ABSTRACT
This chapter investigates the two periods, before and after NAFTA, and the policies that are appropriate for distressed industries. The literature in the pre-NAFTA period includes empirical studies dealing with the significant welfare losses due to trade restrictions. On the legislative policy side, congress had always recognized that certain segments of the economy could be adversely affected by changing conditions in international trade and had to determine what sort of remedies should be applied whenever injury due to import competition occurred. While Trade Adjustment Assistance (TAA) was functioning before NAFTA, the Government intended its role to be strengthened during the post-NAFTA era. At the dawn of the NAFTA agreement, President Bill Clinton anticipated the need for TAA by proposing a $100m in employment relief to aid NAFTA-displaced workers. Traditional trade theory that requires labor and capital to be mobile within a country increasingly required TAA incentives as a prop for those goals.
