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Monday, August 26, 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. TAA is also 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.

TAA program authorizations are scheduled to expire on December 31, 2013. The Trade Adjustment Assistance Extension Act of 2013 (S. 1357) was introduced in the 113
th Congress. It would extend TAA programs through 2020. President Obama also supports TAA reauthorization, linking it to renewal of Trade Promotion Authority (TPA), which Congress may also take up this year. 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.

When 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 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 in the 113
th Congress will likely revive a historical debate over the role of TAA as part of broader trade policy. Legislation introduced so far reflects a status quo extension of existing programs through the end of 2020, including reauthorization at existing levels of $16 million and $90 million, respectively, for the firms and workers programs. Nonetheless, Congress may take up a broader debate on the issue, if history provides any guidance.

Date of Report: August 5, 2013
Number of Pages: 19
Order Number: R41922
Price: $29.95

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