THE MISGUIDED POLICY OF ‚ÄúTRADE ADJUSTMENT ASSISTANCE‚Ä?
December 28, 2007
The idea that negotiated agreements to lower tariffs in the United States should be accompanied by extra welfare benefits available to people who lose their jobs because of import competition is bad public policy, says Sallie James, policy analyst at the Cato Institute.
According to James:
- The Trade Adjustment Assistance program (part of the U.S. Department of Labor) is a relic of the past that reflects a different economy in a different political setting.
- The very existence of trade adjustment assistance perpetuates the myth that free trade creates special "victims" who deserve special programs simply because of the reason for their unemployment.
- But for every worker who is displaced because of competition from imports or "off-shoring," 30 others lose their jobs for other reasons such as changes in technology and tastes, and domestic competition.
Further, studies have suggested that workers displaced because of import competition were as equally successful at finding new jobs as other unemployed workers, says James. Systemic changes that help workers adjust to new opportunities, such as increasing the portability of health insurance and retirement savings, and increasing labor market flexibility to create new jobs, would be more fitting policy prescriptions for a free society and a dynamic, service-oriented economy.
Source: Sallie James, "Maladjusted: The Misguided Policy of 'Trade Adjustment Assistance,'" Trade Briefing Paper no. 26, Cato Institute, November 8, 2007.
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