Fact Sheet: Trade Adjustment Assistance (TAA) and NAFTA-TAA Programs
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The author served as a consultant to the Senate Finance Committee in the spring of and contributed to drafting S Rather, the burden of economic adjustment should be borne in part by the federal government T here is an obligation to render assistance to those who suffer as a result of national trade policy. This statement, made by President John F. Kennedy incould have easily been made by any number of Democratic and Republican Presidents, Cabinet members, Senators, and Congressmen and women over option trade adjustment assistance bill number last 40 years.
And yet, the US government continues to do very little toward meeting this objective. Manufacturing employment was 30 percent of total employment. Over the last 40 years, despite strong employment growth, millions of US workers have lost their jobs. Imports as a share of GDP have tripled. The trade surplus has turned into a huge trade deficit. The manufacturing share of total employment has fallen to 13 percent. International trade benefits an economy by lowering prices, encouraging higher productivity, and improving consumer choice.
But these gains from trade are "net" gains. On the way to option trade adjustment assistance bill number these net gains, an increase in imports usually contributes to plant closings and worker layoffs. The gains from international trade tend to be very large and are widely distributed throughout an economy. By contrast, the costs associated with liberalizing trade tend to be smaller, relative to the benefits, but they are heavily concentrated by industry, location, and worker demographics.
The fact that the gains from international trade almost always outweigh the costs does not mean that the costs are any less real. The costs can be very significant for individual workers and their families.
In addition, the costs can potentially undermine efforts to further liberalize trade. Kletzer finds that about 17 million US option trade adjustment assistance bill number lost their jobs from manufacturing industries between and Over this same period, option trade adjustment assistance bill number US employment increased by approximately 39 million.
In other words, between andfor every job lost in the manufacturing sector, more than 2 jobs were created in the economy. Some might argue that the ability of the US economy to create jobs suggests that it is not necessary to be overly concerned about workers who lose their jobs. This simplistic argument misses several important points:. Workers who lose their jobs associated with increased import competition are faced with the challenge of finding new jobs, acquiring the skills necessary for those jobs, and sometimes uprooting option trade adjustment assistance bill number families in order to take those jobs.
Very few workers received assistance during the program's first 12 years, due in large part to rigid eligibility criteria. InCongress eased the eligibility criteria and the program began to assist thousands of workers in every state throughout the country.
The most frequently asked question about TAA is, do trade-related dislocated workers deserve to receive any more assistance than workers who lose their jobs for other reasons? At the time TAA was established, trade-related dislocated workers tended to be older, women and minorities with less education than other dislocated workers. It was argued that trade-related dislocated workers faced a greater adjustment burden than others and this warranted providing them more assistance.
Kletzer's research, based on more recent data, finds that difficult adjustments are found throughout the manufacturing sector. In addition, workers who lose their jobs from import-competing industries are still slightly older, less educated and more tenured than workers displaced from nonmanufacturing industries. These characteristics are still associated with costly job loss. Since the establishment of the program, the unions and others have also argued that TAA is a means of compensating workers who lose their jobs due to no fault of their own, but rather associated with a change in government policy.
In that regard, TAA is similar to efforts to assist workers adversely affected by various environmental regulations, like the Clean Air Act and legislation to protect the Redwood trees. Option trade adjustment assistance bill number the growth in the importance of trade to the US economy, it has become increasingly difficult to disaggregate the causes of worker dislocation. As a result, from an economic perspective, the argument for a separate program to assist workers whose job loss can be attributed to increased imports has weakened.
From the outset, the primary motivation behind a special program to assist workers who lose their jobs associated with increased imports was based on political considerations.
It was also believed that TAA would make it easier for members of Congress to support efforts at trade liberalization. Recently, there has been a breakdown in bipartisan support for further trade liberalization. Congressional support has weakened, as the magnitude of trade-related dislocations has increased. At the same time, the unions have been pursuing other trade policy changes and have widened their concerns beyond domestic dislocations to include labor standards option trade adjustment assistance bill number other countries.
A poll conducted by the Program on International Policy Attitudes suggests that Americans tend to be more willing to support "free trade," if the government assists workers who lose their jobs. Sixty-six percent of respondents agreed with the statement, "I favor free trade, and I believe that it is necessary for the government to have programs to help workers who lose their jobs. By contrast, 14 percent of respondents did not favor free trade. In contrast to these trade-specific arguments, there are some who believe that existing US programs to assist all dislocated workers are inadequate, and therefore support TAA as a model for a general program that covers all workers.
They argue that given the difficulties in attributing causality to dislocation, all workers should be afforded the kind of assistance provide under TAA. This group does not believe that TAA is too generous; on the contrary, they believe that assistance for non-trade related dislocations is inadequate and should be expanded along the lines of TAA.
Under the existing TAA program, workers can receive up to 52 weeks of income maintenance beyond the standard 26 weeks of unemployment insurancetraining, and job search and relocation assistance. Income maintenance is an entitlement, i. Congress must appropriate sufficient funds to provide payments to any worker who is eligible and participates in the program.
Training is a "capped entitlement," i. InCongress greatly curtailed the provision of assistance under TAA. First, the program option trade adjustment assistance bill number changed to require workers to enroll in training in order to receive income maintenance. This constituted more than a 50 percent cut in assistance.
Contrary to what some people believe, workers cannot become rich living on TAA income maintenance payments. In constant terms, the average weekly payment has been rather constant since In addition to covering workers who lose their jobs from import-competing industries, NAFTA-TAA provides assistance to workers who lose their jobs from plants that move overseas. Over the last few years, the Department of Labor has been assisting "secondary workers"-workers who lost their jobs because they option trade adjustment assistance bill number for suppliers or downstream producers for firms that faced increased import competition from Canada or Mexico, on a discretionary basis.
There are also several technical differences between the two programs. Evaluating TAA is highly sensitive to the measures used. Those who believe option trade adjustment assistance bill number TAA was designed to reduce opposition toward trade liberalization argue that the program has failed.
They point to the increasing difficulties in winning Congressional support for fast-track legislation as evidence that TAA is ineffective. Workers who actually receive assistance under the program do not share this view. For them, TAA may not erase option trade adjustment assistance bill number the economic pain caused by dislocation, but it has made the adjustment to a new job a little easier.
The main handicap in evaluating TAA is that the Department of Labor does not collect the necessary data. Part of the problem lies in the fact that states were given the responsibility for data collection. The states do not have the resources or interest to monitor the program's effectiveness. Only 56 percent of them obtained jobs with earnings at least 80 percent of their previous earnings. Unfortunately, the lack of data makes it impossible to perform a sophisticated evaluation of the program.
A proper evaluation would include a comparison between those workers who received assistance under TAA and a suitable control group. Pressure on the Option trade adjustment assistance bill number manufacturing employment has intensified throughout much of the last 25 years. During that time, approximately 2 million workers have received assistance under TAA. More than half of these workers were laid off from the auto, textiles and apparel, and steel industries.
The number of workers receiving assistance pales in comparison to the total number of workers who lose their jobs, and even by comparison with trade-related dislocations. Of those, only 30, workers, or less than 10 percent, received assistance under TAA. Efforts to reform and expand TAA have been debated since Interest in reforming the program is highly correlated with congressional consideration of trade liberalizing legislation.
Trade Adjustment Assistance is often seen as a quid pro quo for support on trade liberalizing legislation. Significant weaknesses option trade adjustment assistance bill number the program have depreciated its value in "buying" that support. Despite periodic debate to expand and improve the program, the only changes to TAA since were in option trade adjustment assistance bill number, when TAA criteria were tightened income support was made conditional on enrollment in trainingand inwhen Congress created a separate program related to NAFTA.
They also asked the GAO to study the program and make recommendations for improvements. Their intention was to reform the program when the short-term authorization expired. At the same time, there were a large number of plant closings around the country resulting in massive worker layoffs. In response to a number of plant closings in New Mexico, Senator Bingaman stepped up his efforts to find assistance for the unemployed workers and the financially troubled communities.
Senator Bingaman assisted workers and communities to navigate the maze of Federal and state assistance programs. There was an effort to identify shortcomings in existing programs and try some things that were not part of the standard response to a plant closing. The Commission was unable to reach consensus on anything directly related to the trade deficit.
The only thing all Commission members were able to agree on was the need to reform and improve assistance to workers who lose their jobs from import-competing industries. These studies identified the following problems with the programs:. Inadequate training funds 3. Inconsistency between the time for income maintenance and training 4. Lack of effective performance measurements 5. The absence of any assistance to communities with large number of trade-related dislocations.
The proposals in their bill S are based on the GAO findings and Senator Bingaman's on-the-ground experiences in several communities coping with large plant closings and worker layoffs, including in Roswell and Las Cruces, New Mexico, and El Paso, Texas. Most of these proposals have been debated over the last 25 years. Extend TAA to secondary workers: Under the current programs, in order to be eligible for TAA, a worker has to be laid off from a firm that faces import competition.
These are not the only workers who can be adversely affected by increased imports and shifts in production option trade adjustment assistance bill number overseas.