If Congress wants more trade, there’s a bill to pay

The 2023 omnibus appropriations bill, which passed in December, included $500 million in funding for the Trade Adjustment Assistance (TAA) program but apparently lacked the actual authorizing language. TAA helps workers displaced by the effects of international trade to retrain and upgrade their skillsets and can help extend unemployment insurance. As Congress tries to figure out whether the program’s operations will be renewed during the current fiscal year, more than 24,000 workers who have applied are in the lurch.

Trade expands the economy, but the benefits are not equally distributed. It can be what economists call “Pareto efficient”: Everyone is at least as well off as they were before, as long as the winners compensate the losers. But winners do not write checks directly to the losers. Instead, that transfer is best done through domestic policies — policies like worker retraining assistance and extended unemployment insurance.

If getting TAA up and running again means that the administration will get back to fighting for more market access abroad (which could be worth far more than $500 million to the U.S. economy), then it might be a good deal for U.S. businesses, workers and taxpayers.

The TAA program is far from perfect, but it’s gotten a bad rap. Congress and the Kennedy administration launched it in 1962 with good intentions, but adjustment assistance is hard to get right. Workers lose their jobs for a host of reasons that legislators can’t control such as technology, competition and business cycles. If they lose their jobs due to a trade agreement signed by the U.S. government, TAA is intended to help them out a bit.

The original program had few benefits but was expanded in 1974. Since then, successive administrations have revised it in different ways: There was a further expansion in 1980, then it was trimmed under President Reagan before another expansion under George W. Bush. Politicians often come into office with well-intentioned plans to improve the program, which can result in expansion, consolidation and or attempts to streamline the various strands of training and benefit programs around the country.

Warts and all, TAA can make a difference for workers who lose their jobs from trade. The U.S. Department of Labor’s website tells the stories of Joyce, Buford, Brenda, Lori, Jean-Louis, George, Thomas, Lorea and many others. Read through these, one after another, and you can see how the extension in unemployment benefits plus retraining helped these people find new and often better jobs.

Ernesto lost his job as a truck driver and maintenance repairman at a mining company and used TAA money to get certified for an information technology career. “Learn to code” might be a cliché on Twitter, but it helped him earn more than in his old job. Lori lost her job when her employer shifted operations abroad. She used TAA funds toward a degree in office technology, which she utilizes in her new job.

These stories illustrate how the creative destruction of trade often pushes people into more productive opportunities. TAA can help smooth the transition.

Ben Hyman, an economist at the Federal Reserve Bank of New York, found that workers who lost their jobs to trade and got adjustment assistance after 10 years had average cumulative earnings of $50,000 more than workers who lost jobs to trade but did not get adjustment assistance. The program costs more than that, though. As Hyman noted, it costs the government $7,500 per year for retraining and $15,000 per year for extended unemployment insurance. That is, the annual direct costs of adjustment ($22,500 per year) exceed the worker benefit ($5,000 per year).

That $17,500-per-person difference, however, is perhaps a price we pay for the even-larger benefits of trade liberalization.

As Jill O’Donnell, director of the Clayton Yeutter Institute of International Trade and Finance, points out, detailed interviews with large swaths of the American public show that they want more international trade. This is true, O’Donnell notes, even though “the conventional wisdom emanating from Washington is that new trade agreements are political nonstarters.”

Ambassador Katherine Tai, President Biden’s trade representative, was recently asked by members of Congress why she wasn’t pursuing more trade agreements that included actual market access. Tai said that if tariff liberalization can be leveraged to promote “resilience, sustainability and inclusiveness” in the global economy, “I am all for it.”

Trade or domestic policy can’t necessarily guarantee all of that. But a better job? Well, ask Joyce, Buford, Brenda, Lori, Jean-Louis, George, Thomas or Lorea. Their stories demonstrate that trade liberalization can be leveraged for upskilling and a better job. The TAA’s $500 million seems like a small price to pay.

Christine McDaniel is a senior research fellow with the Mercatus Center at George Mason University.