Trade Adjustment Assistance and Offshore Sourcing

For more than 40 years, the United States has recognized that -- though international trade and global commerce are certainly in the best interests of the United States -- there are those workers that are hurt by trade and globalization in general. During the Kennedy administration, to respond to the needs of those workers the Trade Adjustment Assistance (TAA) program was created.

In 2002, the Congress agreed to extend new authority to the Administration to negotiate new trade agreements, but the Congress insisted on a major rewrite of TAA be included in the same legislation to ensure that the needs of those that might lose from trade were fairly addressed. The 2002 Act made a number of changes in TAA the most significant of which were: 1) expanded eligibility for TAA to secondary workers (workers that supply inputs to plants adversely impacted by trade) and to those that work at factories that leave the United States, 2) a new tax credit for workers who receive TAA to help them obtain health insurance coverage, 3) innovative programs to bring workers back into the work force, such as wage insurance (a plan under which the government provides a wage subsidy for two years to workers that take lower paying jobs rather than retrain), and 4) an expanded budget for training.

These new programs are still in an early stage of implementation, but some -- such as the tax credit for health care and wage insurance -- have been widely applauded, though many would like to see them expanded or made more generous. The budget for training has been under stress in the current budget atmosphere and some states have sought more funding; the Bush administration has advocated paring back these funds because they believe demand will not be as high as anticipated by the drafters of the legislation.

The current debate over offshoring, however, raises a whole new set of issues related to TAA. As noted, TAA was already expanded to cover the needs of workers whose employers move operations overseas, but the apparent need for such coverage has increased beyond what was foreseen. In addition, TAA currently is aimed at those workers involved in manufacturing or producing goods, not those involved in producing services -- a sector that has been the focus of much of the offshore sourcing discussion. Further, some of the workers impacted, such as computer programmers, are in high wage sectors and may not be open to traditional retraining; access to wage insurance, however, may better allow them to explore new career alternatives. Finally, if the workers adversely impacted by offshoring were made eligible for TAA, it would likely require a substantial new commitment of resources by the federal government.

In order to better address the challenge posed by offshore sourcing, several changes to the current TAA program that could be made:

1. Expand TAA to Service Workers. In 2002, the Congress contemplated extending TAA to all service workers, but chose not to do so because the need was uncertain and the potential cost considerable. In recent months, the cases of high-skilled service workers losing their jobs because of facility relocation have become very visible. Granting these workers the same access to TAA as manufacturing workers would correct this apparent inequity and allow TAA to address the needs of service workers.

2. Make All Workers Unemployed by the Movement of Their Factory/Facility Out of the United States Eligible for TAA. Current law imposes some restrictions on access to TAA if the plant in question moves to a non-FTA country. There is a strong argument for workers at most factories that leave the country re eligible for TAA, but eliminating them would remove any doubt that workers that lose their jobs when the factory they work in moves overseas would qualify.

3. Expand Wage Insurance. In the 2002 legislation, wage insurance was launched as a limited program for only for older workers. Expanding eligibility to all workers that qualify for TAA, could provide an important opportunity particularly for highly skilled, highly paid workers impacted by offshoring. This program may also actually save the government money because the cost of wage insurance is less than the cost of benefits and training under traditional TAA.

4. Undertake an Exhaustive Review of the Implementation of the 2002 TAA Provisions. Many of the important changes enacted in 2002 are just now being implemented. In particular, there have been complaints on the implementation of the health care tax credit in some states and on the availability of training funds. Congress and the Administration should examine the current programs, including the potential needs created by offshoring, and accordingly fine tune the program. A coordinated effort should also be made to make dislocated workers aware of the 2002 changes to TAA and to the range of other federal and state programs available to them, which in some states includes mortgage assistance and loans.