Maladjusted: The Misguided Policy of “Trade Adjustment Assistance”

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Through much of the post-World War II era of tradeliberalization, organized labor and freetraders struck a grandbargain: negotiated agreements that lower tariffs in the UnitedStates would be accompanied by extra welfare benefits available topeople who lose their jobs because of import competition. As manyfree traders see it, such programs can help mollify the oppositionto new trade agreements and as such are a sacrifice worth making.But that bargain has broken down. The new Democratic majority inCongress has given only half-hearted support for new tradeagreements and has so far refused to grant President Bush newauthority to negotiate and submit them to Congress without the riskof deal killing amendments.

The Trade Adjustment Assistance program is a relic of the pastthat reflects a different economy in a different political setting.The very existence of trade adjustment assistance perpetuates themyth that freeing trade creates special "victims" who deservespecial programs simply because of the reason for theirunemployment. But for every worker who is displaced because ofcompetition from imports or "off-shoring," 30 others lose theirjobs for other reasons such as changes in technology and tastes,and domestic competition. Studies have suggested that workersdisplaced because of import competition were equally successful atfinding new jobs as other unemployed workers. Systemic changes thathelp workers adjust to new opportunities, such as increasing theportability of health insurance and retirement savings, andincreasing labor market flexibility to create new jobs, would bemore fitting policy prescriptions for a free society and a dynamic,service-oriented economy.