Conservatives Should Support Free Trade, Oppose Trade Adjustment Assistance

Congress is currently debating whether to pass Trade Promotion Authority (TPA), which would speed up the consideration of any international trade deal that the executive branch reaches over the next several years. Unfortunately, Senate Republicans have caved to Democrats’ demands that this fast-track trade bill be merged with a reauthorization of the Trade Adjustment Assistance program (TAA), a program which gives assistance to workers who have supposedly been displaced as a result of foreign trade. While the former program may potentially be beneficial to promoting freer trade, the latter is a failed and duplicative government welfare program. The two proposals, TPA and TAA, are not complementary and should be considered separately.

Trade promotion authority does not stop Congress from blocking any trade agreement that the executive branch reaches; it merely requires that the agreements have an up-or-down vote in Congress within a specified period of time after the president signs them.
Economists have understood that free trade is mutually beneficial, even with relatively poor nations, for centuries. As conservatives who care about economic growth, job creation, and a higher standard of living, free trade should always be encouraged wherever it can be found. For this reason, fast-track authority for trade agreements has been a conservative priority for decades.

On the other hand, there is Trade Adjustment Assistance. Under the program, the government gives subsidies—in the form of job training for workers and direct financial assistance for firms—to those purported to be harmed by increased international trade. From a public policy standpoint, trying to “correct” for job losses in particular sectors as a result of increased competition is simply wrongheaded. In order for an economy to grow and thrive, industries need to be flexible and able to change with changing market conditions. Trying to prop up industries that cannot compete on their own merely delays the inevitable and inhibits growth.

The process economist Joseph Schumpeter referred to as “creative destruction” is a necessary and positive feature of innovation and competition, and in the end benefits everyone. Trade Adjustment Assistance essentially offers bailouts instead of letting the market naturally adjust, and makes about as much sense as subsidizing typewriter production after the invention of the computer.

Aside from these problems of principle, TAA has also failed in its stated objectives from a practical perspective. Several studies have analyzed the effectiveness of the program, and have concluded that the program is of dubious value. An analysis from American University found that workers who participated in TAA actually ended up earning 10 percent less than other displaced workers who did not rely on government assistance.[^1] Mathematica Policy Research found no statistically significant difference between employability of program participants and non-participants.[^2] This ineffectiveness doesn’t come for free – the Congressional Budget Office estimates that the program, if reauthorized, will cost taxpayers $1.8 billion between now and 2020. While the idea of protecting American workers from foreign competition appeals to many, the reality is that the program is, both in theory and in practice, deeply flawed.

Finally, the eligibility standards for TAA are notoriously loose, meaning that some companies are able to cash in despite not actually having been impacted by foreign trade. Recent examples are Solyndra, the solar energy boondoggle that famously went bankrupt, and Hostess, which was held hostage by unreasonable union demands.[^3] The assistance to these companies had more to do with politics than helping the displaced and needy.

Conservatives shouldn’t be afraid to support free trade, and allowing the president Trade Promotion Authority may yield some good deals in the future—especially if a conservative is elected to the White House in 2016. But Trade Adjustment Assistance is unambiguously bad policy with a proven record of failure, that only continues the practices of corporate cronyism and bailout culture.

If the Senate passes the hybrid TPA/TAA deal that is currently on the floor, the House of Representatives should respond by only sending back a clean fast-track authority, leaving TAA for a separate debate.

[^1]: Kara M. Reynolds and John S. Palatucci, “Does Trade Adjustment Assistance Make a Difference?” American University Department of Economics Working Paper Series, August, 2008.
[^2]: Peter Z. Schochet, et al., “Estimated Impacts for Participants in the Trade Adjustment Assistance (TAA) Program under the 2002 Amendments,” Mathematica Policy Research, Inc., August, 2012.
[^3]: News release, “US Department of Labor Certifies More Than 18,000 Former Hostess Workers Around the Country as Eligible to Apply for Trade Adjustment Assistance,” U.S. Department of Labor, February 19, 2013 and Eric Martin, “Solyndra Workers to Get Trade Adjustment Assistance Benefits,” Business Week, November 30, 2011.

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