Pitching a penny for trade

May 27th, 2011

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This piece was originally published in The Hill.

Imagine that someone presented you with the following proposition: You can have $10, with more to come. You’re just asked to pitch in a penny to improve your neighborhood. You’d probably be quick to take that deal, right? Well, that’s basically the offer on the table right now for the American economy, yet some in Washington are waffling.

Each year international trade adds one trillion dollars to our economy – translating into $9,000 in annual benefits for the average household. Trade supports 1 out of 5 American jobs, and jobs sustained by exporting products pay 13-18 percent more than the national average. Overall, trade is a very good deal for America.

But, even as the vast benefits of trade are broadly enjoyed, we can’t pretend that they come for free. It’s been estimated that about 500,000 jobs are lost due to trade each year. These displaced workers, who represent about 3 percent of the large churn in our permanent labor market, essentially foot the bill for the greater good that trade does for our economy.

For many of these displaced workers, finding a new job with decent wages can be particularly difficult. These workers tend to be older, lower-income, less educated, less skilled, less mobile and harder to re-employ. They often live in places like Michigan, North Carolina, Ohio and Pennsylvania, which have borne much of the brunt of the economic downturn.

For almost 50 years, America has used Trade Adjustment Assistance – or TAA – to help smooth out trade’s rough edges and make sure that the prosperity of many doesn’t rest on the backs of a few. By helping trade-affected workers and firms to transition to new jobs and business opportunities, TAA does more than provide them with a safety net – it provides a path for them – and for America – to take a more active role in the global economy. TAA helps trade-displaced workers return to employment by providing employment counseling, job training and extended income support. It also helps trade-affected small businesses stay in business and avoid layoffs by supporting projects to bolster a firm’s international competitiveness in areas such as marketing, engineering and quality.

In 2009, Congress made very significant improvements to the TAA program, including covering workers and firms in the services sector, covering jobs lost to factory shifts abroad and increasing funds for training. Unfortunately, because of inaction by Congress, these key reforms expired in February.

In 2010, TAA assisted almost 235,000 American workers, providing skills assessments and career counseling to over 136,000 participants and employment training to almost 100,000 displaced workers. Two-thirds of the participating workers had a high school education or less, 59 percent were over 45 and many lived in hard-hit areas like California, North Carolina and the Rust Belt. The 2009 improvements to TAA enabled the program to assist over 185,000 Americans who may not have been previously ineligible for help. And the small but effective TAA program for trade-impacted firms has enabled 99  percent of participating businesses to survive. Many are thriving and some have even become U.S. exporters.

By assisting workers and firms, TAA also enhances America’s economic potential. By 2012, America will have 3 million fewer skilled manufacturing workers than we need. Improving the skills of trade-displaced workers and helping import-threatened firms to retool their operations will help America have the workers and tools to better compete and win in a global economy.

How much does all of this cost? Renewing the 2009 version of TAA would require about $1 billion per year – essentially a rounding error in the federal budget.

The Obama administration has been working hard to build strong bipartisan support for increased American engagement in global trade. The administration has improved the pending agreements with Colombia, Korea and Panama, and is negotiating a 21st Century trade deal to win fairness for American exporters and workers in important Asian markets. Like earlier administrations, the administration is rightly insisting that a substantial TAA program must be a key pillar of a comprehensive American trade policy that benefits the many while seeking to help the vulnerable few.

One trillion dollars. That’s how much trade benefits America’s economy each year.

One billion dollars. That’s the annual cost of a robust TAA.

It’s true that you can’t get something for nothing, but with a cost of about 1/1000th of trade’s annual benefits, a strong TAA comes pretty close. In view of TAA’s importance to American workers and firms and how much America can continue to gain from further trade expansion, extending and funding a robust TAA seems like an awfully good deal. It shouldn’t take long – even for Washington – to figure out the right move.