The Payoff to America from Globalisation

This article summarizes the economic payoff to the United States from its postwar trade opening and estimates the potential future gains from more opening going forward. To quantify these gains, we survey different methodologies and estimates. We find that trade opening since World War II has added between 800 billion to 1. 4 trillion to the US economy, or about 7, 000 to 13, 000 per household. More speculative estimates of the potential additional gains from removing the rest of US trade barriers range from 400 billion to 1. 3 trillion, or about 4, 000 to 12, 000 per household. Since trade opening permanently raises national income, these gains are enjoyed annually. Trade opening inevitably entails adjustment costs. We estimate that the lifetime cost of all worker dislocations that have been triggered by expanded trade in the United States could be as high as 54 billion, although probably less. The permanent gains from past and potential liberalization easily swamp the modest sums necessary to alleviate the temporary pains of adjustment. In the future as in the past, free trade can significantly raise income – and quality of life – in America.