William A. Reinsch
President, National Foreign Trade Council
Remarks on Trade Adjustment Assistance, February 7, 2002
A. Introduction
1) Good to see TAA being taken seriously as a trade and economic policy instrument after years of bipartisan benign neglect.
2) It is not, however, a new idea but has been around for many years. One of the (many) low points of my legislative career was the failure of Senator Heinz and myself to get through a TAA extension that would have included secondary workers – in 1978! So, these are not entirely new ideas.
3) There have been some victories along the way – Marcia Miller and I spent twelve years and parts of three Administrations making sure the TAA program for firms was not repealed. An unsung program with very little money but significant success in bringing small firms back from the dead or near-dead.
4) What is new – and welcome – is that people appear to be taking the old ideas seriously and appear to understand why they are important, not just as a variation on the theme of economic assistance to dislocated workers, but as a foundation stone of national trade policy.
B. Background
1) The concept of trade adjustment assistance grows out of Congressional and Executive efforts over the past 70 years to cooperate in the development of trade policy. The Constitution (Article I, section 8, paragraph 3) assigns control of interstate and foreign commerce to the Congress, a responsibility it has taken seriously over the years but which has inevitably subjected it to increasing protectionist pressures in recent decades as globalization has eroded America’s historic insularity and created new challenges for American industry.
2) Fundamentally, trade accelerates change at the same time it produces growth.
In political terms, it creates losers faster than they would otherwise be created via the operation of a single-country market. Looking at industries like steel and textiles or low tech consumer goods, gradual declines would be expected in parts of those sectors over time, but trade adds a new element – the pressure and competition of imports – which forces companies to confront their weaknesses as well as overall economic trends more quickly.
3) This creates the political problem of victims – people who vote who are out of work and blame it on imports – rightly or wrongly.
4) The policy challenge for Congress has consistently been to provide a framework for managing the political pressures caused by trade-induced change and then using that framework to address individual issues as they arise.
5) Professor Mac Destler of the University of Maryland has referred to the Congressional response as one of Congress developing “antiprotectionist counterweights, devices for diverting and managing trade-restrictive pressures.”
6) In effect, over time, Congress has constructed a precarious bargain among its members and between itself and business and labor. In essence, that bargain provides for the continuation of policies that, in general and always with some exceptions, support open, rules-based trade.
7) In return, the U.S. government will do two things: address the problem of those hurt by open trade and insist on aggressive enforcement of U.S. trade remedy laws in order to make sure our industries are not disadvantaged by foreign trade practices that violate multilateral rules.
8) Trade adjustment assistance falls into the former category – taking care of the victims. While it would be fair to say that the “victims” have not always welcomed this kind of assistance, it is clear that the existence of the program has played an important role in persuading Members of Congress and the general public to support open trade. It is justified by the fact that the change it seeks to manage is, in significant part, government-induced or accelerated change through trade opening initiatives and trade negotiations. It is not solely the product of market forces.
9) This issue continues to have political resonance. Recent polling by the Program on International Policy Attitudes at the University of Maryland showed that in late 1999, 66% of respondents agreed with the statement, “I favor free trade, and I believe it is necessary for the government to have programs to help workers who lose their jobs.” Only 18% felt that it was not necessary for government to have such programs, and another 14% did not favor free trade. In a parallel survey, more than 85% of respondents said they “would favor free trade if [they] were confident that we were making major efforts to educate and retrain Americans to be competitive in the world economy.” Less than ten percent disagreed.
10) The obvious conclusion to draw is that broad based public support for open trade is significantly enhanced by, if not dependent on, the government’s commitment to assistance for the victims of the changes brought on by such trade. This is a fact that has contributed to the survival of the TAA program over a long period of time and to the current interest in extending and expanding the program.
11) I believe this is a situation where public opinion also reflects sound economics – perhaps one of the rare circumstances. International trade benefits the economy through lower prices, increased productivity, and greater consumer choice. In general, it can serve as a force for improving an economy’s overall productivity, which in turn can result in rising living standards. In order for the economy to experience higher productivity growth, however, workers have to move from low productivity sectors to higher productivity sectors. It is in our economic interest to facilitate that adjustment.
12) It is also in our political interest. As economic growth slows or stops, anti-globalization pressures will grow. The uncertainty of the times makes people nervous about change, particularly change that affects their pocketbooks. TAA is one way the government demonstrates its commitment to help people – and firms and potentially communities – deal with change and make it manageable, a form of support we will badly need in the coming months.
C. The Pending Bill
1) All of that, I believe, makes a case for an expanded TAA program as an integral element of our national trade policy. Clearly, more is expected – and demanded – of the government during periods of recession.
2) The business community, where I now hang my hat, well understands that and supports TAA, just as it supports the enactment of Trade Promotion Authority – and urges the Senate to hurry up and pass both.
3) What we hope to avoid, frankly, is seeing broad agreement on two important programs disintegrate in partisan political fighting over economic policy or trade policy. And we hope to avoid getting sucked into those particular black holes, should they occur.
4) We are well aware there has been controversy over some of the provisions of the Senate TAA bill, the process by which it was approved, and how it should be handled on the Senate floor.
5) With respect to the process, as a 20-year Congressional staff veteran – 17 of them in the Senate – on both sides of the aisle – I would only say water under the bridge. Let’s follow the Biblical maxim, “Let he who is without sin cast the first stone,” and move on.
6) On the question of bringing it to the floor, the business community would like to see a bipartisan process. It seems obvious that if TPA is to pass, TAA will have to pass too. How that is done ought to be a fairly easy negotiation, once agreement on substance is reached.
7) On the substance, there are concerns primarily about the secondary workers and the health care provisions. I understand the parties are talking. This is good, and I would be the last person to interfere in that process. I would only make a few brief comments:
a) As I said in the beginning, secondary workers is not a new idea. There is already a provision for them in the NAFTA TAA program. Defining that universe – drawing a line around that body of workers – is not simple, but it is not impossible. It involves making some choices and leaving some people out – who will complain – but that is what members of Congress are elected to do – make decisions.
b) The health care issue is more difficult, as it is an extension of TAA benefits into new territory. Speaking personally, I think it’s appropriate. If retraining is to succeed we have to look at the total picture of the unemployed worker’s problems, not just one piece. Our main concern is that debate over this provision not destroy the broad bipartisan support for trade adjustment assistance. The provision in its current form is obviously not part of that consensus and was not developed through a bipartisan process. Now is the time to fix that and work out something mutually agreeable.
c) Aside from program costs, which ought to be negotiable once the parameters of the expanded program are set, the others issues are largely in the weeds, and we have confidence in the Committee staff’s ability to work them out.
8) In fact, I must say my sense of the state of play on this bill right now is that it is a deal waiting to be made. All parties recognize its importance, and all parties are signaling their intentions to come to agreement. That inspires me to close my remarks with the phrase Bob Dole used so often in this room (and the room behind us) when he chaired the Committee – go work it out.
