Note on the Fly

by Don Boudreaux on June 21, 2011

in Trade

Even though there is absolutely no reason to give special treatment to people who lose their jobs to imports as opposed to people who lose their jobs to other sources of demand shifts that are unrelated to trade across international borders, Trade Adjustment Assistance (TAA) for workers who lose their jobs to imports is typically justified as a low-cost means of smoothing the road to freer trade.

But today TAA is a boulder blocking the road to freer trade.

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Troll Finder June 21, 2011 at 5:46 pm

Why just today?

John Sullivan June 21, 2011 at 6:14 pm

I thought we already had unemployment insurance.

What about smoothing the road for the consumers who suffer from higher priced goods due to trade protectionism? Why can’t they stake a claim on the companies and unions that stole from them?

I’ve said it before and it can’t be said enough, the consumer perspective is the only correct measure of wealth. Any political intervention that causes higher prices ends up being a net loss of wealth for the society at large-no matter who’s jobs are ‘saved’. But because the higher prices are shared by a great multitude of people, it’s hardly noticed in comparison to the few people or companies who go out of business due to competition.

PrometheeFeu June 21, 2011 at 6:16 pm

TAA is just all-around absurdism. In order to apply for it, you need 2 worker buddies who also lost their job due to import. What if I was let’s say a web design consultant and now I am loosing all my business to India? Why can’t I get TAA?

mitt romney hater June 21, 2011 at 8:42 pm

are the TAA payments a one-time thing that’ll be phased out over a couple of years, or is it written into budgets indefinitely?

(either way, the payments are BAD, but if it’s the former, it may be easier to swallow)

Jurisnaturalist June 21, 2011 at 9:44 pm

Unilaterally eliminating trade barriers could have a $3 billion welfare benefit fir the US That’s almost the same as benefits from eliminating informal trade obstacles at Laredo TX. Trade facilitation, border crossing problems, Public Choice special interest stories are the real problem. That and migration. Otherwise we are fussing over .07% of GDP.

J Mann June 22, 2011 at 10:28 am

If you’re going to change the laws in a way that makes some people worse off and other people better off, while leaving the average better off, I can see the logic in trying to compensate the losers.

On purely political grounds, it will reduce opposition from people who have the right to vote, petition, etc. against free trade.

On moral grounds, depending on your moral premises, there might be an obligation by the winners from a change they have caused to compensate the losers.

From an econ 101 perspective, if you assume away transaction costs, compensating the losers makes the change pareto-efficient.

(I’ll grant, that all begs the question of whether the TAA does any good and/or whether it compensates the losers from the new agreements).

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