U.S. Trade Policy and the Adjustment Process

This paper focuses on the adjustment environment in the United States as set out by the active U.S. trade remedy laws (antidumping, countervailing duties, and safeguards) and the Trade Adjustment Assistance program. We document U.S. industries ’ use of these various laws and relate industry use of trade policies to import competition and revealed comparative advantage. We also examine poten-tial effects of U.S. trade policies on adjustment to shifting comparative advantage and give examples of industry outcomes. An important conclusion is that trade policies delaying industry adjustment can promote new entry into the domestic industry and thereby increase rather than alleviate the pressure on existing plants and workers. [JEL F13, F14, F15] Adjustment to changing conditions of international trade... generally involves decisions in which the costs of adjustment must be weighed against the expected future benefits.... A principal objective of govern-ment policy should be to create an environment in which the decisions... lead to a socially appropriate outcome by removing the general distor-tions... that cause the privately perceived benefits or costs of adjustment to diverge from the true social benefits or costs (Mussa, 1982, p. 117). When the political power of special interests combines with the perni-cious effects of the fixed-number-of-jobs fallacy, the result will almost inevitably be some divergence from the free-trade policies that would probably best serve the broad public interest.... the practical question for economists working on trade policy is how to keep the damage to a minimum (Mussa, 1993, p. 374)