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Better Approaches to Deal With Globalization
Rather than protectionism, a better policy would be
to help domestic workers and companies compete
more effectively, rather than compete less. We need
additional mechanisms that allow us to more fully
capture the benefits from liberalized trade and to
more proactively mitigate its costs. Ideally, policy
should also better address job losses and income
inequality from automation and other technological
advances.
How we respond should depend on regional and
industry circumstances. These include the nature
of trade impacts, the skill sets and location of the
workers that have been affected, and the amount
of resources that can be mobilized to facilitate
adjustment.
Increasing specialization brings real economic
benefits, but can also leave workers more exposed
to shifts in demand for their services, potentially
on short notice. These issues are not going away,
especially as emerging market economies take on
a larger role in the global economy and automation
continues apace. If we are to maintain a more open
trade regime, globalization must be socially and
politically sustainable. For that to be the case, we
have to provide greater support to those who are
hurt by trade.
Policies should include more assistance with job
retraining, help with job search and mobility, and
broader unemployment support. We need to do
more research into what measures have been
effective in economies around the world, and we
should encourage greater experimentation with
new approaches. Getting the balance right between
providing assistance and making sure that individuals
hurt by trade can get back on their feet and achieve
their earning potential will be a challenge, and we
need a better understanding of what actually works.
More generally, we need to do a better job positioning
our workforce to cope with globalization and
technological change. This will involve improvements
across a range of areas, including not only education
and training, but also the business regulatory
environment and infrastructure investment that
could support greater worker mobility. These
measures would also promote higher productivity
growth. While the scope and scale of issues differ
substantially by country, many of these policy areas
may also be relevant in India.
Lastly, there are various measures available in
current trade agreements, such as antidumping
measures and countervailing duties for dealing with
“unfair” trade, as well as escape clauses that provide
safeguards for industries that face a sudden surge
of imports. Again, the challenge is to ensure that
such measures are effective, that they help facilitate
rather than retard adjustment, and that they are not
abused so as to avoid foreign competition. But, both
sanctions and temporary relief have been provided
for in global trade rules. We should be willing to use
them when their use would lead to more equitable
outcomes and would help sustain political support
for a more open trade regime.
Conclusion
Free trade is a concept that remains compelling
but periodically will be tested by economic change.
That is an inescapable fact of life and is a good thing
because it requires the economics profession to
articulate anew the value of a liberalized world trade
regime. While the value from trade is very high, the
associated adjustment costs can be significant and
will require greater attention if globalization is to
work for all of us.
Thank you for your time. I would be happy to take
some questions.
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