Trade Adjustment Assistance for Firms

Trade Adjustment Assistance for Firms

Updated July 10, 2024
Trade Adjustment Assistance for Firms
The Trade Adjustment Assistance for Firms (TAAF)
Congress last reauthorized TAAF and other TAA programs
program helps U.S. firms impacted by import competition
in the Trade Adjustment Assistance Reauthorization Act of
to improve their global competitiveness. TAAF is
2015 (TAARA, Title IV, P.L. 114-27), in conjunction with
administered by the U.S. Department of Commerce’s
the latest TPA reauthorization. TPA expired in July 2021,
Economic Development Administration (EDA). On July 1,
and, to date, the Biden Administration has not sought
2022, TAAF termination provisions took effect, meaning
reauthorization.
EDA cannot accept new petitions for TAAF but may
TAARA included “sunset provisions” for TAAF, which
continue to assist firms that submitted a petition prior to the
program’s
ended TGAAA’s expanded measures as of July 1, 2021.
expiration.
TAARA termination provisions took effect on July 1, 2022,
Historically, Congress has reauthorized and expanded
meaning that firms can no longer submit new petitions for
Trade Adjustment Assistance (TAA) programs, including
TAAF, but firms that filed a petition by June 30, can
TAAF and a program for workers (see text box), in tandem
continue to receive assistance.
with trade liberalization legislation, such as for free trade
agreements (FTAs). Congress has also reauthorized TAA
TAAF Overview
programs during periods of high U.S. unemployment.
EDA provides TAAF funding to 11 regional Trade
While most of the policy discussions have focused on the
Adjustment Assistance Centers (TAACs), which provide
TAA for Workers program, the 118th Congress may
technical assistance to firms in the 50 states, the District of
consider whether or not to reauthorize TAAF, or whether to
Columbia, and the Commonwealth of Puerto Rico. EDA
make policy changes to the TAAF program.
does not directly provide funds to firms. The following
entities may apply to operate a TAAC: (1) universities or
affiliated organizations; (2) states or local governments; or
Trade Adjustment Assistance (TAA) for Workers
(3) nonprofit organizations.
provides workforce services and other benefits for trade-
affected workers. It is administered by the U.S. Department of
Phase 1: Certification. TAACs worked with firms at no
Labor (DOL). Under sunset and termination provisions in the
cost to complete and submit their petitions to EDA to be
Trade Adjustment Assistance Reauthorization Act of 2015,
certified as a trade-impacted firm. Most firms that applied
the program began a phaseout on July 1, 2022. Workers who
for TAAF certification have been from the manufacturing
were receiving benefits prior to the termination may continue
sector. EDA had to certify that firms met three conditions:
to do so, but new worker groups are ineligible for the
program. TAA for Workers has continued to receive funding
• Real or threatened negative employment impacts for “a
to support legacy participants.
significant number or proportion of workers”;
•
Background
Decreases to sales and/or production during a specified
timeframe; and
Congress first authorized TAA programs in the Trade
•
Expansion Act of 1962 (P.L. 87-794), as amended. TAA
Import competition has “contributed importantly” to the
programs were introduced to address domestic concerns
negative impacts on employment and sales and/or
about the localized negative impacts of trade liberalization
production.
without using trade protectionist measures such as tariffs,
Phase 2: Recovery Planning. Once EDA certifies a firm,
quotas, or duties. Congress reauthorized and expanded
the firm works with TAAC staff to develop a business
TAA programs in the Trade Act of 1974 (P.L. 93-618),
recovery plan (“adjustment proposal,” or AP) for approval
which also created “fast track trade negotiating
by EDA. Firms have two years from certification to submit
authority”—expedited legislative consideration of trade
an AP. TAAF covers 75% of phase 2 costs.
agreements, now referred to as Trade Promotion Authority
(TPA).
Phase 3: AP Implementation. Once EDA approves a
firm’s AP, TAACs and firms jointly select and contract
Under the Trade and Globalization Adjustment Assistance
with consultants to assist with AP implementation. Firms
Act of 2009 (TGAAA, part of P.L. 111-5, the American
have up to five years to implement projects, unless EDA
Recovery and Reinvestment Act), Congress expanded
approves an extension. TAAF covers 50%-75% of costs
TAAF through provisions such as (1) the inclusion of
(up to $75,000) to implement APs, depending on the
service-sector firms to reflect their increased role in the
proposed project costs. Examples of AP projects include
U.S. economy, and (2) extended timeframes for evaluating
improvements to marketing/sales, production processes,
negative impacts of import competition on firm sales and/or
financial systems, management, and information systems.
production.
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Trade Adjustment Assistance for Firms
According to EDA, firms receive an average of 57 months
Issues for Congress
of TAAF benefits from the time of petition certification
TAAF reauthorization and trade liberalization.
until program completion.
Members in the 118th Congress may consider whether or
not to renew TAAF and other TAA programs through bills
Table 1. TAAF Program and Participant Information
such as S. 4582 or H.R. 4276. H.R. 4276 would also

2018
2019
2020
2021
reauthorize the following trade measures that expired on
December 31, 2020: (1) the Generalized System of
Appropriations
$13.0
$13.0
$13.0
$13.5
Preferences (GSP), which provides nonreciprocal, duty-free
(millions)
access for certain goods from eligible developing countries,
APs Approved
98
66
64
97
and (2) Miscellaneous Tariff Bills (MTBs) under the
American Manufacturing Competitiveness Act of 2016
Active Firms
530
538
498
538
(P.L. 114-159), which temporarily suspend/reduce tariffs on
Avg. Firm Sales
$12.5
$11.1
$10.1
$18.7
certain imports. Some Members have expressed opposition
(millions)
to renewing such trade measures without reauthorizing
TAA. At the same time, some Members have expressed
Avg. Firm
67
63
57
59
opposition to reauthorizing TAA without consideration of
Employees
TPA. Some Members have criticized the Biden
Source: Department of Commerce EDA, annual TAAF reports.
Administration’s overall trade policy approach, particularly
Note: EDA considers a firm “active” if it has an approved AP, has
what they describe as a lack of negotiations with U.S.
not completed all projects in its AP, and remains engaged in the
trading partners to secure new market access and tariff cuts.
TAAF program.
Some Members have also expressed concerns over
executive trade agreements that the Administration has
For FY2025, EDA has requested $13.5 million in funding
to continue providing technical assistance to firms already
indicated do not require congressional approval (e.g., the
in the TAAF program. EDA stated that it expects a need for
March 2023 U.S.-Japan Critical Minerals Agreement,
continued appropriations through FY2029 to serve firms
ongoing negotiations for the Indo-Pacific Economic
currently in the program. In a previous budget request,
Framework for Prosperity). Administration officials have
EDA noted that unless Congress reauthorizes TAAF, the
noted that a new model of trade policy is needed to promote
“inability to accept new firms into the program will
“equitable economic growth” and build a broader base of
ultimately result in program termination.”
U.S. domestic support for global trade.
Streamlining programs. Members might consider
Impact of TAAF
streamlining TAAF with other federal programs that assist
The 2009 TGAAA included additional oversight and
SMEs facing challenges, such as those operated by the
evaluation criteria for TAAF and required EDA to submit
Small Business Administration (SBA). For more on SBA
annual reports on TAAF to Congress. TGAAA also
programs see CRS Report RL33243, Small Business
mandated the Government Accountability Office (GAO) to
Administration: A Primer on Programs and Funding.
conduct a comprehensive evaluation of TAAF. GAO’s
Changes to TAAF. If Congress chooses to reauthorize
2012 evaluation report noted that changes mandated by
TAAF, Members may consider making changes to the
TGAAA improved operations and led to increased TAAF
program. For example, while TAAF has focused on firms
participation. GAO found that a firm’s TAAF participation
that can demonstrate harm from import competition,
was statistically associated with increased sales. At the
Congress could consider measures to identify or support
same time, GAO recommended improvements to EDA’s
firms before they experience negative impacts. Congress
performance measures and data collection. As of 2021,
could consider requiring EDA to prepare a capacity-
EDA had implemented all of GAO’s recommendations.
building plan to assist industries or regions that the United
In its FY2021 TAAF annual report (the latest available),
States International Trade Commission (USITC) identifies
EDA stated that self-reported TAAF participant data
as potentially vulnerable or likely to experience a negative
collected from FY2010-2021 shows that
impact from implementation of trade liberalizing measures.
• From certification to program completion, firms’
Members may also consider whether or not firms affected
average sales increased by 30%, and average
by factors other than import competition should qualify for
employment decreased by 4%.
TAAF. It is difficult to disentangle trade-related impacts
•
from changes related to technology, the growth of global
For the two years following program completion,
supply chains, labor productivity, consumer preferences,
average sales increased by 11%, and average
and other domestic and global economic factors. In the
employment increased by 18%.
117th Congress, H.R. 5289 would have expanded TAAF
Supporters of TAAF have argued that the program has a
eligibility to firms whose exports declined due to foreign
significant and positive impact on small- and medium-sized
tariffs imposed in retaliation for U.S. tariff increases under
enterprises (SMEs), particularly manufacturers. Critics have
certain executive authorities.
questioned the program’s efficacy and noted that other
government programs are available to provide similar
Kyla H. Kitamura, Analyst in International Trade and
assistance to firms. Previous Congresses and
Finance
Administrations have considered eliminating TAAF due to
IF12430
concerns about costs and duplication with other programs.
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Trade Adjustment Assistance for Firms

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https://crsreports.congress.gov | IF12430 · VERSION 10 · UPDATED