I broadly agree but I am not nearly so sure of myself.Would the answer not be that if the system of laws has suddenly changed then they are entitled to compensation? A change in the legal system is an (uninsurable) arbitrary change due to government action, not the result of market changes. After all why do we demand compensation under eminent domain?
I am aware that John Stuart Mill is in the opposing camp here. He argued that when slavery (which he opposed) was abolished, the slave-owners were entitled to compensation because they had built their businesses on a system of laws that suddenly changed. I do not know what to make of that argument, but it does point to a way in which the bullying analogy fails: bullies are not encouraged by society, even if one might argue that they should be discouraged even more.
A separate argument: people lose their jobs all the time for reasons that have nothing to do with foreign trade. I'd argue that they deserve some help. Why are jobs lost to foreign competition so privileged?
Update 1: The Free Exchange blog gives its view here. Dani Rodrik's view is here.
Update 2: In comments on the Rodrik blog, noted above, Tim Worstall makes any interesting point:
"But once we accept that trade creates losers, at least we can begin to confront these questions explicitly."Update 3: Megan McArdle gets into the act as well.
Perhaps. But we should also acknowledge that not trading also creates losers.
Imagine (as has actually happened recently) that trade in bra and panty sets between the EU and China is open. Imports to the EU come flooding in, threatening jobs of those textile workers in the EU. But also to the benefit of consumers of the bra and panty sets.
Protecting those textile workers (as was done) by quotas was a transfer of resources from consumers to those textile workers. An inefficient one too.
Now here we have the usual logic of compensation for trade changes turned on its head.
*Normally* we are told that we should compensate those who lose out from increased trade. Again, normally, in the form of a lump sum transfer from those who benefit to those who suffer.
Fine, when I see people arguing that the newly protected textile workers of the EU are to make a lump sum transfer to the consumers of bra and panty sets then I'll start listening to arguments that such transfers should happen in the reverse case, when we lower trade barriers.