Ricardo Revisited?

NewAmerica.net, Baumol and Gomory:

In a world in which productivities are often not fixed by nature but are often acquired we have shown the following possibilities:

That the economic development of a trading partner can be harmful to the home country. Although the effect of that development starts good, it ends badly.
That there is a dominant and dominated relation possible between two countries, a relation that is good for the dominant one and bad for the dominated one.
That a country can attain a dominant position only by having an undeveloped trading partner. This can occur naturally if the trading partner is simply there in an underdeveloped state, or the underdevelopment can be brought about by mercantilist actions that destroy industries.
There is inherent conflict not only between a nation in a dominant position but between that dominant partner and the interests of a two-county world.
While a country cannot gain a dominant position by building up its industries, it can avoid a dominated position and assure a good outcome by developing a particular subset of its own industries and not allowing them to be destroyed.

It is possible that the United States and China were in the dominant and dominated position some time ago. We should recognize that China’s evolution away from that state can be harmful to the United States. Furthermore we can observe that China’s gain has been accompanied by the disappearance or at least decline of a number of our industries. We need to be cautious because, as these standard models show, there is a distinct possibility that this situation can even lead to significant loss through deindustrialization in an initially prosperous economy.

 There is a grain of truth here, but It isn't time to write of the Ricardian model.  In the Heckscher-Ohlin model, the 'dominant' country benefits from trading with 'dominated' countries because the capitalists get the benefits of cheap labor.  As productivity grows in 'dominated' countries, our capitalists have less advantage over them which would simply reduce trade if everything else were homogenous (which it is not), so there is no real problem in the Ricardian and Hechscher-Ohlin models.  The real potential problem is outside of those models.  The problem would be if the US specializes in industries which do not grow in productivity and/or demand in the future and the formerly 'dominated' countries do specialize in these industries.  China in particular is specializing in manufacturing which has traditionally been the sector with the very highest productivity growth, so that is a good sector to specialize in for developing future productivity and wealth and the US may lose out by losing relative manufacturing capacity to other countries.  The oil industry has been seeing declines in productivity for decades, but demand is price inelastic and is income elastic and demand grows as global incomes grow and so that sector has a bright future despite its declines in productivity.  The US used up most of our cheap oil a long time ago, and we have been a net importer for 40 years, so this is unlikely to be a bright spot for the US.