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Tuesday, August 23, 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, supporters 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. Despite disagreement, TAA still appears to be important for forging a compromise on national trade policy.

Nonetheless, the legislative fortunes of TAA 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 isolated from its main policy rationale, as was the case at times during the budget-cutting 1980s, TAA sometimes struggled to achieve short-term extensions and maintain funding levels when faced with strong political opposition. TAA was most recently expanded in the American Recovery and Reinvestment Act (ARRA) 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 all TAA program authorizations are scheduled to expire.

The 112th Congress is considering legislative action to extend TAA. Congressional views of TAA reauthorization range from repeal to support for the higher ARRA program and funding levels. Supporters see TAA as vital to addressing the costs of freer trade; opponents view it as costly and ineffective. This issue has become part of the debate on passage of implementing legislation for the proposed FTAs with Colombia, Panama, and South Korea. As Congress seeks to resolve this debate, two issues dominate the discussion: (1) reauthorization of TAA programs; and (2) procedural issues on how to enact TAA legislation.

At present, a bipartisan compromise is being considered on TAA that would allow for extension through December 31, 2013 of many, but not all, of the enhanced programs and funding levels contained in the ARRA. The language incorporated in the KORUS FTA draft implementing bill provides a preliminary view of this compromise. Procedural issues are still under discussion. As a first cut, the two Houses of Congress debated whether to attach TAA to the KORUS FTA draft implementing bill. The Senate Finance Committee completed a “mock markup” of the KORUS FTA draft implementing bill on July 7, 2011 that included TAA. The House, in a simultaneous mock markup, approved a draft bill without it.

Including TAA as part of a trade agreement implementing bill has presented two issues. First, rules governing the treatment of FTA implementing bills under TPA require that they contain only provisions changing laws or providing new statutory authority that are “necessary or appropriate” to implementing the agreement, raising the question for some as to whether TAA provisions meet this standard. Ultimately, the language is subject to congressional interpretation. Second, because TAA and the three FTAs are controversial issues, Members also have differing viewpoints on each of the four possible bills. Many, therefore, would like the chance to vote separately on each of them. Congress is now considering the possibility of taking up TAA in a separate bill. This option has presented a sequencing issue, with congressional leaders still debating the order in which the various bills might be taken up to ensure that all are considered simultaneously. A final determination has not been announced.

Date of Report: August 11, 2011
Number of Pages: 17
Order Number: R41922
Price: $29.95

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