The Benefits of Free Trade to U.S. Consumers

Quantitative Confirmation Of Theoretical Expectation

By James Langenfeld and James Nieberding

James Langenfeld is a director at LECG, an economics and finance consulting firm, and an adjunct professor at Loyola University Law School, Chicago. Previously, he worked at the Federal Trade Commission, Lexecon, Inc., and General Motors, and taught at two other universities. He has published widely, and testified on economic issues in federal and state courts, before the European Commission, and before many governmental authorities. His Ph.D. is from Washington University in St. Louis.

Jim Nieberding is a senior managing economist in LECG’s Washington, D.C. office. His work includes theoretical and empirical analyses of horizontal and vertical issues in private litigation and in matters before the U.S. Federal Trade Commission, U.S. Department of Justice, European Commission, Taiwan Fair Trade Commission, and various federal and state courts. He has taught undergraduate and graduate courses in economics and statistics and has published articles in academic journals. His Ph.D. is from The Ohio State University.

Much of the literature concerning trade liberalization focuses on estimating the effect of increased trade on aggregate economic indicators, such as the growth in GDP per capita. Although there is a general recognition that trade benefits consumers, there is little research that estimates the direct impact of increased trade on U.S. consumers. We take broad measures of the economic impact of trade liberalization from three authoritative studies and apply economic principles to estimate the impact of increased trade on the income of U.S. households. We find, for example, that U.S. households gained about $2,500 in 2002 from increased trade, or the equivalent of almost six percent of the median household income in that year. We believe these results should be given weight in the ongoing debate regarding the effect of globalization.

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