Adjustment Assistance and Globalization: Not Much of a Deal

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from Truthout:



Adjustment Assistance and Globalization: Not Much of a Deal
By Dean Baker
t r u t h o u t | Perspective

Monday 05 November 2007

As Congress debates a new set of trade pacts, there is an effort to expand trade adjustment assistance as a political quid pro quo. The logic is that new trade deals may cause some number of workers to lose their jobs, but additional adjustment assistance will offset much of the pain. This reasoning seriously misrepresents the economic impact of trade, and is likely to divert the country from trade policies that benefit the bulk of the population.

The key point - which every economist knows - is the vast majority of workers who are harmed by trade do not lose their jobs. The main impact of trade is on wages, not jobs. The basic story is the availability of lower-priced imports will displace some number of workers directly. For example, if we buy more cars from South Korea or some other country with which we have a trade deal, there will be a decline in the number of workers employed producing cars in the United States. These workers may qualify for the sort of trade adjustment assistance programs that are being debated in Congress.

Of course, even here the story may not be clearcut. Autoworkers may lose their job simply because a particular model is not selling well, or possibly due to the fact productivity growth reduces the number of workers needed to produce a car. It may not always be possible to determine that increased auto imports from Korea led to any specific autoworker losing his or her job.

But even if we can get around the problem of determining the actual job losers from trade, and then make them whole or at least improve their plight with adjustment assistance, we have only addressed a small part of the damage. The real damage stems from the fact we have depressed the demand for a specific type of labor - in this example manufacturing workers.

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The public should be clear when we continue expanding trade along its current path, the bulk of the workforce is likely to end up as losers. Helping those hardest hit with adjustment assistance may still be a good thing, but it does nothing for the most majority of workers who are hurt by trade. ......(more)

The complete piece is at: http://www.truthout.org/docs_2006/110507F.shtml