Free trade's costs can't be left out of calculation

  • Article by: ERIC WIEFFERING , Star Tribune
  • Updated: May 18, 2011 - 6:15 AM

Commerce Secretary Gary Locke, right, toured a handset assembly line last month at Pantech near Seoul, South Korea. He arrived here Wednesday to build support for ratifying the pending free trade deal with South Korea.

Photo: Lee Jin-Man, Associated Press

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Minnesota manufacturing exports to South Korea surged 20 percent in 2010, vaulting the Asian economic powerhouse from the state's ninth- to sixth-largest export market. A pending free-trade agreement with the United States could make South Korea an even bigger trading partner for Minnesota firms, but the deal should not be signed until Congress agrees to expand a program for American workers who could lose their jobs as a result.

Free trade brings enormous benefits to consumers in the form of lower-cost goods and opens up new markets and new customers to American firms. But it has also become increasingly clear that free trade has exacted a heavy toll on American factory workers, especially during the last decade as more firms shifted their manufacturing to China, Mexico and other low-cost labor destinations.

Congress certainly had this possibility in mind back in 1974, when it established the Trade Adjustment Assistance (TAA) program to help provide jobs training and financial support to workers who lost their jobs or had their hours reduced as a result of trade agreements. In 2009, Congress expanded TAA's eligibility and support levels, raising the amount of training available from two years to three, as well as increasing relocation and job search allowances.

Those amendments to the program expired in February, after Republicans in Congress refused to extend them. Administration officials want them re-instituted before approving new free trade pacts with South Korea, Panama and Colombia.

Some version of TAA has been around since the 1960s, when it was seen largely as a means to buy support from Democrats for trade agreements that might upset labor groups. Then, the main concern was American companies losing business to lower-cost imports from foreign firms. Now, the bigger issue is American companies shifting production jobs abroad.

Use of TAA programs has exploded in the last decade, which has seen the loss of 6 million U.S. manufacturing jobs -- three times the number lost during the previous 20 years. In Minnesota, which actually added manufacturing jobs right up until 1998, employment has shrunk by 25 percent, a data point that represents the loss of 100,000 jobs.

Recession also a factor

Yes, some of those jobs were lost because of the recession, which reduced demand. And some were lost because of domestic competition. That's why, even during the height of the recession, the Department of Labor rejected about 25 percent of those applying for the TAA program. But 58 percent of the approved petitions resulted from jobs shifted abroad.

The Labor Department reported that more than 227,000 unemployed workers participated in TAA programs nationally last year, at a cost of about $1 billion. The average participant was a 46-year-old white male, with a high school diploma or equivalent, who'd worked 12 years before losing his job. While eligible for up to three years of assistance, the average TAA participant exited the program after little more than a year.

Minnesota received $10.5 million for its TAA programs in fiscal 2010, but that total was slashed to $3.1 million for the current year. About 2,700 Minnesotans are currently enrolled in TAA programs, twice the level seen in the years before the recession, said Larry Eisenstadt, TAA program coordinator for the state Department of Employment and Economic Development.

Of course, the ultimate measure of a program's success is how well it does. Nationally, about 87 percent of those who exited a TAA program in 2009 had a job in 2010. Minnesota's program recently received notice that it was the best in the country, with all its participants having a job within three months of exiting the program.

Many business groups, including the U.S. Chamber of Commerce, support the expanded benefits. The three trade agreements on the table are expected to help boost U.S. exports by as much as $10 billion. If that's the case, then $1 billion isn't too high a price to pay for those who will lose their jobs as a result.

ericw@startribune.com • 612-673-1736

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