Order Code RS21078
Updated October 4, 2002
CRS Report for Congress
Received through the CRS Web
Trade Adjustment Assistance for Workers:
Legislation in the 107th Congress
Paul J. Graney
Analyst in Social Legislation
Domestic Social Policy Division
Trade Adjustment Assistance (TAA) for workers offers extended unemployment
benefits and job training to workers left jobless when imported goods have contributed
importantly to their job loss. A similar program was begun with the adoption of the
North American Free Trade Agreement (NAFTA). This Transitional Adjustment
Assistance Program (NAFTA-TAAP) not only aids trade-affected workers but also helps
those who lose jobs because their firms have relocated production to Canada or Mexico.
The authorizations for both programs expired on January 10, 2002, but the programs
continue to operate normally with the $416 million appropriated for FY2002. On
August 6, 2002, President Bush signed the Trade Act of 2002 (H.R. 3009), a bill that
includes the Trade Adjustment Assistance Reform Act of 2002 which will reauthorize
and reform the program. The new program goes into effect for certifications made on
or after November 4, 2002. The Administration’s FY2003 budget request includes total
funding of $462 million for TAA and NAFTA-TAAP. This report will be updated as
legislative action occurs.
The TAA program was established by the Trade Expansion Act of 1962 (P.L. 87794) to provide cash assistance to workers harmed directly by federal trade policies.
Because of difficulties in proving that specific job dislocations were caused by trade
initiatives, little use was made of the program until its overhaul by the Trade Act of 1974
The 1974 Act required that workers show that import competition had “contributed
importantly” to their job loss in order to receive weekly cash assistance, thereby easing
the earlier eligibility rules. The program grew substantially following this legislation,
with spending on TAA reaching $1.6 billion in the program’s peak year of FY1980.
Two acts during the 1980s served to reduce TAA’s cost and focus more resources
on job retraining. Under the Omnibus Budget Reconciliation Act (OBRA) of 1981 (P.L.
Congressional Research Service ˜ The Library of Congress
97-35), TAA benefit amounts were restricted to the level of unemployment compensation
(UC) weekly benefits paid in each state, and training received greater emphasis. Weekly
TAA benefits, termed “trade readjustment allowances” (TRAs), previously had
supplemented UC up to 75% of a claimant’s former wage and replaced 65% of wages
after UC ran out. The 1981 law set TRAs equal to the benefit amount the claimant had
received from the state UC program and made them payable only after the regular UC
benefit had terminated. The second of these acts, the Omnibus Trade and
Competitiveness Act of 1988 (P.L. 100-418), made job training a specific requirement for
program eligibility unless waived by the Secretary of Labor for one of several reasons set
forth in regulations.
Congress acted in the Omnibus Budget Reconciliation Act (OBRA) of 1993 (P.L.
103-66) to extend TAA through September 30, 1998. The only substantive change in law
was to lower the ceiling on annual appropriations for TAA training from $80 million to
$70 million. A new TAA component was added that same year by the North American
Free Trade Agreement (NAFTA) Implementation Act (P.L. 103-182) to assist workers
dislocated by NAFTA. This new component is called the NAFTA transitional adjustment
assistance program, or NAFTA-TAAP. The law entitles workers who lose their jobs
because of NAFTA, including those whose employers shift production to Canada or
Mexico, to the same income support as is available under the regular TAA program.
Waivers of job training are not allowed under NAFTA-TAAP, but workers eligible for
both TAA and NAFTA-TAAP can choose between them.
The TAA and NAFTA-TAAP programs establish individual entitlements to federal
benefits. That is, they create a legal obligation on the part of the U.S. government to
make funds available in the amounts necessary to pay cash benefits and purchase job
training services for all individuals who meet the eligibility criteria established in law.
Although considered to be entitlements, TAA and NAFTA-TAAP do not have dedicated
tax revenue that can be held in reserve to fund them. As with many other entitlements,
these programs obtain their funds through annual appropriations. While the law
establishes annual ceilings on authorized appropriations for training, individuals may also
be eligible for training under other programs such as the Workforce Investment Act of
The most recent law (P.L. 106-113) reauthorizing the programs for more than a year
extended the authorizations for TAA and NAFTA-TAAP through FY2001. Eight
continuing resolutions kept the programs authorized through January 10, 2002. There is
ample precedent for enactment of appropriations in the absence of a spending
authorization, and the programs are currently operating normally with $416 million
appropriated for FY2002.
During the 107th Congress, legislation has been passed to reform and reauthorize
TAA through FY2007, eliminating the separate NAFTA-TAAP. On December 6, 2001,
the House passed H.R. 3008, reauthorizing the programs through FY2003 with an added
26 weeks of benefits and a further 26 weeks for those in need of remedial education. The
Senate included authorization of a reformed and consolidated TAA through FY2007 in
its version of H.R. 3009 that passed on May 23, 2002. The House passed a rule (H.Res.
450) on June 26, 2002 that had the effect of amending the Senate amendment to H.R.
3009 and requesting a conference with the Senate on the bill. The resulting conference
report was passed by the House on July 27 and by the Senate on August1, 2002. President
Bush signed the Trade Act of 2002 on August 6 making it P.L. 107-210. The new
program goes into effect for petitions that are certified as eligible for benefits on or after
November 4, 2002. Several other bills affecting TAA have also been introduced in the
107th Congress for the purpose of reforming and/or expanding the program.
Reform and Consolidation. Previous efforts to consolidate the job training
programs sponsored by the federal government resulted in the passage of WIA. WIA did
not make any changes to TAA or NAFTA-TAAP, but it does require coordination among
the various federal job training programs. The most comprehensive reform proposal
introduced in the 107th Congress was S. 1209, along with its companion bills (H.R. 3359
and H.R. 3670), which would have replaced TAA for workers and NAFTA-TAAP with
a new Adjustment Assistance for Workers program. While retaining much of the
structure of TAA and NAFTA-TAAP, the new Adjustment Assistance for Workers would
expand on those programs in significant ways. S. 1209 was reported favorably with an
amendment in the nature of a substitute on February 4, 2002. Most of the bill’s language
was included in S.Amdt. 3401 to the Andean Trade Preference Act (H.R. 3009) proposed
by Senator Baucus and Senator Grassley on May 10 as a substitute amendment with some
compromises discussed below. After some further modifications, the amendment and
H.R. 3009 were passed by the Senate on May 23, 2002. The House-passed amendment
to H.R. 3009 proposed less sweeping changes to the two current programs. The
conference report and final law did result in the consolidation of the NAFTA-TAAP with
the regular TAA program.
Eligibility Expansion. Several bills have been introduced in the 107th Congress
that extend benefits under the adjustment assistance program to workers who are not
currently eligible. Once again, S. 1209, H.R. 3359, H.R. 3670, and the Senate-passed
version of H.R. 3009 included the most comprehensive of these proposals. They would
extend eligibility by reason of production shifts to any country rather than just Canada or
Mexico as under the present NAFTA-TAAP. Workers in secondary industries and certain
groups that are generally ineligible now would have been included. The Senate-passed
version of H.R. 3009 excluded truckers and some secondary workers that were included
in the earlier bills as part of the compromise reached in offering S.Amdt. 3401. The
House-passed amendment to H.R. 3009 included a more specific definition of suppliers
whose workers would be eligible for assistance. The new law extends coverage to these
groups: 1) secondary workers in firms that supply parts for articles that were the basis for
a certification of eligibility at the primary company, 2) downstream workers who must
also have their eligibility based on an increase in imports from, or a shift in production
to, Canada or Mexico, 3) workers who have lost their jobs because of a production shift
to certain additional countries, 4) farmers and ranchers,1 but not fishermen or taconite
workers. S. 1100 would also provide TAA for farmers. H.R. 457 would amend the Trade
Act of 1974 to establish a transitional adjustment assistance program for workers
adversely affected as a result of the extension of nondiscriminatory treatment (normal
trade relations treatment) to the products of the People’s Republic of China. H.R. 837 and
S. 422 would provide that, for purposes of making determinations for certain trade
For a further discussion of the proposed program for farmers and ranchers, see CRS Report
RS21182, Trade Adjustment Assistance for Farmers.
remedies and TAA benefits, imported semi-finished steel slabs and taconite pellets
produced in the United States would be considered to be articles like or directly
competitive with each other. S. 2088 would provide that any worker in an industry would
be presumed eligible for TAA benefits for a 4-year period after the International Trade
Commission determines that an article is being imported into the U.S. in such quantities
as to harm the domestic industry producing a similar article. H.R. 4550 would clarify the
eligibility for benefits of adversely affected workers who are engaged in self-employment
Benefit Expansion. In addition to the TRAs and training, TAA can also provide
allowances of up to $800 for job search assistance and/or relocation to a new job site. S.
1209, H.R. 3359, and H.R. 3670 proposed raising these allowance maximums to $1,200
for job search assistance and $1,500 for relocation, while the Senate-passed version and
conference agreement set the maximum amount at $1,250 each. These bills would have
also made available another 26 weeks of cash benefits beyond the TRAs now available.
During the debate on S.Amdt. 3401, the Senate passed an amendment adding 26 more
weeks of benefits for those who need remedial education to match the provision already
passed by the House. These additional weeks are included in the new authorization. H.R.
2613 also would have increased by 26 weeks the maximum number of weeks of benefits
for workers in need of remedial education, and H.R. 2810 would provide this increase for
all workers eligible for NAFTA-TAAP while doubling the annual amount authorized for
training to $60 million. H.R. 2810 would further provide an additional 78 weeks of
benefits under NAFTA-TAAP for workers with limited English proficiency or otherwise
in need of remedial education, and it would also remove the prohibition of waivers from
S. 1209, H.R. 3359, H.R. 3670, and the Senate-passed version of H.R. 3009 would
have increased the present combined ceiling on annual training funds of $110 million to
$300 million. The House amendment to H.R. 3009 would have increased the ceiling for
TAA training to $110 million while leaving the NAFTA-TAAP ceiling at $30 million.
P.L. 107-210 increases the training amount to $220 million for the newly unified program.
H.R. 3359 would have followed S. 1209 as originally introduced in providing a
refundable credit against the individual income tax equal to 50% of the health insurance
premiums that eligible unemployed workers must pay if they want their employersponsored health coverage continued during periods of unemployment. S. 1209 as
reported and H.R. 3670 would have provided a new subsidy that would pay 75% of health
insurance premiums for eligible workers, and states would then have the option to provide
the unsubsidized portion under Medicaid and to provide temporary Medicaid coverage
for certain uninsured individuals. S.Amdt. 3386 would have changed the 75% subsidy
to a 73% refundable tax credit payable in advance and would also have made it available
to retired steel workers. The Senate-passed version of H.R. 3009 lowered the tax credit
to 70% and did not include this benefit for retired steel workers. The House-passed
amendment to H.R. 3009 would have provided a means-tested 60% refundable tax credit
and would extend this benefit to retired steel workers and other retirees over the age of
55 without other coverage such as Medicare who are receiving their retirement benefits
from the Pension Benefit Guaranty Corporation (PBGC). The new law sets the
refundable tax credit at 65% for eligible TAA recipients, alternative TAA recipients, and
PBGC beneficiaries. The alternative TAA program grew out of the wage insurance
provision in the Senate-passed version of H.R. 3009. It will be a demonstration project
that would pay older workers 50% of the difference in wages between their former jobs
and lower paying new jobs up to $10,000 over 2 years. The conference agreement
requires firm eligibility in addition to individual eligibility. The health insurance and
demonstration project for older workers will not be available immediately in November,
but they will be implemented by August 2003.
S. 1209, H.R. 3670, and the Senate-passed H.R. 3009 also would have called upon
the Small Business Administration to establish a displaced worker self-employment
training pilot program. H.R. 3768 would give both employer and employee a credit for
social security taxes paid for the first year of employment in a job the worker obtains after
completing TAA training. H.R. 3982 would apply half of the tariffs imposed on imported
steel products to help replace the health insurance lost by those who are eligible for TAA.
Funding. President Bush proposed in his FY2003 budget to extend the TAA and
NAFTA-TAAP programs, and the budget request includes total funding of $462 million
for TAA and NAFTA-TAAP, which represents an increase of $46 million over FY2002
funding levels of $416 million. The breakdown would be $297 million for TAA benefits
and $94.5 million for training with $33 million and $37 million for NAFTA-TAAP.
Summary of Changes to TAA for Workers As Contained in the
Trade Act of 2002 (P.L. 107-210)
Workers can become eligible either because imported goods contributed
importantly to their unemployment or because of shifts in production to
certain other countries outside the United States. Currently, a shift in
production does not serve to qualify jobless workers under TAA;
production shifts can qualify workers under NAFTA-TAAP, but only if
the destination country is Canada or Mexico. The Senate had passed a
broader provision, but the House had not addressed production shifts.
TAA is consolidated into one program as the Senate proposed.
Workers in secondary industries (those that supply industries directly
affected by trade or plant relocation and downstream producers) will be
covered. The more restrictive definitions of secondary workers in the
House bill were not included in the conference report, but downstream
producers are only covered with regard to the NAFTA countries.
Currently, only directly affected industries are covered by TAA.
A new TAA program for family farmers and ranchers is established in
the new law, but benefits are not extended to independent fishermen or
taconite workers. All of these groups were included in the Senate-passed
bill, but none of them were included by the House.
A petition for eligibility from a group of workers will be considered
simultaneously by the Governor of the state and the U.S. Secretary of
Labor. This approach should speed up the current process used by
NAFTA-TAAP, in which the two officials consider petitions serially
rather than simultaneously. The Secretary will have 40 days in which to
act instead of the 60 days under the current TAA program.
The new program will offer an additional 26 weeks of cash benefits
beyond what is now available plus another 26 weeks for those who need
remedial education. Thus, a maximum of 130 weeks of benefits will be
available (26 or more weeks from UC, the remainder from the TAA
The Trade Act follows the Senate bill in raising to $1,250 per claimant
the allowance maximums for individuals who (a) must search for jobs
outside their local area of residence, and/or (b) must relocate to begin
new employment. The current maximum allowances are $800 each.
Factors that would permit the Secretary to waive otherwise required
training are spelled out in the new law’s language. The more general
Senate provision giving the Secretary discretion to waive the requirement
for “other” reasons was dropped by the conference.
The ceiling on annual training funds will be raised to $220 million. The
House had proposed raising TAA training to $110 million while leaving
NAFTA-TAAP training at $30 million. The Senate had proposed a total
of $300 million for training.
A new demonstration project for alternative TAA for older workers,
which will make up 50% of the wage difference (up to $10,000) between
the wage on a new job and the old one for up to 2 years, will be added.
This is intended to facilitate speedier transitions into new occupations or
industries without requiring older workers to participate in a lengthy
training program. Eligibility will be limited to those over age 50 whose
incomes are less than $50,000 yearly, who work full time, and who find
new jobs within 26 weeks after job separation. The conference
agreement added a requirement for group eligibility that was not in the
Senate bill, but it also extended the project for 5 years rather than the 2
years called for by the Senate.
A new refundable and advanceable tax credit for 65% of health insurance
premiums for eligible TAA recipients, alternative TAA recipients, and
PBGC beneficiaries will be available for the purchase of insurance
through COBRA continuation coverage, high-risk pools, state employee
plans, or through other means. P.L. 107-210 will authorize grants to
states for establishing and administering eligibility and enrollment
assistance for tax credit eligibles and for the development of high risk
pools. The House had proposed a 60% credit for TAA recipients and
PBGC beneficiaries, while the Senate bill included a 70% credit only for
The Department of Labor has a website with answers to frequently asked questions
on the new TAA program at [http://www.doleta.gov/tradeact/2002act_faq.asp].