PERHAPS AT NO POINT in recent years has the debate over the direction of trade policy so demanded public attention.Whether it has been Al Gore and Ross Perot clashing on national television about the merits and pitfalls of the North American Free Trade Agreement (NAFTA), or individual members of Congress attempting to provide additional protection for domestic industries in the General Agreement on Tariffs and Trade (GATT), the debate over the pace and scope of changes in trade regulations and tariffs has been omnipresent.Both proponents and opponents of NAFTA and GATT have argued that the implementation of these treaties will have large and important effects on the domestic economy.Close to the surface in this debate is the issue of U.S. manufacturing competitiveness."The experience of increasing import competition, particularly from export-led economies such as Japan, Korea, Singapore, and Taiwan, concurrent with stagnant living standards during the 1970s and 1980s and decreasing employment in manufacturing, has left some people wondering aloud about the competitiveness of U.S. manufacturing.The concerns include the long-term viability of important We thank Dora Costa, Mark Doms, Jon Gruber, Ron Jarmin, Frank Levy, Robert McGuckin, and Steve Pischke for helpful discussions.We also benefited from the comments of our discussants and the editors, as well as seminar participants at the Bureau of the Census and the University of Pittsburgh.Additionally, we thank Bob Taylor