Mitigating the Adjustment Costs of International Trade

In the present era of globalization and rapid technological advance living standards across the world have risen at unprecedented rates, and over a billion people have been lifted out of poverty. The theoretical and empirical evidence demonstrating that nations gain from trade is overwhelming (Irwin, 2015). However, trade has distributional consequences and gains and losses are spread unevenly. The policy challenge is how to promote and deepen trade integration while ensuring that the losers from trade liberalization are assisted and the cost of their adjustment is mitigated. As the G-20 leaders concluded in their declaration last year "We recognise that the benefits of international trade and investment have not been shared widely enough. We need to better enable our people to seize the opportunities and benefits of economic globalisation." (G20, 2017) It is a fact that, in many instances, the sudden rise in competition from imports, especially – but not only – from China and other low-income countries and the formerly planned economies of Eastern Europe, have caused considerable disruption. These import surges have sometimes undermined the economic viability of localities and whole communities. While some cities and regions have thrived as they have taken advantage of the expansion of export markets across the world, many individuals, communities, and localities have been unable to adjust.