Paulie K recently has done some back of the envelope calculations regarding trade and deindustrialization, concluding that trade isn't an important factor in the long term effects of deindustrialization. In this, he refers to Dorne, Autor, and Hanson's notorious China Shock paper. His argument:

What looks like disagreement is actually a difference in the questions being asked; once you take that into account, there’s more or less a consensus about the historical record. Basically, it comes down to which of these two questions you’re trying to answer:

1. How much of a role did trade play in the long-term decline in the manufacturing share of total employment, which fell from around a quarter of the work force in 1970 to 9 percent in 2015? The answer is, something, but not much.

2. How much of a role did trade play in the absolute decline in manufacturing employment, down about 5 million since 2000? Here the role is bigger, basically because you’re comparing the same effect with a much smaller denominator; even so, trade is less than half the story, but by no means trivial.

Autor et al only estimate the effects of the, um, China shock, which they suggest led to the loss of 985,000 manufacturing jobs between 1999 and 2011. That’s less than a fifth of the absolute loss of manufacturing jobs over that period, and a quite small share of the long-term manufacturing decline.

I’m not saying that the effects were trivial: Autor and co-Autors show that the adverse effects on regional economies were large and long-lasting. But there’s no contradiction between that result and the general assertion that America’s shift away from manufacturing doesn’t have much to do with trade, and even less to do with trade policy.

Krugman isn't so much wrong in his claims as he is misinterpreting the significance of the co-Autor's research on China in a way that makes trade seem unimportant. However, the co-Autor's research does shake up a general consensus and does say trade policy matters in highly economically significant ways. The key to their research is that trade has persistent and differential impacts on deindustrialization; Krugman's aggregate level of abstraction unfairly conceals these results. The co-Autors' research provides substantial disagreement on an important issue: re-adjustment. When Kruggles talks about productivity, he is talking about technological change. He argues that when you decompose the lost manufacturing jobs into those due to trade and those due to technology, trade's impact is a lot smaller than technology, so trade policy is irrelevant to de-industrialization. However, Krugman implicitly argues that what matters is the direct partial equilibrium effects from trade and technology. The whole point of the China shock research project is that trade has very different general equilibrium effects on deindustrialization than technology, so trade policy matters.

The co-Autors actually decomposed trade and technology shocks in another paper.

Local labour markets with greater exposure to trade competition experience differentially large declines in manufacturing employment, with corresponding growth in unemployment and non-employment. The employment decline is not limited to production jobs but instead affects all major occupation groups, including a notable decline in managerial, professional and technical jobs. Employment losses are particularly large among workers without college education, for whom we also observe employment declines outside the manufacturing sector which may stem from local demand spillovers. While trade exposure reduces overall employment and shifts the distribution of employment between sectors, exposure to technological change has substantially different impacts, characterised by neutral effects on overall employment but substantial shifts in occupational composition within sectors. In particular, we find that susceptibility to technological change predicts declining employment in routine task-intensive production and clerical occupations both in the manufacturing and non-manufacturing sectors. For most demographic groups, these declines in routine employment are largely offset by increasing employment in abstract or manual task-intensive occupations which tend to comprise the highest and lowest paid jobs in the economy. One exception is among women, for whom the reduction in routine-occupation employment translates to an overall decline in employment. Concurrent with the rapid growth of US imports from China, the effect of trade competition on the manufacturing sector has become stronger over time, while the effect of technological change on employment composition in the manufacturing sector has subsided. Conversely, the impact of technology on the non-manufacturing sector is growing as technological change seems to be shifting from automation of production in manufacturing to computerisation of information processing in knowledge-intensive industries.

Krugman implies that the long term relative decrease in deindustrialization is almost entirely due to technology and the recent absolute decrease is partially trade. What the co-Autors are arguing is that, while the long term trend remains, the cause of the trend has changed primarily to trade. This is a contradiction to "the general assertion that America’s shift away from manufacturing doesn’t have much to do with trade, and even less to do with trade policy!" Krugman's long term / short term distinction is, honestly, rather sloppy. The whole point is that while the trend has continued, there has been a shift in the important cause of the trend. It did not have much to do with trade policy in the 1970s. It does now.

Even more importantly, the co-Autors show that trade and technology have differential impacts on de-industrialization. Technology shocks produced a standard trade theory reallocation to other sectors with neutral employment effects. Trade shocks result in a persistent loss of overall employment. This matters a lot! (Especially when you look at, say, recent elections.

Krugman's badeconomics here is more of an error of omission not commission. His argument unfairly downplays the co-Authors on the relevance of trade policy for de-industrialization by framing it in such an aggregate way that glosses over very significant findings.

p.s. No I don't think trade agreements are bad economics. I'm not making argument about policy, it is an argument about how to interpret the causes and effects of deindustrialization.