Despite talk of human rights, drug trafficking and tariffs, the political battle over the Colombia free trade pact is, in part, about taking care of those who are thought to lose their jobs because of increased foreign competition. Democrats in Congress want an increase in the benefits offered under the Trade Adjustment Assistance program in exchange for their support of the Colombia agreement. Politically, promising to compensate those affected by trade makes sense; practically, it is difficult and costly and, worse, probably doesn’t work.
Boosting unemployment benefits for all workers, which was considered as part of the stimulus package Congress passed earlier this year, would be more effective and better for the economy as a whole.
Trade Adjustment Assistance was started in 1962 as a way to ease the loss of manufacturing jobs to foreign competition. To qualify, the company, workers, union officials or the state Department of Labor must apply to the U.S. Department of Labor and demonstrate that the job loss was tied to moving production to a country that has a free trade agreement with the United States or because of foreign imports. The department reviews sales data and surveys customers to determine if moving jobs offshore or foreign imports are responsible for the layoffs.
The U.S. Department of Labor recently determined that 70 workers who lost their jobs because of the closure of a lumber mill in Ashland were not available for TAA benefits, although the company blamed imports from Canada for the shutdown.
Only a small fraction of laid-off workers qualify for TAA benefits, which far exceed those available to employees who lose their jobs for other reasons. Regular unemployment benefits last for a maximum of 26 weeks. Workers who qualify for TAA can extend these benefits, including retraining, for two years. Workers over age 50 may get a wage subsidy, and additional health benefits are available.
As Harvard economist and former Bush administration official Greg Mankiw asks: “Can you really tell whether a worker is losing a job due to trade or due to other forces such as technological change?” Second, “Is a worker who loses a job due to trade deserving of a more generous safety net than a worker who loses his job due to other forces, such as technological change?”
The answer to the first question is probably not; the second, certainly not. However, as the stalled debate over the Colombia pact highlights, trade is a difficult topic politically and TAA allows more lawmakers to justify voting for trade agreements.
When a worker is out of a job, it doesn’t much matter whether the factory downsized or closed because of cheaper products from other countries, technological upgrades that reduced the need for human labor or decreased demand. So, instead of being more individually generous to a small group deemed affected by trade, a better approach would be to extend general unemployment benefits, which also happen to be the most effective economic stimulus. This would help more workers and the economy in general.
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