Julian Sanchez attacks trade protectionism:

Here’s a modest proposal, then: Let’s permit whatever restrictions on trade and globalization people like, but with the “winners” under those rules compensating the “losers” via some sort of special targeted tax. We’ll levy this on the workers and stockholders enriched by whatever form of protection from international competition they want to demand, and cut a check to workers, stockholders, and consumers in other sectors that would have benefited from lower prices or operating costs as a function of trade and outsourcing, in the amount of whatever the benefit to them would have been of less restricted trade…

The key thing to bear in mind here is that there’s nothing morally special about the level of globalization in 2007 or 1990 or 1970 as some kind of special baseline. We talk about “winners” and “losers” relative to some status quo ante where there happened to be a different level and pattern of globalization, but the point of comparison is—from the point of view of justice, if not realpolitik—arbitrary. Which is why compensations from the “winners” to “losers” under protectionism makes as much sense—probably more—than the parallel sort of compensation as globalization increases. The only reason to think otherwise is to suppose we’re specially and permanently entitled to the pattern of holdings we’d have at some particular but arbitrary level and kind of globalization.

Theory aside, given the strength of status quo bias, adjustment assistance or some other form of compensation is politically necessary to make trade liberalization feasible. Paying people to overcome their status quo bias echoes the political necessity of paying people to overcome another bias:

It is tempting to argue… that all changes require adjustment, and that assistance should be provided in a generic fashion… This viewpoint is valid in a cosmopolitan world… However, in the real world, the refusal to accept change – and hence the need to accomodate it and facilitate it through adjustment assistance – is greater when the source of disturbance is foreign… The case for differential adjustment assistance rests on this asymmetry in communities’ attitudes toward change from foreign and domestic sources. [Bhagwati, Protectionism, p.118-9]

Trade adjustment assistance facilitates liberalization by dampening both of these biases. But it might not if the general public knew its effectiveness.

Don Davis & James Harrigan provide theoretical grounding for public worries in “Good Jobs, Bad Jobs, and Trade Liberalization”:

Globalization threatens “good jobs at good wages”, according to overwhelming public sentiment. Yet professional discussion often rules out such concerns a priori. We instead offer a framework to interpret and address these concerns. We develop a model in which monopolistically competitive firms pay efficiency wages, and these firms differ in both their technical capability and their monitoring ability. Heterogeneity in the ability of firms to monitor effort leads to different wages for identical workers – good jobs and bad jobs – as well as equilibrium unemployment. Wage heterogeneity combines with differences in technical capability to generate an equilibrium size distribution of firms. As in Melitz (2003), trade liberalization increases aggregate efficiency through a firm selection effect. This efficiency-enhancing selection effect, however, puts pressure on many “good jobs”, in the sense that the high-wage jobs at any level of technical capability are the least likely to survive trade liberalization. In a central case, trade raises the average real wage but leads to a loss of many “good jobs” and to a steady-state increase in unemployment.

NBER working paper.