Labor Rents, Ajustment Costs, and the Cost of U.S. Steel Trade Restraints in the 1980s

Recent studies have compared labor losses in import-competing industries with the costs of protection and found that those losses are not large enough to justify trade restraints. This study develops a new technique for estimating the costs and benefits of protection and provides a complete accounting of labor losses related to imports, including labor rents, unemployment costs and labor force dropouts. We find that a small steel tariff or auction quota could have generated net welfare gains for the U.S. in the 1980s, even though actual protection through Voluntary Restraint Agreements generated net welfare losses.