ECONOMY

A blow to hopes of a trade policy for US workers

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Hi from Washington, where following last week’s jubilation over 130 countries backing a new international tax plan, Washington is back to grumbling about digital levies. The Treasury has warned the EU that its planned digital levy won’t fly with a new OECD deal, while Katherine Tai has “urged” Canada to drop its plans for a digital tax too. Expect more on this in the coming weeks.

Our main piece today is on the US’s fund for retraining workers struck down by globalisation. The cash available for those who lost their jobs because of rising volumes of imports, or because their jobs moved overseas, has shrunk, which has some important implications for the new administration’s trade policies.

Charted waters looks into the aftermath of the Covid-19 outbreak at Shenzhen’s Yantian port.

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A dent in Biden’s pledge to protect US workers

President Joe Biden’s efforts to create a “worker-centred” trade policy have just been struck a blow by the US Congress. And it’s yet another tale of very important existing legislation unceremoniously expiring.

The Trade Adjustment Assistance for Workers programme, the US’s fund to help those who lose their jobs because of global trade retrain and find new work, reverted to a much more limited and less generous version on July 1. The programme, which provides income support, job search and relocation allowances, and a health coverage tax credit, was first introduced by John F Kennedy in 1962, and has been renewed multiple times since.

Despite the efforts of a handful of Democrats on Capitol Hill, the support is now much diminished. It no longer applies to IT or service sector workers, only to those employed in manufacturing. The number of countries to which you can claim your job has been sent is more limited. The time period in which to apply has dropped from 26 weeks to 16 weeks. The pot of money available for training, relocation and employment services run by states has more than halved, falling from $450m to $220m.

This has happened quite quietly, despite it representing a huge cut to what the US pays unemployed workers in order to try and help them find new jobs. The fund, which acts as a sort of globalisation insurance, is now going to be significantly harder to access. Black and ethnic minority workers are over-represented in the applicants for help, according to Department of Labor figures, and the people getting the help tend to be older, with the portion of claims coming from over 50s greater than their share of the workforce.

The number of people being helped had fallen last year. According to the Department of Labor’s 2020 report, 96,000 workers were eligible for assistance in 2020, a 6 per cent increase compared with 2019. Just 23,000 received any benefits, down 17 per cent from the previous year. While about half of the people applying for assistance worked in manufacturing jobs, more than two-thirds of those were re-employed outside of manufacturing. Industrial states tended to be the biggest beneficiaries, but the state receiving the highest lump sum amount of federal cash was California. That aside, Illinois, Indiana, Ohio, and Pennsylvania were all notable recipients. 

On the Hill, the handful of Democrats who tried to renew it were, in the Senate, Debbie Stabenow, representing Michigan, and Sherrod Brown of Ohio, and in the House, Earl Blumenauer, along with Richie Neal, the chair of the Ways and Means committee. The cost of inaction, Blumenauer has noted, would “fall most heavily on women and workers of colour”. Some have called not just for renewal, but for restructuring and expansion. Tim Meyer, of Vanderbilt law school, has wants aid to be given to people harmed by US trade wars. Protectionism and tariffs should be covered, as well as liberalisation and offshoring. 

So why, given Biden’s focus on a worker-centric trade policy, has the assistance suffered a blow?

One factor is that Republicans have traditionally seen renewal of the assistance as a bargaining chip to get Democrats to go along with Trade Promotion Authority renewal, which grants the president authority to go out and negotiate trade deals, sets out the objectives of US trade policy and also governs how those deals, when signed by negotiators, then pass through Congress for ratification. But with Trade Promotion Authority now expired as of last week, the bargaining chip element no longer exists.

It would be smart for Washington to have solid infrastructure in place to retrain workers who’ve lost their jobs. Over the past decade, American workers have lost out to competitors in lower-waged countries, as well as to automation. In the coming decade, we doubt that trend will reverse. Supermarket checkouts will eventually be wholly unstaffed, taxis might not need drivers, and at some point a robot could probably write this newsletter. And that’s before you even consider the impact of globalisation. But there’s another thing, too: when you say you want a worker-centric trade policy, it’s odd to let a crucial benefit package aimed at retraining workers harmed by it to expire — especially if you’re looking for the votes of workers in Pennsylvania and Ohio.

Charted waters

A Covid-19 outbreak among workers at Yantian, a port in the Chinese city of Shenzhen, in late May led to severe disruption, and resulted in container shipping rates surging to fresh highs. Conditions are returning to normal, but the port is still playing catch-up with the number of blank sailings — where shipping lines skip stops at the port — still far higher than they were before the outbreak.

“While we can see that cargo is moving through the port again, this event is shaping up to be one of the most disruptive of the year,” said Josh Brazil, vice-president of marketing at project44, a data platform for the logistics industry. “This is yet another reminder to shippers that disruptions can happen at any point, and that it’s increasingly important that they gain full visibility into their shipments, diversify and bolster their supply chains, and do everything possible to get ahead of events like these that are inevitable in today’s world.” Claire Jones

Trade links

The headlines proclaiming agreement on the global tax deal made for welcome reading. But what about the nitty gritty? Despite the agenda being driven by the US, it may not be quite as easy as many assume for Congress to pass the deal, as this piece explains. Washington continues to pile on the pressure in Brussels, calling on the EU to cancel plans for a separate digital levy to that agreed under the global deal. The call between US Treasury secretary Janet Yellen and Margrethe Vestager, European Commission vice-president, which we reported earlier this week, went well. But the US continues to insist that Europe going its own way on this could derail the talks on a global deal.

Chad Bown of the Peterson Institute, the DC think-tank, looks into how to protect semiconductor supply chains in a better way than the US has tried so far.

Nikkei reports ($) that Huawei’s chip design arm has struck a deal with a Shenzhen-based chip tool maker to get around US export curbs on its former suppliers in Taiwan. They also have a piece on the five things to know about China’s cyber security regulator. Data security has become the latest theatre of tensions with the US following the crackdown on Didi after its New York listing. Claire Jones

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