Trade and Employment From Myths to Facts - International Labour ...

Chapter 6: Trade adjustment costs and assistance: The labour market dynamics
adjustment measures should be preferred over targeted TAA. Apart from moral concerns
why those affected by trade liberalization should be treated differently than
those affected by other shocks, including those stemming from globalization as a
whole, targeted assistance appears to have had rather mixed success in facilitating
structural adjustment. It addition, it appears nearly impossible to identify all workers
adversely affected by trade liberalization.
The political economy argument – that there is more support for liberalization
if adjustment assistance exists – is important, but may be less relevant if a good generally
available social protection system is in place. Very concentrated structural
changes, such as mass lay-offs or regional concentration, though, may justify specific
TAA.
Demand for social protection in developing countries, especially emerging
economies, appears to be increasing as the exposure to external shocks is increasing
with globalization. Strengths and weaknesses of passive and active labour market policies
have been discussed in this chapter. Many of the instruments may presently be
beyond reach in many developing countries but important lessons can be learned
from experiences in developed countries.
A strong case can be made that it is important that adjustment policy measures
focus on supporting the distribution of gains from globalization more equally and
to increase efficiency of the adjustment process. Most adjustment costs appear to be
borne by workers. In many countries, the majority of workers seem to be very concerned
about trade liberalization. Labour market policies can have significant leverage
here, as they have the potential to raise support for liberalization among voters if
liberalization is expected to bring net benefits for a country.
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