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Thursday, October 13, 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 dislocation that may be caused by increased trade liberalization. It is justified now, as it was then, on grounds that the government has an obligation to help the “losers” of policy-driven trade liberalization. In addition, TAA is presented as an alternative to policies that would restrict imports, and so provides assistance while bolstering freer trade and diminishing prospects for potentially costly tension (retaliation) among trade partners. As in the past, critics strongly debate the merits of TAA on equity, efficiency, and budgetary grounds. Nonetheless, TAA still appears to serve what is now a historically pragmatic legislative function: it remains important for forging a compromise on national trade policy.

Over time, the legislative fortunes of TAA have ebbed and flowed. When Congress considered TAA as part of a major trade legislation package, as was the case in 1962, 1974, and 2002, it tended to receive long reauthorizations and increased programmatic funding. When isolated from its main policy rationale, as was the case at times during the budget-cutting 1980s, TAA struggled sometimes to achieve even short-term extensions and maintain funding levels when faced with 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 on February 12, 2011, leaving TAA programs to operate at pre-ARRA levels until February 12, 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 address the costs of freer trade; opponents view it as costly and ineffective. Passage of a TAA bill has become linked to consideration of implementing legislation for the proposed FTAs with Colombia, Panama, and South Korea. Congress faces two challenges: (1) reauthorization of TAA programs; and (2) determining the legislative procedures for the bills.

The Senate passed a TAA compromise bill (H.R. 2832) on September 22, 2011. It would extend the programs for workers, firms, and farmers through December 31, 2013. The communities program would be repealed. Many, but not all of the enhanced programs and funding levels contained in the ARRA would be reauthorized, including extending benefits to services workers and firms, and requiring expanded evaluation and reporting requirements on the programs. The provisions of the bill would apply retroactively to the expiration date of the ARRA enhancements.

Procedural issues over how to move the TAA and FTA implementing bills are still under discussion. H.R. 2832 passed in the Senate by a vote of 70-27. Consideration of H.R. 2832 in the House depends on finding an agreement with the Obama Administration over sequencing House consideration of the three FTA implementing bills, which have yet to be introduced. The Obama Administration has made clear that it will not transmit to Congress implementing legislation for the FTAs until the House votes on TAA, in part because of the possibility that it would not pass if the FTAs were voted on first. House Republican leadership insists that the House take up the TAA legislation after the FTA implementing bills have been sent over from the White House to ensure that Congress has a chance to consider them. At present, a procedural solution has not been finalized.

Date of Report: September 28, 2011
Number of Pages: 17
Order Number: R41922
Price: $29.95

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