Wage Insurance for Workers and More Enforcement Tools for the Government

Unbelievably, this article by Wiliam A. Galston appeared in today’s Wall Street Journal. Republicans, along with Bill Clinton,  have long been espousing free trade (i.e. NAFTA, trade with China), while Elizabeth Warren, Bernie Sanders and now Donald Trump, have been activating against it because of the harm it has done to American workers. Even Hillary Clinton has come around to opposing it. Is this article one of the first trumpet calls to a serious change-of-heart on the part of the right? Have they really begun to care about our working class?

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No matter who wins, the 2016 presidential campaign already has undermined public support for trade agreements and should force supporters of the Trans-Pacific Partnership to reassess their strategy.

Donald Trump and Sen. Bernie Sanders have opposed these agreements for decades. Although she supported the TPP as secretary of state, Hillary Clinton came out against it early in her presidential campaign. Last week, she expanded and explained her opposition. When asked about a possible vote on the TPP during the lame-duck session of Congress after the November election, she replied: “I have said I oppose the TPP agreement—and that means before and after the election.”

It is difficult to see how an end-of-the-year push for the agreement can succeed when the president-elect, no matter the party, is sure to be dead-set against it.

Mrs. Clinton has also clarified her overall approach to the issue. “I’m not interested in tinkering around the margins of our trade policy,” she said. “I think we need a fundamental rethink of how we approach trade deals” so that American workers and jobs come first. “Looking back over the past decades, as globalization picked up steam, there’s no doubt that the benefits of trade have not been as widely enjoyed as many predicted,” she declared. “Corporations may have won, but many workers lost.”

Although we can argue about the numbers, Mrs. Clinton clearly is on the right track. In retrospect, China’s accession to the World Trade Organization in 2001 marked a turning point in the global economy that most of us were slow to recognize. Recent work by labor economists has documented the devastating impact—especially on U.S. manufacturing jobs and wages—of the surge in Chinese imports over the past 15 years.

Responding by turning to protectionism and isolationism, as Mr. Trump urges, would be a catastrophic mistake for the U.S. and the world. Yet the status quo is unacceptable and will make it politically impossible to reach further international agreements.

There are steps that the Obama administration and its successor could take to rebalance the playing field and rebuild public support for America’s leadership in the world economy.

To begin, U.S. administrations should make aggressive use of antidumping provisions in existing trade agreements. Alleging systematic dumping, the Obama administration in March imposed large import duties on Chinese cold-rolled steel. This should be the beginning of action on a broader front. On Monday The Wall Street Journal reported a 20% increase in Chinese government subsidies for hard-pressed companies during the past year. Asked about a large infusion of cash into a struggling aluminum firm employing 10,000 workers, a Chinese official replied: “The government’s aim is to help maintain social stability.” This is code for a bailout that cannot be defended on economic grounds. Washington must make it clear that social stability in China no longer can be purchased at the price of social instability in the U.S.

Second, Congress and the next administration should adopt a proposal offered by veteran trade officials John Veroneau and Shara Aranoff to increase the investigative capacity of the U.S. trade representative and to expand the enforcement tools available to the U.S. International Trade Commission.

Specifically, with the concurrence of the Senate Finance and House Ways and Means committees, the ITC would be empowered not only to investigate alleged violations of trade agreements but also to issue trade-enforcement advisory opinions on the merits of these claims. The ITC’s reputation for political independence would lend weight to its views.

As policy experts across the political spectrum have noted, many workers displaced by trade and offshoring haven’t been able to find new jobs that pay as much as the previous ones. These workers and their families are asked to make do with incomes that can be 40% lower than they once enjoyed. This is why the mostly ineffective Trade Adjustment Assistance program should be bolstered by adopting a system of wage insurance.

Under this system, displaced workers would receive a wage supplement amounting to half the gap between their current and previous earnings, up to an annual maximum of $10,000. The supplement wouldn’t be permanent, but because it is tied to employment and is more generous than traditional unemployment insurance, it would give workers an incentive to find a job as quickly as possible. That would minimize the negative effects of extended unemployment while shoring up growth in the U.S. labor force.

Unless leaders in both parties who fear an American retreat from global economic leadership move aggressively to push back against illegal practices and to help the workers damaged by globalization, there is no possibility of rebuilding public support for expanded trade.

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