Trade Adjustment Assistance (TAA) and Its
Role in U.S. Trade Policy
J. F. Hornbeck
Specialist in International Trade and Finance
Laine Elise Rover
Research Associate
August 11, 2011
Congressional Research Service
7-5700
www.crs.gov
R41922
CRS Report for Congress
Pr
epared for Members and Committees of Congress
Trade Adjustment Assistance (TAA) and Its Role in U.S. Trade Policy
Summary
Congress created Trade Adjustment Assistance (TAA) in the Trade Expansion Act of 1962 to help
workers and firms adjust to economic dislocation caused by trade liberalization. Although most
economists agree that there are substantial national gains from trade, supporters of TAA argue
that the government has an obligation to help those hurt by policy-driven trade opening. In
addition, as an alternative to policies that might otherwise restrict imports, it can provide
assistance, while supporting freer trade. Often controversial, it is still strongly debated some 50
years later on equity, efficiency, and budgetary grounds. Despite disagreement, TAA still appears
to be important for forging a compromise on national trade policy.
Nonetheless, the legislative fortunes of TAA have ebbed and flowed. When TAA remained a
cornerstone of major trade legislation as it was in 1962, 1974, and 2002, it received long
reauthorizations and increased programmatic and funding support from Congress. When isolated
from its main policy rationale, as was the case at times during the budget-cutting 1980s, TAA
sometimes struggled to achieve short-term extensions and maintain funding levels when faced
with strong political opposition. TAA was most recently expanded in the American Recovery and
Reinvestment Act (ARRA) of 2009, although the higher funding levels and program
enhancements expired in February 2011, leaving TAA programs to operate at pre-ARRA levels
until 2012, when all TAA program authorizations are scheduled to expire.
The 112th Congress is considering legislative action to extend TAA. Congressional views of TAA
reauthorization range from repeal to support for the higher ARRA program and funding levels.
Supporters see TAA as vital to addressing the costs of freer trade; opponents view it as costly and
ineffective. This issue has become part of the debate on passage of implementing legislation for
the proposed FTAs with Colombia, Panama, and South Korea. As Congress seeks to resolve this
debate, two issues dominate the discussion: (1) reauthorization of TAA programs; and (2)
procedural issues on how to enact TAA legislation.
At present, a bipartisan compromise is being considered on TAA that would allow for extension
through December 31, 2013, of many, but not all, of the enhanced programs and funding levels
contained in the ARRA. The language incorporated in the KORUS FTA draft implementing bill
provides a preliminary view of this compromise. Procedural issues are still under discussion. As a
first cut, the two houses of Congress debated whether to attach TAA to the KORUS FTA draft
implementing bill. The Senate Finance Committee completed a “mock markup” of the KORUS
FTA draft implementing bill on July 7, 2011, that included TAA. The House, in a simultaneous
mock markup, approved a draft bill without it.
Including TAA as part of a trade agreement implementing bill has presented two issues. First,
rules governing the treatment of FTA implementing bills under TPA require that they contain only
provisions changing laws or providing new statutory authority that are “necessary or appropriate”
to implementing the agreement, raising the question for some as to whether TAA provisions meet
this standard. Ultimately, the language is subject to congressional interpretation. Second, because
TAA and the three FTAs are controversial issues, Members also have differing viewpoints on
each of the four possible bills. Many, therefore, would like the chance to vote separately on each
of them. Congress is now considering the possibility of taking up TAA in a separate bill. This
option has presented a sequencing issue, with congressional leaders still debating the order in
which the various bills might be taken up to ensure that all are considered simultaneously. A final
determination has not been announced.
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Trade Adjustment Assistance (TAA) and Its Role in U.S. Trade Policy
Contents
Introduction...................................................................................................................................... 1
TAA Programs and Rationale .......................................................................................................... 1
Antecedents to TAA......................................................................................................................... 3
The Randall Commission .......................................................................................................... 4
Early TAA Legislation............................................................................................................... 5
Trade Expansion Act of 1962 .......................................................................................................... 6
The Failure of TAA: 1963-1974 ...................................................................................................... 7
Trade Act of 1974 ............................................................................................................................ 8
The Trade Agreements Act of 1979 and the 1980s .......................................................................... 9
NAFTA and the Trade Act of 2002: TAA Expansion..................................................................... 10
The American Recovery and Reinvestment Act (ARRA) of 2009 and TAA Revision.................. 11
Reauthorization in the 112th Congress ........................................................................................... 12
Outlook .......................................................................................................................................... 13
Appendixes
Appendix. TAA Reauthorization, 1962-2011 ................................................................................ 14
Contacts
Author Contact Information........................................................................................................... 14
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Trade Adjustment Assistance (TAA) and Its Role in U.S. Trade Policy
Introduction
A “national trade policy” promoting trade liberalization emerged after a period of protectionism
with passage of the Reciprocal Trade Agreements Act (RTAA) of 1934. It continues to be the
dominant, but hardly uncontested, trade position of the United States. The substantial and widely
recognized national gains to trade have long been recognized, yet trade liberalizing legislation
often faces strong political opposition because related costs, although much smaller, affect a vocal
and concentrated constituency. Congress first addressed this inherent tension with legislation that
allowed for the re-imposition of tariffs and other trade barriers when domestic industries were
threatened or hurt by imports. In 1962, however, Congress adopted an additional approach by
providing trade adjustment assistance (TAA) directly to trade-affected firms and workers. It
remains a controversial pillar of U.S. trade policy today.
The 112th Congress is considering reauthorization of TAA and two issues dominate the
discussion. First, Members disagree on reauthorization of TAA programs. Second, procedural
issues over how to move the TAA and FTA implementing bills are still under discussion,
including whether to consider TAA as part of an implementing bill for the U.S.-South Korea Free
Trade Agreement (KORUS FTA), or in separate legislation.
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 an alternative to import relief that many argue has
served to promote the long-term U.S. trade liberalization agenda. It will also consider the extent
to which TAA has been linked to both renewal of trade agreements authority,1 and passage of
trade agreement implementing legislation. TAA has become an integral part of an increasingly
complex U.S. trade policy. Understanding the origins of TAA, the historical congressional debate,
and legislative options taken by Congress over the past 50 years may help inform the debate over
TAA in the 112th Congress.
TAA Programs and Rationale
TAA began with two programs covering workers (retraining, relocation allowances, extended
unemployment benefits) and firms (loans, loan guarantees, technical assistance, tax benefits).
Congress added a communities program (loans and grants) in 1974, which was subsequently
terminated in 1982, and a farmers program (technical assistance and cash benefits) in 2000.
Congress authorized another communities program in 2009. All TAA programs are usually
reauthorized at one time. This report does not address details of the four programs, which are
available in other CRS reports. Rather, it takes a holistic policy approach to the issue of assistance
for adjusting to import penetration, with occasional reference to the large workers and much
smaller firms programs, which have formed the core of TAA since its inception in 1962.
1 Trade agreements authority refers to the authority Congress conveys to the President to enter into reciprocal trade
agreements. It began in 1934, and as the negotiation process became more complex, so too did this statutory authority.
The complexity may be seen in the fast track rules created in the Trade Act of 1974, and further modifications made in
subsequent trade bills, including the Trade Act of 2002, which provides for what is now referred to as trade promotion
authority (TPA). For details, see CRS Report RL33743, Trade Promotion Authority (TPA) and the Role of Congress in
Trade Policy, by J. F. Hornbeck and William H. Cooper.
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Nearly eight decades after passage of the RTAA, the pending FTAs and President Obama’s
National Export Initiative stand as current reminders of the importance that the United States
places on trade expansion, particularly of exports. The pursuit of export growth, however,
generally cannot be done without conceding to a reciprocal increase in imports, and the tradeoff
does not affect stakeholders equally. While freer trade can benefit exporters, consumers, and the
economy as a whole, it can place hardship on some import-competing industries facing increased
competition.2 This is the cost of economic adjustment, and supporters of TAA argue that workers
(especially the permanently displaced) and firms hurt by imports increased in part by changes in
trade policy have more severe adjustment problems than others affected by different types of
economic dislocation. From this reasoning, it is argued that they deserve their own category of
assistance, rather than rely on broader programs designed to address all types of economic
dislocation.3
The issues raised by this policy were identified early on in the postwar economic policy debate.
Justification rested on arguments for (1) economic efficiency, by speeding the adjustment process
and returning idle resources to work more quickly; (2) equity, by compensating for lost income
while spreading the cost of freer trade to society as a whole; and (3) political pragmatism, by
defusing opposition to trade liberalizing legislation. Additionally, the costs of trade liberalization
were at first managed through temporary protection (e.g., escape clause and peril point
provisions—see next section) to maintain a coalition in favor of free trade. TAA was viewed as a
more constructive alternative. It would provide for positive adjustment rather than negative
reaction to tariff reduction, with expectations that costs would be temporary for an adjustment
period, and much less than those of more protectionist measures.4
The logic of these claims was challenged in the past, as it is today. Opponents argued that
economic efficiency was far from guaranteed given that subsidies can operate to reduce worker
and firm incentives to relocate, take lower-paying jobs, or in other ways seek a solution to being
idled. Equity issues arose because many economic groups hurt by changing economic
circumstances caused by other than trade policies were not afforded similar economic assistance.
A frequently cited alternative argues that if society has a responsibility to help all those dislocated
by economic change, then policies should not be narrowly restricted to trade-related or other
categories of harm.5
2 For a brief but comprehensive summary, see J. David Richardson, “Uneven Gains and Unbalanced Burdens? Three
Decades of American Globalization,” in The United States and the World Economy, ed. C. Fred Bergsten (Washington,
DC: Institute for International Economics, 2005), pp. 111-118.
3 An early assessment may be found in Clair Wilcox, “Victims of Tariff Cuts,” The American Economic Review, vol.
40, no. 5 (December 1950), pp. 884-889. See also C. Michael Aho and Thomas O. Bayard, “Costs and Benefits of
Trade Adjustment Assistance,” in The Structure and Evolution of Recent U.S. Trade Policy, ed. Robert E. Baldwin and
Anne O. Krueger (Chicago: University of Chicago Press, 1984), pp. 154-155 and J. David Richardson, “Comment,” in
The Structure and Evolution of Recent U.S. Trade Policy, pp. 192-193, and more recently, I. M. Destler, American
Trade Politics, 4th ed. (Washington, DC: Institute for International Economics, 2005), p. 327.
4 For early renditions of TAA justification, see Richard A. Givens, “The Search for an Alternative to Protection,”
Fordham Law Review, vol. 30, no. 1 (January 1, 1961), p. 20, William Diebold, Jr., The United States and the
Industrial World: American Foreign Economic Policy in the 1970s (New York: Praeger Publishers, 1984), p. 150 and
153, and J. David Richardson, “Comment,” pp. 192-193.
5 Katherine Baicker and M. Marit Rehavi, "Policy Watch: Trade Adjustment Assistance," Journal of Economic
Perspectives, vol. 18, no. 2 (Spring 2004), pp. 251-252, Wilcox, Victims of Tariff Cuts, p. 889, Matthew J. Slaughter
and Robert Z. Lawrence, “More Trade and More Aid,” The New York Times, June 10, 2011, and George F. Will,
“Obama and Free Trade: Appease Big Labor,” The Washington Post, June 8, 2011.
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Administrative hurdles and costs were also considered high. Economists, among others, pointed
to the methodological difficulties in defining and measuring injury from tariff reduction, arguing
that solutions would be inexact, if not arbitrary.6 Previous studies suggest that many firms, even
smaller ones, could adjust on their own, and that workers could just as well rely on more broadly
available unemployment and retraining programs. In addition, over time, the costs of TAA would
rise, diluting political support.7
Perhaps the strongest case for TAA is its potential political effect, despite being difficult to
estimate precisely. Nonetheless, even many of the most ardent skeptics of TAA are reluctant to
dismiss the likelihood that it may have helped garner support for important trade agreements
going back to the General Agreement on Tariffs and Trade (GATT) 8 multilateral trade talks of the
1960s and 1970s. That support is often directly attributed to the TAA provisions provided in the
Trade Expansion Act of 1962 and the Trade Act of 1974, which authorized the President to enter
into important tariff-cutting agreements negotiated respectively in the GATT Kennedy and Tokyo
Rounds.9 It was also a quid pro quo for providing President Bush with TPA in 2002, the most
recent granting of such authority (see the Appendix for a legislative chronology).
Antecedents to TAA
TAA was a product of a time in which there was a major shift in U.S. domestic, trade, and foreign
policies. The seeds were planted with the Reciprocal Trade Agreements Act (RTAA) of 1934, a
response to the tariff-raising Smoot-Hawley Act of 1930. The shift from protectionism toward
trade opening was rooted in a concern for domestic economic welfare, in recognition that
inhibiting imports could have resulted in retaliation, possibly hurting U.S. producers, particularly
at a time when the economy needed a lift out of the Great Depression. The RTAA provided time-
limited authority to the President to enter into reciprocal tariff-reducing agreements, without the
need for congressional approval afterward. It is the early precursor to the now-expired Trade
Promotion Authority (TPA). The legislation was controversial, prompting resistance not only to
the trade provisions, but to what some considered to be a concession to the President of
traditional congressional authority over tariffs.10
Within a few years, increased trade openness took on a stronger foreign policy rationale. By
1940, President Franklin D. Roosevelt’s State of the Union address had elevated U.S. trade policy
to an “indispensible part of the foundations for any stable and durable world peace,”11 even as the
6 Wilcox, Victims of Tariff Cuts, p. 8845-889, C. Michael Aho and Thomas O. Bayard, “Costs and Benefits of Trade
Adjustment Assistance,” pp. 153-155, 168-169, and 177, and George F. Will, “Obama and Free Trade, Appease Big
Labor,” The Washington Post, June 8, 2011.
7 TAA costs rose dramatically with the automobile retrenchment in the early 1980s, providing the Reagan
Administration with ample room to reduce funding significantly. Aho and Bayard, “Costs and Benefits of Trade
Adjustment Assistance,” pp. 184-185. It is also an issue for the 112th Congress.
8 GATT was the precursor to the World Trade Organization (WTO).
9 Destler, American Trade Politics, pp. 296-298 and Congressional Quarterly, CQ Almanac 1998, pp. 18-3-18-9.
10 Douglas A. Irwin, “From Smoot-Hawley to Reciprocal Trade Agreements: Changing the Course of U.S. Trade
Policy in the 1930s,” in The Defining Moment: the Great Depression and the American Economy in the Twentieth
Century, ed. Michael D Bordo, Claudia Goldin, and Eugene N. White (Chicago: University of Chicago Press, 1998),
pp. 340-346.
11 Robert E. Baldwin, U.S. Trade Policy Since 1934: An Uneven Path Toward Greater Trade Liberalization, National
Bureau of Economic Research, Working Paper 15397, Cambridge, October 2009, p. 2.
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approaching world war was about to devastate international commerce. As a result, trade re-
emerged as a key ingredient of a foreign economic policy geared toward rebuilding the post-war
economic system in support of international stability, and particularly as a counterweight to
encroaching Soviet communism. This stance took on even greater importance as the United States
became the undisputed leader of the “free world” during the Cold War.12
Yet, trade liberalization was contentious because a foreign economic policy of cooperation based
on minimizing international tension ran headlong into concerns over protecting domestic industry
from imports. As much as congressional testimony in the 1940s tilted toward protectionism,
public opinion appeared to be more indifferent for two reasons. First, U.S. imports in a war-torn
world were not large enough to be a serious threat to U.S. jobs and production. Second, trade was
viewed as a key element of the Cold War strategy. The lack of public reaction to liberalizing
commerce made it easier for the United States to make the transition to multilateral trade
negotiations (MTNs) under the newly created GATT.13
Despite the foreign policy imperative of trade with other nations, the success of the trade
agreements program would again inspire responses to harmful imports. Two policies dominated:
the escape clause, first instituted by executive order under President Truman and later established
in legislation; and the peril point provision.14 The escape clause allowed for the temporary re-
imposition of tariffs when fairly priced imports were proven or threatened to harm domestic
industry. The peril point provision required the United States Tariff Commission (USTC) to
evaluate the effects of tariff reductions, and determine a point at which tariffs might be reduced
without doing harm to domestic producers.15
Although President Eisenhower would continue to receive renewed trade agreements authority
that allowed him to pursue tariff-reducing agreements, domestic pressure resulted in shorter
extensions and more limited tariff cuts. Trade as foreign economic policy again found itself in
tension with a domestic policy aimed at securing and maintaining the economic welfare of U.S.
citizens at home. This policy tension opened the door to the earliest legislative vestiges of TAA in
the early 1950s. While it would take more than a decade to become law, TAA legislation would
eventually serve, at least in part, to reconcile sometimes competing foreign and domestic
economic policy priorities.
The Randall Commission
At the end of the Truman Administration, the Public Advisory Board for Mutual Security (the
Bell Committee) made first mention of assistance to firms and workers facing increased
competition from imports.16 Although little came from this proposal at the close of the Truman
12 As quoted in, Robert E. Baldwin, U.S. Trade Policy since 1934: An Uneven Path Toward Greater Trade
Liberalization, p. 2. In fact, President Eisenhower would later write that trade expansion meant expansion in the “free
world,” as a response to the Soviet Bloc. Dwight D. Eisenhower, “Document #908; To John Foster Dulles,”
Department of State Bulletin, vol. 30, no. 763 (February 8, 1954), p. 187.
13Robert A. Pastor, Congress and the Politics of U.S. Foreign Economic Policy (Berkeley: University of California
Press, 1980), pp. 94-95; Diebold, The United States and the Industrial World, p. 151, and Destler, American Trade
Politics, p. 7, 12-13.
14 Pastor, Congress and the Politics of U.S. Foreign Economic Policy, p. 100
15 Baldwin, op. cit., pp. 5-7 and Irwin, op. cit., pp 347-349.
16 Diebold, The United States and the Industrial World, p. 152.
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presidency, a year later TAA hit the spotlight in the report prepared by the 1953 Commission on
Foreign Economic Policy, created by Congress as part of a one-year extension of the trade
agreements authority legislation. Known as the Randall Commission, its appointed task was to
recommend a long-term strategy for U.S. foreign economic policy. In addition to recommending a
three-year extension of the Trade Agreements Act, it evaluated a proposal for “government
assistance to communities, employers, and workers.” The report found TAA noteworthy in theory,
but criticized and ultimately rejected it as too narrow an approach to economic dislocation by
limiting assistance to groups affected only by lower import tariffs.17
The proposal, drafted by commissioner David J. McDonald, President of the United Steel
Workers, expressed concern that “unemployment caused by government action, as in the lowering
of tariffs, should be of particular concern to the government,” particularly in times of economic
slowdown.18 The plan called for temporary assistance to communities, companies, and workers
threatened by imports, to be given in the form of technical and financial assistance. This approach
would presumably encourage import-affected industries to diversify their output, and encourage
communities to explore ways to expand employment opportunities with additional financing for
privately supported industrial development corporations.19
In a formal critique of the Randall Commission report, a group of noted economists
acknowledged the historical precedent for government assistance in cases of policy-induced
economic change, but reiterated a preference for responses that addressed the larger problem of
economic dislocation rather than just the tariff issue. They also raised a number of pragmatic
questions related to operating TAA programs.20 Two important legislative initiatives emerged
from this effort. First, a report evaluating TAA was called for in legislation extending trade
agreements authority to the President. Second, the following year, the first of a series of TAA bills
would be introduced in the 83rd Congress.
Early TAA Legislation
Senator John F. Kennedy, who would eventually see TAA put into practice during his presidency,
was an avid supporter of assistance to those affected by trade. He introduced in the 83rd Congress
the Trade Adjustment Act of 1954 (S. 3650), which acknowledged the importance of international
trade, but also the potential for localized adjustment problems, even when trade benefited the
nation as a whole. Congress did not act on the bill, and an identical version was introduced in the
84th Congress by Senator Hubert Humphrey. Originally introduced as a stand alone bill, it was
offered as an amendment to H.R. 1, the bill extending trade agreements authority to the President,
linking TAA to the authority of the President to enter into reciprocal trade agreements.21
The Kennedy/Humphrey bills, among others, proposed that where a reduction in tariffs on
competing articles “have been found either to threaten or to have caused serious injury to a
17 U.S. Congress, House, Report to the President and the Congress, Commission of Foreign Economic Policy, prepared
by Chairman Clarence B. Randall, 83rd Cong., 2nd sess., January 23, 1954, H. Doc. 290 (Washington: GPO, 1954), p.
54.
18 Ibid., p. 55.
19 Ibid.
20 Klaus Knorr and Gardner Patterson, A Critique of the Randall Commission Report (Princeton: Princeton University
Press, 1954), pp. 29-33.
21 Other bills would be introduced in the 86th Congress before becoming law in the 87th Congress.
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domestic industry,” that a board consider application for assistance from firms, communities,
industrial development corporations, employees, or organizations representing employees. Aid
would be limited to a period of adjustment and was not to be considered a permanent subsidy.
The goal was to respond to negative effects of a liberal trade policy without resorting to
protectionist policies.22 As would be the fate of future TAA bills in the 1950s, Congress took no
action, but TAA became increasingly solidified as part of the U.S. trade policy debate.
Both the Democratic and Republican platforms of the 1960 election placed foreign economic
relations at the center of their agendas. The Democratic platform included a specific appeal for
TAA as part of an expanded trade policy. The Republican platform, by contrast, had no such
proposal, giving added weight to the escape clause and peril point provision.23 By 1961, the
GATT Dillon Round was concluded and it was revealed that the United States had cut the tariffs
of 61 items below their peril point.24 This development marked a departure from earlier more
cautious policies which, coupled with high U.S. unemployment, created an environment
conducive to assisting trade-affected constituents.25
Trade Expansion Act of 1962
The global market expanded briskly following World War II, and the growing importance of the
then-European Economic Community (EEC) nudged U.S. policy further toward trade
liberalization. Forming a trade pact with one of the most important markets in the world was not
only considered an economic imperative, but central to achieving lasting world peace by defusing
tension over protectionist policies. The United States also faced balance of payments pressures,
modest unemployment, and the growing Communist threat, so trade policy had become an
essential ingredient of foreign economic policy. In this light, many considered the Trade
Expansion Act of 1962 to be the most important legislative initiative of the 87th Congress.26
The 1962 Trade Act not only gave the President unprecedented “tariff-cutting authority,”
particularly with respect to a critical trade partner, but added a whole new approach to dealing
with domestic resistance to trade liberalization—trade adjustment assistance. TAA stood in
contrast to the escape clause and peril point (the latter dropped in the 1962 Act). These options
were well honed in the 1950s, despite pressure by the Executive Branch to limit their use. TAA
was also a different and more highly targeted approach than the escape clause, focusing on
specific firms and workers rather than an entire industry. TAA was offered in the form of
increased and extended unemployment benefits, retraining and relocation allowances, loans and
technical assistance for firms, and special tax deductions.27
22 S. 3650, The Trade Adjustment Act of 1954, and Sen. Humphrey, “Extension of the Trade Agreements Act-
Amendments,” Senate bill introduction, Congressional Record, vol. 101, part 3 (March 30, 1955), pp. 3997-3998.
23 John T. Woolley and Gerhard Peters, The American Presidency Project, Santa Barbara, CA. Available at
http://www.presidency.ucsb.edu/ws/?pid29602.
24 Congressional Quarterly. “The Trade Expansion Act: President Receives Unique Tariff-Cutting Rights and
Adjustment Program After Carefully Planned Campaign,” CQ Almanac 1962 p. 259.
25 Ibid., 261.
26 Ibid., p. 263-264.
27 Ibid., pp. 249, 255-256.
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TAA shifted the trade debate by acknowledging more fully in legislation the costs of trade
liberalization. It was also politically effective, generating support from labor constituencies
without turning to more protectionist responses. It is notable that a relatively lengthy and broad
“negotiating authority” was achieved in a bill that also included TAA for the first time. Despite
passage with bipartisan support, it was, nonetheless, the most controversial aspect of the bill. The
House mounted stiff resistance to TAA from Republicans and some conservative Democrats, who
objected to special treatment for tariff-affected workers and firms, and who sought a separate vote
on TAA. Despite this effort, the bill was debated under a closed rule, prohibiting amendments,
and passed with bipartisan support, despite a majority of Republicans voting against it. The
Senate rejected attempts to delete or modify the TAA provisions, and proceeded to pass the bill
with broad support and only minor amendments.28
The 1962 Trade Act also changed the nature of trade legislation. In recognizing the need to
address domestic concerns as part of trade liberalization, Congress and President Kennedy
incorporated TAA into broader trade policy. Previously, Congress concerned itself with (1)
conveying a specific trade agreements authority to the President, which in turn (2) would lead to
new trade agreements, without the need for further congressional action. After 1962, it would
become difficult to consider new trade agreements authority without taking up TAA, and it
became increasingly likely that prospects for congressional support for new trade agreements
would also hinge on such an accommodation.
The Failure of TAA: 1963-1974
TAA initially achieved one goal: greater support from labor groups for trade liberalization. By
1971, as the U.S. balance of trade turned to deficit for the first time since 1888, and perceptions
of lost income and jobs to foreign competition grew, this support eroded. The failure of TAA to
provide significant relief from imports in its first decade of operation added to labor’s concerns.
From 1963 until 1969, none of the 6 worker or 12 industry-wide petitions for TAA led to
assistance. The eligibility criteria were tough to meet, requiring demonstration that the imported
article was increasing, that the increase “was caused in major part” by the tariff reduction, and
that the increase was the “major cause” of injury to the firm or worker. The multistep process also
took months to complete and was costly for the applicants.29
In hindsight, the inability to demonstrate injury and the laborious administrative procedures
combined with strict U.S. Tariff Commission (USTC) rulings led to a deepening dissatisfaction
with TAA.30 Although USTC adjudication would become more relaxed in the early 1970s, and the
number of affirmative rulings would rise, they were still only a fraction of total petitions, and the
political tide had already turned on TAA.31 Pressure mounted to address programmatic
28 Ibid., p. 277.
29 Charles R. Frank, Jr., Foreign Trade and Domestic Aid (Washington, DC: The Brookings Institution, 1977), pp. 4-5
and 40-47. Other administrative relief from imports such as the escape clause and anti-dumping rules also proved to be
difficult to obtain.
30 Another criticism argued that the lack of positive TAA rulings only encouraged the practice of trade-affected parties
seeking relief through political contacts in both the legislative and executive branches. Gary Clyde Hufbauer and
Howard F. Rosen, Trade Policy for Troubled Industries (Washington, DC: Institute for International Economics, 1986),
p. 35.
31 Dominic Sorrentino, “Trade Adjustment Assistance to Workers Displaced by Imports, Fiscal 1963-73,” U.S.
Department of Labor, Monthly Labor Review, Washington, DC, January 1974, pp. 63-65.
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deficiencies, but by 1972 organized labor formally rejected the program for the time being. In
hearings before the House Subcommittee on Foreign Economic Policy of the House Committee
on Foreign Affairs, leaders of the AFL-CIO came out against the program, as well as trade
liberalization in general. The sentiment is reiterated by one trade expert: “So in the first 30
postwar years, import-affected industries that played the trade policy games by the legal rules
generally lost out” and pressure mounted for Congress to intervene directly for constituents, an
option that the trade remedy rules “were intended to avoid.”32
Critics called for major adjustments to the TAA eligibility criteria and administrative procedures,
but the Nixon Administration offered a trade bill that actually diminished TAA. As the bill wound
its way through Congress, however, both the House and the Senate not only restored all TAA
benefits, but also added to them and made changes that would help make it easier to implement
the programs. This was accomplished in one of the most far-reaching trade bills in U.S. history,
the Trade Act of 1974.33
Trade Act of 1974
Unlike in 1962, TAA was not the most controversial trade issue in 1974, although Congress still
paid it considerable attention. Despite intentions to the contrary, TAA had so far done little to
encourage retraining or relocation of workers, and few firms capable of recovery received
meaningful assistance. Providing additional unemployment insurance was its most noted
accomplishment, and not one deemed by some as particularly effective in addressing injury from
imports. Although numerous bills were introduced that would address many of TAA’s perceived
weaknesses, Congress passed none of them until TAA was once again united with the major 1974
trade bill providing for renewal of trade agreements authority. Originally crafted by the Nixon
Administration, the draft trade bill acknowledged the deficiencies of the TAA program, and
effectively gutted it. Congress, however, decided to re-tool rather than terminate the program.34
Among the major changes, the eligibility criteria were made less stringent so that imports no
longer had to be the “major cause” of dislocation, meaning more important than all other causes
combined. Congress replaced this test with criteria requiring demonstration that a significant
number of workers had lost their jobs, that a firm’s sales had decreased, imports had increased,
and that the imports “contributed importantly” to the declines. Determinations also were moved
to the U.S. Department of Labor and the U.S. Department of Commerce for workers and firms,
respectively, leaving escape clause determination to the newly named U.S. International Trade
Commission (USITC). Requiring the two departments to act within 60 days versus six months for
the USITC made TAA preferable to escape clause action.35
Other notable changes included adding a new program for communities, increasing worker and
firm benefits, and providing special assistance for older displaced workers, or those who tend to
make up a larger portion of plant closings, rather than layoffs.36 Congress also included strong
32 I. M. Destler, American Trade Politics, p. 140.
33 Charles R. Frank, Jr., Foreign Trade and Domestic Aid, p. 5.
34 Ibid., pp. 70-71 and Congressional Quarterly, “Congress Clears Trade Bill on Final Day,” CQ Almanac 93rd
Congress, 1974, pp. 553-562, and Pastor, Congress and the Politics of U.S. Foreign Economic Policy, p. 143.
35 Ibid.
36 Plant closings do not discriminate among employees, and so capture older and more experienced workers who often
(continued...)
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language indicating its intent that the program be used as a meaningful form of relief from
imports.37 In the end, the Trade Act of 1974, known for its dramatic changes in how trade
agreements would be considered under new expedited procedures, also provided a congressional
imprint of support for TAA by carefully considering ways to enhance the program, and ensuring
its prominence by linking it to the major trade bill providing renewed trade agreements authority
to the President.
The Trade Agreements Act of 1979 and the 1980s
In 1979, U.S. trade policy took a major step with ratification of the GATT Tokyo Round of
multilateral trade negotiations. For TAA, however, it marked the beginning a long period of
decline. Separate legislation to extend and expand the program passed the House, but failed to
move through the Senate.38 Although Congress eventually reauthorized the program, by the early
1980s, TAA had become a victim of its own growth, negative program evaluations, and changing
political and economic priorities. The declining automobile industry proved to be one catalyzing
factor in its demise. The slowing economy and increased Japanese imports led to large layoffs and
related “explosion of TAA claims,” which at the time resulted in historically generous benefits.
This combination multiplied TAA program costs, so that President Carter, generally a supporter,
expressed concern over the budgetary impact. Although he agreed to a two-year extension, TAA
could not escape the impending deep budget cutting of the incoming Reagan Administration.39
Congress extended TAA in the Omnibus Budget Reconciliation Act of 1981, but the act reduced
benefits and eliminated $2.6 billion from the budget. Detractors cited as cause, a General
Accounting Office (GAO) report that challenged the program’s effectiveness to bring about
adjustment rather than simply pay out additional benefits.40 High unemployment provided a
reason for Congress to support TAA, but Congress extended it only through fiscal year 1983,
again with much diminished finances and tightened standards for eligibility, particularly for
unemployment benefits. By 1983, the Reagan Administration openly sought to terminate the
program (as did his successor President George H. W. Bush), which was spared in reduced form
by a congressional extension through fiscal year 1985.41
After two very short extensions and a three-month lapse, TAA was finally extended for six years,
through fiscal year 1991, as part of deficit-reduction legislation passed in 1986. Its programs were
again trimmed with, for example, the elimination of all loans, loan guarantees, and other direct
financial assistance to firms, providing only technical assistance, the basis of the firm program
today. It received additional extensions first through fiscal year 1993 in the Omnibus Trade and
Competitiveness Act (OTCA) of 1988, and second, through fiscal year 1998 in the budget
(...continued)
make up much of the work force. Layoffs, by contrast, tend to affect younger workers disproportionally because layoffs
are generally based on seniority.
37 Charles R. Frank, Jr., Foreign Trade and Domestic Aid, pp, 63-67.
38 Congressional Quarterly, Inc., “Trade Adjustment Assistance,” CQ Almanac 1979, pp. 327-328.
39 Ibid., and Destler, American Trade Politics, p. 150.
40 Congressional Quarterly Inc., Trade: U.S. Trade Policy Since 1945, Washington, DC, 1984, pp. 23-69.
41 Congressional Quarterly, Inc., “Trade Adjustment Aid Cut,” CQ Almanac 1983, pp. 251.
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Trade Adjustment Assistance (TAA) and Its Role in U.S. Trade Policy
reconciliation bill of 1993 (see the Appendix).42 The lengthy extensions appeared to be inversely
proportional to the budgetary effort in the bills.
In short, beginning in the 1980s, TAA came under severe pressure. Evaluations criticized the
program’s effectiveness and rising costs, making it more difficult to support, even as a form of
leverage to promote trade liberalization. TAA was also caught up in the deficit reduction
negotiations, losing much of the clout it may have had years before, when it was part of finding
compromise in broader trade and foreign policy debates. Two of its longest extensions were for
much reduced program commitments, both done in budget rather than trade bills, where it was
divorced from its primary policy rationale. But even within the trade policy debate, emphasis was
shifting back toward import relief, as seen in the rise of special protection in the form of
voluntary export restraints (VERs), and countervailing duty (CVD) and antidumping (AD)
petitions. These became core negotiating objectives during future GATT rounds, temporarily
relegating TAA to the back seat of trade policy.43
NAFTA and the Trade Act of 2002: TAA Expansion
The major trade events of the 1990s, occurring relatively early in the decade, were passage of the
North American Free Trade Agreement (NAFTA) and the GATT Uruguay Round. Negotiations to
implement NAFTA were well underway during the 1992 presidential campaign and were
highlighted in the debates. Newly elected President Clinton oversaw the implementation of
NAFTA, but did so only after a number of conditions were attached, including TAA.44 NAFTA
reinvigorated TAA by producing a separate program (NAFTA-TAA) that applied to dislocation
related to increased trade with Mexico and Canada. This limited case was the only time that TAA
was directly linked to a specific FTA implementing bill, which Congress passed in December
1993. Four months earlier, Congress had already extended the general TAA programs for a five-
year period as part of the omnibus budget reconciliation bill.45
In 1999, TAA was extended through 2001, at which point it lapsed until reauthorized for five
years as part of the Trade Act of 2002. TAA played a major role again in the 2002 debate over the
extension of trade agreements authority (renamed Trade Promotion Authority—TPA) to President
Bush. President Bush and the Republicans pushed hard to renew the long-expired trade
agreements authority. The Democrats were unwilling to provide such authority unless TAA was
reauthorized. With the apparent need for a quid pro quo, the House Ways and Means Committee,
under Republican leadership, offered a TAA bill first. The Senate Finance Committee drafted its
own TAA bill, and agreement was tentatively struck to keep the votes separate on the two
issues.46
After a lengthy and exhaustive legislative process, however, the final bill that would become the
Trade Act of 2002 incorporated TAA, TPA, and a host of other trade issues. Despite some
Republican opposition to the TAA language, revised and expanded TAA programs were
42 Congressional Quarterly Inc., “Trade Adjustment Aid,” CQ Almanac 1986, p. 351.
43 Destler, American Trade Politics, p. 128 and Hufbauer and Rosen, Trade Policy for Troubled Industries, pp. 36-39.
44 John M. Rothgeb Jr., U.S. Trade Policy: Balancing Economic Dreams and Political Realities (Washington, DC:
Congressional Quarterly Inc., 2001), p. 205.
45 Congressional Quarterly Inc., CQ Almanac 1993, pp. 137-175.
46 Congressional Quarterly, Inc., “Victory for Bush on Fast Track,” CQ Almanac 2002, pp. 18-3 - 18-5.
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reauthorized for five years. Among the key new features, the bill merged NAFTA-TAA with the
general program, created government-subsidized health insurance (Health Care Tax Credit) for
dislocated workers, altered eligibility criteria to include secondary or downstream workers
affected by imports, and added a new program for farmers. The bill as a whole passed in a tense,
close, but bipartisan vote.47 At this juncture, TAA had once again worked its way into the center
of the trade policy debate and trade-related legislation.
The American Recovery and Reinvestment Act
(ARRA) of 2009 and TAA Revision
In the intervening years since the Trade Act of 2002, some in Congress debated TAA reform with
an eye on making it more responsive to the complex economic challenges brought about by
“globalization.” In the 110th Congress, a bipartisan understanding was formulated that included
expansion of eligibility and funding for all TAA programs. The House passed a version of TAA
expansion in December 2007, but the Senate did not take up the bill and program authorizations
expired on December 31, 2007. TAA apparently also failed to move because of a Senate attempt
to link TAA to an implementing bill for the proposed U.S.-Colombia free trade agreement. The
110th Congress instead provided short-term funding through consolidated appropriation bills to
keep the TAA programs running.48
In the 111th Congress, consideration of TAA reauthorization coincided with the U.S. economy
falling into a deep recession following an unprecedented financial crisis. Congress responded
with passage of the American Recovery and Reinvestment Act (ARRA) of 2009. This act became
the legislative and budgetary vehicle to move TAA revisions that had been developed over the last
few years. Despite continued disagreement on TAA expansion, Congress reauthorized it as part of
the large ARRA bill. It extended the programs through December 31, 2010, and revamped them
using a revised version of the framework developed in the 110th Congress. This framework
included eligibility for service workers and firms, a new communities program, an increase in the
Health Care Tax Credit for dislocated workers, and additional funding for all programs, among
other changes.
As TAA programs were about to expire again at the close of 2010, Congress extended them
through February 12, 2012, as part of the Omnibus Trade Act of 2011. Higher authorization levels
and expanded provisions of the ARRA, however, were only extended through February 12, 2011.
This outcome presented Congress with a controversy when the ARRA provisions expired.
Supporters of the expanded TAA see the ARRA-passed reforms as long-sought permanent
changes needed to modernize TAA for the 21st Century. TAA detractors view the lapsed
expansion of TAA reforms under the ARRA as the appropriate outcome of a limited-life stimulus
bill. TAA programs continue to operate at their pre-ARRA levels until early 2012, and legislation
has been introduced in the 112th Congress that ranged from terminating TAA to reauthorizing it at
the higher ARRA levels, reflecting these varied viewpoints.
47 Ibid., and U.S. Congress, House Committee on Ways and Means, Subcommittee on Trade, Trade Act of 2002,
Conference Report to accompany H.R. 3009, 107th Cong., 2nd sess., July 26, 2002, H.Rept. 107-624 (Washington:
GPO, 2002), pp. 14-25.
48 Inside U.S. Trade, Stimulus Package May Include TAA Reauthorization and Expansion, January 9, 2009.
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Reauthorization in the 112th Congress
TAA program authorizations are set to expire in early 2012 and the 112th Congress is considering
legislative action to extend them. This issue has become part of the debate on passage of
implementing legislation for the proposed FTAs with Colombia, Panama, and South Korea. As
Congress seeks to resolve this debate, two issues dominate the discussion: (1) reauthorization of
TAA programs; and (2) procedural issues on how to move TAA legislation.
Congressional views of TAA reauthorization range from repeal to support for the higher ARRA
program and funding commitments. Supporters see TAA as vital to addressing the costs of freer
trade; opponents view it as costly and question its effectiveness. At present, a bipartisan
compromise is being considered on TAA that would allow for extension through December 31,
2013, of many, but not all, of the enhanced programs and funding levels contained in the
ARRA.49 The language incorporated in the KORUS FTA implementing bill provides a
preliminary view of this compromise.50
Procedural issues over how to move the TAA and FTA implementing bills are still under
discussion. As a first cut, the two houses of Congress debated whether to attach TAA to the
KORUS FTA draft implementing bill. The Senate Finance Committee completed a “mock
markup” of the KORUS FTA draft implementing bill on July 7, 2011, that included TAA. The
House Ways and Means Committee, in a simultaneous mock markup, approved a draft bill
without it. Including TAA as part of a trade agreement implementing bill has proven problematic
for at least two reasons.
First, rules governing the treatment of FTA implementing bills under TPA require that they
contain only provisions changing laws or providing new statutory authority that are “necessary or
appropriate” to implementing the agreement, raising the question for some as to whether TAA
provisions meet this standard. Supporters note that the NAFTA implementing bill included TAA
provisions. Detractors point out that it was a TAA program specific to NAFTA and not a
reauthorization of the program in its entirety, which has never been done in an implementing bill.
The “necessary or appropriate” language, however, is subject to congressional interpretation, and
opinions differ as to whether the NAFTA-TAA example constitutes an exception or precedent for
inclusion of TAA in an FTA implementing bill.51
Because TAA and the three FTAs are controversial issues, Members also have differing
viewpoints on each of the four possible bills. Many, therefore, would like the chance to vote
separately on each of them.52 Congress is now considering the possibility of taking up TAA in a
separate bill. This option has presented a sequencing problem, with congressional leaders still
debating the order in which the various bills might be taken up to ensure that all are considered
simultaneously.53 A final determination has not been announced.
49 "Congressional Staff Close to Deal on How to Move FTAs, TAA," Inside U.S. Trade, July 27, 2011.
50 U.S. Congress, Senate Committee on Finance, United States-South Korea Free Trade Agreement Implementation Act
Statement of Administrative Action, Draft, 112th Cong., 1st sess., June 28, 2011, pp. 32, 36-39.
51 “Finance Approves FTAs, TAA at Mock Markup, Rejects All Amendments,” Inside U.S. Trade, July 8, 2011. The
customs reauthorization language in the NAFTA bill is also cited, but arguments on either side can be heavily nuanced.
52 “Some Progress on FTAs,” Washington Trade Daily, July 14, 2011.
53 "Congressional Staff Close to Deal on How to Move FTAs, TAA," Inside U.S. Trade, July 27, 2011.
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Outlook
Congress created TAA in 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 liberalization. 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, it is still strongly debated on equity,
efficiency, and budgetary grounds. Despite disagreement, TAA still appears to serve what is now
a historically pragmatic legislative function: it remains important for forging a compromise on
national trade policy.
Nonetheless, the legislative fortunes of TAA have ebbed and flowed. When TAA remained a
cornerstone of major trade legislation as it was in 1962, 1974, and 2002, it received long
reauthorizations and increased programmatic funding support from Congress. When isolated from
its main policy rationale, as was the case at times during the budget-cutting 1980s, TAA struggled
sometimes to achieve even short-term extensions and maintain funding levels when faced with
political opposition.
TAA is again at the center of the U.S. national trade policy debate. Historically, TAA has been
reauthorized separately from trade agreement implementing bills, in part because it had already
been accomplished by the time such a bill was presented to Congress, but also because when TAA
was addressed in a trade bill, it tended to be one focused on broader trade policy. On occasion,
attempts have been made to include TAA provisions as amendments to draft implementing bills
during “mock markups,” but generally they have not been reported out of committee. In 2005,
TAA amendments were offered in the Senate to a draft implementing bill for the Dominican
Republic-Central America-United States Free Trade Agreement (CAFTA-DR), but it was not
included by the Bush Administration’s final bill sent to Congress. The TAA programs, however,
had already been reauthorized through fiscal year 2007, so there was no immediate need for
legislative action.
The situation is perhaps different in the 112th Congress, in part because the ARRA-based TAA
expansion has lapsed and the rest of the program authorizations will expire in early 2012.
Supporters see the implementing bill as an opportunity to reauthorize TAA, particularly given the
divided attitudes toward TAA in Congress and increased pressure to prioritize deficit reduction.
Others disagree on whether or how to move TAA legislation. Still, as in many cases in the past, it
appears as though congressional action on trade policy is unlikely to be completed without
consideration of TAA reauthorization.
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Trade Adjustment Assistance (TAA) and Its Role in U.S. Trade Policy
Appendix. TAA Reauthorization, 1962-2011
Year
Bill
Public Law
Extension Date
Length
1962
Trade Expansion Act of 1962
P.L. 87-794
Permanent
1974
Trade Act of 1974
P.L. 93-618
Sept. 30, 1982
8 years
1981
Omnibus Budget Reconciliation Act of 1981
P.L. 97-35
Sept. 30, 1983
1 year
1983
A bill to Amend the International Coffee
P.L. 98-120
Sept. 30, 1985
2 years
Agreement Act of 1983
1984
Deficit Reduction Act of 1984
P.L. 98-369
Nov. 15, 1985
10 weeks
1985
Emergency Extension Act of 1985
P.L. 99-107
Dec. 19, 1985
5 weeks
Lapses until March 1986
1986
Deficit Reduction Amendments Act of 1985
P.L. 99-272
Sept. 30, 1991
6 years
1988
Omnibus Trade & Competitiveness Act
P.L. 100-418
Sept. 30, 1993
2 years
1993
Omnibus Budget Reconciliation Act of 1993
P.L. 103-66
Sept. 30, 1998
5 years
1998
District of Columbia Appropriations
June 30, 1999
9 months
1999
Consolidated Appropriations Act of 2000
P.L. 106-113
Sept. 30, 2001
2¼ years
Lapses Sept. 30, 2001, to August 6, 2002
2002
Trade Act of 2002
P.L. 107-210
Sept. 30, 2007
5 years
2007
TAA Extension Act
P.L. 110-89
Dec. 31, 2007
3 months
Lapses Dec. 31, 2007, to Feb. 17, 2009
2008
Consolidated Appropriations Act of 2008a
P.L. 110-161
Dec. 31, 2008
1 year
2009
Consolidate Security, Disaster Assistance, and
P.L. 110-329
Feb. 2009
2 months
Continuing Appropriations Act of 2009a
2009
American Recovery & Reinvestment Act
P.L. 111-5
Dec. 31, 2010
2 years
(ARRA) of 2009b
2010
Omnibus Trade Act of 2010
P.L. 111-344
Feb. 12, 2012
13 months
Source: CRS from various sources.
a. Appropriations only.
b. Expanded provisions under the ARRA expired on February 12, 2011. Most TAA programs were authorized
at pre-ARRA levels until February 12, 2012. The workers program expires on December 31, 2011.
Author Contact Information
J. F. Hornbeck
Laine Elise Rover
Specialist in International Trade and Finance
Research Associate
jhornbeck@crs.loc.gov, 7-7782
lrover@crs.loc.gov, 7-1883
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