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Wednesday, October 19, 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.

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. TAA program authorizations are set to expire on February 13, 2012, and the 112th Congress is taking legislative action to extend them. Based on an understanding between House and Senate leaders, and the White House, a compromise TAA reauthorization bill (H.R. 2832) is being considered as part of a deal for voting on three implementing bills for the proposed free trade agreements (FTAs) with Colombia (H.R. 3078), Panama (H.R. 3079), and South Korea (H.R. 3080).

The TAA extension would reauthorize the workers, firms, and farmers programs through December 31, 2013. TAA for communities would be repealed, considered duplicative of other federal programs. 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.

Congressional Democrats and the White House insisted that consideration of the three FTA implementing bills be contingent upon passage of TAA reauthorization legislation. To accommodate concerns on all sides over legislative procedure, an elaborate process was agreed to that ensures consideration of the four bills within a relatively short time span. The House passed a bill on September 7, 2011, reauthorizing the Generalized System of Preferences (H.R. 2832), sending it to the Senate, where it was amended with TAA reauthorization. On September 22, 2011, the Senate agreed to the amended bill, 70-27, after which it was sent to the House. In separate action, the House Ways and Means Committee favorably reported out all three FTA implementing bills on October 3, 2011.

On October 6, 2011, the House Committee on Rules issued a closed rule covering all four bills. Senate amendment to H.R. 2832 is expected to be taken up by the House on October 12, 2011, along with implementing bills for the three FTAs. H.R. 2832, as amended, will be considered under a rule that waives all points of order and allows for one hour of debate. The bill requires simple majority to pass, and having already been agreed to in the Senate, House passage would then allow it to be sent to the President for signature.

Date of Report: October 7, 2011
Number of Pages: 16
Order Number: R41922
Price: $29.95

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