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Tuesday, January 22, 2013

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



J. F. Hornbeck
Specialist in International Trade and Finance

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 opening. 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, finding agreement on TAA remains important for forging a compromise on national trade policy. This report discusses the role of TAA in U.S. trade policy from its inception as a legislative option in the early 1950s to its core role as a cornerstone of modern trade policy that many argue has served to promote the long-term U.S. trade liberalization agenda.

TAA was reauthorized through December 31, 2013, in the 112
th Congress. Democratic leaders and the Obama Administration considered TAA a quid pro quo for passage of three implementing bills for free trade agreements (FTAs) with Colombia, Panama, and South Korea. There was, however, considerable partisan debate over the direction TAA should take. Congress had expanded TAA significantly in the American Recovery and Reinvestment Act (ARRA) of 2009 from an earlier version in the Trade Act of 2002. The issue before the 112th Congress was how to craft a compromise TAA bill that would receive bipartisan support in the both Houses, and assure its passage along with the three implementing bills. Such an understanding was developed and became part of H.R. 2832, a bill to reauthorize the Generalized System of Preferences (GSP). In an elaborate legislative procedure, both chambers passed the four trade bills on October 12, 2011.

TAA reauthorization reflected a compromise that allowed for passage as part of a larger trade deal. Because it was understood that TAA was essential to move the three FTA implementing bills, both parties and Houses of Congress eventually embraced this solution, albeit not unanimously. The bill reauthorized the workers, firms, and farmers programs through December 31, 2013, but discontinued TAA for communities because it was considered duplicative of other federal programs. Many, but not all, of the enhanced programs and funding levels in the ARRA were reauthorized, including restoring eligibility to services workers and firms, increasing income support for workers undergoing job training, raising the Health Coverage Tax Credit, expanding funding for training benefits, and reinstituting more detailed program evaluation and reporting requirements. Funding was reduced from ARRA levels for job search, relocation assistance, and wage insurance for older workers. Public sector workers are no longer eligible for benefits. TAA eligibility is retroactive to the expiration date of the ARRA enhancements. The firms and farmers TAA programs were reauthorized at annualized levels $16 million and $90 million, respectively, much less than in ARRA, but comparable to current (and historical) appropriated levels.

Although many opponents of expanding TAA programs spoke out against the reauthorizing legislation, its ultimate passage once again suggests that TAA remains an integral part of the debate over trade liberalization. Without providing assistance to those hurt by trade liberalization, moving ahead with the trade policy agenda remains a difficult proposition, an outcome consistent with TAA legislative history since 1962.



Date of Report: January 9, 2013
Number of Pages: 19
Order Number: R41922
Price: $29.95

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