The post-NAFTA influence of Trade Adjustment Assistance on the U.S. garment industry
by Lall B. Ramrattan, Michael Szenberg
Global Business and Economics Review (GBER), Vol. 4, No. 1, 2002

Abstract: This paper analyses the influence of the Trade Adjustment Assistance (TAA) programme on the garment industry. It evaluates costs and benefits and the factors affecting TAA certification and denial processes of petitions for firms and displaced import-impacted garment employees following trade liberalisation. Theoretically, we place the TAA model within the Second Welfare theorem that considers welfare optimum after transfers such as TAA. Empirically, we used recently available TAA time-series data in both partial (PE) and computational general equilibrium (CGE) points of view. The partial equilibrium approach examines the conventional effect trade liberalization has in expanding the area of measuring consumer surplus. The resulting welfare gain, based on prevalent tariff rates, price elasticity, and value of imports, is netted for estimates of costs to the displaced employees. In the general equilibrium approach, we developed a NAFTA vs. the rest of the world (ROW) model with a view of reconciling the PE estimate with the usually upward biased CGE estimates. The resulting welfare estimates include the PE estimate. Both the PE and CGE assessments of TAA's influence on the troubled garment industry have shown that TAA benefits were significant for the performance of the industry during the trade liberalisation era. The twin estimations show a robust view of TAA performance, in the direction of cushioning distress to displaced workers and minimising transition costs to other job placements or to retirement, while allowing for an increase in efficiency that may be gained from liberalising trade.

Online publication date: Mon, 07-Feb-2005

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