Not that it's easy. To start, you have to know how much is gained and lost by whom. Consider the big winners from trade. They include shareholders and employees of export companies that find new customers abroad, importers that can offer new products at home, and other businesses that can get cheaper inputs. Then there are all the consumers who can buy new or cheaper goods and services. What is the value of trade to these people? Next, consider the big losers: workers whose jobs disappear and shareholders whose companies fold because of foreign competition. How much economic damage has been done to them?
Economists can -- and routinely do -- answer these questions with statistical estimates. The tougher question is how to accomplish the redistribution. You can't tax new imports to skim off some of the benefits to consumers, since the whole point of a free trade agreement is to render imports tariff-free. You could, however, make people pay for the agreement itself.
But how? One idea would be to identify the prospective winners of a new trade agreement and ask them to contribute lump sums to a fund that would compensate the losers. The trade agreement would go forward much as buyouts do in the stock market; if enough of the winners signed up and contributed, the rest of them would be compelled to pay, perhaps on their annual tax bills. Then the fund -- likely to hold a lot more than $1 billion for any major agreement -- would be divvied up between the losers.
In addition to solving the redistribution problem, the fund would help everyone, winners and losers alike, to understand how trade affected their economic futures. Moreover, it would allow the losers to spend their compensation however they saw fit; some might choose to retrain for a higher-skill job, while others might prefer to take a lower-skill job and buy a new car. Of course, some people might try to weasel out of the winners' category and paint themselves as losers. But the government already does a reasonable job of figuring out who should receive various payments and benefits, from emergency relief to unemployment insurance. Fraud in this case would be even harder -- how do you fake a decades-long career in manufacturing?
No, the biggest obstacle for the new mechanism might be getting politicians and the public to trust economists, their statistical models, and a dose of new thinking. Until that happens, the WTO will continue to twiddle its thumbs, and gains from trade will still be left on the table.
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