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
October 7, 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 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, critics strongly debate the merits of TAA on equity, efficiency, and budgetary grounds.
Nonetheless, TAA still appears to serve what is now a historically pragmatic legislative function:
it remains important for forging a compromise on national trade policy.
TAA was most recently expanded in the American Recovery and Reinvestment Act (ARRA) of
2009, although the higher funding levels and program enhancements expired on February 12,
2011, leaving TAA programs to operate at pre-ARRA levels until February 12, 2012, when all
TAA program authorizations are scheduled to expire. TAA program authorizations are set to
expire on February 13, 2012, and the 112th Congress is taking legislative action to extend them.
Based on an understanding between House and Senate leaders, and the White House, a
compromise TAA reauthorization bill (H.R. 2832) is being considered as part of a deal for voting
on three implementing bills for the proposed free trade agreements (FTAs) with Colombia (H.R.
3078), Panama (H.R. 3079), and South Korea (H.R. 3080).
The TAA extension would reauthorize the workers, firms, and farmers programs through
December 31, 2013. TAA for communities would be repealed, considered duplicative of other
federal programs. Many, but not all, of the enhanced programs and funding levels contained in the
ARRA would be reauthorized, including extending benefits to services workers and firms, and
requiring expanded evaluation and reporting requirements on the programs. The provisions of the
bill would apply retroactively to the expiration date of the ARRA enhancements.
Congressional Democrats and the White House insisted that consideration of the three FTA
implementing bills be contingent upon passage of TAA reauthorization legislation. To
accommodate concerns on all sides over legislative procedure, an elaborate process was agreed to
that ensures consideration of the four bills within a relatively short time span. The House passed a
bill on September 7, 2011, reauthorizing the Generalized System of Preferences (H.R. 2832),
sending it to the Senate, where it was amended with TAA reauthorization. On September 22,
2011, the Senate agreed to the amended bill, 70-27, after which it was sent to the House. In
separate action, the House Ways and Means Committee favorably reported out all three FTA
implementing bills on October 3, 2011.
On October 6, 2011, the House Committee on Rules issued a closed rule covering all four bills.
Senate amendment to H.R. 2832 is expected to be taken up by the House on October 12, 2011,
along with implementing bills for the three FTAs. H.R. 2832, as amended, will be considered
under a rule that waives all points of order and allows for one hour of debate. The bill requires
simple majority to pass, and having already been agreed to in the Senate, House passage would
then allow it to be sent to the President for signature.
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Contents
Introduction...................................................................................................................................... 1
TAA Programs and Rationale .......................................................................................................... 1
Antecedents to TAA......................................................................................................................... 3
The Randall Commission .......................................................................................................... 5
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
Appendixes
Appendix. TAA Reauthorization, 1962-2011 ................................................................................ 13
Contacts
Author Contact Information........................................................................................................... 13
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Trade Adjustment Assistance (TAA) and Its Role in U.S. Trade Policy
Introduction
When Congress passed the Reciprocal Trade Agreements Act (RTAA) of 1934, it reflected an
important transition in “national trade policy” away from “protectionism” toward greater “trade
liberalization.” This shift continues to be the dominant, but hardly uncontested, trade policy of the
United States. The substantial national gains from 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 reimposition 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.
TAA program authorizations are set to expire on February 13, 2012, and the 112th Congress is
taking legislative action to extend them. Based on an understanding between House and Senate
leaders, and the White House, a compromise TAA reauthorization bill (H.R. 2832) is being
considered as part of a deal for voting on three implementing bills for the proposed free trade
agreements (FTAs) with Colombia (H.R. 3078), Panama (H.R. 3079), and South Korea (H.R.
3080); see last section of report.
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 considered by Congress over the past 50 years may help inform the current
discussion of TAA reauthorization.
TAA Programs and Rationale
TAA was first authorized in 1962, 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 2002. Congress authorized another communities program in 2009, but appears poised
to repeal it. All TAA programs are usually reauthorized in one bill, although administered by three
different federal agencies. This report does not address details of the TAA programs, which are
available in other CRS reports. Rather, it takes a holistic policy approach to the economic issue of
federal assistance for adjustment to import penetration, with occasional reference to the large
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 trade 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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workers and much smaller firms programs, which have formed the core of TAA since its
inception in 1962.
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 industries facing increased competition from
imports.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 relying on broader programs designed to address all types of economic
dislocation.3
The issues raised by TAA 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 freer trade. TAA was offered 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
TAA skeptics challenged the logic of these claims. They 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 The TAA debate has a long history. See, Clair Wilcox, “Victims of Tariff Cuts,” The American Economic Review,
vol. 40, no. 5 (December 1950), pp. 884-889, 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, 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,
(continued...)
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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
Political accommodation proved to be another factor for congressional support of TAA. Those
concerned with the negative effects of trade liberalization often found TAA to be an acceptable
tradeoff for supporting trade legislation, and TAA skeptics often conceded to advance the broader
trade agenda. TAA provisions in the Trade Expansion Act of 1962 and the Trade Act of 1974 are
often cited as providing the support necessary to conclude ground-breaking trade agreements like
the General Agreement on Tariffs and Trade (GATT) 8 Kennedy and Tokyo Rounds of the 1960s
and 1970s.9 TAA 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), and
similar tradeoffs are also being debated in the 112th Congress.
Antecedents to TAA
TAA was a product of a time of shifting U.S. domestic and foreign economic policies. The seeds
for change were planted with the RTAA, a reaction to the tariff-raising Smoot-Hawley Act of
1930. The shift from protectionism toward greater trade opening was rooted partly in the
prevailing belief that to escape the Great Depression, the domestic economy would be best served
by boosting demand worldwide. In addition to the benefits of export expansion, trade policy
embraced the idea that restricting imports ran the risk of mutually destructive global retaliation.
The RTAA provided time-limited authority to the President to enter into reciprocal tariff-reducing
agreements, without the need for congressional approval afterward. It was the early precursor to
the now-expired Trade Promotion Authority (TPA). Still, 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, trade liberalization took on a stronger foreign policy rationale, as well. By
1940, President Franklin D. Roosevelt’s State of the Union address had elevated U.S. trade policy
(...continued)
“Obama and Free Trade: Appease Big Labor,” The Washington Post, June 8, 2011.
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.
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to an “indispensible part of the foundations for any stable and durable world peace,”11 a view
expressed in the shadows of an approaching world war that would soon devastate international
commerce. As a result, the President had positioned trade policy as a key ingredient to
reconstruction of the post-war economic system, both as a pillar of international stability, and 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
Nonetheless, trade liberalization remained contentious in Congress because the foreign policy
imperative of supporting international stability began to run headlong into concerns over
protecting domestic industry from imports. Congressional testimony in the 1940s emphasized the
renewed tilt toward protectionism, even as public opinion appeared more indifferent for two
reasons. First, U.S. imports in a war-torn world were not large enough to present a serious threat
to U.S. jobs and production. Second, trade was viewed as a key element of the Cold War strategy.
And so, the lack of public concern over liberalizing commerce provided Congress with a window
to take on multilateral trade negotiations (MTNs) under the newly created GATT.13
Over time, however, as trade liberalization expanded, the need to address the concerns of import-
competing industries also grew. Two policies at the time 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 reimposition 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 these sometimes competing foreign and domestic
economic policy priorities.
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.
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.
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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
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 negatively 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
16 Diebold, The United States and the Industrial World, p. 152.
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.
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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
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 The GATT Dillon
Round was concluded in 1961, in which the United States agreed to cut the tariffs on 61 items
below their peril point.24 This development marked a departure from earlier, more cautious
negotiated positions which, coupled with high U.S. unemployment, created a policy 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
21 Other bills would be introduced in the 86th Congress before becoming law in the 87th Congress.
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.
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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, hurt by “concessions granted under
trade agreements.” 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
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 began to erode. 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, not one 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
27 P.L. 87-794, Title III and ibid., pp. 249, 255-256.
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.
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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
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 game 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 increased them and made changes that would facilitate program implementation.
This was accomplished in the Trade Act of 1974, one of the most far-reaching trade bills in U.S.
history.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 retool 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 factor” of threatened or actual 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
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.
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.
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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 often made the TAA option 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
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 of 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 FY1983, 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 FY1985.41
35 Ibid and P.L. 87-794, sec. 301.
36 Plant closings do not discriminate among employees, and so capture older and more experienced workers who often
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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After two very short extensions and a three-month lapse, TAA was finally extended for six years,
through FY1991, 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 FY1993 in the Omnibus Trade and Competitiveness
Act (OTCA) of 1988, and second, through FY1998 in the budget 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
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.
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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
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
previous few years and included in the December 2007 bill. 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.
At the close of 2010, as TAA programs were about to expire again, 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.
46 Congressional Quarterly, Inc., “Victory for Bush on Fast Track,” CQ Almanac 2002, pp. 18-3 - 18-5.
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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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 bills have
been introduced in the 112th Congress that ranged from terminating TAA to reauthorizing it at the
higher ARRA levels, reflecting these varied viewpoints.
Reauthorization in the 112th Congress
TAA program authorizations are set to expire on February 13, 2012, and the 112th Congress is
taking legislative action to extend them. Based on an understanding between House and Senate
leaders, and the White House, a compromise TAA reauthorization bill (H.R. 2832) is being
considered as part of a deal for voting on three implementing bills for the proposed FTAs with
Colombia (H.R. 3078), Panama (H.R. 3079), and South Korea (H.R. 3080).
The TAA extension would reauthorize the workers, firms, and farmers programs through
December 31, 2013. TAA for communities would be repealed, considered duplicative of other
federal programs. Many, but not all, of the enhanced programs and funding levels contained in the
ARRA would be reauthorized, including extending benefits to services workers and firms, and
requiring expanded evaluation and reporting requirements on the programs. The provisions of the
bill would apply retroactively to the expiration date of the ARRA enhancements.49
Congressional Democrats and the White House insisted that consideration of the three FTA
implementing bills be contingent upon passage of TAA reauthorization legislation. To
accommodate concerns on all sides over legislative procedure, an elaborate process was agreed to
that ensures consideration of the four bills within a relatively short time span. The House passed a
bill on September 7, 2011, reauthorizing the Generalized System of Preferences (H.R. 2832),
sending it to the Senate, where it was amended with TAA reauthorization. On September 22,
2011, the Senate agreed to the amended bill, 70-27, after which it was sent to the House. In
separate action, the House Ways and Means Committee favorably reported out all three FTA
implementing bills on October 3, 2011.
On October 6, 2011, the House Committee on Rules issued a closed rule covering all four bills.
Senate amendment to H.R. 2832 is expected to be taken up by the House on October 12, 2011,
along with implementing bills for the three free trade agreements. H.R. 2832, as amended, will be
considered under a rule that waives all points of order and allows for one hour of debate.50 The
bill requires simple majority to pass, and having already been agreed to in the Senate, House
passage would then allow it to be sent to the President for signature.51
49 For details on the large workers program, see CRS Report R42012, Trade Adjustment Assistance (TAA) for Workers,
by Benjamin Collins.
50 U.S. Congress, House Committee on Rules, Providing for Consideration of the Senate Amendment to the Bill (H.R.
2832) to Extend the Generalized System of Preferences and for Other Purposes, Report to accompany H.Res. 425,
112th Cong., 1st sess., October 6, 2011, H.Rept. 112-240 (Washington: GPO, 2011), pp. 1-3.
51 As for the FTA implementing bills, it is expected that the Senate Finance Committee will report them out on October
11, 2011, with the full Senate taking them up the following day.
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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
Consolidated Security, Disaster Assistance,
P.L. 110-329
Feb. 2009
2 months
and 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.
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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