Does Anyone Lose as a Result of International Trade?
In our smartphone and wheat example, consumption increases in both the United States and China as a result of trade. Everyone gains, and no one loses. Or do they? In our example, we referred repeatedly to “China” or the “United States” producing smartphones or wheat. But countries do not produce goods—firms do. In a world without trade, there would be smartphone firms and wheat farms in both China and the United States. In a world with trade, there would be only Chinese smartphone firms and U.S. wheat farms. Chinese wheat farms and U.S. smartphone firms would be competed out of business. Overall, total employment would not change, and production would increase as a result of trade. Nevertheless, the owners of Chinese wheat farms, the owners of U.S. smartphone firms, and the people who work for them are worse off as a result of trade. The losers from trade are likely to try to persuade the Chinese and U.S. governments to interfere with trade by barring imports of the competing products from the other country or by imposing high tariffs on them.
