The Politics of Trade Adjustment Versus Trade Protection

• Author: Sung Eun Kim,Krzysztof J. Pelc
• DOI: 10.1177/0010414020957687
• Published date: 01 November 2021
• Date: 01 November 2021
• Subject Matter: Articles

2021, Vol. 54(13) 2354 –2381

https://doi.org/10.1177/0010414020957687

Comparative Political Studies

© The Author(s) 2020

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DOI: 10.1177/0010414020957687

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Article

The Politics of Trade

Adjustment Versus

Trade Protection

Sung Eun Kim1 and Krzysztof J. Pelc2

Abstract

The United States’ Trade Adjustment Assistance (TAA) program seeks

to help workers transition away from jobs lost to import competition.

By contrast, trade remedies like antidumping seek to directly reduce

the effect of competition at the border. Though they have very different

economic effects, we show that trade adjustment and protectionism act as

substitutes. Using the first geo-coded measure of US trade protectionist

demands, we show that controlling for trade shocks, counties with a

history of successful TAA petitions see fewer calls for trade protection.

This effect holds when we confine our analysis to the steel industry, a heavy

user of antidumping duties. And though they are both means of addressing

import exposure, the two policy options have distinct political effects: in

particular, successful TAA petitions carry a significant electoral benefit

for Democratic candidates. Greater recognition of the substitutability

of trade compensation and protectionism would improve governments’

response to import exposure.

Keywords

trade adjustment, trade protection, globalization, embedded liberalism

1Korea University, Seoul, Korea

2McGill University, Montreal, Canada

Corresponding Author:

Krzysztof J. Pelc, Department of Political Science, McGill University, 855 Sherbrooke St West,

Montreal H3A2T7, Canada.

Email: kj.pelc@mcgill.ca

957687

CPSXXX10.1177/0010414020957687Comparative Political StudiesKim and Pelc

research-article

2020

Kim and Pelc 2355

2 Comparative Political Studies 00(0)

Introduction

In April of 1976, President Gerald Ford responded to a petition for import

relief from US footwear manufacturers by denying the trade barriers the

industry had requested. Instead, the president offered trade adjustment to the

industry’s workers. Tariffs on footwear imports would remain as they were,

but workers in the footwear industry would receive “expeditious consider-

ation” from the Secretaries of Commerce and Labor to receive 2 years of cash

benefits and re-employment services, including job training, job search, and

relocation allowances.1

This episode was surprising in a number of ways. The well-organized and

politically powerful footwear industry had explicitly asked for trade barriers.

The US International Trade Commission, tasked with assessing the petition,

had unanimously found that import competition had indeed been a “substan-

tial cause of serious injury” to the industry. And five of the six commissioners

had also recommended some form of trade protection in response, either

through tariffs or quotas.2 Yet President Ford, a Republican, sided with the

minority position put forth by the sixth USITC commissioner, to offer com-

pensation to workers through the Trade Adjustment Assistance program

instead, since trade barriers would be overly distortionary. In doing so,

President Ford found himself making an explicit choice between the two

policy options at governments’ disposal when responding to domestic pain

resulting from liberalization. It is this choice that interests us in this article.

When it comes to addressing the labor dislocation resulting from import

competition, democratic governments can turn to one of two options. They

can protect, or they can compensate: either shield the trade-exposed firms by

temporarily suspending liberalization and increasing barriers to trade, or allo-

cate funds directly to trade-exposed firms and individuals. And while these

two mechanisms are responses to the same general phenomenon, they differ

in most other respects. One is an international response, and the other is a

domestic one. The first seeks to export the pain resulting from labor disloca-

tion, while the second seeks to address it within national bounds. And as we

demonstrate in this article, the two policy options also hold significantly dif-

ferent economic and political effects, which may provide a clue to how gov-

ernments choose between them.

An analogous tradeoff between protection and compensation has long

been understood to lie at the heart of the postwar embedded liberalism com-

promise: as democracies become increasingly open to foreign competition

in an attempt to increase gains from trade, they must “buy off” those

opposed to liberalization through transfers of one form or another.3 But this

tradeoff has been examined almost exclusively in structural terms: the test

of the embedded liberalism hypothesis has traditionally taken the form of