Wednesday, July 25, 2007

A Trade Trade?

The Washington Post reports that congressional Democrats are seeking to expand the role, scope and power of the Trade Adjustment Assistance program. The TAA was implemented to help workers adjust to the impact of globalization, by providing funds for re-training, relocation, and job searching to those "whose hours of work or wages are reduced as a result of increased imports." Currently, TAA assistance is limited to those in the manufacturing sectors, whom had been the hardest hit by globalization; the Democrats are trying to expand TAA to jobs in the service industries, such as computer programmers and call-center staffers. According to the Post:

Last year, the Labor Department approved 1,400 petitions covering about 400,000 workers, according to a recent study by the Government Accountability Office, though fewer than 100,000 workers sought and received benefits. The agency denied 800 petitions, mainly because the workers did not produce "an article" and hence fulfill the basic definition of a manufacturing worker. Most of the denials involved two industries, the GAO said: business services such as computer programming and airport-related services such as aircraft maintenance.

The TAA is a grand political compromise that helps make globalization possible. While globalization produces massive net benefits, those benefits tend to be spread across the entire population, while the costs of globalization are typically localized in inefficient industries that suffer as jobs move abroad. Those that lose their jobs have a larger incentive to lobby their congressmen than the vast majority that benefit from lower prices and increased quality; thus, globalization contains the seeds of its own defeat. The TAA helps reduce the cost of economic dislocation, making it easier for the public and politicians alike to "do the right thing" by advancing the cause of globalization. The TAA has typically enjoyed broad bipartisan support, and the current bill is co-sponsored by Sen. Olympia Snowe (R-ME) and Sen. Max Baucus (D-MT).

Why is this effort from the Democrats problematic then? In the past, TAA has been part of a grand trade deal: Republicans would support TAA and in return Democrats would support free trade deals. But the current Congress doesn't seem as willing to give that quid pro quo. The extension of Trade Promotion Authority (formerly known as Fast Track, TPA means that Congress can only vote up-or-down on trade bills, rather than amending, adding, and subtracting to the deal. Without TPA, it is exceedingly difficult to conclude trade agreements, as other states are loathe to make concessions knowing that Congress may very well undo whatever US concessions are given in return.) is in danger, and Congress has delayed consideration, let alone approval, of the previously signed trade deals with Peru, Panama, Colombia, and South Korea, despite a deal in May to bring the agreements to a vote. Protectionism was a major theme of many of the Democrats who won office in last year's election, and passing TAA in the absence of a commensurate expansion of global trade will only further retard the global and domestic economy.

Hopefully, Senate Republicans will insist that the Democrats acquiesce on trade in exchange for expanding protection for those who suffer from globalization. If they don't, and the growing anti-trend continues, economic promise will grow dim.


Matt Eckel said...

The thing to keep in mind, though, is that Congressional Democrats are not acting in a vaccum. They are facing increased pressure from their constituents to institute protectionist policies as income inequality and economic uncertainty continue to rise in the United States. While I support free trade, I recognize that it must be made politically solvent. Adjustment assistance is one piece of the puzzle, but far more aggressive policies will have to be put in place in order to soothe people's economic woes and keep them from being blamed (wrongly) on free trade. In particular, this means creating a system of universal health care, an education trust fund, better unemployment insurance etc. When the government takes its hands off trade (a necessary and positive step, let me reemphasize), it must intervene more aggressively to mitigate some of the negative consequences. Sustained free trade is politically incompatible with the domestic policy regime that has reigned in Washington in recent years. Republicans must be willing to put forward a REAL compromise.

Seth Weinberger said...

Matt: While I don't disagree with your sentiment or general argument, I do take issue with your specifics. Linking support or expansion of trade to issues like health care or education reform would effectively doom globalization, as those issues are so politically difficult. It's not just a question of compromise with those areas. It's true, Americans need to feel more positive about globalization, but an expansion of TAA is the logical and possible route to go.

Matt Bondy said...

I'm a bit surprised that the Democrats would push to broaden the scope of the TAA horizontally rather than deepen its present ability to assist laid off manufacturers.

Would it be too cynical to presume, on a political note, that most Democrats - in their NE and Pacific NW strongholds - are beholden more to manufacturer's interests than to those of white collar workers anyway? Is TAA really doing *that* good of a job for its present beneficiaries that the system should be broadened rather than improved-in-place?


Matt Eckel said...

I'm not suggesting an explicit link to this round of trade bills, which the Democrats ought to let through. Rather, I think that those elected officials that are supportive of free trade need to recognize that its political solvency is quickly evaporating, and a damaging populist backlash will take place absent some of the more substantive corrective measures that I proposed above. Unfortunately, another person will need to occupy the Oval Office in order to implement such large scale reforms. I just hope that public pressure hasn't grown too strong to ignore by that point.