Trade Adjustment Costs in Developing Countries: - World Bank ...

23Notes on American Adjustment Policiesfor Global-integration Pressures 1J DAVID RICHARDSON1. OVERVIEWThe Trade Adjustment Assistance (TAA) program of the United States is nearingits fiftieth year. Like many 50-somethings it has expanded and contracted, sometimesin regretful ways. But it has also gained in experience and seasoning; and,we will argue, current relevance. Much has also changed over 50 years in globalgoods markets, including their volatility and its consequences. Goods-marketvolatility is sure to continue to confront firms, workers, and communities evenafter macroeconomic normalcy is restored.Features of TAA’s somewhat unshapely structure may in fact have promise fortoday’s stressful labor markets, such as its conditional link of extended incomesupport to a worker’s retraining initiative. Looking further ahead, growing instabilitiesin worker earnings, as well as growing reasons for extended bouts ofstructural unemployment, suggest the need for a reshaped program. A reshapedprogram would recognize the many ways that globally enabled dynamism exposesworkers to the same instability and displacement as does trade—even whensuch dynamism seems more narrowly conceived as technological and organizationalinnovation.Both the regrets and the seasoning of historic TAA can provide a foundationfor radical reform—a widening of its remit to structural adjustment assistance(SAA), a reemphasis on its reemployment goals for workers and training goals forfirms, refinement of some of its features, in particular its insurance options (goingwell beyond its current wage insurance), and adoption of innovative new firmworker-civicstakeholder partnerships, especially for training.Such reshaped and regrounded structural assistance initiatives will require creativereform and innovation in domestic policies designed to underpin the ini-1 These notes draw on well over a decade of research by my colleagues and me at the Peterson Institutefor International Economics; in particular Howard F Rosen, and also C Fred Bergsten, KimberlyAnn Elliott, J Bradford Jensen, Lori G Kletzer, Howard Lewis III, Catherine L Mann, and Matthew J.Slaughter. Because my understanding of my mandate for this World Bank project was American policy,I have consciously disregarded the extensive European and broader OECD literatures on adjustmentpolicies, including the recently revised and expanded European Globalization Adjustment Fund (EGF).