The Politics of Trade Adjustment

• In Event: Political Consequences of Localized Trade Shocks in the United States

Abstract

Trade adjustment assistance and protectionism can both be used to offer workers relief from import competition. Looking at the United States’ TAA program, we show how at the program’s origin, in the 1960s and 1970s, trade adjustment was seen as a substitute for protectionist measures like antidumping. Through an examination of the steel industry, we demonstrate that this substitution effect still exists in part: in what amounts to a plant-level test of the embedded liberalism hypothesis, we test whether factories operating in areas with high TAA responsiveness to trade shocks become less likely to petition for import relief through trade protection. This leads us to examine the sequence of events that follows import competition in different districts. We then relate these two mechanisms of import relief to electoral outcomes: as we demonstrate, greater reliance on TAA in a given area consistently favors Democratic candidates, while reliance on AD duties does not. This finding, by itself, could explain the emergence of partisan beliefs over the two key means of providing relief to workers exposed to the global economy.

Authors

• Krzysztof J. Pelc, McGill University

• Sung Eun Kim, Korea University