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A Closer Look at Trade Adjustment Assistance

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By William Reinsch:

Over the years Trade Adjustment Assistance, or TAA, has become a standard part of the trade wonk’s vocabulary. The program has had its ups and downs. The Reagan Administration tried hard to kill it; the George H. W. Bush Administration tried too, but perhaps not so hard. Clinton didn’t do it any favors, particularly at the beginning of his term. Republican-controlled Congresses have been unsympathetic — the program actually expired a few years ago except for residual authority that kept it going at a reduced level until it was reauthorized. Yet despite all that, it’s still here and still part of the discussion. 

The reason is simple.  While economists debate vigorously over whether trade causes a net aggregate job loss — I wrote about that in July, pointing out that the data suggests there are other factors that are more important — there is really no debate that trade costs some people some jobs. Nor is there debate that the people who lose their jobs because of trade are not usually the same people getting the new jobs our economy is creating. So, the generally accepted result is that we have a bunch of people — and one can argue how big a bunch it is — who lost their jobs because of trade and are having difficulty finding a new one because they don’t have a broad enough set of skills to enable them easily to change to something new and because they often live in areas that don’t have a lot of other opportunities anyway (The fact that they are often older workers, and companies don’t like to hire older people, even though age discrimination is illegal, is also important — although nobody likes to talk about it, except old people like me.)  

This is the population TAA was designed for, and the program was sold in the beginning back in the Kennedy Administration as a bargain — organized labor would support, or acquiesce in, trade liberalization, and government would take on responsibility for helping the victims of that liberalization. This point is made frequently when the program’s future is debated. 

Unfortunately, things didn’t turn out that way. Particularly in its early years most petitions for assistance were rejected, and even later on many impacted workers were not participating either because they were not deemed eligible or because they didn’t apply. In addition, those that did participate did not always find that doing so made it any easier to find new employment. Indeed, there is some data that shows the percentage of people finding a new job was about the same whether they received TAA or not. So, it would be hard to argue the government delivered on its part of the bargain.

At the same time, it is also hard to argue labor delivered on its part. Never enthusiastic about the program — labor leaders used to refer to it as “burial insurance” — it has clearly not deterred labor from vigorously opposing trade agreements, both old and new. As a result, the political rationale for supporting TAA is clearly not what it used to be — it buys the pro-trade folks nothing. 

That suggests it may be time to think about folding the program into the government’s overall unemployment insurance program. While there is some evidence that the characteristics of the population who lost their jobs because of trade are somewhat different from those of the general population of unemployed, the fact is they are all unemployed and in need of the same services — and it is hard to rationalize treating one group of disadvantaged people different from another in the same boat. 

I do not come to this conclusion easily or lightly. I’ve defended the program from attacks on it since the 1970s and am one of its biggest fans, but if the rationale for a separate program has disappeared, it makes sense to see if there is a better way.

Others have advocated the same thing, but for many of them it has meant simply abolishing TAA and doing nothing about the larger program. That would be an abdication of the government’s responsibility and a huge policy mistake. An integral part of reframing the trade policy debate and turning it into a constructive conversation about the future has to include how to deal with the consequences of the rapid changes that globalization forces on us. For workers, that means helping them become more agile — developing a broader set of skills to equip them for changing jobs more easily, polishing their job search skills, and easing the transition from one job to another, particularly when relocation is required. Simply put, if we want people to think about trade more positively, then we have to deal with inequality and the growing disaffected part of our population, which means we have to do a better job not only of creating new jobs but of equipping our workers to fill them.

How to do that better will be the subject of my next column.
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William Reinsch is a Distinguished Fellow with the Stimson Center, where he works principally with the Center’s Trade21 initiative.

Photo credit: U.S. Government Work via Flickr
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