Overall, the evidence that trade has depressed the 10  wages of unskilled workers in the developed world is mixed at best . Instead, most economists have argued that the more important factor behind rising wage inequality in the United States has been the “skill-biased” nature of technical progress – the fact that computer technology seems to have added more to the productivity of high-skilled than lower skilled employees. One recent and well-publicised IMF study made the same point (Chapter 3, World Economic Outlook, April 2017) but this is only the latest in a very extensive and long-lived literature that has reached broadly similar conclusions. 8  Note that this could reflect the effect of a period of unemployment – so-called “scarring” – and needn’t say anything about the impact of trade on wages. 9 Krugman (1995). 10 Harrison et al. (2011) provide a useful survey; Haskell and Slaughter (2003) provide a careful anaylsis designed to distinguish the effects on wage inequality of both technology and trade and find only weak effects of the latter; Stone and Cavazos Capeda (2012) find some effect of imports on wage differentials but, allowing for their impact on productivity, positive effects across the distribution. 10  All speeches are available online at www.bankofengland.co.uk/speeches  10  I can’t possibly do any real justice to this work. Nor should I over-state its results. None of it attributes everything to the nature of recent technical progress or dismisses entirely the impact of trade on inequality.
But you can I think see a broad-brush correspondence between these high-level developments and the more specific trends in the UK’s clothing and textile sector. Until the early to mid-1970s import penetration was roughly stable and real clothes prices fell at the relatively gentle pace of 1% or so a year (Charts 3 and 4). We’ve seen the same broad stability, in both trade and prices, in the years since the financial crisis, during which global trade growth has also slowed. But the years in between saw a marked rise in import penetration and very rapid declines in real UK clothes prices, particularly over the second half of that period. 2  Tariffs began to fall in the 1950s, container ships, which materially reduced shipping costs, were first developed later that decade, and the first regional trade agreements (notably the EEC) were made in the 1960s. 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  Chart 3: Import penetration started growing in  Chart 4: Real UK clothes prices fell steeply  1970s, rose strongly in 90s, stable post-crisis  between mid-1970s and the crisis  35  clothing and textile imports, % of consumption  30 25 20 15 10 1965 1970 1975 1980 1985 1990 1995 2000 Source: ONS and UN Comtrade Database  Source: ONS  Cumulatively, those declines were pretty spectacular. Even in nominal terms, clothes in the UK were on average cheaper in 2008 than they had been in 1975 (Chart 5).