Thursday, January 31, 2013
Tweet[IWS] CRS: TRADE ADJUSTMENT ASSISTANCE FOR FIRMS: ECONOMIC, PROGRAM, AND POLICY ISSUES [28 January 2013]
IWS Documented News Service
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Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
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Congressional Research Service (CRS)
Trade Adjustment Assistance for Firms: Economic, Program, and Policy Issues
J. F. Hornbeck, Specialist in International Trade and Finance
January 28, 2013
http://www.fas.org/sgp/crs/misc/RS20210.pdf
[full-text, 11 pages]
Summary
Although trade liberalization can enhance the economic welfare of all trade partners, it also
causes difficult adjustment problems for some import-competing firms and workers. Congress has
responded to these problems with trade adjustment assistance (TAA) programs for workers, firms,
and farmers. This report discusses the TAA for Firms (TAAF) program and related policy issues.
Congress first authorized TAA in the Trade Expansion Act of 1962 (P.L. 87-794), including a new
firm and industry assistance program, now administered by the Economic Development
Administration (EDA) of the U.S. Department of Commerce. It provides technical assistance to
help trade-affected firms make strategic adjustments to improve their competitiveness in a
dynamic global economy.
The 111th Congress reauthorized a more extensive TAA program for firms that expanded
eligibility to services firms, increased authorized funding levels, provided greater flexibility for a
firm to demonstrate eligibility for assistance, established new oversight and evaluation criteria,
created a new position of Director of Adjustment Assistance for Firms, and required submission
to Congress of a detailed annual report on the TAAF program. Congress allowed those expanded
provisions to expire on February 13, 2011, but the 112th Congress, in passing the Trade
Adjustment Assistance Extension Act of 2011 (P.L. 112-4), extended the firms program through
December 31, 2013,with many, of the enhanced program provisions reinstated retroactively,
including extending benefits to services firms. It is funded annually at $16 million.
EDA has released four annual reports under the new statutory requirements that point to
administrative and operational improvements. The FY 2012 TAAF annual report further notes
that two years after completion of the program, on average, firm sales increased by 26.8%,
employment rose by 13.2%, and productivity increased by 11.9%, better outcomes than the
benchmark manufacturing industry as a whole. This outcome is reported as being particularly
encouraging given TAAF firms have had such a high “survival rate,” and yet face the additional
burden of all having to adjust to import competition compared to the benchmark. Still these
numbers varied significantly from the year before, and despite the high success rate for firms that
“completed” the TAAF program, it is important to note that they represent only about half of all
firms that had their adjustment proposals approved for assistance. The rest left the program for
numerous reasons without completing the adjustment plan and were no longer monitored.
To address the evaluation issue more completely, the Government Accountability Office (GAO)
conducted a comprehensive evaluation of TAAF program in 2012. It found that EDA’s
administration and evaluation efforts had improved markedly because of changes provided in the
2009 legislation. GAO also confirmed EDA’s assessment that trade-impacted firms benefitted
from specialized attention provided by TAAF assistance, but to a lesser extent. GAO found a
“small and statistically significant relationship between program participation and sales,” which
was particularly relevant to smaller firms, albeit also highly correlated with firms operating in
high-growth industries. Employment effects were not found to be statistically significant.
For a broader policy discussion on TAA, see CRS Report R41922, Trade Adjustment Assistance
(TAA) and Its Role in U.S. Trade Policy, by J. F. Hornbeck. See also CRS Report R42012, Trade
Adjustment Assistance for Workers, by Benjamin Collins and CRS Report R40206, Trade
Adjustment Assistance for Farmers, by Remy Jurenas.
Contents
Background and Recent Developments ........................................................................................... 1
The Economics of Trade Adjustment ............................................................................................... 2
The Firm Trade Adjustment Assistance Program ............................................................................ 3
Eligibility and Certification ....................................................................................................... 4
Program Evaluation ......................................................................................................................... 6
EDA Annual Reports on TAAF ................................................................................................. 6
GAO 2012 Report ...................................................................................................................... 7
Tables
Table 1. Firm TAA Authorizations and Appropriations, FY2001-2013 ........................................... 3
Table 2. Trade Adjustment Assistance for Firms, Select Program Indicators for FY2003- 2012 ....................................... 5
Contacts
Author Contact Information............................................................................................................. 8
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