Don’t Let Trade Adjustment Assistance Block Free Trade | Citizens Against Government Waste

Don’t Let Trade Adjustment Assistance Block Free Trade

The WasteWatcher

George Bernard Shaw once said that if you laid all the world’s economists end to end, they still would not come to a conclusion. On most issues, from the effects of fiscal stimulus, to ideal tax rates, to the appropriate size of government, he was probably right. For every right-leaning Milton Friedman there has long been an equally leftist John Kenneth Galbraith. But there is one issue on which the vast majority of economists speak with one supportive voice: free trade.

In 2006, Wake Forest University economist Robert Whaples surveyed 210 randomly-selected Ph.D. economist members of the American Economic Association and found that 87.5 percent of them “agree that the U.S. should eliminate remaining tariffs and other barriers to trade.” Indeed, since Adam Smith and David Ricardo made their devastating cases against Mercantilism in the late 18th and early 19th centuries, anti-free trade economists have been squarely in the minority. Why? Because free trade works, both in theory and in practice. Over the last 30 years, countries like Chile, China, India, Japan, Poland, Singapore, South Korea, and Taiwan have enormously raised their standards of living through the wealth-expanding powers of free trade. Through it all, Americans have benefited from the expansion of export markets and the anti-inflationary power of lower prices on a huge array of consumer goods.

Today, despite the pleadings of populist factions in both parties, most Democrats and Republicans seem to agree that reducing trade barriers and making the world economy more open is the right thing to do. Unfortunately, free trade agreements (FTAs) between Panama, South Korea, and Colombia, signed in 2006 and 2007, are still awaiting approval by Congress. On April 7, 2011, after meeting with Colombian President Juan Manuel Santos, President Obama stated that his administration has “intensified [its] efforts to move forward on trade agreements with Panama and Colombia, consistent with our values and with our interests” (emphasis added). There, it seems, is the rub. Congressional Democrats and President Obama have made it clear that they will not approve the pending FTAs unless Republicans reauthorize Trade Adjustment Assistance (TAA), a program within the Department of Labor that purports to compensate and retrain American workers who lose their jobs as a result of foreign competition.

TAA’s primary aim (reimbursing and reeducating laid-off workers) may sound laudable, but it is entirely unjustifiable. There is no reason to treat unemployed workers who lost their jobs as a result of international trade as though they are more deserving of assistance than workers who lose their jobs due to domestic competition, but that is the purpose of TAA. Its benefits are significantly more generous than those of standard unemployment insurance, and it is difficult to interpret that discrepancy as anything but a sop to the American unions that represent manufacturing workers most susceptible to foreign rivals. As George Will asked, “Why should someone be entitled to such welfare just because he or she is affected negatively by competition that comes from abroad rather than down the street?” Lamentably, for some members of Congress, the answer to Will’s question is simple: because they vote for Democrats.

Along with other unions, the United Auto Workers has come out against the proposed FTA with Colombia, and the United Steelworkers Union opposes all three pending FTAs. Meanwhile, Canada has already approved trade deals with both Colombia and Panama, and the European Union has passed agreements with all three countries. Labor unions have every right to be concerned about the effects of increased trade, but allowing them to hold hostage the negotiation process on FTAs that will promote jobs and growth for the vast majority of Americans is absurd. Worse, it sends the message that ordinary Americans not paying union dues or working manufacturing jobs are less qualified for government largesse than their rust-belt counterparts. If equality of opportunity is what the Obama administration seeks, that message is the wrong one.

Luke Gelber

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