Gains from trade: evidence from nineteenth century Japan
Populist movements in the US and Europe have mounted an attack on economic globalization. Their responses to more than a half-century of globalization include leaving multilateral trading blocs, imposing steep unilateral tariffs and striving for balanced bilateral trade.
Trade theory suggests that this rejection of today’s open trade regime will impose costs on globalized economies. But using the experience of contemporary economies to assess the magnitude of these costs presents significant analytical challenges because of multiple modes of globalization – investment and migration as well as trade – and substantial technological change.
Even if we were able to disentangle the impact of open trade from these other influences, we would still face the issue of identifying the causal impact of open trade. Identification requires a comparison with a counterfactual world without open trade: the longevity of the current period of globalization makes that difficult.