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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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