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Globalization’s biggest cheerleaders came up with 17 things to help people hurt by trade

A job seeker at a veterans' job fair in California
Reuters/Lucy Nicholson
An obvious question with no easy answers.
  • Ana Campoy
By Ana Campoy

Deputy editor, global finance and economics

Published This article is more than 2 years old.

The International Monetary Fund is sounding less bullish about the benefits of free trade as it gears up for its first meeting during the Trump era, on April 21. Indeed, its recent statements betray real concern about globalization’s viability, under attack from resurgent protectionists around the world.

“The role of trade in the global economy is at a critical juncture,” the IMF warned in a April 10 report it co-authored with the World Bank and the World Trade Organization. These champions of globalization offer a clear-eyed assessment of its biggest shortcoming: the displacement of certain workers by trade over open borders. 

Their proposed solutions are less clear-cut. Addressing the plight of globalization’s losers requires much more than lip service now, as embracing protectionism has proven a vote-winning political strategy of late. So, the three international institutions dug deep into their members’ experience to identify programs that could help improve the lot of those hurt by trade—or, as they put it, that would “make trade openness more socially sustainable.”

They came up with 17 types of policies. They range from emergency safeguards to protect a local industry from a flood of imports to retraining programs to easier access to bank loans for workers seeking to become self-employed. (Click here for a PDF of a diagram that details all of the options.)

The effectiveness of versions of policies that have actually been implemented, the report admits, has been mixed. Some, such as quickly—and frequently—providing counseling after a worker is laid off, have shown success. And on-the-job training is more effective than knowledge imparted in a classroom setting, they say.

Others haven’t worked so well. Wage subsidies can help workers who are switching industries, but they also tempt employers to pay them less. Retraining programs are no good if workers don’t know they exist, which has been a problem in the US and Europe, according to the report. In both places, the funding assigned for those kinds of programs was only enough to cover a relatively small number of workers. 

Another potential hurdle, which receives little attention in the report, is that many of the suggested policies require increased social spending, another tough sell among some of the conservatives who resent globalization.

Dealing with social spending’s PR problem is a challenge for another day; for now globalization’s cheerleaders are focusing on trade’s PR problem. The IMF’s paper provides useful facts that could be turned into promotional slogans for defenders of free trade: “International trade has slashed the cost of everyday goods by a quarter!” or “Cutting trade tariffs increases productivity!”

The research also offers examples of real government campaigns that try to convince the public of trade’s many blessings. The European Commission regularly posts success stories of companies that have grown their business thanks to trade, such as a small Spanish guitar maker that is now selling its instruments in South Korea: 

Others efforts are wonkier. The US put out a 52-page document (pdf) laden with jargon such as “production reallocation” and “innovation production function.” 

If trade’s boosters want to get globalization’s discontents on board, they’re going to have to do better than that.

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