Against Trade Adjustment Assistance Programs

by Pejman Yousefzadeh on July 4, 2011

Steve Chapman writes truth:

International trade has been one of the most powerful forces for prosperity in the history of the world. But a lot of Democrats, including the one occupying the Oval Office, treat it as a mixed blessing at best, requiring reparations for the alleged victims.

That’s the source of the fight between the president and congressional Republicans over two things the White House wants: free trade agreements with South Korea, Colombia, and Panama and renewal of assistance to workers whose jobs disappear because of foreign competition.

Republicans are agreeable to the trade deals. But the Trade Adjustment Assistance program, which doles out funds for extended unemployment benefits, job training, and relocation, is another story entirely.

They think it amounts to largely wasting billions of dollars. They see no reason to hold free trade hostage to this boondoggle. And they’re right.

The argument for the program is that trade has many beneficiaries and a small number of victims, who ought to be compensated for their trouble. Most of us get richer from buying and selling in the international marketplace, and this program takes some of that extra wealth and spreads it around to the unlucky few who are worse off.

But the logic has never stood up well to inspection. If a steelworker in Pennsylvania loses his job because of competition from Texas, he is just as unemployed as one whose competition comes from Brazil. Yet the latter gets special help and the former gets none.

Which is explained by xenophobia, of course; losing your job as a result of domestic competition is no big deal to politicians, but losing your job as a consequence of foreign competition is somehow an affront that must be punished. As Chapman also notes, a study in the journal Contemporary Economic Policy found that there is “no statistical evidence that the TAA program improves the average employment outcome of beneficiaries over a comparison group.” There is no reason on Earth why we should continue with the program, let alone make it a sine qua non for signing on to free trade agreements.

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