reason that initially economists dismissed this as being an important issue. Again, as I said earlier, trade theory tells us that trade will cause distributional conflict, and this conflict can be severe in the short run, but the premise is in the long run you adjust. How do you adjust? By moving to opportunity through mobility.

Within your community, you may move to a different sector, to a different firm. Or, you know, within your country, you may move to a different part of the country where there are jobs. As it turns out, there is much less mobility than people thought. And to this day, this is kind of puzzling why there is so little mobility.

In fact, there is a lot of evidence that mobility has declined over time in the United States. And one of the reasons people give is the cost of home ownership. So many people who own their homes consider an area where there is an adverse economic shock, let's say increasing imports from China, then

this area declines economically, that means the house prices go down. Now suppose you want to move to another area, you have to sell your house at a low price and then move to another area where presumably prices are rising. So not only do you sell your price at a discount, you face a premium in other areas.

So let's say a worker wants to move from Detroit to the Bay Area, where the jobs are. It's not just that you don't have the skills. You may not have the skills to move to a different industry. On top of that, you need to sell your house in Detroit and buy a house in the Bay Area. So that's one part, one aspect of mobility costs.

I think it goes beyond that. There are also psychological factors. We recognize that in the national context. When we talk about ethnicity, people have roots. They are attached to their communities. It's not easy for them to move. Whatever the reasons are, the existing evidence shows very clearly that there has been much less mobility because if there had been more mobility, we would not be seeing these effects.

And to me, it's also a paradox that right now we are all concerned about immigration from other countries, not just in the United States, also in Europe, everywhere. So the premise there is people move too much. There is more opportunity here. Everyone wants to come here. But within a country, there seems to be too little mobility. People do not move as much as they should.

And then you're absolutely right. If there had been more mobility, we would not be seeing all those effects. There is in certain communities, in certain industries, there is still demand. There was always demand for workers. But at the same time, we saw entire communities declining without people moving to where the opportunity was. And so that poses a big challenge for policy makers.

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So in your book, as you mentioned, it was based on some lectures given a few years ago, and then you updated it somewhat for the book, but there's the whole publication cycle. So you mentioned a couple of things that have kind of come up since then in terms of arguments against globalization being sort of concerned about the resilience of global value chains or also just dependency on, even if they're not...

tightly interconnected, but if there's some specific crucial thing that we need from one country, then if, you know, that country becomes hostile or gets invaded or whatever else, then we're vulnerable. What other, are there any other, you know, on the new developments kind of on the research side that have

Have people changed sort of, you know, how much they weight the importance of different factors in globalization and inequality or in its impacts? So in research, this is an emerging area because traditionally geopolitics, political factors or resilience considerations were left out of research completely. And I think to a certain extent, it takes very different models. So, for example, these dependencies, they require one to think,

Importantly, about critical inputs, to think about technologies where you need to employ all inputs in certain portions for the product to be produced. And in the traditional models, we don't have this. We need to think about worst case scenarios. Traditional economies

But when we develop models, we think about how we maximize expected value, not how we avoid worst-case scenarios. So in many cases, it would require a different type of thinking. But I would say before we go there, just on the empirical front,

One is to question to what extent all these concerns are valid. Some of them are, others are not. So I mentioned the COVID pandemic before. That's when all these arguments about resilience emerged. And it's true that value chains were under strain during that period. What's not true is that this was specific to global value chains. So if you think about some of the sectors where we've had big shortages, think, you know, if you remember toilet paper or...

what was it uh toilet paper i think i remember the only paper was a big one listen the swabs for doing covet testing was that was an issue i remember reading about or at some point early on because there was not many places that were equipped to make the right you know sterile kind of swab right but but you know these are these were domestic supply chains these were not global buying chains i think anything trade during that time helped so one example i like to gain this face was and

We all remember, you know, for one or two weeks, there was this enormous demand for face masks and there were none. And that's when people started screaming about global value chains. Well, a few weeks later, we started importing them from China. And the reason we imported from China is China had already gone through the first wave of COVID, if you remember, around March 2020.

And by that time, they had a surplus of face masks. So they started exporting them to the United States. And I think face masks are an interesting case because this is one case where we have had at the time total dependency on China. So more than 80% are imported from China. At that time, China saved the day, even though by now they're a geopolitical rival. But it shows how complex these relationships are.

And then it's true that the economy took a big hit, but it was by far the biggest shock, the biggest global shock that we've had since World War II. So of course the economy took a hit. But there are many papers that have shown the hit would have been much worse without trade. And in general, if you think about resilience issues, it really matters what the shock is, what the nature of the shock is. So...

People think about, first of all, people have supply shocks in mind. So something that affects the supply. There you want to be diversified, but, and that's always a good idea, you want perhaps to have multiple suppliers across many countries.

However, if you have a shock like COVID that was global, that affected multiple countries, diversification is not going to help. And then all these arguments about reshoring, suppose you produce the product domestically. If you have a shock that originates in the domestic economy, then you're going to be much worse off than without trade.

So sometimes people put all these arguments about resilience forward without thinking carefully what's the nature of the shock and what exactly do we mean by resilience. So I think during that time, all these arguments that surfaced,

were very confused, but they were very popular. And part of the reason I think they were so popular is there had been this simmering discontent with globalization. That was one more argument against something that people had come to suspect. And then comes the invasion of Ukraine. And there, the main concern is national security and dependence on a country that one day can become your rival, your geopolitical rival.

Um, it,

There's no question these are important concerns, and no one will argue that national security is an important concern. At the same time, it's an argument that has often been misused and abused. So protectionism in agriculture was often justified on the basis of national security. Right now, the Nippon Steel Agreement is blocked based on national security, even though Japan is an ally. It's all about saving the jobs of 10,000 workers.

So there are many cases where this argument has been abused. So my personal view is it's a serious argument, but as a social scientist, I think I should be kind of skeptical when the government puts it forward because it needs to be scrutinized. And the problem with national security is we don't always have access to the necessary information as academics. I don't have clearance from the government, so I don't know.

what exactly is going on. That said, there are some cases that are pretty straightforward to me. So take the case of advanced logic chips, the semiconductor supply chain. 83% of them are manufactured in one location in Taiwan.

You know, forget about China. Suppose something happens in Taiwan, a negative shock. You don't want to be reliant on a single company in a single country. So a certain degree of diversification seems totally sensible to me in that case. So it has to be evaluated on a case-by-case basis, I think. But just want to be careful of it, not just being excused to do something that politicians want to do to protect a constituency as opposed to for an actual economic or security reason, I guess. That's right.

And...

So, um, why don't we for our last few minutes, um, have two sort of related questions. Maybe first is just if you, uh, if it were a month or so ago and you didn't know which administration was coming in and this, what would you recommend as sort of the, the ways that trade policy should shift, um, or, uh, what angles should they pursue in the coming years? What would be the things that would make the country better off? And then after you discuss that, maybe discuss, you know, uh,

ways, what it seems like the Trump team is likely to pursue and what impacts you expect that to have. Well, I have not been happy with the trade policy of the US since 2016 that applies to both administrations.

I do believe that trade, I won't necessarily use the term free trade because it's never been completely free, but I do believe in trade. I believe it has had beneficial effects both for the U.S. economy and for other countries.

and the current path of protection is, and closing the borders more generally is a path that is going to ultimately hurt the US economy. So I would be very much in favor of de-escalating. That said, I do think that a certain degree of diversification is desirable. I think the one positive aspect

I should not use these terms, you know, but I don't want to say that there's something good came out of COVID, but perhaps, you know, one benefit is that it induced us to think a little bit about these diversification issues that are potentially important. So a certain degree of diversification, I think, is important. So I think we can pursue such strategies. So what are the policy tools that are the best policy tools for getting diversification?

So one example is take the case of the semiconductor supply chain. Semiconductors are essential for every facet of modern life. We need to diversify away from Taiwan. What's less clear to me is that we need to bring manufacturing back to the United States as opposed to promoting manufacturing in other countries, let's say Korea or Japan, countries that are allies of the United States. That's less clear to me.

I do believe in low tariffs and de-escalation of the old rhetoric against China. The current administration has advertised a transactional approach, so tough rhetoric, imposed tariffs in return for China making some concessions. The most important concession would be opening their markets to US goods and also the European goods. So, you know, if that happened,

Maybe the threat of tariffs is not as bad if you view it just as a tool to elicit concessions in cases where we haven't managed to make progress in the past. And finally, I think whatever the trade policy is,

of the future is there has to be some serious thought about addressing the distributional effects of trade. These are usually an afterthought. Traditionally, policymakers focus on the aggregate impact. We are doing the same thing now when we think about the impacts of tariffs, especially on inflation. We just think about the aggregate impact. But there are distributional impacts which have proven to be much more significant in the last few years. So whatever the approach is, this needs to be taken explicitly into account.

Is there a good way to do that? I feel like that was certainly, I mean, again, that's something economists have always been aware of, that there would be dislocations and groups that would lose out from exposure to trade. And there were various kinds of talk about subsidies or education programs or train people to code or something like that, but it never seemed like it ever had that much backing. Is

Is that all we have to do? Is there any sense of tools that are

useful for addressing this issue that are feasible? That's a very good question. I would say there is no silver bullet, partly because we never thought about this seriously. The usual response is retraining programs, you know, adjustment assistance. The fact is they have not worked in the past. So if you think about the trade adjustment assistance, in theory, this is what really should do the trick. In practice, it has never worked.

And some people would say, well, it's never worked because this program is much too small. But it has not been successful. So, you know, we are at an impasse because we don't want to scale up a program that has not been successful. At the same time, maybe the reason it was not successful is because it was so small, so it's hard to tell. But at any rate, it seems this readjustment thinking has not...

have helped us so far. So my two thoughts on this are, given that we don't have a great solution, perhaps if we consider further liberalization or going back to the old regime, we should consider taking things more slowly. Part of the reason I think we saw this backlash is things happen much too fast. I mean,

In the last decade, since 2000, there have been enormous changes in the US labor market. And these changes were overdue. But from a human point of view, from a human perspective, it was much too fast for people to adjust. So maybe taking things more slowly would be a good idea. And here I'm thinking that people always claim the next frontier is services. In principle, technology has made services tradable.

So in theory, you could have another explosion of trade in the service sector. But imagine what the labor market consequences of this would be. If you can outsource lawyer services or medical services from other countries, they would be huge in the United States. And I think in cases like that,

we need to take it more slowly. So that's one thought. My other thought is that given what research has shown about the spatial dimension of inequality, place-based policies that have always been vilified

in the US and in other countries, they deserve a closer look. This is not to say that I'm necessarily an advocate of these policies, they're well known or they're inefficiencies, but we know that other approaches have not worked. And given that the main effects of trade have manifested themselves at the community level, I think the right level to target interventions is the communities and the communities. What would be an example of place-based policies that haven't worked or that might work?

So someone gave me the example. Oh, one example is take pitchfork.

used to be a great industrial city, went through a big decline. The industrialization, it has emerged as a new center of healthcare, computer services, universities. So basically the service sector. And that happened over several years, but you can imagine investments and interventions that would speed up the process.

Even if you want to provide adjustment assistance, let's say with training programs or more investment in skills, you could target all these interventions, all these investments towards communities that have suffered more from adverse effects of trade or globalization in the past. So rather than making them widely available in the US, you target them towards specific communities. So these kinds of interventions could potentially be

more successful than what we've tried in the past. But again, it will take some experimentation and some creativity to come up with.

At any rate, I would say the most important step towards solving a problem is to recognize that you have one. Until very recently, it was disputed that this was an issue. Many people had the reaction that you had, that people move, there is mobility, this is not something we need to worry about. So first we need to recognize that we have a problem.

Second, we need to recognize that it's important to find a solution. And third, I would add, even though these days it's like talking to the deaf, that the solution is not to impose tariffs or make China the enemy. The solution would be to try to provide remedies domestically.

Okay, well, I think that's a great summing up point. So I'll stop here. And thanks again for your time. Again, the name of the book is The Unequal Effects of Globalization from the MIT Press. And as you said, you know, the scene keeps shifting in terms of the data and the state of academic research. But I think it creates a great overview of some of the key issues with the relationship between trade and inequality. So I definitely encourage people to follow up and get it.

So thank you very much. Thank you very much for having me.