Saving Free Trade: A Pragmatic Approach

Saving Free Trade: A Pragmatic Approach

Saving Free Trade: A Pragmatic Approach

Saving Free Trade: A Pragmatic Approach

Synopsis

American Supporters of free trade are on the defensive. Record U. S. trade deficits are fueling demands from industry, Congress, and the public for tariffs, import quotas, and other protectionist measures that could reverse America's long-standing commitment to open markets and sacrifice much of the economic progress experienced in recent years. In Saving Free Trade: A Pragmatic Approach, Robert Z. Lawrence and Robert E. Litan analyze both the allure of protectionism and the problems associated with free trade, proposing reasonable, cost-effective ways of helping industries, workers, and communities battered by intense import competition. The book focuses on the escape clause of the U. S. Trade Act of 1974, meant to provide domestic industries temporary shelter from severe import competition, and the trade adjustment assistance program, designed to provide direct aid to companies, workers, and communities injured by imports. The authors analyze the assumptions and implication of the many currentcongressional attempts to amend the provisions of the escape clause and the assistance program. They then set forth their own proposals, including new definitions of import injuries, modifications of provisions for providing relief for beleaguered companies, new standards for compensating and retaining displaced workers, and a plan for insuring communities against severe losses to their tax bases if local industries fail because they can no longer compete. Saving Free Trade provides a detailed but nontechnical introduction to the complex implications of amending trade policy and shrewd, innovative proposals for improving America's ability to adapt to rapid changes in world markets.

Excerpt

As record trade deficits in the 1980s fuel demands for increased protection from a tide of imports, American industry, the public, and Congress have advocated tariffs, quotas, and "voluntary" restraint agreements to forestall plant closings and save American jobs. This protectionist sentiment now threatens to overwhelm our nation's long- standing commitment to open markets, and with it much of the economic progress recorded worldwide in recent years.

In Saving Free Trade: a Pragmatic Approach, Robert Z. Lawrence and Robert E. Litan explore the complex and volatile subject of American trade policy. After considering arguments for providing aid to soften the impact of trade-related dislocations, the authors focus on the effectiveness of the two instruments used to provide this aid: the escape clause of the U.S. Trade Act of 1974, which allows domestic industries to receive temporary protection from import competition, and the trade adjustment assistance program, which was intended to direct aid to firms, workers, and communities injured by imports. They also examine the potential results of congressional proposals for trade reform and put forth their own pragmatic approach for saving free trade--an approach that can both relieve protectionist pressures and effectively and inexpensively promote the adjustment of workers, firms, and communities harmed by intense foreign competition.

Robert Z. Lawrence and Robert E. Litan are senior fellows in the Brookings Economic Studies program. They are grateful to Alice M. Rivlin, Robert Herzstein, Janet Nuzum, David Richardson, and Lawrence White, who reviewed the manuscript and provided valuable comments and suggestions. They also appreciate the dedicated research assistance provided by Tamara L. Giles. Finally, they thank Kathleen M. Bucholz, Jacquelyn G. Sanks, and Evelyn M. E. Taylor for handling the word processing, and Kim L. Orchen for research assistance. Jeanette Morrison and James R. Schneider edited the manuscript, and Carolyn A. Rutsch checked it for factual accuracy.

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