Monday, June 13, 2011

Breaking the logjam on trade deals

The US has negotiated trade deals with Colombia, South Korea and Panama.  The deals appear to have bipartisan support.  But they are being held up in Congress because Republicans have refused to go along with an extension of the stimulus-era spending on the Trade Adjustment Assistance program (TAA), which provides support for workers who have lost their jobs because of trade. (TAA has been around since the 1960s but its funding jumped considerably under the stimulus package; Democrats are pushing essentially to make the stimulus component permanent.) 

In theory TAA seems like a nice way to win popular support for trade deals which on balance benefit the economy overall, but definitely create losers along with winners.  However, it is very hard to identify individuals who can definitely prove they lost their jobs to imports (which GM workers will lose their jobs because of Hyundai's growth and which will lose them people simply do not like GM's cars).   Also, why should those who lose their jobs to imports (even if they can be identified) get extra benefits that other displaced workers fail to receive (e.g., those who lose their jobs to technological change). 

Economists Matt Slaughter and Robert Lawrence propose in a recent NYT op-ed that TAA be scrapped and replaced by a program that provides assistance for all laid-off workers.  Their argument: "More Trade and More Aid."  It could be financed by changing the structure of the payroll tax, charging a much lower rate but widening the base. 

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