Search Penny Hill Press

Tuesday, August 16, 2011

Trade Adjustment Assistance (TAA) and Its Role in U.S. Trade Policy

J. F. Hornbeck
Specialist in International Trade and Finance

Laine Elise Rover
Research Associate

Congress created Trade Adjustment Assistance (TAA) in the Trade Expansion Act of 1962 to help workers and firms adjust to economic dislocation caused by trade liberalization. Although most economists agree that there are substantial national gains from trade, backers of TAA argue that the government has an obligation to help those hurt by policy-driven trade opening. In addition, as an alternative to policies that might otherwise restrict imports, it can provide assistance, while supporting freer trade. Often controversial, it is still strongly debated some 50 years later on equity, efficiency, and budgetary grounds, but may still serve a pragmatic legislative function. For those Members concerned with the negative effects of trade, it can provide a countervailing response to help maintain what is often slim majority support of highly contested trade legislation. For these reasons, it has been central to U.S. trade policy for the past half century.

Over time, however, the legislative fortunes of TAA reauthorization have ebbed and flowed. When TAA remained a cornerstone of major trade legislation, as it was in 1962, 1974, and 2002, it received long reauthorizations and increased programmatic and funding support from Congress. When TAA was passed as part of budget reconciliation bills, distancing it from its main trade policy rationale, as in the 1980s, it struggled at times to maintain funding levels and even shortterm extensions. TAA was most recently expanded in the American Recovery and Reinvestment Act of 2009, although the higher funding levels and program enhancements expired in February 2011, leaving TAA programs to operate at pre-ARRA levels until 2012, when programs expire.

TAA program authorizations are set to expire in less than a year and the 112
th Congress is considering legislative action to extend them. This issue has become part of the debate on passage of implementing legislation for the proposed free trade agreements (FTAs) with Colombia, Panama, and South Korea. TAA took center stage when its proponents argued that its reauthorization should be considered along with the implementing bills. As Congress seeks to resolve the debate, two issues dominate the discussion. First, Members disagree on the utility and need to continue funding TAA programs. Supporters see it as vital to addressing the adverse effects of freer trade; opponents view it as costly and question its effectiveness. Nonetheless, there appears to be a bipartisan understanding coalescing on the extension of TAA.

Second, procedural issues over how to move the TAA and FTA implementing bills are still under discussion. Including TAA as part of a trade agreement implementing bill, as was originally proposed, has proven to be problematic for at least two reasons. First, given the strict rules governing the treatment of FTA implementing bills under TPA, some Members have raised questions over the appropriateness of adding TAA provisions. Second, both TAA and the FTAs are controversial, and many Members would like the chance to vote separately on the two issues. Congress is now considering the possibility of taking up TAA in a separate bill. This option has presented a sequencing problem, with congressional leaders still debating the order in which the various bills might be considered.

Historically, TAA has been reauthorized separately from trade agreement implementing bills. On occasion, attempts have been made to include TAA provisions as amendments to draft implementing bills during “mock markups,” but generally they have not been reported out of committee. The situation is perhaps different in the 112
th Congress. Many of the expanded portions of TAA have expired, and supporters see the implementing bill as perhaps the best opportunity to reauthorize TAA in the near future given some resistance to TAA by a Congress intently focused on deficit reduction.

Date of Report: August 1, 2011
Number of Pages: 17
Order Number: R41922
Price: $29.95

Follow us on TWITTER at or #CRSreports

Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.