Trade Adjustment Assistance for Firms

The Limits of Trade Adjustment Assistance

The TAAF program targets those firms impacted specifically by import competition and not by other forms of trade or market disruption. Other federal programs provide assistance for other forms of economic disruption. A 2019 GAO analysis identifies multiple potential causes of disruption, including trade agreements, defense or energy policy changes, emerging technologies, and shifting business models. The report provides an inventory of economic adjustment assistance programs that respond to economic disruptions, including TAAF. While TAAF is solely focused on assisting businesses, other programs target a mix of individuals, businesses, communities, and other beneficiaries (e.g., coal communities, health tax credits).

TAAF is not intended to address all potential disruptions that confront firms involved in international trade. Such disruptions can include an economic downturn that leads to suppressed demand by foreign customers; increased costs or lowered demand due to tariffs and trade disputes; or supply chains affected by protectionism or other policy shifts. In the 116th Congress, some Members have introduced bills to expand the scope of TAAF to address additional trade related elements of economic disruption. For example, one bill introduced (H.R. 6124) would extend TAAF to cover firms whose exports declined because of foreign retaliatory measures adopted in repose to tariffs imposed under the Trump Administration. Other proposals focus on the TAA for Workers program to assist workers whose jobs are eliminated through automation (see S. 3034) or those adversely affected by disruptions in global supply chains from the Coronavirus Disease (COVID–19) (see H.R. 6205).

Trade adjustment assistance can play a role in helping companies adapt to a changing environment. Enabling firms to adopt greater digitization or automation, target new markets, or develop business continuity plans to increase resilience may lead the firm to need a different workforce with different skills. Upskilling the workforce of a single TAAF company or helping that firm recruit and possibly relocate new trained workers could be part of a business recovery plan under TAAF. However, broader government or private sector programs are likely needed to address broader educational and training needs of entire industries or sectors.

Issues for Congress

As Congress considers trade liberalization agreements and ongoing trade negotiations, it may wish to further examine the TAAF in light of the current debate of its effectiveness and the impact of international trade on the U.S. economy and recent trends. An implementing bill for a new trade agreement and upcoming expiration of TPA may provide Congress an opportunity to reexamine and potentially revise the TAA programs. In addition to adjusting appropriations levels, Congress could examine changing the current program or EDA’s administration of it.

Potential options for Congress to consider on TAAF may include:

• determining if the program should be limited to assisting firms who face competition from imports or if it should be expanded to assist firms who face increased costs or decreased demand due to changes in domestic or foreign tariffs or other trade-related policies;
• determining if current funding levels are appropriate;  further refining the performance metrics to measure the employment or economic impact of TAAF programs;
• placing a stronger emphasis on assisting SMEs to utilize technology to improve operational efficiency, expand into new markets, including through e-commerce, and take fuller advantage of an increasingly digitally driven economy;
• facilitating partnerships with large multinational companies to support SME integration into GVCs;
• facilitating partnerships with educational institutions or programs to train workers for digital or other skills needed by the TAAF firm or other employers;
• aligning Federal programs by linking qualified workers of a TAAF firm with the TAA for Workers program under the Department of Labor; or
• consolidating or streamlining TAAF with other federal programs that assist troubled SMEs such as those operated by the Small Business Administration (SBA).

While TAAF has traditionally focused on firms who can demonstrate they have been harmed by import competition, Congress could also explore the feasibility and possible steps that could or should be taken before firms are harmed. Congress might consider requiring EDA to conduct outreach and education on pending trade liberalization agreements. The analysis of each proposed trade agreement by the USITC may help identify industries or regions as potentially vulnerable or likely to experience a negative impact as a result of proposed trade liberalizing measures. For example, the USITC economic impact assessment report for the Trans-Pacific Partnership (TPP), before the United States withdrew from the negotiations, contended that U.S. demand for business services would outstrip supply, presenting opportunities for growth, while employment could decline in certain manufacturing and transport sectors. Congress could, for example, consider requiring EDA to prepare a capacity building plan to assist those industries or regions that the USITC identifies as potentially vulnerable or likely to experience a negative impact from implementation of a proposed trade agreement.

To download the full report, please click here. 

Rachel F. Fefer is an Analyst in International Trade and Finance at the Congressional Research Service.