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Something We Can Actually Do about Trade

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By William Reinsch: 

Much of the trade debate this election year has focused on how trade policy and trade agreements have failed our workers: how income inequality continues to grow, and how the alleged benefits of trade have passed the workers by only benefitting large corporations.

One part of dealing with that is to refute it with the consumer argument — that trade lowers prices and saves consumers’ money, which is particularly meaningful for families on tight budgets. This has turned out to be economically true but politically irrelevant. Price tags don’t say, “if this product had been made entirely in the U.S., it would cost X dollars more.” There is actual research on this point — a recent article in MIT Technology Review calculated that if the Apple iPhone 6s plus were made entirely in the U.S. of U.S.-sourced components, it would cost between $809 and $849 instead of the current $749 price — but most consumers don’t read academic journals and don’t internalize the savings they are receiving.

The other part of dealing with it is to acknowledge its truth — that trade has been a contributing factor to job loss and inequality — and then to talk about effective ways of countering that trend rather than steps that don’t work but make us feel better.

As I have pointed out several times, simply opposing a trade agreement is by definition a negative strategy. It means doing nothing, which can only mean that while things might get worse, they certainly won’t get any better. The anti-trade folks try to finesse that point by arguing that they’re not against all trade agreements, just the bad ones, ignoring the inconvenient fact that most of them have never found one they could support.

The truth is that while we might argue over which, if any, of them are “bad,” we can probably agree that none of them are perfect. And why would anyone expect them to be? They are the product of negotiation, which inevitably means give and take. No one gets 100%, and it has become commonly accepted in the negotiating world that if one produces an agreement that disappoints everyone equally, it is probably a good piece of work. So, Donald Trump’s jeremiads notwithstanding, our negotiators are neither stupid nor venal. They do very well, but they never get 100% of what they ask for.

So, what do we do that will actually make things better? I answered that question at a macro level by detailing the competitiveness tripod — helping the victims adjust, incentives to stay here, and running faster than the competition. Today I want to elaborate on part of the first element — adjustment — how we help those who have lost their jobs because of trade rebuild their lives and incomes.

Nobody does that very well, except maybe Denmark, because it’s hard. The part of the work force most affected not only does not have a rich reservoir of fallback skills and job search experience, but often lives in communities where there are few other alternatives anyway.

It turns out, however, that we might be doing better than we thought. The Labor Department’s most recent annual update on the trade adjustment assistance (TAA) program concluded that 74% of the workers who lost their jobs because of trade get new ones within three months of receiving TAA benefits, and after six months, 92% of them are still working.

This is good news, but don’t get too excited. A 2013 Labor Department report notes that the program addresses only a fraction of the problem. Labor estimates that only half of the 4.8 million workers eligible for retraining benefits over the past 40 years actually received any, and it is probably worse than that today in light of cutbacks in the program when it was last reauthorized. So, the bottom line is that we seem to be getting better at solving the problem, but we are doing less of it, just as the need is greater.

One solution: enact an expansion of the TAA program with implementing TPP. Both parties have argued that trade costs jobs. Giving the TAA program a shot in the arm would give politicians a chance to put their money where their mouths are.
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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: ILO via Flickr
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