TRADE ADJUSTMENT ASSISTANCE: HISTORY
TRADE ADJUSTMENT ASSISTANCE: HISTORYTrade Adjustment Assistance was created inthe Trade Expansion Act of 1962, as recompense for workers and businesses hurt by theNation’s policy of lowering trade barriers. Theprogram was intended not as a payoff but asan aid to adjustment. “This cannot and will notbe a subsidy program of government paternalism,” said President Kennedy in announcingthe trade bill that created TAA. “It is insteada program to afford time for American initiative, American adaptability and American resiliency to assert themselves. ” Two linked motives for TAA were fairness—the obligation, asPresident Kennedy said, “to render assistanceto those who suffer as a result of national tradepolicy’’—and the need to find a different waythan protective tariffs or quotas to cope withthe disruptive effects of trade,In principle, the TAA approach, offering adjustment assistance in place of protection, fitswith a policy of free trade. In practice, questions have been raised since TAA was createdon whether the adjustment assistance wasreally working. Was TAA meeting its goal ofhelping displaced workers train for and findnew jobs and helping businesses adapt to thechallenge of rising imports? Is it reasonable toexpect that firms losing out to imports can recover, even with good technical assistance?Another recurring question had to do withfairness: Is it equitable or even possible to distinguish between job losses due to trade andlosses due to other (but related) factors, suchas advances in technology or changes in consumer preference? Does the worker who losesa long-held job because of import competitionneed more help than his neighbor who losesout to automation? Or is there a special responsibility to workers affected by trade? A nationalprogram to help all displaced workers find ortrain for new jobs was created in Title III ofthe Job Training Partnership Act of 1982 (JTPA),but TAA has some benefits that do not existin the Title III program.Arguing that trade-affected workers can beserved in a program open to all displaced work20ers, the Administration has proposed to abolish TAA, to replace Title III of JTPA with a newworker readjustment program, and to authorize funding for the new program at about twicethe current level of TAA and Title III fundingcombined. The Administration bill does not,however, include all the benefits now availableto TAA-certified workers. While proposing toend TAA for workers, the Administration tookmore forceful action to close out the TAA program for firms, asking for a budget rescissionin 1987 (which Congress did not approve) andmeanwhile granting such short-term low-levelfunding that program activities virtually ceased.Trade Adjustment Assistance for both workers and firms continues to have strong supportin Congress. The equity argument, that specialhelp is due those who are injured by the Nation’s trade policy, is widely accepted acrossparty lines. In 1986, Congress reauthorizedTAA and extended it for 6 years, through theend of 1991. While rewriting trade legislationin the spring of 1987, Congress again considered substantial changes in TAA, in particularthe program for workers, The emphasis in theproposed changes was on making adjustmentservices stronger and more flexible.This section outlines briefly the experiencewith TAA over the past quarter of a century.The next two sections discuss issues related,first, to the current operation and future of theprogram for workers and second, to the program for firms and industries.Trade Adjustment Assistance for Workers,1962-87Over its 25 years, TAA for workers has beenmuch more a compensation than a training program, whatever the intentions of its founders.The benefits TAA offers to trade-affected workers are extra income maintenance (more thanunemployment insurance provides) and training and relocation assistance. Of 4.5 billionspent on the program over the years, more than97 percent has gone for income maintenance;
21nearly all the workers certified for TAA havereceived this benefit. However, training hasbeen a stronger part of the program in the 1980s;training and relocation assistance has accounted for about 25 percent of spending since1982. Demands for training were great enoughin early 1987 that the appropriation for the fiscal year— 29.9 million—was nearly exhaustedat the end of the first quarter.Spending for TAA and the number of workers served has fluctuated greatly over the years,Almost inactive for the first dozen years, theprogram grew to large proportions by 1980(costing 1.6 billion that year], was restructuredand sharply reduced in the early 1980s, and isnow again expanding, It is a sizable programtoday. In addition to the 29.9 million for training and relocation assistance, spending for income maintenance is projected to be 176 million for fiscal year 1987. If workers continueto be certified at the same rate as in the firsttwo quarters of the year, 110,000 to 140,000workers will have become eligible for benefitsduring the year. ’ Both in amount of spendingand in number of workers served, TAA is nowabout as large a program as the general program, under Title III of the Job Training Partnership Act of 1982, which is open to all displaced workers,Administration of TAA for workers is dividedbetween the State employment security agencies and the U.S. Department of Labor, TheLabor Department makes the decisions on certifying groups of workers as trade-affected, according to the criteria in the law. The Stateagencies, under cooperative agreements withthe Labor Department, determine the eligibility of individual workers covered by a certification, and process applications for benefits.The Unemployment Insurance (UI) offices takecharge of income maintenance payments, and1Nearly 48,000 workers were certified in the first quarter offiscal year 1987, and about 22,000 in the second quarter. TheLabor Department simplified and speeded up the certificationprocess at the beginning of the first quarter. Thus, the exceptionally large number of certifications in the first quarter probably reflects the Department’s efforts to reduce a backlog of petitions If certifications for the last half of the fiscal year run atthe rate of the second quarter, the total for the year will be about114,000.the Employment Service (ES) is responsible forhelping workers find jobs or training opportunities.Creation and Early Years: 1962-74The Trade Expansion Act of 1962, authorizing the Kennedy round of trade negotiationsunder the General ‘Agreement on Tariffs andTrade (GATT), also created Trade AdjustmentAssistance, Labor spokesmen strongly supported the adjustment program as a part of thelaw. George Meany, president of the AFL-CIO,told the Senate Finance Committee:There is no question whatever that adjustment assistance is essential to the success oftrade expansion. And as we have said manytimes, it is indispensable to our support of thetrade program as a whole.2To the House Committee on Ways and Meanshe said that TAA would:. . . strengthen both our domestic economyand our world competitive position by helping companies and workers to increase theirefficiency, either in their present field or a newone. 3Eleven years later, labor support for TAA hadevaporated. Meany called TAA “burial insurance” and said that “adjustment assistance cannot solve modern trade problems.”4 By the early1970s, there was good reason, aside from thesuccess or failure of TAA itself, to reevaluatetrade policy. Economic and trade conditionshad changed. The United States had gone througha recession in 1970, and in 1971 and 1972 experienced its first merchandise trade deficitsin many decades. However, there was also aquite specific reason for labor’s disaffectionwith TAA, which was that very few workershad benefited from it. The eligibility require2Hearings before the Committee on Finance, U.S. Senate, July24, 1962, cited in Steve Charnovitz, “Worker Adjustment: TheMissing Ingredient in Trade Policy, ” California ManagementReview, vol. xxvii, No. 2, winter 1986.3Hearings before the Committee on Ways and Means, U.S.House of Representatives, Mar. 19, 1962, cited in Steve Charnovitz,op. cit.4Hearings before the Committee on Ways and Means, U.S.House of Representatives, May 17, 1973, and the Committee onFinance, U.S. Senate, March 27, 1973, cited in Steve Charnovitz,op. cit.
22ments as laid out in the 1962 law and as interpreted by the administering agency, the U.S.Tariff Commission, were so restrictive that noone qualified from 1962 till 1969. The TariffCommission then reinterpreted the eligibilityrules, and for the first time approved some petitions; still, only about 54,000 workers had beencertified for benefits by 1975.The TAA benefits for workers provided inthe 1962 law were training, relocation assistance, and extra income maintenance, at ahigher level and for a longer time than UI afforded. The idea was that workers who lost theirjobs because of trade were likely to go throughlonger than average spells of unemployment,and needed time to train in new skills. Incomesupport was in the form of Trade ReadjustmentAllowances (TRAs) which, combined with UI,could pay up to 75 percent of the worker’sformer wage and could last for a full year, or65 weeks for workers at least 60 years old. TheTRA alone, after unemployment insurance ranout, could pay as much as 65 percent of theworker’s former wage or 65 percent of the average manufacturing wage, whichever was lower;UI paid less than that in many States, and wasgenerally limited to 26 weeks.The law emphasized training. Congressionaldebate on the bill also showed that its backersexpected training to be a prominent feature ofTAA; the floor manager in the House of Representatives said that most workers gettingTRAs would:. . . [receive] an intensive training programwhich will be aimed at getting these workerstrained in skills which will enable them, in asshort a time as possible, to take their rightfulplace in the economy.5Any eligible trade-affected worker could gettraining free, if referred by the Department ofLabor. Moreover, workers could collect an additional 26 weeks of TRA (a total of 78 weeks)while in training. The law directed the LaborDepartment to disqualify workers for TRAs ifthey refused suitable training when referred toit, or failed to make satisfactory progress.‘Rep. Eugene Keogh (D-NY) was House floor manager. See ConJune 27, 1962, p. 1145.gressional Record,The law also included a relocation benefit.For workers who could find a suitable job onlyoutside their commuting area, TAA offeredreimbursement of “reasonable and necessaryexpenses” (to be prescribed by regulation) ofmoving a worker and his family and household,and a lump sum payment, equal to two and onehalf times the average weekly manufacturingwage, for other related expenses.The benefits under the 1962 law remainedmostly theoretical. To become eligible, a groupof three workers, or their representative, or thecompany, had to petition the Tariff Commission, which then determined whether “as a result in major part of concessions granted under trade agreements” increased imports werecausing or threatening to cause unemploymentor underemployment of a significant numberor proportion of workers in a firm or subdivision. Until 1969, not one petition was approved.Over the next 5 years, about 46,000 workers received TRAs; no complete record was kept ofthose receiving training, but they were few,according to the Department of Labor.Years of Expansion: 1975-81In the Trade Act of 1974, Congress revisedthe framework for trade negotiations, to guidethe forthcoming Tokyo Round of GATT tradetalks, and at the same time restructured TAA.The biggest change in TAA for workers wasto ease the eligibility requirements. The newlaw no longer required proof that trade concessions caused injury to firms or workers, oreven that imports were a major cause, but onlythat increased imports “contributed importantly” to the injury. It created two criteria forinjury: 1) an absolute decline in sales, production, or both, in a firm or subdivision; and2) actual or threatened total or partial layoffsof a significant number or proportion of theworkers,Another major change was to raise benefits.TRAs were now set at 70 percent of the worker’s previous wage and capped at 100 percentof the national average manufacturing wage;combined TRA and UI benefits could be asmuch as 80 percent of the previous wage. The
23period of eligibility for TRAs was still 52 weeks,except for people in training or workers 60 andover, who qualified for an extra 26 weeks. Recognizing that very little practical adjustmentassistance had reached trade-affected workersunder the 1962 law, Congress established a newtrust fund drawing from tariffs to pay for theprogram. Also, the law added a new benefitwhich would repay workers 80 percent of thecosts of searching for jobs outside their homeareas (up to a maximum of 500). Finally, certification of workers for TAA was moved fromthe Tariff Commission to the Department ofLabor.Over the next 7 years, many more workersreceived TAA benefits, and far more moneywas spent, than in the first dozen years of theprogram (figures 1 and 2). At least some workers displaced by trade did receive compensation. But very few received any kind of adjustment assistance, and compensation was usuallyso late—typically beginning 14 to 16 months1969197119731975after layoff—that most workers were back atwork, either at the old job or a new one, by thetime they got their first payment, Accordingto surveys of TAA during this period, two-thirdsof the workers receiving TRAs were eventually recalled to their old jobs and thus were notreally displaced—for the time being at any rate. 6In fiscal years 1975 to 1981, over 1.3 millionworkers were certified eligible for TAA benefits. Fully half of these workers were certifiedin one fiscal year (1980) when auto workers responded to rapidly rising imports and widespread layoffs with unprecedented applicationsfor TAA benefits. Spending for the program,‘Two of the most comprehensive reviews were U.S. Congress,General Accounting Office, Restricting Trade Act Benefits toImport-Affected Workers Who Cannot Find a Job Can Saveh4il)ions (Washington, DC: 1980); and Walter Corson, Walter Nicholson, David Richardson, and Andrea Vayda, Final Report: Survey of Trade Adjustment Assistance Recipients, report to theBureau of International Labor Affairs, U.S. Department of Labor (Princeton, NJ: Mathematical Policy Research, Inc., 1979).197719791981YearaEstlmated.SOURCE U S Department of Labor, Bureau of International Labor Affairs and Otflce of Trade Adjustment Assistance,198319851987’
24Figure 2.–Outlays for TAA Benefits for Workers, 004003002001000196919711973 Trade readjustment allowances1975197719791981198319851987 aYearTraining, jobsearch, and relocation assistanceaEstimated.SOURCE: U.S. Department of Labor, Off Ice of Trade Adjustment Assistance; and U.S. Congress, House Committee on Ways and Means, Background Mater/a/and Dataon Programs WIttrm the Jur/sd/ct/on of the Cornm/ffee on Wavs arrd Mearm, 1987 Ed/tion,Corw., 1st sess., Committee Print WMCP, 100-4. Mar 6, 1987,pp. 318, 320.10Othwhich was about 150 million in fiscal years1976 and 1977, and about 260 million in thenext 2 years, soared to 1.6 billion in 1980 and 1.4 billion in 1981.Nearly all of this money went for TRAs. Some48,000 workers (4 percent of those certified) entered training. About 5,200 got out-of-area jobsearch assistance and 4,400 relocation assistance; each of these services went to fewer thanone-half of one percent of the certified workers. Of the 3.9 billion spent for the programin 7 years, only 43 million went for training,relocation, and out-of-area job search combined(table 1).The TRAs, though no doubt welcome at anytime, did not serve the purpose of income support during the time the workers were unemployed, since 50 to 70 percent were back at workby the time they got their first payment.’ Several factors accounted for the delays. First,workers were slow to file petitions. Many didnot know until months after their layoff thatthe program existed; and when they did discover TAA, did not know how to apply. TheU.S. Department of Labor did not try to acquaint workers directly with the program, buturged the State employment security agencies,which administer TAA through the local ESand UI offices, to do so. The outreach systemdid not work well. Most workers who heardabout TAA discovered it through their union,The Mathematical study found that the average delay in receiving the first TRA payment was 14 months, and 50 percentof the recipients were reemployed. The General Accounting Office (GAO) found an average delay of 16 months and 71 percentreemployed. See Corson, et al., op. cit.; and U.S. Congress, General Accounting Office, op. cit.
25Table 1 .–Workers Certified for TAA, Trade Readjustment Assistance, and Adjustment Services, 1975-87FiscalWorkersyearcertified1975 (4th qu.) . . . .34,8791976 . . . . . . . . . . .144,3961977 ., . . . . . . . .116,7261978 . . . . . . .165,8661979 ., . . . . .140,0791980 ., . . . . . . . .684,7661981 . . . . . . . .51,0721982 . . . . . . . . .19,4651983 . . . . . . . . .56,1731984 . . . . . . . . . . .19,6881985 . . . . . . . . . . .25,3391986 . . . . . . . .93,1321987 . . . . 110,000-140,000fWorkersreceivingTRAsOutlaysfor TRAs(millions 482572561,6221,440103373540119e176eNumber of �20,366C5,84411,2996,8217,4247,743 en.a.Outlays (millions of 721,1819311,4916976967999161,384 en.a.44261916318556292,0116623,2692,2201,6921,089 en,a. rchRelocation or 19&5 and Ig87, “outlays’ are apprOprlatlOnSblncluded In total for tralnln9cof orker entering tralnln ,n 1980, 5,840 (59pe cent) paid forthelr own tralnlng costs, In 1981 18,940(94 percent) paid forthelr own tralnlng Tratnees were ellglbleforTRA living allowancesdlncluded In total for relocationelj s Department of Labor estimate‘OTA estimateNOTES Trade Readjustment Allowances (TRAs) provide Incomeworkers’ commuting areasupport during unemployment or tralnlngJob search expenditures are for job searches outside theSOURCES U S Congress, House Committee on Ways and Means, Background Maferfal and Data on Progarns WIthIn the Jurwdlct(on of the Cornrnf(tee on Ways andMeans, 1987 Ed/t/on IOOth Cong , 1st sess Comm!ttee Print WMCP 100.4, Mar 6.1987, PP 318, 320, U S Department of Labor. Off Ice of Trade AdjustmentAss{stanceco-workers, or the company, belatedly as a rule.Workers and unions typically lost 7 months ingetting petitions filed, and another 2 or 3months after the workers were certified, oftenbecause State agencies failed to notify them thatthey were now eligible for benefits.The other main factors in the delay were thatthe Labor Department generally took muchlonger than the 60 days allowed under the lawto process petitions for certification. As morepetitions were filed, backlogs grew and delaysof 5 or 6 months before certification were common. State agencies added more delays inchecking out individual workers’ eligibility andbenefits. Thus, by the time the average claimant got his first check, 14 to 16 months had goneby.These delays were part of the reason for thefailure to deliver adjustment services. Themajority of workers had taken a job in the yearor more that it took for government help toreach them; at this point there was little to bedone for them, other than giving them a lumpsum retroactive payment. Also contributing tothe failure was the fact that workers did not72-674 0 - 87 – 2know that training or other adjustment services were available. One study found that onlyone-third knew a
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