Trade Adjustment Assistance is a Small Price To Pay For the Benefits of Trade Deals

Next week, the Senate will vote on Trade Promotion Authority (TPA), a measure that gives the President trade negotiating power that is necessary to wrap up the Trans-Pacific Trade Partnership (TPP), a 12 country Pacific Rim deal, and possibly a later deal with European nations.  To garner the votes needed to pass the TPA measure in the Senate, Democrats want assurances that a subsequent vote on a workers’ assistance program known as Trade Adjustment Assistance (TAA), will pass both chambers.

The TAA offers cash benefits, job training and health care tax credits to workers displaced by foreign trade. According to the Heritage Foundation, the program spends about a billion dollars annually.  But, as is typical with government job training programs, it has shown to be ineffective.  A 2012 study on the TAA found that over a four-year period, TAA recipients earned considerably less after completing training that the program offers, compared to non-trained TAA recipients.  Furthermore, reemployment rates for TAA recipients were lower during the first three years than the reemployment rate for those receiving traditional  unemployment insurance benefits.  Some form of workers’ assistance has been in existence since the Trade Expansion Act of 1962; however, the TAA was significantly reformed in 2002 to counteract effects of the North American Free Trade Agreement (NAFTA).  With potential increases to TAA expenditures that account for new trade deals, however, the TAA will still pale in comparison to the potential benefits of the TPP and the Transatlantic Trade and Investment Partnership (TTIP).

Participation in the TPP alone is estimated to increase U.S. real income $77 billion annually. Even with incremental increases to TAA expenditures due to unintended consequences of these trade agreements, the economic benefits of the trade agreements far outweigh the costs to fund the TAA.  If the fate of TPA is truly entwined with that of the TAA renewal, it may be time for Republicans to compromise on the TAA in order to give the president a fighting chance at wrapping up these trade deals that will position the U.S. for continued economic success.

Comments (3)

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  1. Jacob says:

    Free trade is a no brainer, that in the long run is good for everyone.

  2. Evalynde Hollande says:

    Aren’t people wary of the TPP due to the effects it may have on lower income jobs? While the economy as a whole clearly benefits from the trade deal, how can you ensure that there are no losers among the lower socioeconomic classes?

    • Josh says:

      You can’t ensure no “losers” if by losers we mean people that suffer temporary job displacement due to increased trade. However lowering costs of goods and services on aggregate has to be considered a win for low SES people. Low SES individuals spend a larger percentage of disposable income on consumer goods, therefore they accrue the largest relative benefit from reductions in prices.

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