Written By: Terence P. Stewart
Stewart and Stewart
Washington, DC
The Trade Adjustment Assistance ("TAA") program has been part of the political compromise behind trade liberalization since the Trade Expansion Act of 1962. TAA is based on the concept that, while trade liberalization should be an economic benefit for the nation as a whole, there are workers, industries, and communities who will be adversely affected by trade liberalization and who would benefit from training and other benefits to help them adjust to the changing business environment in the United States. President Kennedy set out the rationale for enacting TAA:
When considerations of national policy make it desirable to avoid higher tariffs, those injured by that competition should not be required to bear the full brunt of the impact. Rather, the burden of economic adjustment should be borne in part by the Federal Government. * * * Just as the Federal Government has assisted in personal readjustments made necessary by military service, just as the Federal Government met its obligation to assist industry in adjusting to war production and again to return to peacetime production, so there is an obligation to render assistance to those who suffer as a result of national trade policy.[1]
Subsequently, the TAA program was substantively revised and expanded by the Trade Act of 1974, the Trade Act of 2002, and the Trade and Globalization Adjustment Assistance Act of 2009.
There have been shifting positions amongst many as to whether the benefits of TAA justify the costs or are otherwise addressed by other government programs, making renewal of TAA in recent times challenging. At the same time, there has been interest by others in Congress to expand benefits to historically non-covered groups (addition of farmers and service workers a decade ago) to ensure that all those disadvantaged by trade in terms of job loss have access to training and other benefits. What is clear from the large and mounting trade deficit ($11.9 trillion between 1974 and 2013 and $700 billion in 2013 for goods, and $9.5 trillion between 1974 and 2013 and $467.6 billion for goods and services in 2013) is that millions of Americans are denied jobs because of the trade deficit that the country runs. An estimated 3.75 million jobs were lost in America in 2013 alone because of the trade deficit in goods. TAA or any other adjustment program can only work effectively where alternative jobs in fact exist for workers with the right job skills. Little thought is being given to this basic truth. With TAA having expired (end of 2013), we are seeing the usual posturing happening on the Hill as to its renewal.
In the absence of a serious debate about the causes of and possible solutions to the huge and persistent trade deficit, the debates on renewals of programs such as TAA largely miss the bigger issues and needs of society.
While this article does not intend to go into the pros and cons of TAA or ways that it could be improved for the benefit of those who find themselves out of work, some statistics that we have generated from some of the data available for the 2000-2013 period raise some interesting shifts in the use of TAA by laid-off workers.
To understand the significance of the shifts, it is important to understand that, since 2002, there have been three bases for workers who have lost jobs to seek benefits from the TAA program:
- An increase in imports of a like or competitive product where the increase has been a cause of the loss of work;
- A shifting of production by an employer from the United States offshore with the obvious loss of jobs in the United States; and
- An increase in imports adversely affecting a customer where workers in the supplier company are a significant input into the product and workers are dislocated as a result ("secondary" effect).
Since 2000, roughly 20,000 TAA petitions have been certified by the Department of Labor. This does not include petitions for companies or for agricultural producers. For this article, we reviewed petitions that were certified for the months of October – December 2000 through 2013 – 5,102 cases—to provide a snapshot of the certifications during this time; the actual number of certifications is likely to be four times as many. In 1994, the North American Free Trade Agreement (NAFTA) Implementation Act provided for TAA eligibility where there was a shift in production by the worker's firm to Canada or Mexico. This provision was repealed by the Trade Act of 2002, which actually expanded coverage to any country. The Trade Act of 2002 also added the option of the secondary effect of imports.
What one sees is continued large numbers of cases of jobs lost to increased imports and an explosion of certifications for workers who have lost their jobs by reason of employers shifting jobs overseas. Indeed as the table and chart below demonstrate, while there was a sharp uptick in certifications during the deep recession of late 2008-2009, there was a sharp drop off in certifications from increased imports after 2009 but certifications for plants moving jobs offshore remained substantial and much larger than those from imports.
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[1] John F. Kennedy, Special Message to the Congress on Foreign Trade Policy (January 25, 1962) (http://www.presidency.ucsb.edu/ws/?pid=8688).