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Greg J. Mastel’s practice at international law firm Akin Gump focuses on the formulation and implementation of international trade and tax policy by Congress and the executive branch. He advises and represents clients regarding trade and tax legislation and related regulatory developments such as free trade negotiations and trade disputes. Before joining Akin Gump, Mastel served from 2000 to 2003 as the chief economist and chief international trade adviser to the U.S. Senate Finance Committee.
The TAA Coalition is a non-profit organization dedicated to improving TAA's effectiveness.
One theme consistently emphasized by free trade critics, which seems to strike a sympathetic chord in the public, is that more open trade and competition will lead to job losses in particular industries. On this point, there can be little doubt. Free trade has contributed to job losses in some industries, notably autos, apparel, and steel. Other factors have certainly contributed to those job losses, and imports have benefited the U.S. economy overall, but the possibility that dismantling trade barriers could create some job losses whatever the offsetting benefits seems to lead many to oppose trade liberalization.
The most logical response to those concerns, however, is not to maintain trade barriers, which have many negative effects. The more sensible approach is to develop strong programs to address the needs of those displaced workers while liberalizing trade. The United States, as well as most developed countries, has recognized this reality and maintains programs to address the needs of displaced workers. The lingering skepticism on free trade, however, suggests that public confidence in those programs is low. And although the public wisdom on free trade is questionable, the conviction that worker adjustment programs are not working well is strongly based in fact.
Political changes are always difficult to predict precisely, but it is reasonable to expect that a more robust worker adjustment program would increase public confidence in policies supporting freer trade. Funds invested in such an initiative could thus benefit not only displaced workers but also the entire economy by increasing the ability of the United States -- and other democratic governments -- to adopt trade liberalization. Worker adjustment programs could thus be a perfect -- even necessary -- complement to free trade policy. Unfortunately, current U.S. policy to date has proven to be inadequate and failed to win public confidence, but there are concrete policy options available to address the performance and, it is hoped, the confidence deficit.
History of U.S. Adjustment Policy
Most U.S. unemployment policies, notably unemployment insurance, have their roots in the New Deal era after the Great Depression. Certainly, these programs, which provide relief regardless of the cause of unemployment, are closely related to trade adjustment assistance policies and provide a measure of help to those who lose their jobs due to international competition.
The program put forward by Kennedy included the same basic elements of today’s TAA -- training programs to promote long-term employment, along with income support during the period that training is taking place. The periods of assistance have been expanded from the original Kennedy package, and new training options have been added, but the basic program is much the same.
Congress has revisited TAA a few times in the intervening years, usually in connection with a trade agreement or legislation to otherwise liberalize imports. In order to win support for the North American Free Trade Agreement (NAFTA), the Clinton administration created a special TAA program for workers impacted by imports from NAFTA countries that offered broader eligibility than had previously been the case. In 2002, Congress and President George W. Bush agreed on legislation that made it easier for the administration to negotiate new trade pacts in exchange for expanding TAA to more workers and creating new benefits and training options for displaced workers.
Worker Adjustment Programs
TAA is not the only program available for displaced workers. Most notably, individuals who are involuntarily unemployed for any cause can generally receive income benefits under Unemployment Insurance (UI). Displaced workers in most cases are also eligible for retraining assistance under the Workforce Investment Act (WIA). Federal spending on WIA since 2001 has ranged between approximately $2.5 billion and $3.5 billion a year.
TAA is sometimes referred to as a "Cadillac" of worker adjustment programs because it generally provides considerably more assistance for a longer period of time. As of the 2002 amendments, TAA became available to most qualifying workers for up to 104 weeks (130 weeks for those receiving remedial education) -- four times longer than regular UI benefits. TAA recipients are also eligible for a tax credit to maintain health insurance and, in some cases, have the option of new programs, such as wage insurance for older workers. Wage insurance -- also known as Alternative TAA -- provides older displaced workers the option of returning to work at a lower-paying job, with the federal government making up a portion of the lost wages for two years.
In recent years, many petitions for TAA assistance have been denied by the Department of Labor (DOL). Many observers, including the Court of International Trade (which has jurisdiction over TAA eligibility appeals), have been harshly critical of what they characterize as arbitrary decision-making by the DOL, which has kept the denial rate high (around one-third of all applications) despite a number of revisions to the law in 2002 aimed at making TAA more broadly available.
Program Improvements
As this discussion makes plain, certain possible improvements in the TAA program to address problems (and hopefully increase political confidence) are obvious.
There have been significant efforts in Congress to address expanding TAA to services and offshoring. The Congressional Budget Office (CBO) did provide a budget score during the 109th Congress that estimated that this legislation would lead to new expenditures of $1.4 billion in 2006-2010 and $3.8 billion from 2006 to 2025. In addition, the CBO analysis suggested that training program costs would need to be increased by $60 million over the first 10 years of the proposed program.
In isolation, these numbers sound rather large. But one must keep in mind that the United States imported nearly $1.5 trillion worth of goods in 2004 and collected approximately $23.6 billion (including user fees) in tariffs from those imports in 2004. Some economists put the total benefit of liberal trade policy to the United States as high as $1 trillion annually with the potential for an additional $500 billion in gains if remaining barriers are eliminated. As a percentage of these numbers, the entire cost of TAA including the expansion would annually be about 0.2 percent of the total value of estimated trade benefits, or 12.5 percent of current annual tariff collections.
If these programs succeed in easing the political course for future trade liberalization, the dollars invested by expanding TAA to the new areas -- which equity and logic indicate should be included -- would be a tremendously productive investment for the U.S. economy. In fact, it would seem that the investment would be foolish to overlook, given the possible benefits.
To read all of Mastel's article, click here.
POSTED BY: madmilker (August 04, 2007 12:22 AM)
if jobs don't move....there will never be the need for government to step in and train anyone!
So what if price of items go up...if the wages go up the items will cost the same as the percentage of payroll! Just who started this "cheap crap" is a good thing anyway! a dang meat cutter was making $18 an hour in 1989 and now make $9. But I think "we the people" is about to change all that cause the pen in their hand marking a ballot is worth more than all the money the greedy people can park in a bank!
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