TRADE 

ADJUSTMENT 

ASSISTANCE

Commerce Program 

Has Helped 

Manufacturing and 

Services Firms, but 

Measures, Data, and 

Funding Formula 

Could Improve

Report to Congressional Committees

September 2012

GAO-12-930

United States Government Accountability Office

GAO
 United States Government Accountability Office 

Highlights of GAO-12-930, a report to 

congressional committees 

September 2012 

TRADE ADJUSTMENT ASSISTANCE 

Commerce Program Has Helped Manufacturing and 

Services Firms, but Measures, Data, and Funding 

Formula Could Improve 

Why GAO Did This Study 

Over the past decade, U.S. imports of 

goods and services have almost 

doubled, reaching $2.7 trillion in 2011. 

Although trade expansion can enhance 

economic welfare, many firms and 

workers experience difficulties 

adjusting to import competition. The 

TAA for Firms program assists tradeimpacted, economically distressed 

U.S. firms in making adjustments that 

may enable them to remain 

competitive in the global economy. The 

Department of Commerce’s EDA 

administers the $15.8 million program 

through 11 TAA Centers throughout 

the United States. In 2009, the Trade 

and Globalization Adjustment 

Assistance Act, as part of American 

Recovery and Reinvestment Act, 

amended the TAA for Firms program 

and mandated that GAO review its 

operation and effectiveness. GAO 

examined (1) the results of the 

legislative changes on program 

operations and participation, (2) the 

performance measures and data EDA 

uses to evaluate the program and what 

these tell us about the program’s 

effectiveness, and (3) how program 

funding is allocated and spent. 

GAO reviewed pertinent legislation, 

program documentation, and data; 

conducted an economic analysis and a 

survey of participant firms; and met 

with EDA officials, representatives of 

the 11 TAA Centers, and others. 

What GAO Recommends 

GAO recommends that Commerce 

establish more effective measures of 

program outcomes, improve its data 

collection, and allocate funds in a way 

that considers program needs and 

costs. Commerce concurred with 

GAO’s findings and recommendations. 

What GAO Found 

Changes to the Trade Adjustment Assistance (TAA) for Firms program mandated 

by the Trade and Globalization Adjustment Assistance Act led to program 

improvements and increased participation, but participation declined when the 

legislative changes lapsed and the program faced funding uncertainty. The 

changes resulted in reduced time to certify firms, new performance reporting, and 

increased participation. For example, officials told GAO that creating a director 

position and other full-time positions for the program reduced time to certify firms. 

In fulfilling new reporting requirements, the Economic Development 

Administration (EDA) collected information on performance measures and issued 

three annual reports. Also, EDA certified 26 services firms not previously eligible, 

as well as 32 additional firms based on more flexible certification requirements to 

demonstrate trade impacts. Although EDA increased the number of certified 

petitions and approved business recovery plans from fiscal years 2008 through 

2010, the lapse in the legislative changes from February to October 2011 and 

uncertainty about program funding contributed to a decline in certified petitions 

and approved plans in fiscal year 2011. 

EDA’s performance measures and data collection for the TAA for Firms program 

provide limited information about the program’s outcomes, although GAO’s 

economic analysis found that participation in the program is statistically 

associated with an increase in firm sales. EDA collects data to report on 16 

measures to gauge the program’s performance, such as the number of firms that 

inquired about the program and the number of petitions filed, but most of these 

measures do not assess program outcomes. EDA is exploring better ways to 

assess the effect of their efforts on firms. In addition, EDA does not 

systematically maintain data collected by the TAA Centers on the firms they 

assist, resulting in gaps in centralized data that EDA could use to evaluate the 

program and meet reporting requirements. However, GAO’s analysis of data 

collected from the centers showed that the program was associated with 

increased sales and productivity for manufacturing firms, although some factors 

were more strongly correlated with improved performance than was participation 

in the TAA for Firms program. GAO’s survey of and interviews with firms 

participating in the program found that many firms reported satisfaction with the 

program’s impacts. Notably, 73 percent reported that the program helped them 

with profitability; 71 percent that it helped them retain employees; and 57 percent 

that it helped them hire new employees. 

To allocate funding to the TAA Centers, EDA uses a formula of weighted factors, 

such as each center’s share of approved business recovery plans. However, the 

formula does not factor in differences in program need and costs in centers’ 

service regions, even though centers varied in their use of program funds. For 

example, the formula does not take into account potential need for the program 

based on its objective of assisting firms that have lost sales and employment due 

to import competition. The formula also does not take into account the 

considerable differences in the costs of operating the centers to assist firms. As a 

result, some centers had spent their entire allocation by the conclusion of the 

most recent grant period, while other centers had not. Although EDA de-obligates 

and reallocates any unspent funds, it uses its allocation funding formula to do so, 

thus perpetuating the deficiency of failing to consider variable needs and costs. 

View GAO-12-930. To view an e-supplement 

with more data see GAO-12-935SP. For more 

information, contact J. Alfredo Gomez at 

(202) 512-4101 or gomezj@gao.gov. 
Page i GAO-12-930 Trade Adjustment Assistance

Letter 1 

Background 4

TGAAA Changes Led to Program Improvements and More 

Participation 10

EDA’s Performance Measures and Data Collection Limit Its Ability 

to Gauge Program Effectiveness, but Our Analysis Shows 

Positive Impact 16

EDA’s Allocation of Program Funds Falls Short of Meeting Key 

Standard for Funding Formulas 28

Conclusions 39

Recommendations for Executive Action 40

Agency Comments 41

Appendix I Scope and Methodology 42

Appendix II Trade Adjustment Assistance for Firms and Other Department of 

Commerce Programs 47

Appendix III Economic Analysis of the Effect of Trade Adjustment Assistance 

Policy on Firm Market Performance 50

Appendix IV Data That EDA Uses for Its Funding Allocation Formula and Share of 

Funding by Center 59

Appendix V Comments from the Department of Commerce 61

Appendix VI GAO Contact and Staff Acknowledgments 66

Tables

Table 1: TGAAA Marked First Legislative Change to the TAA for 

Firms Program since 1986 11

Contents
Page ii GAO-12-930 Trade Adjustment Assistance

Table 2: Few of EDA’s 16 Performance Measures for TAA for Firms 

Program Are Outcome Measures; Most Are Output 

Measures 17

Table 3: TAA Centers’ Backlogs of Approved, Unfunded Assistance 

from Cooperative Agreement Year 2008 to April 2012 36

Table 4: Overview of TAA for Firms and MEP Programs 48

Table 5: Summary of Data Used in TAAC Regression Analysis 53

Table 6: Semi-log Model Coefficients for TAA for Firms Regression 

Models 56

Table 7: Data Used for TAA for Firms Funding Allocation Formula 

and Each Center’s Share of Funding Based on Each 

Factor, Cooperative Agreement Year 2011 59

Table 8: Funding Allocation to TAA Centers Based on EDA’s 

Funding Formula, Cooperative Agreement Year 2011 60

Figures

Figure 1: TAA Centers Cover 11 Regions and Are Affiliated with 

Seven Universities and Four Nonprofit Organizations 5

Figure 2: TAA for Firms Process Requires Collaboration among 

Firms, TAA Centers, and EDA 7

Figure 3: TAA Centers Proposed a Variety of Projects in Firms’ 

Business Recovery Plans, Fiscal Years 2009 through 2011 9

Figure 4: Petitions Certified and Business Recovery Plans 

Approved by EDA and the TAA Centers, Fiscal Years 2008 

through 2011 14

Figure 5: TAA for Firms Program Clients Expressed Satisfaction 

with Program and Results 26

Figure 6: TAA for Firms Funding Formula Allocates Funding to 

TAA Centers Using Fixed and Variable Factors 31

Figure 7: TAA Centers’ Costs Varied during Cooperative Agreement 

Years 2008 through 2010 34

Figure 8: Proportion of Indirect Costs Tends to Be Higher for 

University-Affiliated TAA Centers, Cooperative 

Agreement Years 2008 through 2010 35
Page iii GAO-12-930 Trade Adjustment Assistance

Abbreviations

Commerce Department of Commerce

EAA Economic Adjustment Assistance

EDA Economic Development Administration

FGLS feasible generalized least squares 

ITC International Trade Commission

MEP Manufacturing Extension Partnership

NAICS North American Industry Classification System

NIST National Institute of Standards and Technology

OMB Office of Management and Budget

TAA Trade Adjustment Assistance

TGAAA Trade and Globalization Adjustment Assistance Act

View GAO-12-935SP Key Components

Trade Adjustment Assistance: Results of GAO’s Survey of Participant 

Firms in the Trade Adjustment Assistance for Firms Program 

(GAO-12-935SP), an e-supplement to GAO-12-930. 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-12-930 Trade Adjustment Assistance

United States Government Accountability Office 

Washington, DC 20548

September 13, 2012

The Honorable Max Baucus

Chairman

The Honorable Orrin G. Hatch

Ranking Member

Committee on Finance

United States Senate

The Honorable Dave Camp

Chairman

The Honorable Sander Levin

Ranking Member

Committee on Ways and Means

House of Representatives

From 2001 to 2011, U.S. imports of goods and services grew sharply, 

almost doubling from about $1.4 trillion to about $2.7 trillion. During the 

same period, the United States entered into free trade agreements that 

liberalize trade with 14 partner countries. The World Trade Organization 

also admitted China, Vietnam, and 11 other members during this time. In 

2012, bilateral free trade agreements with South Korea and Colombia 

went into effect. Further trade liberalization is being pursued, including a 

Transpacific Partnership among 11 nations in the Asia-Pacific region and 

North America regions. 

Although trade expansion can enhance the economic welfare of all trade 

partners, many firms and workers experience difficulties adjusting to 

import competition. Congress has responded to concerns about these 

difficulties with trade adjustment assistance (TAA) programs, including 

the TAA for Firms program administered by the Department of 

Commerce’s (Commerce) Economic Development Administration (EDA).1

 

1

The three other TAA programs focus on workers, farmers, and communities.

Established in 1962, the TAA for Firms program provides technical 

assistance to help trade-impacted, economically distressed firms make 

adjustments that may enable them to remain competitive in the global 

economy. In fiscal years 2009 through 2012, EDA received $15.8 million 

annually for the TAA for Firms program, an amount far smaller than the 

 
 

Page 2 GAO-12-930 Trade Adjustment Assistance

funding provided for other TAA programs. EDA uses its appropriation for 

the TAA for Firms program to fund 11 TAA Centers, which provide 

assistance to U.S. manufacturing, production, and service firms in all 50 

states, the District of Columbia, and the Commonwealth of Puerto Rico. 

We last examined the TAA for Firms program in 2000.2

Congress authorized and amended the TAA for Firms program under the 

American Recovery and Reinvestment Act’s Trade and Globalization 

Adjustment Assistance Act (TGAAA) of 2009 and mandated that we 

review the operation and effectiveness of these amendments by 

September 30, 2012. In response, this report examines (1) the results of 

the legislative changes on program operations and participation, (2) the 

performance measures and data that EDA uses to evaluate the program 

and what these tell us about the program’s effectiveness, and (3) how 

program funding is allocated and spent.

To describe the results of the legislative changes on program operations 

and participation, we reviewed relevant program legislation, regulations, 

and agency documentation, including those outlining the operational and 

administrative changes to implement the program amendments in the 

TGAAA. We analyzed agency data on firms’ program participation and 

interviewed EDA officials, including the Director of the TAA for Firms 

program, the Chief Counsel, and certifying officials, to determine the 

impact of the legislative changes on the program’s operations. We 

conducted site visits or teleconferences with the 11 TAA Centers. During 

these visits, we interviewed staff, firm representatives, and consultants to 

learn about their procedures for conducting outreach and assisting firms 

and to learn about the results of the legislative changes on the program. 

We selected the eight site-visit locations to take into account geographic 

diversity and a mix of nonprofit and university-affiliated TAA Centers,3

 

2

See GAO, Trade Adjustment Assistance: Impact of Federal Assistance to Firms Is 

Unclear,

as 

well as a range of industries, and number of submitted and approved 

GAO-01-12 (Washington, D.C.; Dec. 15, 2000). In this report, we noted that the 

impact of the program was inconclusive because EDA did not monitor and track program 

outcomes of program recipients. We recommended that Commerce establish more 

effective measures of program outcomes and apply these measures to evaluate the 

effectiveness of the program. Commerce agreed with our findings and recommendations. 

In response, Commerce established new measures and performance targets in fiscal year 

2002 and has reported the results in its annual performance plans.

3

A TAA Center may be affiliated with a university, private firm, or nonprofit organization; 

however, nonprofit organizations and universities currently manage all of the centers.
 

Page 3 GAO-12-930 Trade Adjustment Assistance

petitions and business recovery plans. In addition, we collected and 

analyzed data from EDA and the 11 TAA Centers to determine the 

number of firms receiving assistance from fiscal years 2008 through 

2011. We assessed the reliability of the data by checking for accuracy 

and completeness. We determined that the data were sufficiently reliable 

for the purposes of reporting numbers of submitted and approved 

petitions and business recovery plans.

To determine the extent to which EDA’s performance measures capture 

program effectiveness, we used criteria from our prior work. We also 

reviewed EDA guidance and conducted interviews with EDA officials to 

identify their data collection procedures and to learn how program data 

are used. We reviewed two prior studies of the effectiveness of the TAA 

for Firms program—our 2000 report and a report issued by the Urban 

Institute in 1998.4

GAO-12-935SP

To gauge the impact of the program, we collected data 

on a group of firms that completed at least one project in their business 

recovery plans during fiscal years 2009 through 2011, as well as data on 

general economic indicators, and conducted a regression analysis with 

these data. Because the data we collected did not include any information 

about firms that did not participate in the program, this analysis allows us 

to make inferences from the regression estimates only for the firms that 

participated in the program during this time period. In addition, we 

conducted a survey of 163 firms to obtain their views about the quality of 

the assistance received and its impact. We received usable responses 

from 117 of them, for a final response rate of 72 percent. We conducted 

an analysis of our survey results to identify potential sources of 

nonresponse bias by comparing respondents with nonrespondents on key 

characteristics. Our analysis did not identify any large differences 

between respondents and nonrespondents for these characteristics. As a 

result, we determined that the survey results for the 117 respondents 

were sufficiently reliable to present in our report. This report does not 

contain all of the results from the survey. The survey and a more 

complete tabulation of the results can be viewed online in an 

e-supplement to this report at . 

To examine how EDA allocates and spends program funding, we 

interviewed EDA officials and TAA Center staff, reviewed EDA and TAA 

 

4

See GAO-01-12 and Urban Institute, Evaluation of Trade Adjustment Assistance 

Program, (Washington, D.C.: November 1998).
 

Page 4 GAO-12-930 Trade Adjustment Assistance

Center program data and reports, and analyzed documentation of the 

funding formula and the allocation of program funding. We reviewed 

EDA’s 2003 spending plan defining the factors included in the formula; 

using equity standards from social science research to evaluate and 

design funding allocation formulas,5 we assessed the program’s current 

funding formula and the data used to measure each of the factors. We 

also analyzed EDA’s spending plans for cooperative agreement years 

2009 to 2011 to assess the measures used to allocate program funding to 

the TAA Centers during each of those cooperative agreement years.6

We conducted this performance audit from July 2011 to September 2012 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe the 

evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

 

For a more complete discussion of our scope and methodology, see 

appendix 1.

The purpose of the TAA for Firms program is to help trade-impacted, 

economically distressed U.S. manufacturing, production, and service 

firms make adjustments that may enable them to remain competitive in 

the global economy. The program delivers technical assistance to firms 

by developing business recovery plans and providing matching funds to 

implement the projects in the plans. EDA uses its appropriation for the 

TAA for Firms program to fund 11 TAA Centers, signing a cooperative 

agreement with each center. The centers provide assistance to U.S. 

manufacturing, production, and service firms in all 50 states, the District 

of Columbia, and the Commonwealth of Puerto Rico. Each TAA Center 

uses the funding that EDA allocates under the cooperative agreement to 

 

5

We outline these equity standards in our prior work. See GAO, Vocational Rehabilitation 

Funding Formula: Options for Improving Equity in State Grants and Considerations for 

Performance Incentives, GAO-09-798 (Washington, D.C.: Sept. 30, 2009). 

6

EDA enters into a cooperative agreement with each TAA Center, generally for a 3-year 

period. Because each year covered by a cooperative agreement begins on July 1 and 

ends on June 30 and does not correspond to the federal fiscal year of October 1 to 

September 30, we refer to the years covered by a cooperative agreement as cooperative 

agreement years rather than fiscal years. 

Background
 

Page 5 GAO-12-930 Trade Adjustment Assistance

cover its administrative and operational costs and works directly with 

firms in its geographic region to provide assistance on a cost-share basis. 

None of the program funds go directly to firms; instead, funds go to thirdparty consultants to implement firms’ projects. The centers cover 

geographic regions of varying size, composed of one to eight states. A 

TAA Center may be affiliated with a university, private firm, or nonprofit 

organization; however, as shown in figure 1, nonprofit organizations 

currently manage four centers, while the other seven centers are affiliated 

with universities.

Figure 1: TAA Centers Cover 11 Regions and Are Affiliated with Seven Universities and Four Nonprofit Organizations
 

Page 6 GAO-12-930 Trade Adjustment Assistance

Staff at the TAA Centers generally target their outreach to small and 

medium-sized firms in the manufacturing, agricultural, and service 

sectors.7

• analyzing industry databases;

They use a variety of outreach methods to identify potential 

firms, including the following:

• conducting cold calls and providing information via websites, e-mail, 

and mail;

• presenting at seminars and meetings hosted by banking consortia, 

business and trade associations, and members of Congress;

• collaborating with state and local entities, including local departments 

of commerce and agriculture, economic and small business 

development centers, and chambers of commerce;

• targeting firms with workers who qualify for the TAA for Workers 

program or firms involved with International Trade Commission 

antidumping lawsuits; and

• acting on referrals from program consultants and current and former 

clients.

Once a firm connects with a TAA Center, staff may use various methods 

to determine whether firms are financially able to participate in the 

program. Some centers review preliminary financial documentation in an 

effort to help ensure that firms are eligible for assistance and committed 

to participating in the program. One center developed a series of eligibility 

questions on its website, so that firms can determine whether they are 

eligible for the program before applying for assistance.

The TAA for Firms program process has three phases—petition for 

certification, recovery planning, and business recovery plan 

implementation—requiring collaboration among firms, TAA Centers, and 

EDA. Figure 2 presents a flowchart summary of the process.

 

7

Small and medium-sized firms are firms with fewer than 500 employees, according to the 

U.S. International Trade Commission. 
 

Page 7 GAO-12-930 Trade Adjustment Assistance

Figure 2: TAA for Firms Process Requires Collaboration among Firms, TAA Centers, and EDA

A firm seeking TAA program benefits must submit a petition to EDA to 

receive certification of its eligibility to participate in the program. TAA 

Center staff collect documentation from a firm to demonstrate in the 

petition each of the following:

1. A significant number or proportion of the firm’s workers have been or 

are threatened to be totally or partially separated.

2. Total sales and/or production or sales and/or production of a product 

that represents at least 25 percent of the firm’s total have decreased 

absolutely during the 12-month period preceding the most recent 12-

month period; or total sales and/or production, or that of a product that 

represents at least 25 percent of the firm’s total, have decreased 
 

Page 8 GAO-12-930 Trade Adjustment Assistance

during the most recent 12-month period compared with the preceding 

12-, 24-, or 36-month period.

3. Increases in imports of articles or services comparable to, or directly 

competitive with, the firm’s articles or services contributed importantly 

to worker separations (or threat thereof) and the declines in sales or 

production. Firms must generally demonstrate that import impact has 

occurred, using a combination of import data or statements from their 

customers to certify that imports were a factor in the decreased 

purchase of the firm’s products.

Once EDA approves the petition and certifies the firm, the firm and TAA 

Center staff have 2 years to develop a business recovery plan and submit 

it to EDA for approval. Center staff work closely with the firm’s 

management to identify the firm’s strengths and weaknesses and develop 

a customized plan designed to stimulate its recovery and growth.8

After EDA approves a business recovery plan, the TAA Center funds 

projects within the plan,on a cost-share basis with the firm, subject to the 

availability of funds. The TAA for Firms program will provide up to 

$75,000 toward the projects, but firms are required to match federal 

funds.

 EDA 

requires standard information in each business recovery plan, such as a 

description of the firm’s competitive problems, prospects for recovery, and 

specific technical assistance projects. However the length, level of detail, 

and amount of information provided in the plans vary across the TAA 

Centers. EDA officials review and approve the plans on the basis of 

whether they meet regulatory requirements and supply the necessary 

supporting documents.

9

 

8

The firm pays up to 25 percent of the cost of developing the plan, while the program pays 

up to 75 percent.

TAA funds can be used to provide technical assistance to firms 

but may not be used for capital expenditures such as physical plant 

improvement or machinery upgrades. In fiscal years 2009 through 2011, 

9

A firm that requests $30,000 or less in total assistance to implement an approved 

business plan must pay at least 25 percent of the cost of the assistance. Firms that 

request more than $30,000 in total assistance, up to $75,000, must pay 50 percent of the 

total cost.
 

Page 9 GAO-12-930 Trade Adjustment Assistance

TAA Centers proposed four types of projects in firms’ business recovery 

plans (see fig. 3).10

Figure 3: TAA Centers Proposed a Variety of Projects in Firms’ Business Recovery 

Plans, Fiscal Years 2009 through 2011

To assist a firm in implementing the projects in its business recovery plan, 

TAA Center staff work with firm management to identify and competitively 

select third-party consultants with the specific expertise needed. In some 

instances, center staff said that they collaborate with consultants from 

Commerce’s Manufacturing Extension Partnership program to implement 

projects in the TAA firms’ business recovery plans. (Please see app. II for 

a discussion of the similarities, differences, and interactions among the 

 

10EDA did not provide a breakdown of services for fiscal year 2008, because it was not 

required to report this information until fiscal year 2009.
 

Page 10 GAO-12-930 Trade Adjustment Assistance

TAA for Firms, Manufacturing Extension Partnership, and other 

Commerce programs.)

In addition to mandating that we report on the TAA for Firms program, the 

TGAAA mandated that we report on the other TAA programs.11 In July 

2012, we issued our report on the TAA for Farmers program.12 Our reports 

on the TAA for Workers and Communities programs are forthcoming.

The 2009 legislative changes to the TAA for Firms program resulted in 

reduced firm certification processing times, new performance reporting, 

and increased firm participation. However, EDA officials and TAA Center 

staff said that the lapse of these legislative changes from February 2011 

to October 2011 and the uncertainty regarding program funding 

contributed to a decrease in firm participation in fiscal year 2011.

The TGAAA marked the first major change in the TAA for Firms program 

since 1986 (see table 1). The 2009 legislation included changes to the 

program, such as eligibility for service sector firms and more flexible 

certification requirements. However, TGAAA provided that the provisions 

that expanded eligibility would expire and that on January 1, 2011 the 

TAA for Firms program be administered as if the expanded provisions 

had not been enacted. As authorization of the program was about to 

expire on January 1, 2011, Congress passed the Omnibus Trade Act of 

2010 to extend the program through February 2012.13

 

11The TAA for Firms program is one of four trade adjustment assistance programs; the 

other three provide assistance for workers, farmers, and communities impacted by 

international trade. Under the TAA for Workers program, the Department of Labor 

provides services and benefits, such as training and reemployment services and income 

support, to eligible manufacturing and other workers. Under a TAA program to assist 

trade-impacted communities, the Department of Labor awards grants to institutions of 

higher education for developing or improving education and career training programs for 

persons eligible for the TAA for Workers program, and the Department of Commerce 

awarded strategic planning and implementation grants to trade-impacted communities. 

The Department of Agriculture administers a TAA program that provides help to individual 

farmers and fishermen to become more competitive in producing their current commodity 

or transitioning to a different commodity.

However, this 

12See GAO, Trade Adjustment Assistance: USDA Has Enhanced Technical Assistance for 

Farmers and Fishermen, but Steps Are Needed to Better Evaluate Program Effectiveness, 

GAO-12-731 (Washington, D.C.: July 12, 2012).

13P.L. 111-344. 

TGAAA Changes Led 

to Program 

Improvements and 

More Participation

Some TGAAA Changes 

Resulted in Reduced Firm 

Certification Processing 

Times, New Performance 

Reporting, and Increased 

Firm Participation
 

Page 11 GAO-12-930 Trade Adjustment Assistance

legislation did not reinstitute the TGAAA changes, which resulted in a 

lapse of the TGAAA changes from February 2011 until October 2011. In 

October 2011, the TAA Extension Act of 2011 reinstituted many of the 

TGAAA’s changes, including service sector firm eligibility and the more 

flexible certification requirements.14

Table 1: TGAAA Marked First Legislative Change to the TAA for Firms Program 

since 1986

Year enacted Legislation

1962 Trade Expansion Act of 1962

• Established TAA for Firms program.

• Authorized direct financial assistance (loans/guarantees) and 

technical assistance to firms.

1975 Trade Act of 1974

• Authorized current TAA for Firms program.

• Outlined procedures, eligibility requirements, benefits terms and 

conditions, and administrative provisions of the program.

1986 Consolidated Omnibus Budget Reconciliation Act of 1985

• Eliminated direct financial assistance (loans/guarantees) to firms.

• Increased government participation in technical assistance.

• Expanded criteria for firm certification.

2009 Trade and Globalization Adjustment Assistance Act of 2009 (TGAAA), 

part of the American Recovery and Reinvestment Act of 2009

• Required annual report to Congress.

• Established service sector firm eligibility.

• Established more flexible certification requirements.

• Established 40-day certification requirement.

• Increased authorized funding levels to $50 million.

• Created Director of Adjustment Assistance for Firms position.

2010 Omnibus Trade Act of 2010

• Extended program but allowed TGAAA changes to lapse from 

February 2011 to October 2011; program operated according to 

pre-TGAAA program regulations during this time. 

2011 Trade Adjustment Assistance Extension Act of 2011

• Extended program until December 2013.

• Reinstated TGAAA changes.

Source: GAO analysis of TAA for Firms statutes.

 

14P.L. 112-40.
 

Page 12 GAO-12-930 Trade Adjustment Assistance

Four changes mandated by the 2009 legislation contributed to

improvements in program operations and increased participation:

• Creation of director’s and other full-time positions. The creation of a 

director’s position and other full-time positions for the program 

resulted in reduced certification processing times for petitions. Prior to 

the 2009 legislation, the TAA for Firms program was administered by 

rotating staff members and interns. TAA Center staff said that this 

resulted in inconsistent review of petitions. Center staff reported that 

with the full-time professional staff now available, reviews are 

dependable. In addition, EDA stated in its 2011 annual report that its 

staff reduced the average processing time for petitions to 21 days—a 

48 percent reduction from fiscal year 2010 and a faster turnaround 

than the 40 days required by the TGAAA.

• New annual reporting on performance measures. The TGAAA 

required EDA to gather information on performance measures and 

submit annual reports to Congress. EDA has submitted three annual 

reports to Congress on these performance measures as a result of 

the legislation.

• Inclusion of service sector firms. According to our analysis of EDA data, 

the inclusion of service sector firms allowed EDA to certify 26 firms not 

previously eligible for assistance in fiscal years 2009 through 2011. 

Examples of service sector firms assisted by some TAA Centers 

include architectural engineering firms, telecommunications firms, and 

software development firms.

• Expansion of the “look-back” period from 12 months to 12, 24, or 36 

months. Our analysis of EDA data shows that 32 additional firms 

participated in the program in fiscal years 2009 through 2011 as a 

result of the expanded the look-back period. Prior to the legislative 

changes, firms were allowed to compare sales and production data in 

the most recent 12 months only with data from the immediately 

preceding 12-month period. Staff at the TAA Centers told us that it 

was difficult to certify some firms with the 12-month look-back period, 

because that amount of time was often not adequate to demonstrate 

declines in sales and production. Center staff said that the expanded 

look-back period was particularly helpful during the recent recession, 

because it enabled more firms to demonstrate the requisite declines.
 

Page 13 GAO-12-930 Trade Adjustment Assistance

Although these legislative changes generally improved the program and 

increased participation, TAA Center staff noted some challenges in 

assisting service sector firms. For example, some service sector firms 

had difficulty establishing import impact along with requisite declines in 

sales and production. Because service sector firms do not have industryspecific codes that allow TAA Center staff to analyze import data, EDA 

allowed the use of certification letters from firm customers to demonstrate 

import impact in lieu of import data. However, many of the firms’ 

customers did not want to certify in writing that they were outsourcing 

services, according to center staff. As a result, staff said that some 

service sector firms could not provide sufficient evidence of import impact. 

In addition, some Center staff expressed concern that they did not have 

sufficient funding to serve both manufacturing and service sector firms.

From fiscal year 2008 through fiscal year 2010, EDA certified and 

approved an increased number of petitions and business recovery plans 

(see fig. 4). In addition, with a few exceptions, the TAA Centers generally 

submitted an increased number of petitions and business recovery plans 

during this period. According to center staff, the economic downturn 

contributed to the increase in firms applying for and receiving assistance 

from the TAA for Firms program from fiscal year 2008 through fiscal year 

2010, because more firms could demonstrate a decline in sales and 

employment. Additionally, EDA officials and TAA Center staff stated that 

the 2009 legislative changes increased interest in, and demand for, the 

program by prospective firms. For example, EDA officials and TAA Center 

staff said the news of the increased funding authorization generated 

many inquiries from firms, and one TAA Center official noted that the 

large increase in authorized funding in the TGAAA led to the expectation 

that the program would be able to service a greater number of firms. EDA 

officials also stated that demand for the program increased because more 

firms were eligible under the expanded look-back period.

Participation Increased 

after TGAAA Changes but 

Declined after Changes 

Lapsed and Future of 

Program Became 

Uncertain
 

Page 14 GAO-12-930 Trade Adjustment Assistance

Figure 4: Petitions Certified and Business Recovery Plans Approved by EDA and the TAA Centers, Fiscal Years 2008 through 

2011
 

Page 15 GAO-12-930 Trade Adjustment Assistance

In total, EDA certified 878 petitions and approved 761 business recovery 

plans for fiscal years 2008 through 2011. Because TAA Centers use a 

variety of methods prior to completing a petition to determine if a firm is 

financially able to participate in the program, center staff told us that EDA 

approved almost all of the finalized petitions they received. In addition, 

center staff said that EDA rarely rejected submitted business recovery 

plans, owing to the firms’ in-depth diagnostics and detailed business 

recovery plans.

Figure 4 also shows that EDA certified fewer petitions and approved 

fewer recovery plans in fiscal year 2011 than in fiscal year 2010. Certified 

petitions decreased from 330 in fiscal year 2010 to 149 in fiscal year 

2011, and approved business recovery plans decreased from 264 in fiscal 

year 2010 to 183 in fiscal year 2011. EDA officials and TAA Center staff 

attributed the decline to three factors:

• Lapse of TGAAA changes. EDA officials and TAA Center staff

reported that the lapse of the legislative changes from February to 

October 2011 meant that service sector firms were no longer eligible 

to receive assistance. Center staff also said that the lapse in the 

TGAAA provisions disrupted the certification and approval process for 

several service sector firms and excluded them from participating. In 

addition, center staff stated that without the option to use the 

expanded look-back period, some petitioning firms that would have 

been eligible before the lapse could not show the requisite declines in 

sales or production during this time.

• Program uncertainty. The President’s fiscal year 2012 budget 

proposed to eliminate the TAA for Firms program. EDA reported that 

the uncertainty regarding the program’s future funding caused the 

TAA Centers to focus on existing clients instead of identifying new 

firms. One center stated in its 2010 annual report that the possibility 

that the program might be cancelled required the center to reserve 

sufficient funds to cover closeout costs rather than bring new firms 

into the program. Other center staff confirmed that uncertainty about 

the program affected outreach efforts and budgeting, because of 

concerns that the program would be eliminated.

• Improvement in the economy. Some TAA Center staff said that fewer 

firms were eligible to participate in the program because the 

economy’s improvement from fiscal year 2010 to fiscal year 2011 

prevented some firms from demonstrating a decrease in employment, 

sales, and production.
 

Page 16 GAO-12-930 Trade Adjustment Assistance

EDA collects data on 16 measures reported in its annual report to 

Congress and in Commerce’s performance and accountability report, but 

we found that these performance measures, and EDA’s use of them, do 

not adequately focus on program outcomes. In addition, EDA’s lack of 

centralized, comprehensive, and reliable data on participating firms limits 

its ability to improve program management and program outcomes. 

However, we found the program may have had positive outcomes that 

are not captured in EDA’s performance measures and data collection. 

Our data analysis showed that participation in the program was positively 

associated with an increase in sales, and our survey respondents 

reported satisfaction with the assistance they received from the program.

As TGAAA requires, EDA currently collects data on 14 performance 

measures to include in its annual report on the TAA for Firms program, as 

well as two measures to include in Commerce’s annual performance and 

accountability report. However, we found that these measures are largely 

output measures rather than measures of program outcomes. We define 

performance measurement as the systematic ongoing monitoring and 

reporting of program accomplishments, particularly progress toward 

preestablished goals or standards.15

• inputs: program staffing and resources;

Performance measures may address

• outputs: the type or level of program activities conducted or the direct 

products or services delivered by a program; or

• outcomes: the results of those products and services.

Outcome-oriented goals and performance measures assess the results of 

a program, compared with its intended purpose, and are important for 

ensuring accountability. We characterize most of EDA’s performance 

measures as output measures, since they measure goods and services 

delivered by a program—for example, the number of firms certified as 

eligible for the program or the number of business plans approved by 

EDA. We characterize only three of the measures— measures 10, 15, 

and 16—as outcome measures, as shown in table 2.

 

15GAO, Designing Evaluations, 2012 Revision, GAO-12-208G (Washington, D.C.: 

Jan. 31, 2012).

EDA’s Performance 

Measures and Data 

Collection Limit Its 

Ability to Gauge 

Program 

Effectiveness, but Our 

Analysis Shows 

Positive Impact

Limitations in 

Performance Measures 

Hinder EDA’s Ability to 

Determine Program 

Effectiveness
 

Page 17 GAO-12-930 Trade Adjustment Assistance

Table 2: Few of EDA’s 16 Performance Measures for TAA for Firms Program Are 

Outcome Measures; Most Are Output Measures 

(1) The number of firms that inquired about the program.

(2) The number of petitions filed.

(3) The number of petitions certified/denied.

(4) The average time for processing petitions. 

(5) The number of petitions filed and firms certified for each Congressional District in the 

United States.

(6) The number of firms that received assistance in preparing their petitions.

(7) The number of firms that received assistance developing business recovery plans 

(Adjustment Proposals). 

(8) The number of Adjustment Proposals approved and denied by the Secretary of 

Commerce. 

(9) Sales, employment, and productivity at each firm participating in the program at the 

time of certification.

(10) Sales, employment, and productivity at each firm upon completion of the program 

and each year for the 2-year period following completion.

(11) The financial assistance received by each firm participating in the program.

(12) The financial contribution made by each firm participating in the program.

(13) The types of technical assistance included in the Adjustment Proposals of firms 

participating in the program.

(14) The number of firms leaving the program before completing the project or projects in 

their Adjustment Proposals and the reason the project was not completed.

(15) Percentage of TAA Center clients taking action as a result of the assistance 

facilitated by the TAA Centers. 

(16) Percentage of those actions taken by TAA Center clients that achieved the 

expected results. 

Source:Department of Commerce

Notes: Shading designates output measures. Adjustment proposals refers to business recovery 

plans. 

Outcome measure 10—sales, employment, and productivity of each firm 

on completion of the program and in each of the 2 years after 

completion—is closely tied to the program’s intended purpose of helping 

firms adjust to international trade competition. However, in its 2011 

Annual Report on the TAA for Firms program, the primary analysis that 

EDA offers for its data on performance measures notes how the 

program’s participants fared relative to the nationwide average for all 

manufacturing firms. Specifically, employment for participating firms 

decreased less for TAA for Firms participants than for firms nationwide 

(a 1.9 percent decrease for program participants, compared with a 4.5 

percent decrease nationwide, according to Bureau of Labor Statistics 
 

Page 18 GAO-12-930 Trade Adjustment Assistance

data). Likewise, productivity for TAA for Firms participants increased by 

less than 1 percent, whereas average productivity increased by 10 

percent nationwide since 2009. However, comparing performance data 

for trade-impacted firms with data for the nationwide manufacturing 

industry is not sufficient for determining whether the program is effective 

in helping firms. TAA for Firms recipients are in distress, having already 

been certified as adversely impacted by international trade. These firms 

demonstrated lost sales and employees to qualify for the program and 

cannot be expected to perform at the same level as the national average, 

which includes firms not impacted by trade competition. Nevertheless, 

EDA has not attempted to isolate the impact of the program’s assistance 

on firms from other influences. In November 2009, we reported that using 

program evaluation methods to rule out plausible alternative explanations 

for outcomes that may be influenced by a variety of external factors, such 

as changes in the economy, can help strengthen evaluations.16

Several TAA Center officials noted that data from the performance 

measures do not adequately show the effect that the program has on its 

participants, and they further commented that they do not find these 

measures particularly useful for improving program management. For 

example, a representative from one TAA Center said that an important 

measure of success is firm survival, which determines the number of jobs 

that are saved or created, but firm survival is not measured in the annual 

performance metrics. A representative of another TAA Center noted that 

a weakness in measuring sales, employment and productivity 2 years 

after program completion is that the nature of the business cycle is such 

that sales and production must increase to the point where orders cannot 

be filled before the firm believes it is justified in hiring new staff. As a 

result, there is a time lag between increased sales and production and 

increased employment that might not be reflected in the 2-year data.

In June 

2010, EDA outlined plans for an objective evaluation of the effectiveness 

and efficiency of the program and individual TAA Centers. However, the 

evaluation was not implemented because of a lack of funding for it, 

according to the program’s director.

EDA acknowledges that the program’s performance measures should be 

improved and has made improving the measures a goal and taken steps 

 

16GAO, Program Evaluation: A Variety of Rigorous Methods Can Help Identify Effective 

Interventions, GAO-10-30 (Washington, D.C.: Nov. 23, 2009). 
 

Page 19 GAO-12-930 Trade Adjustment Assistance

toward it. According to the director of the program, EDA has entered into 

a partnership with economists from the George Washington University 

and the University of North Carolina-Chapel Hill to improve the 

performance metrics for all EDA programs under the Government 

Performance and Results Act. Planned activities include the creation of a 

new logic model that will map out inputs, outputs, and outcomes for 

EDA’s programs. The economists will also assist EDA in creating more 

expansive performance metrics for all programs, including TAA for Firms. 

EDA anticipates that this project will be completed by fall of 2014. 

Although EDA and the TAA Centers independently collect data on 

participating firms and program operations that may be useful for 

evaluating the TAA for Firms program, gaps in centralized, 

comprehensive, and reliable program data limit EDA’s ability to analyze 

program trends and inform decisions to improve results.

The issues with EDA’s data that we identified fall into four clear but 

interconnected categories:

• Gaps in centralized data. According to EDA officials, the agency 

maintains a database of information from petitions, such as firm 

location, sales or production, employment, and the basis for eligibility. 

EDA staff also maintain a separate database of information from firms’ 

approved business recovery plans, including the total dollar amount of 

assistance and types of projects approved. However, TAA Center 

staff do not have access to EDA’s databases and maintain their own 

independent program data and information. We found that EDA does 

not maintain the necessary data, such as whether the firm is a public 

or private firm or a multiplant firm, to conduct a quantitative analysis of 

the effects of TAA for Firms assistance on participating firms, but that 

the TAA Centers collected the time-series data required to perform an 

economic analysis. Although we were able to conduct an analysis of 

the program’s impact on firms, doing so required us to compile more 

complete and comprehensive firm-level data that the centers had 

collected for other purposes. For example, in the absence of 

centralized program data, we utilized the firm-level data cited in the 

conference report on Commerce appropriations compiled by the 

centers for fiscal year 2012, including firms’ current and prior sales 

and employment and the fiscal years in which firms completed 

Lack of Centralized, 

Comprehensive, and 

Reliable Data Affects 

Program Management and 

Analysis
 

Page 20 GAO-12-930 Trade Adjustment Assistance

projects in their approved business recovery plans.17

• EDA makes multiple data requests of TAA Centers. EDA frequently 

makes multiple requests to the TAA Centers for program data when 

preparing required reports, and center staff noted that they are often 

asked to provide or validate program data and information they have 

already reported, including the data for the program’s annual reports. 

Staff at several centers that we visited stated that they were able to 

comply with repeated requests for data, but they cited concerns about 

the use of limited staff time to prepare reports of data they had 

previously reported.

EDA officials 

commented that the program would benefit from having a complete 

data set on firms to respond to future data requests from stakeholders 

and analyze the effectiveness of the program; however, the data EDA 

currently has accessible are not sufficient for such an analysis.

• Data requests require verification but can still result in inaccuracies. In 

addition, EDA relies on each of the TAA Centers to validate its data. 

However, when we compared EDA’s data with data provided by the 

centers, we identified errors in EDA’s data. For example, we found 

that EDA’s certification data did not include 30 of the 32 firms that 

were certified on the basis of the expanded look-back period in fiscal 

years 2009 to 2011. EDA officials also could not ensure the reliability 

of data on petition and business recovery plan approvals prior to fiscal 

year 2008, because EDA had not validated these data with each of 

the centers.18

• Lack of guidance results in dissimilar information across TAA Centers. 

EDA has not developed guidance on the format and types of program 

data that TAA Centers should collect, which has contributed to a lack 

of comparable data on program activities across the centers. Though 

TAA Centers have begun to track expenses by specific program 

activities—such as outreach, petition development, and business 

 

17The conference report required EDA to report on the number and location of firms 

assisted between fiscal years 2009 and 2011, the results of this investment, and the value 

each TAA Center added to the process.

18EDA found the petition and business recovery plan data collected in 2007 to be 

unreliable for reporting purposes because EDA’s database systems were created between 

2007 and 2008 and these data were entered into the system without sufficient oversight. 

However, we found EDA’s data on certifications and business recovery plan approvals for 

fiscal years 2008 to 2011 to be sufficiently reliable for reporting purposes.
 

Page 21 GAO-12-930 Trade Adjustment Assistance

recovery plan development and implementation—EDA has not 

clarified how the centers are to record these activities, according to 

EDA officials. As a result, Commerce’s Office of Inspector General 

reported that TAA Centers do not appear to be consistent in how each 

records and allocates costs among program activities.19

EDA officials noted that they had been working toward establishing a 

centralized database, accessible online, in which TAA Centers and EDA 

could enter and verify program information. According to officials, this 

effort is currently on hold pending Commerce’s response to guidance 

from the Office of Management and Budget (OMB) on the establishment 

of shared information technology services for federal agencies.

Many of the 

centers conduct customer satisfaction surveys, but each has its own 

set of questions and method of administering the survey. Without 

consistent information, EDA cannot monitor activities across TAA 

Centers or conduct a comparative program analysis.

20 Further, 

EDA headquarters experienced a computer virus during our review, which 

demonstrated the value of the centers’ systems for obtaining and 

reporting historical data.21 However, without centralized comprehensive 

and accurate data on program operations, EDA is hindered in its ability to 

effectively evaluate the program, such as by determining the effects of 

program assistance on firms.

 

19Department of Commerce, Office of Inspector General, Letters to Congress Regarding 

Review of Administrative Costs of Trade Adjustment Assistance Centers (Washington, 

D.C.: May 11, 2012). 

20Issued in May 2012, OMB’s Federal Information Technology Shared Services Strategy

provides federal agencies with policy guidance on the range of information technology 

services. The strategy requires agencies to use a shared approach to information 

technology services delivery. 

21In January 2012, EDA’s computer network experienced a computer virus attack. EDA 

disabled its computer network, including its e-mail and Internet access, to investigate the 

origin and nature of the attack. As a result, according to EDA officials, program data that 

EDA had previously collected were no longer available, because the data had been 

corrupted and the agency had removed its computer equipment to avoid transmitting the 

virus. 
 

Page 22 GAO-12-930 Trade Adjustment Assistance

Given the weaknesses we found in EDA’s performance measures and 

data collection, and because few other studies have examined the 

effectiveness of the program, we undertook further analysis to determine 

the impact of the TAA for Firms program.22 We found that participation in 

the program was associated with increased sales, although other factors, 

such as a firm having multiple plants, had a stronger effect on 

performance. We used a regression analysis to determine the sales 

performance of firms that participated in the TAA for Firms program from 

1998 through 2011, both before and after program participation, while 

controlling for other variables, such as the size of the firms and conditions 

in the economy.23

We collected data from the TAA Centers on firms’ sales and employment 

2 years prior to having a business recovery plan approved and 2 to 3 

years after, along with industry information.

By comparing firm sales before and after participation 

in the program, rather than comparing firms in the program with firms that 

did not receive assistance, we were able to examine whether participation 

in the TAA for Firms program was associated with positive outcomes for 

firms that actually received assistance under the program.

24 Our data included about 570 

firms in more than 250 5- and 6-digit North American Industry 

Classification System (NAICS) industries25 that had experienced a 

decrease in either sales or employment owing to import penetration.26

 

22A 1998 Urban Institute study commissioned by EDA found statistically significant 

improvements in sales, employment, and survivability for firms receiving Trade Adjustment 

Assistance compared with firms that were certified as eligible but did not receive 

implementation assistance. We reviewed the TAA for Firms program in 2000 and 

recommended that Commerce establish more effective program measures and use the 

new measures as criteria to evaluate the program’s effectiveness. See GAO-01-12. 

23We conducted the same analysis using employment as the dependent variable, but the 

TAA for Firms policy variable, as well as a number of firm, market, and macroeconomic 

control variables were not significant.

24The 11 TAA Centers provided data on firm sales, employment, and productivity, as well 

as other firm-specific data on items such as age, industry codes, and qualitative data. 

These firms were mostly in manufacturing industries. Please see appendix III for more 

information about the population of firms in our study.

25NAICS is a two- through six-digit hierarchical classification system, offering five levels of 

detail. Each digit in the code is part of a series of progressively narrower categories, and 

the more digits in the code signify greater classification detail. 

26Import penetration is defined as the ratio of imports to apparent domestic consumption, 

which shows the share of the U.S. market for the particular product served by imports. 

Apparent domestic consumption is derived by subtracting net exports (exports minus 

imports) from U.S. industry sales or shipments.

Our Analysis Shows 

Participation in the TAA 

for Firms Program Is 

Statistically Associated 

with Increases in Firm 

Sales and Productivity
 

Page 23 GAO-12-930 Trade Adjustment Assistance

About 85 percent of the firms in our analysis were small to medium sized. 

About one-third had fewer than 25 employees, and about two-thirds had 

fewer than 50 employees; only about 5 percent had more than 300 

employees. We also created overall industry and macroeconomic 

variables using Bureau of Labor Statistics and Census data, to isolate the 

effect of the program on firm sales while accounting for other factors in 

the general economy. We found that some firm- and market-related 

factors had a stronger and more significant effect on firm sales than did 

participation in the TAA for Firms program, such as whether the firm was 

a multiplant firm, and whether it was a publicly or privately held firm. With 

regard to the effect of program participation on sales, we determined the 

following:

• There is a small positive and statistically significant relationship 

between program participation and sales. Overall, we estimate that 

the effect of participation in the program was an increase in firm sales, 

ranging from 5 to 6 percent on average, if all other factors are held 

constant. This translated into an average increase of about $280,000 

to $350,000. The effect was greater for the firms with 300 or fewer 

employees that accounted for 95 percent of the firms in our sample. 

Using productivity (firm sales divided by employment) as one outcome 

variable, we also found that the effect of the program on productivity 

was about a 4 percent increase.

• As imports rose, sales declined for TAA for Firms clients. Our 

analysis shows that import penetration was highly statistically 

significant and most likely had a very negative effect on firm sales. 

According to our estimates, for every 1 percentage point increase in 

the industry import penetration ratio, sales of firms included in our 

analysis decreased by about 16 percent on average. Our analysis 

also shows that import penetration increased from an average of 34 

percent in 2000 to 39 percent in 2011 for industries associated with 

the firms in our study.

• TAA for Firms participation combined with market growth increased 

firm performance. We found a statistically significant and positive 

effect of industry market growth on firm sales after firms participated 
 

Page 24 GAO-12-930 Trade Adjustment Assistance

in the program.27 Specifically, for firms participating in the program, 

the percentage change in firm sales increased as market growth 

increased. For firms in relatively high-growth industries, such as 

certain types of metal manufacturing, plastic pipe manufacturing, and 

flooring industries, the combination of participation in the program and 

industry growth affected sales more positively, with such firms 

experiencing a 6 to 10 percent increase in sales. This result suggests 

that firms that participated in the TAA for Firms program during the 

1998 through 2011 period were better able to take advantage of 

growth in their markets or to translate overall market growth into firm 

sales, compared to before participating in the program. For lowgrowth markets, the effect was not as positive. Specifically, firms 

selling products in the lowest-growth (or negative-growth) markets—

the bottom percentile of our sample’s industry growth ranges—still 

experienced declines in sales ranging from -0.5 percent to -2.8 

percent. Since our analysis captured marginal effects, this may simply 

mean that the negative factors weighing on the firm outweigh the 

positives, including the effects of program participation.

 

27For market growth, we used yearly value of shipments data from the Census Annual 

Survey of Manufacturers for 1997 through 2010. For 2011, we estimated a projected value 

of shipments. We then estimated market growth rates for each industry (as determined by 

the six-digit North American Industry Classification System) associated with each firm by 

taking the natural log differences of the value of shipments divided by the change in year. 

Log growth rates are often used in economic modeling and empirical analyses.
 

Page 25 GAO-12-930 Trade Adjustment Assistance

Our survey of TAA for Firms participants also showed that the program 

had a positive effect. We conducted a survey of 163 firms that had a 

recovery plan approved in fiscal year 2009 to obtain their views about 

their experience with the program; we received responses from 117 of the 

163 firms, with a final response rate of 72 percent.28 The survey included 

questions about the TAA Center, the consultants who carried out the 

projects included in the business recovery plans, and the outcomes of the 

firm’s participation in the program.29

More than 90 percent of responding firms reported that they were either 

very or generally satisfied with the services they received from the TAA 

Center and the consultants who performed work for them (see fig. 5). 

Over 80 percent reported that the program helped them to identify 

projects and business process improvements, and 62 percent said that 

the program helped them to identify management weaknesses.

 

28We conducted an analysis of our survey results to identify potential sources of 

nonresponse bias by comparing respondents with nonrespondents on three key 

characteristics: total sales, number of employees, and the total amount of technical 

assistance approved. Our analysis did not find any large differences between respondents 

and nonrespondents for these three characteristics, and we determined that the survey 

results for the 117 respondents were sufficiently reliable to present in our report.

29GAO-12-935SP. 

TAA for Firms Clients 

Reported Satisfaction with 

Program and Its Outcomes
 

Page 26 GAO-12-930 Trade Adjustment Assistance

Figure 5: TAA for Firms Program Clients Expressed Satisfaction with Program and Results

Note: The difference between the cumulative percentage and 100 percent represents the following 

responses: “didn’t help,” “as satisfied as dissatisfied,” “generally dissatisfied,” “very dissatisfied,” 

“don’t know,” and “no response/not applicable.” 

a

Because of rounding, the percentages for export sales sum to a cumulative percentage of 34. 
 

Page 27 GAO-12-930 Trade Adjustment Assistance

In terms of outcomes, survey results indicate that responding firms 

believed the program was particularly helpful in improving marketing and 

sales (84 percent); helping them to stay in business (82 percent); helping 

to improve profitability (73 percent); helping them to retain employees (71 

percent); and helping them to hire new employees (57 percent). In 

narrative responses to our survey’s open-ended questions, 22 firm 

representatives said that the program helped their business to grow or 

improve. In addition, 30 respondents wrote positive comments about the 

TAA Centers’ attentiveness to their needs and the ease of working with 

the centers.

Only 34 percent of respondents wrote that the program helped their firm 

with export sales, although we heard in interviews with staff at several 

TAA Centers that they encourage small firms to increase exports. One 

survey respondent noted, “TAA Centers should undertake a program 

which would encourage small businesses to export. In my experience 

most small businesses do not export because they believe (incorrectly) 

that exporting is difficult.” Our survey respondents also suggested that the 

program could be improved by increasing the availability of funding, and 

allowing funds to be used for capital improvements. (For the complete 

results of our survey, please see GAO’s e-supplement, GAO-12-935SP.)

During the course of our work, representatives of firms and the TAA 

Centers identified the following specific ways that the program had 

helped firms.

• In California, a metal parts manufacturer was certified in 2007 

because of increased competition from Taiwan and China. The firm 

faced a 15 percent decline in employment over a 2-year period before 

certification. The TAA Center helped improve the firm’s manufacturing 

technology, enabling it to produce more high-end products, increase 

production efficiency, and lower costs. The Center also helped the 

firm to develop a marketing strategy and website upgrade to improve 

the firm’s name recognition. This assistance helped the firm increase 

its sales by about 8 percent, and productivity has more than doubled. 

Over the past 2 years, the firm reported that it has hired two additional 

employees.

• In North Carolina, a TAA Center assisted a manufacturer of sheet metal 

roofs and artisan works with financial consulting and a website 

upgrade. The company reportedly hired an additional three employees 

since it began working with the TAA Center and was able to employ 
 

Page 28 GAO-12-930 Trade Adjustment Assistance

more crews than it could previously. The owner said that his company 

might have had to lay off half its staff without the TAA Center’s help.

• In New York, a TAA Center helped a teak furniture manufacturer that 

sold its products through catalogues. The firm was impacted by 

competition from imports. The TAA Center encouraged the firm to 

rebrand itself in order to penetrate higher-end markets through a 

higher-quality catalogue and targeted advertising. As a result, the firm 

reportedly doubled sales and hired 16 new staff.

• In Massachusetts, a TAA Center helped an environmental 

management firm that faced growing competition from international 

trade. The TAA Center provided $10,000 for an improved website, 

which, according to the president of the company, resulted in a 10 to 

15 percent increase in sales in the first year.

EDA allocated funding to the 11 TAA Centers for cooperative agreement 

years 2008 to 201130 using a funding allocation formula that comprises a 

set of weighted factors; however, the formula does not take into account 

the potential number of firms in need of the program and differences in 

costs across the centers. According to beneficiary equity—a key standard 

for designing and evaluating funding formulas—funds should be 

distributed to regions according to the needs of their respective 

populations and should take into account the costs of providing program 

services, so that each service area can provide the same level of services 

to firms in need.31 However, TAA Centers varied considerably in their 

costs and use of the allocation they received. Though EDA deobligates 

and reallocates any unspent funds, it uses its allocation funding formula 

to do so, thus perpetuating the deficiency of failing to consider variable 

needs and costs in allocating its funds.

 

30Cooperative agreement years run from July 1 to June 30.

31See GAO-09-798. 

EDA’s Allocation of 

Program Funds Falls 

Short of Meeting Key 

Standard for Funding 

Formulas
 

Page 29 GAO-12-930 Trade Adjustment Assistance

The TAA for Firms authorizing legislation does not specify how EDA 

should allocate funding to the TAA Centers. In September 2003, EDA 

developed, in consultation with the centers, a funding allocation formula 

that it uses to allocate grant funds to each center. EDA intended that the 

funding allocation formula would develop consistency in the yearly 

allocation process and provide TAA Centers with sufficient funds to 

operate a productive program. EDA recognized that such consistency in 

funding allocations was necessary, in part because of the complexity of 

the program and the provision of the centers’ professional business 

advice to assist in the firms’ recovery planning and projects. EDA’s 

funding formula divides two-thirds of allocated funding equally among the 

11 centers according to base funding and two fixed factors:

• Geographic size: The TAA Center’s service region in square miles

• Number of firms: The service region’s share of the nation’s firms in the 

agricultural, mining, and manufacturing sectors

The funding formula divides the remaining one-third of allocated funding 

among the TAA Centers according to three variable factors:

• Approved business recovery plans: The center’s share of the total 

number of business recovery plans approved by EDA within the past 

2 fiscal years

• Employees in approved recovery plans: The center’s share of the total 

number of employees in the business recovery plans approved in the 

last 2 fiscal years

• Firms achieving expected results: The center’s share of the total 

number of firms that reported achieving anticipated outcomes from 

actions the firms took as a result of the program assistance they 

received during the past fiscal year32

Once it had determined the funding formula factors and measures for 

each, EDA weighted the factors to determine how it would distribute 

annual funding to the 11 TAA Centers. The pie chart in figure 6 shows 

 

32This factor is measured by the percentage of a TAA Center’s clients who reported 

satisfaction with the assistance received, and assistance being demonstrated by the 

center’s payment to a third-party consultant helping the firm implement a project.

EDA Uses Funding 

Formula to Allocate 

Program Funds to TAA 

Centers
 

Page 30 GAO-12-930 Trade Adjustment Assistance

how the funding formula weighs each of the different factors. The bar 

chart in figure 6 shows the resulting allocation to each center based on 

each of the factors for cooperative agreement year 2011. For a 

discussion of the data used to produce the allocation and of the resulting 

allocation, see appendix IV.

The TAA for Firms funding formula places an emphasis on an equal 

distribution of program funding across the centers, as it allocates about 

two-thirds of program funding using base funding and relatively fixed 

factors (see fig. 6). As a result, TAA Centers’ share of total program 

funding has remained relatively equal and constant over cooperative 

agreement years. For example, during the cooperative agreement years 

2008 to 2010, each center’s portion of total funding ranged from 7.2 

percent to 10.2 percent. Between the 3-year cooperative agreement 

period of 2008 to 2010 and the 1-year cooperative agreement period of 

2011, the change in TAA Centers’ share of total program funding ranged 

from 0.2 percent to 1.6 percent.
 

Page 31 GAO-12-930 Trade Adjustment Assistance

Figure 6: TAA for Firms Funding Formula Allocates Funding to TAA Centers Using Fixed and Variable Factors

Note: TAA Centers ordered according to size of funding allocation for cooperative agreement year 

2011. 

EDA included the formula’s three remaining factors to account for 

differences in TAA Centers’ performance.

• EDA included each center’s share of the total number of firms that 

reported achieving anticipated outcomes from actions they took as a 

result of the assistance they received during the past fiscal year and 

the total number of business recovery plans approved within the past 

2 fiscal years. 
 

Page 32 GAO-12-930 Trade Adjustment Assistance

• To offset the potential of those factors to motivate centers to increase 

their individual funding levels by targeting a large number of very 

small firms, EDA also included as a final factor each center’s share of 

the total number of employees in the business recovery plans 

approved in the past 2 fiscal years. 

EDA’s TAA for Firms funding formula does not include a direct measure 

of the number of firms potentially in need of the program based on the 

program’s key objective of providing technical assistance to firms that 

have lost sales and employment because of increased competition from 

imports. As a result, the formula falls short of a key criterion that we 

previously established for the evaluation of allocation formula 

approaches. Under the beneficiary equity standard, a funding allocation 

formula should include a factor that distributes funding to each service 

area according to the respective target population needing assistance so 

that each service area can provide the same level of services to the 

population in need. To meet this equity standard, the formula should use 

reliable and appropriate measures of need in each state or region.33

Consequently, TAA Centers that may have a greater number of 

distressed firms because of import competition potentially receive similar 

amounts of funding as centers serving a much smaller number of tradeimpacted firms. For example, there are wide differences in the numbers of 

certified petitions and approved business recovery plans among the 

centers. In addition, staff at some centers stated that they undertake 

outreach efforts to identify firms. Staff at other centers stated that they 

identify client firms without conducting much outreach, and still others 

have so many current clients that they do not seek new ones. However, 

the program lacks information to determine whether it is achieving equity 

for trade-impacted firms across TAA Centers’ service regions.

EDA’s allocation of funding also does not take into account variations in 

TAA Centers’ costs of providing firms assistance. To meet the beneficiary 

equity standard, a formula should account for differences in the cost of 

providing services in each region, so that each firm may receive the same 

level of assistance.34

 

33See 

The centers provide EDA with information on 

GAO-09-798. 

34See GAO-09-798. 

Funding Allocation 

Formula Does Not Take 

into Account Differences 

in Program Need

Funding Allocation 

Formula Does Not Take 

into Account TAA Centers’ 

Varying Costs
 

Page 33 GAO-12-930 Trade Adjustment Assistance

programmatic costs by cost categories.35 However, we found that TAA 

Centers’ direct and indirect operating costs varied considerably during the 

cooperative agreement years 2008 to 2010 (see fig. 7).36 For example, 

during that time period, centers’ costs for personnel salaries and fringe 

benefits ranged from approximately $877,000 to $2.1 million,37

 

35TAA Centers’ programmatic costs include personnel salaries and fringe benefits; travel 

costs, equipment, and supply costs; and indirect and other costs not allocated to specific 

projects, such as rent and utilities, as well as the federal share of funding for technical 

assistance provided to firms by third-party consultants. 

and 

centers’ costs for travel and for equipment and supplies ranged from 

$52,000 to $260,000.

36In May 2012, the Department of Commerce Office of Inspector General (OIG) reported 

that EDA does not require the TAA Centers to provide a complete breakdown of all 

expenses by activity, and therefore EDA does not know the true total cost of centers’ 

program activities, including administrative expenses. However, according to cost data 

that the Commerce OIG obtained for cooperative agreement years 2007 to 2010 from the 

New England, New York State, and Western Centers, these centers spent, on average, 82 

percent of total program costs on activities to assist firms, with the remaining 18 percent 

spent on administrative activities. The Commerce OIG did not find the administrative costs 

of these centers to be unreasonable. See Department of Commerce, Office of Inspector 

General, Letters to Congress Regarding Review of Administrative Costs of Trade 

Adjustment Assistance Centers, (Washington, D.C.: May 11, 2012). 

37EDA reported for fiscal years 2009 to 2011 (Oct. 1, 2008, to Sept. 30, 2011) each TAA 

Center’s personnel costs spent on preparing petitions and developing and implementing 

business recovery plans cited in a conference report on Commerce appropriations for 

fiscal year 2012. According to EDA’s estimates, in fiscal years 2009 through 2011, the 

centers spent an average of approximately $891,000 to assist firms in preparing petitions 

and developing and implementing business recovery plans. These costs ranged from 

$318,000 to $1.6 million across the centers.
 

Page 34 GAO-12-930 Trade Adjustment Assistance

Figure 7: TAA Centers’ Costs Varied during Cooperative Agreement Years 2008 through 2010

Note: TAA Centers are shown in order of consultant costs. Consultant costs include funds to thirdparty consultants to provide technical assistance to eligible firms to implement projects in approved 

business recovery plans. Personnel and fringe costs include wages and salaries paid to employees of 

the centers and the cost of benefits paid to employees. Indirect costs include facilities and 

administrative costs and other costs that do not fit into any other categories, including rent and 

utilities, and other administrative costs. Equipment, supplies, and travel include costs of purchasing 

and leasing equipment; materials, such as paper, computers, and any materials needed to conduct 

training; and travel costs that are necessary for center personnel to carry out and manage program 

activities. 
 

Page 35 GAO-12-930 Trade Adjustment Assistance

In addition, indirect cost rates are set according to OMB guidelines and 

vary depending on whether the TAA Center is affiliated with a university 

or an independent nonprofit organization.

• For university-affiliated centers, indirect costs tend to be higher than 

those of nonprofit-affiliated centers. The indirect costs for the 

university-affiliated centers ranged from 12.9 percent of total costs to 

30.3 percent of total awarded funds, or about $473,000 to $958,000, 

for cooperative agreement years 2008 through 2010.

• For nonprofit-affiliated centers, the indirect costs ranged from 5.5 

percent to 14.1 percent of total awarded funds, or about $251,000 to 

$662,000, for cooperative agreement years 2008 through 2010 (see 

fig. 8).

Figure 8: Proportion of Indirect Costs Tends to Be Higher for University-Affiliated TAA Centers, Cooperative Agreement Years 

2008 through 2010

Note: TAA Centers are shown in order of the proportion of indirect costs to total awarded funds for 

cooperative agreement years 2008 through 2010. Indirect costs, referred to as facilities and 

administrative costs for university-affiliated centers, include space rent, utilities, postage, and other 

administrative costs.
 

Page 36 GAO-12-930 Trade Adjustment Assistance

The direct and indirect costs of operating the centers to provide 

assistance to firms affect the amount of program funding that centers 

have available for direct assistance to firms. During cooperative 

agreement years 2008 through 2010, the share of program funding for 

third-party consultants implementing projects in firms’ approved business 

recovery plans varied widely across the centers, ranging from 21.2 

percent of total expenditures or $670,000 for the Western Center to 73.7 

percent or $3.4 million for the New England Center.

In part because of the variation in the direct and indirect costs of 

operating the centers to provide assistance to firms, marked differences 

exist in the centers’ backlogs of approved but unfunded assistance to 

firms. The TAA for Firms program’s total backlog of unfunded assistance 

approved from cooperative agreement year 2008 to April 2012 exceeds 

$24 million for a total of 796 firms, but this backlog ranged from $1 million 

for 27 firms assisted by the Western Center to $3.9 million for 133 firms 

assisted by the New England Center (see table 3).

Table 3: TAA Centers’ Backlogs of Approved, Unfunded Assistance from 

Cooperative Agreement Year 2008 to April 2012 

TAA Center

Total unfunded assistance in 

firms’ approved business 

recovery plans Number of firms

New England $3,897,125 133

Midwest $3,499,668 112

Southwest $2,712,390 69

Great Lakes $2,711,120 67

MidAtlantic $2,641,687 109

Mid-America $1,746,593 53

Southeastern $1,725,487 59

Rocky Mountain $1,722,737 59

Northwest $1,613,857 62

New York State $1,193,907 46

Western $1,058,218 27

Total $24,522,787 796

Source: GAO presentation of EDA data.

Note: TAA Centers shown in order of unfunded assistance.

EDA’s approach to allocating funding resulted in differences in the 

centers’ use of the allocations they received. Five centers spent their 

entire funding allocation by the conclusion of the 3-year cooperative 
 

Page 37 GAO-12-930 Trade Adjustment Assistance

agreement period 2008 through 2010, while six centers did not. The total 

proportion of unspent funds among the six centers ranged from 1.3 

percent to 9.8 percent. In addition, some centers that spent their full 

allocation had a backlog of unfunded assistance for projects approved 

since fiscal year 2008, totaling more than $3.4 million as of April 2012. At 

the same time, some centers that had unspent funds had smaller 

backlogs totaling less than $1.2 million.38

To meet the beneficiary equity standard, a funding allocation formula 

should use reliable and appropriate measures of the cost of providing 

services in each region. Because EDA’s funding formula does not take 

into account variations in TAA Centers’ costs of providing assistance to 

firms, EDA cannot ensure that trade-impacted firms in different service 

areas receive the same opportunities for assistance through the centers. 

The available evidence we analyzed suggests wide variation in the 

number of firms that the centers are able to assist and the amount of 

funding that they may provide to implement approved business recovery 

plans, raising questions about whether limited program funding is being 

used effectively.

Although EDA deobligates any 

unspent funds and reallocates these funds for the following cooperative 

agreement period, it uses its allocation funding formula to do so, thus 

perpetuating the deficiency of not including centers’ variable needs and 

costs in allocating funds among them.

EDA officials have begun discussions with TAA Center staff to revise the 

program’s funding allocation formula. In February 2012, EDA convened a 

conference of center directors that included a discussion of potential 

changes to the formula. According to EDA officials, these discussions are 

still in the early stages and there have been no specific proposals of the 

factors and weights that might be included in a revised formula. The 

director of the TAA for Firms program stated that EDA’s current effort to 

improve performance measures for all of its programs may identify 

 

38EDA officials stated that they recognize that TAA Centers vary in the portion of allocated 

funding they use and in their backlogs of approved but unfunded assistance; however, 

EDA has not established specific guidance on how centers should use their allocated 

funds and the amount of unfunded backlog Centers should carry. According to these 

officials, EDA does not distribute centers’ unspent funds to other centers that have spent 

their full allocation and have greater amounts of approved but unfunded assistance, 

because of concerns about creating incentives for centers to increase their funding 

backlogs.

EDA Is Undertaking 

Efforts to Revise Its 

Funding Allocation 

Formula
 

Page 38 GAO-12-930 Trade Adjustment Assistance

measures that could be used in a revised funding formula. Although EDA 

officials stated that they recognize the importance of including a factor in 

the formula that would account for potential program need, they have not 

identified data that would enable them to measure and account for 

differences in the numbers of trade-impacted firms across the centers’ 

service regions. The agency is considering using Commerce’s Census 

Bureau databases to explore the possible use of available data in a 

revised funding allocation formula. It is unlikely that any new formula 

would be finalized before July 2014, according to EDA officials.

Directors at two TAA Centers we visited stated that they have undertaken 

efforts to reduce their centers’ operational costs in an effort to provide 

additional funding to implement firms’ projects. One center director noted 

that the center’s management initiated cost-reduction efforts, even though 

EDA’s funding formula does not provide incentives to reduce such costs. 

Several center directors further noted that, since the centers’ operational 

costs are relatively fixed, any reduction in costs results in an increased 

amount and proportion of funding to assist firms. The data we analyzed 

support this inference. For example, although funding for the program 

remained at $15.8 million in fiscal years 2009 and 2010, the centers 

helped 114 more firms petition for certification and gained EDA approval 

for 93 more business recovery plans in fiscal year 2010 than in fiscal year 

2009. In addition, for cooperative agreement years 2009 and 2010, the 

centers increased the total portion of awarded funding for consultants by 

about 12 percent while reducing costs in other categories.

In revising EDA’s funding allocation formula, the agency and the TAA 

Centers will likely need to consider how to strike a balance among several 

key factors—need, costs of providing services, and available resources. 

Revising EDA’s funding formula presents challenges and risks, which will 

require flexibility in implementing any allocation under a new formula. For

example, center directors stated that a revised formula should be 

carefully designed to avoid unintended incentives and should encourage 

centers to reduce indirect costs and maximize the funding available to 

assist firms. In addition, because revising the formula will likely result in 

decreased funding for some centers and increased funding for others, 

any change to the funding formula should include a transition period so 

that funding recipients have time to adjust, as our prior work has shown.39

 

39See GAO-09-798. 
 

Page 39 GAO-12-930 Trade Adjustment Assistance

An abrupt reduction in funding levels could disrupt a center’s ability to 

provide assistance to firms. Flexibility in transitioning to a new funding 

formula would allow centers greater predictability and stability to develop 

long-range plans and meet their current commitments.

The United States has arguably gained much from its engagement in the 

global economy and its active pursuit of trade liberalization. Lowering 

trade barriers such as tariffs offers benefits to consumers and creates 

new opportunities for American exporters abroad. Yet these long-term, 

widely disbursed gains are also accompanied by adjustment costs borne 

directly and in a more concentrated manner by import-competing firms 

and their workers. Over the past decade, the pace of trade liberalization 

has been vigorous, as has been the growth in U.S. imports. Although 

funding for Commerce’s TAA for Firms program, at less than $16 million, 

is small relative to the $1.3 trillion rise in imports over the past decade, 

our economic analysis and survey results show that the program has 

delivered positive results for participating manufacturing and services 

firms. We found that these firms receive individual attention from TAA 

Center professionals located in their regions, practical help in developing 

business recovery plans, and federal matching funds to pursue projects 

designed to address competitive weaknesses and capitalize on strengths. 

Many participating firms that were negatively impacted by trade have 

recorded gains in sales and productivity since starting the program. Our 

analysis of more than 500 firms’ financial data and other firm and 

economic factors shows that this sales growth is positively associated with 

participation in the TAA for Firms program.

The changes to the TAA for Firms program that Congress enacted in the 

TGAAA in 2009 gave EDA and TAA Center officials more flexibility in 

certifying firms, strengthened professional management of the program, 

and improved transparency regarding the program’s performance. 

However, enhanced accountability can be accomplished only through 

better measures of how the program is helping firms adjust to import 

competition. EDA collects performance data, but few of its performance 

measures are outcome oriented. EDA also has several interrelated 

weaknesses in its collection of data that make needed reporting 

burdensome and unreliable at times. Better and more readily retrievable 

data would give EDA and Congress a more comprehensive and complete 

picture of program activities and enable more meaningful and ongoing 

analysis of impact. Given its small budget relative to the demonstrated 

need for trade adjustment assistance—as suggested by the substantial 

backlog of approved but unfunded projects—EDA can do more to ensure 

Conclusions
 

Page 40 GAO-12-930 Trade Adjustment Assistance

that its allocations reflect firms’ and regions’ varied needs for assistance 

and TAA Centers’ varied costs in providing this assistance. EDA can also 

encourage more efficient program administration by making the cost of 

services a criterion in its funding formula and by incentivizing TAA 

Centers’ cost-containment efforts, so that more funds are available to 

serve firms. EDA has recognized many of these weaknesses and has 

made initial efforts to address them. Given the current pursuit of further 

trade liberalization, following through with these improvements to the TAA 

for Firms program is essential to ensure that the program uses its budget 

in the most efficient manner possible.

We recommend that the Secretary of Commerce take the following three 

actions:

1. To ensure that the performance measures used to evaluate the TAA 

for Firms program demonstrate program results and to help ensure 

that EDA can comprehensively evaluate the effectiveness of the 

program,

• broaden the program’s evaluation approach, for instance, by 

developing additional quantifiable outcome-oriented performance 

goals and measures for key program areas and conducting further 

analysis of the data to isolate the impact of the TAA for Firms 

program from other influences, such as economic trends.

2. To improve the data available to manage and evaluate the TAA for 

Firms program,

• develop a data system to consistently collect, maintain, and 

analyze sufficiently reliable and up-to-date data on program 

operations and participant firms.

3. To ensure that EDA’s allocation of funding to TAA Centers reflects 

varied program needs and costs,

• revise the program’s funding formula by reevaluating the factors 

and weights it uses to allocate funding under its cooperative 

agreements, and include measures of need, such as the number 

of import-impacted firms in each center’s service region and the 

center’s costs in providing assistance to firms.

Recommendations for 

Executive Action
 

Page 41 GAO-12-930 Trade Adjustment Assistance

We provided a draft of this report to the Department of Commerce for 

comment. We received written comments from Commerce, which are 

reprinted in appendix V. Commerce concurred with our findings and 

recommendations and provided additional information and observations 

on implementing our recommendations. For example, Commerce stated 

that EDA intends to focus on developing improved performance 

measurement and accountability. In addition, Commerce noted that EDA 

intends to take steps to improve its data collection and examine the 

funding allocation formula used to distribute program funds to the TAA 

Centers in collaboration with the centers and Congressional stakeholders. 

Commerce expects to complete these efforts by 2014.

We also received technical comments from Commerce, which we 

incorporated as appropriate.

We are sending copies of this report to the appropriate congressional 

committees, the Department of Commerce, and other interested parties. 

In addition, the report is available at no charge on the GAO website at 

http://www.gao.gov. 

If you or your staff have any questions about this report, please contact 

me at (202) 512-4101 or gomezj@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. GAO staff who made key contributions to this report 

are listed in appendix VI.

J. Alfredo Gomez

Acting Director

International Affairs and Trade

Agency Comments
Appendix I: Scope and Methodology

Page 42 GAO-12-930 Trade Adjustment Assistance

The Trade and Globalization Adjustment Assistance Act of 2009 

(TGAAA), part of the American Recovery and Reinvestment Act of 2009, 

mandated that we report on the operation and effectiveness of the Trade 

Adjustment Assistance (TAA) for Firms program. We examined (1) the 

results of the legislative changes on program operations and participation, 

(2) the performance measures and data that EDA uses to evaluate the 

program and what these tell us about the program’s effectiveness, and (3) 

how program funding is allocated and spent.

To determine the results of the legislative changes on the program’s 

operations, we reviewed relevant program legislation and regulations as 

well as agency documentation and data on the number and type of firms 

participating in the TAA for Firms program. We reviewed program 

regulations and agency guidance outlining the operational and 

administrative changes to implement the amendments under the TGAAA. 

We collected from the Department of Commerce’s (Commerce) Economic 

Development Administration (EDA) and the 11 TAA Centers’ data on 

certifications and approved adjustment plans from fiscal years 2008 to 

2011. We analyzed these data and the data reported in the TAA for Firms 

annual reports for fiscal years 2009 through 2011 to determine the types 

of services firms received and how the legislative changes impacted 

program participation.1

 

1

To assess the reliability of the TAA for Firms program data that EDA reports, we 

interviewed EDA officials who manage the data collection and reviewed documentation of 

the steps taken to collect the data, the quality checks performed, and other internal 

controls in place to ensure data reliability. In addition, we performed our own data 

reliability tests. We determined that the data are sufficiently reliable for the purposes of 

reporting trends in firm petitions, certifications, and business recovery plan approvals.

We assessed the reliability of the data by 

checking for accuracy and completeness. We determined that the data 

were sufficiently reliable for the purposes of reporting the number of 

submitted and approved petitions and approved business recovery plans. 

We interviewed EDA officials, including the TAA for Firms program 

Director, Chief Counsel, and certifying officials, to determine the effects of 

the legislative changes on the program. We also conducted a site visit or 

teleconference with each of the 11 TAA Centers, interviewing staff, 

representatives of participant firms, and consultants to understand 

procedures for identifying and assisting eligible trade-impacted firms and 

to obtain their opinions and observations on the legislative changes’ 

effects on the program.

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 43 GAO-12-930 Trade Adjustment Assistance

We conducted site visits to eight TAA Centers—in Ann Arbor, Michigan; 

Atlanta, Georgia; Blue Bell, Pennsylvania; Boulder, Colorado; Chicago, 

Illinois; Los Angeles, California; North Billerica, Massachusetts; and 

Seattle, Washington. We conducted teleconferences with the remaining 

three centers—in Binghamton, New York; Blue Springs, Missouri; and 

San Antonio, Texas. We selected our site visit locations to achieve 

geographic diversity and a mix of nonprofit and university-affiliated 

centers, as well as a range of industries, numbers of submitted and 

approved petitions, and numbers of business recovery plans. To 

determine how the TAA for Firms program relates to other economic 

development programs that assist manufacturers, including Commerce’s 

Manufacturing and Extension Partnership (MEP) program, we interviewed 

TAA Center staff, MEP consultants, and officials at Commerce 

headquarters. We also reviewed documentation of program objectives, 

eligibility requirements, and services provided.

We assessed EDA’s performance measures and data for the program. 

We analyzed the two performance measures reported for the TAA for 

Firms program in the agency’s performance and accountability reports as 

well as the 14 measures specified by TGAAA and included in the TAA for 

Firms annual reports. Using criteria from prior GAO work, we assessed 

the extent to which the program’s performance measures reflect the 

characteristics of effective performance measures.2 We reviewed other 

reports about the program: one conducted by the Urban Institute in 

November 19983 and our prior report on the program.4

 

2

GAO, Designing Evaluations: 2012 Revision, 

To examine how 

program data are collected and used to manage the program, we 

interviewed EDA officials and TAA Center staff and reviewed EDA and 

TAA Center program data and reports. We interviewed EDA officials 

responsible for collecting and reporting program data, as well as TAA 

Center staff, to determine the procedures for collecting, validating, and 

reporting data on program operations. We also reviewed data and 

documents, including quarterly and annual reports from EDA and the 

centers, to understand the types of program data collected and the 

purposes for which the data are used.

GAO-12-208G, (Washington, D.C.: 

Jan. 2012).

3

Urban Institute, Evaluation of Trade Adjustment Assistance Program, (Washington, D.C.: 

Nov. 1998). 

4

See GAO-01-12. 
Appendix I: Scope and Methodology

Page 44 GAO-12-930 Trade Adjustment Assistance

To estimate the impact that the TAA for Firms program assistance has 

had on firm performance, we collected data on a group of participant firms 

with business recovery plans approved in fiscal years 2009 through 2011 

and data on general economic indicators, and we conducted a regression 

analysis with these data to assess the effects of the assistance on this 

group of participating firms, controlling for firm, industry, and 

economywide factors. From each of the 11 TAA Centers, we obtained 

financial data on firms that had an approved business recovery plan and 

had completed at least one project in their approved recovery plan in 

fiscal years 2009, 2010, and 2011. We assessed the reliability of the data 

we received from the centers by testing the data for obvious errors and 

completeness. In addition, we interviewed and received written responses 

from staff at the centers who had knowledge of the data, to obtain 

information on the procedures for collecting and verifying the data 

reported. The centers drew their responses to our data collection 

instrument primarily from the petition and business recovery plan 

approval data they collect from firms. In doing so, they used the data that 

they had previously compiled for a conference report on Commerce 

appropriations for fiscal year 2012. This helped ensure the accuracy, 

completeness, and consistency of the data. We found the data sufficiently 

reliable for the purposes of our analysis. For our dependent variable or 

outcome variable, we used data on yearly firm sales during this period as 

a proxy for firm performance. We combined these data with data on 

industry-wide and firm-specific variables that determine performance, 

such as firm-specific financial data, growth rates, firm size, age, and other 

qualitative firm and industry indicators. To control for factors in the 

general economy, we incorporated macroeconomic variables in our 

analysis, including the Census Bureau’s regional unemployment rates 

and a yearly time trend. In addition, to estimate the effects of trade on firm 

performance, we calculated and incorporated an international trade 

variable—the import penetration ratio for each firm’s industry. Our 

regression model determined whether participation in the TAA for Firms 

program had a statistically significant effect on firm performance after the 

firm received assistance under the program. Because the data we 

collected did not include any information about firms that did not 

participate in the program, this analysis allows us to make inferences 

from the regression estimates only for the firms that participated in the 

program during this time period. We present more complete information 

about the data and methodology of the analysis in appendix III.

To report the views of certified firms on program operations and on the 

quality and impact of program services, we interviewed firm representatives 

and consultants during our site visits to TAA Centers. We also conducted a 
Appendix I: Scope and Methodology

Page 45 GAO-12-930 Trade Adjustment Assistance

survey of firms that had a business recovery plan approved by the Trade 

Adjustment Assistance for Firms program in fiscal year 2009. We selected 

this population to ensure that those surveyed had received assistance from 

one of the TAA Centers and had some experience with implementing a 

recovery plan. Our research at the beginning of our review indicated that it 

would be feasible to survey these firms within our time frame and achieve 

an acceptable response rate. We conducted formal pretests with 

representatives of three firms and considered comments from EDA officials 

to ensure that our questions were appropriate and could be understood by 

respondents. Our survey covered the following topics:how the firms learned 

of the program, the types of assistance the firms received from the TAA 

Centers, the level of the firms’ satisfaction with the assistance, and the 

impact of the assistance on the firms. We administered our survey between 

March 2012 and April 2012. We surveyed the 163 firms for which we 

obtained contact information, of the 171 firms that had a business recovery 

plan approved in fiscal year 2009. We received responses from 117 of the 

163 firms, with a final response rate of 72 percent. However, because we 

did not randomly select the firms we surveyed, the survey results do not 

permit us to draw conclusions about all firms participating in the TAA for 

Firms program. We conducted an analysis of our survey results to identify 

potential sources of nonresponse bias by comparing respondents to 

nonrespondents on three key characteristics: total sales, number of 

employees, and total amount of technical assistance approved. This 

analysis did not indicate any large differences between respondents and 

nonrespondents for these three characteristics, and we determined that the 

survey results for the 117 respondents were sufficiently reliable to present 

in our report. The survey and a more complete tabulation of the results can 

be viewed online at GAO-12-935SP. 

To examine the funding formula EDA uses to allocate program funds and 

to examine how funds were spent, we reviewed EDA’s 2003 spending 

plan, which defines the factors included in the formula as well as the data 

used to measure each of the factors. In addition, we analyzed EDA’s 

available spending plans covering cooperative agreement years 2009 

through 2011 to assess the measures used to allocate program funding to 

the TAA Centers during each of those cooperative agreement years. We 

used equity standards from social science research for evaluating and 

designing funding allocation formulas to assess the TAA for Firms 
Appendix I: Scope and Methodology

Page 46 GAO-12-930 Trade Adjustment Assistance

formula.5 To determine the amount of funding allocated to each of the 11 

centers, as well as the centers’ direct and indirect costs, we analyzed 

EDA’s budget data for cooperative agreement years 2008 through 2011. 

We also analyzed centers’ data on the amount of approved, unfunded 

assistance for cooperative agreement years from fiscal year 2008 to April 

2012, and the number of firms affected. We reviewed published work of 

the Commerce Office of Inspector General’s assessment of the 

administrative costs of the centers.6

We conducted this performance audit from July 2011 to September 2012 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe the 

evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

 

5

We outline these standards in our prior work. See GAO, Vocational Rehabilitation 

Funding Formula: Options for Improving Equity in State Grants and Considerations for 

Performance Incentives, GAO-09-798 (Washington, D.C.: Sept. 30, 2009); Great Lakes: 

EPA and States Have Made Progress In Implementing the BEACH Act, but Additional 

Actions Could Improve Public Health Protection, GAO-07-591 (Washington, D.C.: May 1, 

2007). 

6

Department of Commerce, Office of Inspector General, Letters to Congress Regarding 

Review of Administrative Costs of Trade Adjustment Assistance Centers (Washington, 

D.C.: May 11, 2012).
Appendix II: Trade Adjustment Assistance for 

Firms and Other Department of Commerce 

Programs

Page 47 GAO-12-930 Trade Adjustment Assistance

The MEP program, like the TAA for Firms program, is a Commerceadministered program aimed at helping manufacturers. The MEP 

program was established in 1988 and is administered by Commerce’s 

National Institute of Standards and Technology (NIST) to enhance 

productivity and technological performance and to strengthen the global 

competitiveness of small and medium-sized U.S. manufacturers, helping 

them create and retain jobs. Under this program, NIST has established 

relationships with 60 nonfederal organizations, called MEP centers, 

located throughout the United States and Puerto Rico. NIST enters into 

annual cooperative agreements with each of the 60 MEP centers, 

whereby NIST provides federal funding to the centers subject to the MEP 

centers’ providing matching funds from state and local entities and 

meeting performance measures. These centers provide services to small 

and medium-sized manufacturers to help them develop new customers, 

expand into new markets, and create new products. MEP centers focus 

on helping manufacturers in five key areas––technology acceleration, 

supplier development, sustainability, workforce, and continuous 

improvement.1 Specifically, MEP centers enter into contracts with firms to 

deliver technical assistance to improve their manufacturing processes 

and productivity, expand capacity, adopt new technologies, utilize best 

management practices, and accelerate company growth. Table 1 

provides a comparative overview of the TAA for Firms and MEP 

programs.

 

1

Examples of MEP-supported projects include management and staff training, policy and 

procedure development, new product development, and plant certifications.

Appendix II: Trade Adjustment Assistance for 

Firms and Other Department of Commerce 

Programs 

TAA for Firms and 

Manufacturing Extension 

Partnership Program
Appendix II: Trade Adjustment Assistance for 

Firms and Other Department of Commerce 

Programs

Page 48 GAO-12-930 Trade Adjustment Assistance

Table 4: Overview of TAA for Firms and MEP Programs

 TAA for Firms MEP 

Target population Small- and medium-sized firms in manufacturing, 

production, and service sectors; economically 

distressed and trade impacted.

Small- and medium-sized firms in manufacturing 

sector, including firms that want to grow and 

distinguish themselves in the marketplace.

Goals and objectives Help economically distressed U.S. businesses 

develop strategies to compete in the global 

economy. 

Help U.S. manufacturers increase profitability and 

retain employees while competing with imported 

products.

Enhance productivity and technological 

performance and strengthen the global 

competitiveness of small- and medium-sized 

U.S-based manufacturing firms.

Eligibility A firm must demonstrate trade impact on 

employment, sales, and production through a 

certification process.

All firms classified as a manufacturer under 

industry-specific codes; once those requirements 

are satisfied, the firm can be assisted 

immediately.

Mode of assistance and 

services 

Firms pay up to 25 percent of the cost of 

developing a business recovery plan.

Firms participate in cost-sharing for technical 

assistance. EDA may fund up to 75 percent of the 

total cost for proposals up to $30,000 or 50 

percent for proposals over $30,000 and up to 

$75,000.

Third-party consultants implement approved 

projects. Firm can only receive a total of $75,000 

in matched funding.

Firms receive assistance free of charge with a 

firm assessment and a project implementation 

plan.

Firms participate in cost-sharing for technical 

assistance. MEP typically provides 33 percent of 

the cost of the projects, while the state 

government, local partners, and the firms cover 

the remaining 67 percent, with the average 

proposal ranging from $30,000 to $50,000.

MEP staff implement approved projects, 

although third-party consultants may be used if 

necessary; firm can participate in program 

multiple times with no funding limit.

Source: GAO analysis of program documents and discussions with program officials.

As shown in table 4, trade-impacted firms can qualify for either program, 

although the eligibility requirements for each program differ. For example, 

the TAA for Firms program requires applicants to complete a certification 

process that demonstrates trade impact on the firm’s employment, sales, 

and production. In contrast, the MEP program does not require applicant 

firms to go through a certification process. Firms must only demonstrate 

they are a manufacturer under industry-specific codes, according to MEP 

officials. Officials from the TAA for Firms program said that in some 

instances, trade-impacted firms may choose to participate in the MEP 

program rather than the TAA for Firms program because they can receive 

faster assistance. In addition, officials confirmed that participant firms in 

the TAA for Firms program have subsequently participated in the MEP 

program for additional services, and vice versa. However, officials from 

both programs did not have data to determine the extent to which this has 

occurred.
Appendix II: Trade Adjustment Assistance for 

Firms and Other Department of Commerce 

Programs

Page 49 GAO-12-930 Trade Adjustment Assistance

Although trade-impacted firms can qualify for both programs, and some 

trade-impacted firms have received assistance from both programs, TAA 

for Firms and MEP program officials said that the programs are more 

complementary than duplicative in nature. For example, the programs 

collaborate at the state, regional, and national levels to provide services 

to manufacturing firms. At the state and regional levels, MEP consultants 

often bid on and win contracts to implement projects in the TAA 

participant firms’ business recovery plans, according to TAA Center and 

MEP staff. Staff from both programs also said that MEP consultants 

sometimes refer firms to the TAA for Firms program and that TAA for 

Firms officials sometimes refer firms to the MEP program. At the national 

level, EDA officials informally consult with MEP officials at NIST on best 

practices and opportunities for collaboration. For example, EDA staff said 

that they have spoken at MEP conferences to educate consultants about 

the TAA for Firms program.

In addition to administering the TAA for Firms program, EDA administers 

the Economic Adjustment Assistance (EAA) program through six regional 

offices. The EAA program’s purpose is to help economically distressed 

communities by supporting a wide range of construction and other 

assistance using flexible tools to address pressing economic recovery 

issues. TAA Center officials said they had little interaction with EAA 

officials or the EDA regional offices because the EAA program assists 

communities rather than firms.

TAA for Firms and 

Commerce’s Economic 

Adjustment Assistance 

Program
Appendix III: Economic Analysis of the Effect 

of Trade Adjustment Assistance Policy on Firm

Market Performance 

Page 50 GAO-12-930 Trade Adjustment Assistance

We examined the impact of the TAA for Firms program on participant 

firms’ performance and effectiveness using statistical analysis. For this 

analysis, we obtained a sample of financial data on firms from the 11 TAA 

Centers that had an approved business recovery plan and were certified 

from 1998 through 2010. We used regression analysis to assess whether 

there was a statistically significant relationship between firm performance 

and participation in the TAA for Firms program, controlling for other firmspecific, industry-specific, macroeconomic, and trade factors. Using firm 

sales and firm productivity as proxies for firm performance, we found a 

positive and statistically significant relationship between participation in 

the TAA for Firms program and the performance of the firms in our 

sample. Using different model specifications, we estimated that the firms 

participating in the TAA for Firms program experienced yearly increases 

in sales of 5 to 6 percent, all else held constant. Our results also suggest 

that participation in the TAA for Firms program was associated with 

increased firm productivity, measured by the ratio of yearly sales to 

employment, of about 4 percent per year, all else held constant.

Moreover, we observed higher performance when participating firms were 

in growing markets, which may suggest that participation allowed them to 

leverage the market expansion.

The aim of our analysis was to evaluate the policy impact of the TAA for 

Firms on firms participating in the program. Typically, we do not observe 

the counterfactual state—how firms that participated would have 

performed had they not participated—and we do not observe outcomes 

associated with a control group of firms that did not participate. A control 

group would require identifying a group of firms that is as much like the 

firms in our sample as possible but did not participate in the program. 

However, selecting a group that was affected by import penetration 

similarly to the actual participant group would be quite difficult. Moreover, 

using a control group has weaknesses. For example, macroeconomic and 

other trends could affect the two sets of firms differently.

Given these data challenges, we measured the average effect of TAA for 

Firms participation on the firms in our sample. We made inferences from 

our regression estimates only for this sample. While this approach 

allowed us to focus on the firms that actually participated, it cannot 

determine whether these firms might have improved in the absence of the 

program. It is possible that participating firms have some unobservable or 

unmeasured characteristic—such as superior management—relative to 

firms that did not participate. In such circumstances, participation in the 

program might be incidental to improved performance.

Appendix III: Economic Analysis of the 

Effect of Trade Adjustment Assistance Policy 

on Firm Market Performance

Policy Evaluation 

Methodology
Appendix III: Economic Analysis of the Effect 

of Trade Adjustment Assistance Policy on Firm 

Market Performance

Page 51 GAO-12-930 Trade Adjustment Assistance

Overall, our data set included 579 firms, or panels, and 2,711 

observations. We used a panel of cross-sectional, time-series data that 

included values for variables across a number of years for a group of 

firms. To obtain data on performance of the various firms in the program, 

we sent a data collection instrument to TAA Centers, requesting data on 

firms that had completed at least one project in their business recovery 

plan in 2009, 2010, or 2011. Our data collection instrument requested 

data on sales and employment 2 years prior to entry into the program, in 

the certification year, and 2 to 3 years after entry into the program as well 

as other quantitative and qualitative data for each firm. The panel of data 

had unequal time periods, as firms in our sample entered and exited the 

program at different times. For example, two firms that completed a 

project in 2009 might have entered into the program in different years. In 

addition, the data were nonsequential in time and included gaps. For 

instance, EDA did not collect data on sales and employment for every 

year and explained that some of the data could not be obtained or was 

missing.1

For each firm in each year, we specified the empirical model as:

Although some regression methods can accommodate 

unbalanced panels, others cannot, and this placed certain constraints on 

our regression methods. The time periods of the panels for each firm 

averaged 4 years, with a minimum of 2 years and a maximum of 6 years.

Log (Sales) = β0 + β1 Emp + β2 Emp2 + β3 Age + β4 Age2 + β4 Growth + 

β5 Growth_lg1 + β6 TAAF Policy + β7 PolGrwth + β8 Nmulti + β9 Nprodmkt 

+ β10 Ngeomkt + β11Npubpriv + β12 TPR + β13 Unemp + β14 Year + ε

Where, β0 is the constant term, the other betas are the variable 

coefficients, and ε is the error term. For each year t, we define the 

dependent variables as:

Log (Sales) = yearly logarithm of firm sales

Log (Prod) = yearly logarithm of productivity defined as firm sales 

divided by firm employment

 

1

This is reportedly a common pattern in collection of data on countries, states, or firms 

and is more the norm than the exception. For example, data for some time periods in 

panels cannot be collected because of lack of resources or funding. See Baltagi, Badi H., 

Economic Analysis of Panel Data, 2nd ed. (West Sussex, England: John Wiley & Sons, 

Ltd., 2003). 

Discussion of Empirical 

Model, Data, and Variables
Appendix III: Economic Analysis of the Effect 

of Trade Adjustment Assistance Policy on Firm 

Market Performance 

Page 52 GAO-12-930 Trade Adjustment Assistance

And, we define the independent or control variables as:

Emp = yearly employment for firm (proxy for size of firm)

Emp2 = yearly employment squared for firm 

Age = age of firm

Age2 = age squared of firm

Growth = yearly growth in industry value of shipments for each 

industry

Growth_lg1 = yearly growth in industry value of shipments, lagged 

one year

TAAF Policy = trade adjustment assistance indicator = 0 before 

certification and 1 thereafter

PolGrwth = interactive variable: TAAF Policy * growth

Nmulti = indicator variable for multiplant firm; 1 if multiplant firm, 0 

otherwise

Nprodmkt = categorical variable indicating which level of the product 

market the firm sells to such as raw, intermediate, and final/consumer

Ngeomkt = categorical variable indicating which geographic market 

the firm sells to, such as local, regional, domestic, international, or 

some combination of these markets

Npubpriv = indicator variable for whether the firm is public or private; 

public = 1, private = 0

TPR = industry-level import penetration ratio for each 5 and 6-digit 

NAICS code

Unemp = yearly regional unemployment rate (BLS Census Region)

Year = year trend variable (1998 through 2011)

A summary of the panel data showing the variables used, including the 

means, standard deviations, minimums and maximums, is shown in 

table 5.
Appendix III: Economic Analysis of the Effect 

of Trade Adjustment Assistance Policy on Firm 

Market Performance 

Page 53 GAO-12-930 Trade Adjustment Assistance

Table 5: Summary of Data Used in TAAC Regression Analysis

Variable Observations Mean Standard deviation Minimum Maximum

Panel definition variables

Firmid 2711 1 579

Year 2711 2007 1998 2011

Dependent or outcome variables

Sales ($) 2711 17,500,000 46,700,000 5,936 530,000,000

Lsales 2711 15.57 1.45 8.69 20.09

Lprod 2621 11.78 0.59 8.27 15.05

Independent or control variables

TAAF Policy 2711 0.4644 0.4988 0 1 

Age 2697 44.2 28.12 4 210

Age2 2697 2744.03 3905.23 16 44100

Emp 2621 93 169 1 1918

Emp2 2621 37038.16 203128.1 1 3678724

Growth 2710 -0.0057 0.1482 -1.0152 0.7462

Growth_lg1 2682 0.0024 0.1387 -0.7301 0.6891

Polgrwth 2710 0.0078 0.1038 -1.0152 0.74616

Nmulti 2711 0.1741 0.3793 0 1 

Npubpriv 2711 0.0491 0.216 0 1 

Nprodmkt 2711 2.5308 0.6108 1 4 

Ngeomkt 2701 3.8775 1.149 1 6 

TPR 2200 0.3574 0.3007 0.0022 2.6886

NAICS 2711 31311 339999

Macroeconomic control variables 

Unemp 2711 7.13 2.04 3.61 11.03

Year 2711 2007 2.72 1998 2011

Source: GAO analysis of data from Commerce, Bureau of Labor Statistics, U.S. Census Bureau, Annual Survey of Manufacturers, and 

U.S. International Trade Commission’s Tariff and Trade Data Web, 1997-2011.

For our main dependent variable, we used the natural log of firm sales to 

proxy firm performance. We transformed the sales variable into natural 

logarithms, because the distribution of firm sales was highly skewed to 

smaller sales amounts. When transformed into natural logarithms, the 

sales data exhibited more of a normal distribution, making it more useful 

for regression analysis and reducing the effects of outliers.

Our policy variable is represented in the model as an indicator variable 

denoted by 0 prior to a firm’s certification by a TAA Center and 1 after 
Appendix III: Economic Analysis of the Effect 

of Trade Adjustment Assistance Policy on Firm 

Market Performance 

Page 54 GAO-12-930 Trade Adjustment Assistance

certification. Using this variable, we tested whether the policy variable 

going from 0 to 1 brought about a statistically significant increase in the 

log of sales over time for these firms. When a firm changes from 

nonparticipation to participation, sales would change by some percent. 

We also created an interactive term—polgrwth—which is the policy 

variable times the growth variable. This allows detection of whether 

changes in market growth over the period, in combination with the TAA 

for Firms policy, had a further effect on firm sales.

For our independent variables, we used firm-specific financial and 

qualitative variables, which we transformed into indicator variables. Our 

firm-specific variables included employment and firm age. In the data 

collection instrument we sent to TAA Centers, we asked for qualitative 

data such as reach of the geographic market, level of the product market, 

whether the firm was public or private, and whether it was part of a 

multiplant firm. These variables represent market structure characteristics 

such as size, product differentiation, and economies of scale of the firm.

We also created variables that were market- or industry-specific, such as 

growth and lagged growth. For this, we used Census of Manufacturing, 

Annual Survey of Manufactures value of shipments data on a yearly basis 

from 1998 to 2010, at the five- and six-digit North American Industry 

Classification System (NAICS) level.2

 

2

According to “Frequently Asked Questions” on the NAICS website at url: 

Since 2011 data were not yet 

available, we forecast this variable using regression techniques and 

calculated the growth rates using natural log differences divided by the 

change in year. Also, because changes in firm performance could result 

from prior year demand or market growth, we included a variable for 

lagged market growth.

http://www.census.gov/eos/www/naics/faqs/faqs in answer to the question, “What is the 

NAICS structure and how many digits are in a NAICS code?” The NAICS is a two- through 

six-digit hierarchical classification system, offering five levels of detail. Each digit in the 

code is part of a series of progressively narrower categories, and the more digits in the 

code signify greater classification detail. The first two digits designate the economic 

sector, the third digit designates the subsector, the fourth digit designates the industry 

group, the fifth digit designates the NAICS industry, and the sixth digit designates the 

national industry. The five-digit NAICS code is the level at which there is comparability in 

code and definitions for most of the NAICS sectors across the three countries participating 

in NAICS (the United States, Canada, and Mexico). The six-digit level allows for the 

United States, Canada, and Mexico each to have country-specific detail. A complete and 

valid NAICS code contains six digits.
Appendix III: Economic Analysis of the Effect 

of Trade Adjustment Assistance Policy on Firm 

Market Performance 

Page 55 GAO-12-930 Trade Adjustment Assistance

We also created an international trade variable at the six-digit NAICS 

industry level for import penetration, using International Trade 

Commission (ITC) import and export data from its online Tariff and Trade 

Data Web and the Census Annual Survey of Manufacturers’ value of 

shipments data. We calculated this variable as follows: Imports / (Value of 

Shipments + Imports – Exports). This ratio measures imports as a 

proportion of apparent domestic consumption and is often used in the 

trade literature as a proxy for import penetration. We found that trade data 

were missing in the ITC database for some of the unique NAICS 

industries represented in our firm sample from the TAA Centers. 

Specifically, although there are about 579 firms in our sample overall, 

when matched with the trade data the sample size reduces to about 472

firms. Including this variable yields a smaller data set and somewhat 

different regression results.

Table 6 below presents the regression analysis results, for three model 

specifications, with

1) the dependent variable as the log of firm sales;

2) the dependent variable as the log of firm sales including the import 

penetration variable; and

3) the dependent variable as the log of productivity (sales divided by 

employment).

The table also shows the regression coefficients and Z-value of the three 

regression equations. We estimated the model specifications using the 

feasible generalized least squares (FGLS) estimator because of 

autocorrelation or correlation in the error terms over time in the data.3

 

3

We used the FGLS model, xtgls in Stata, a panel data regression technique that can 

correct for serial correlation. We tested for the presence of autocorrelation using the 

xtserial command in Stata and found that we could not reject the presence of serial 

correlation in the data. Also, in this type of model, the autocorrelation coefficient may be 

different across panels, since the dependent variables are likely to be autocorrelated 

within a panel or firm. Therefore, this estimator allowed us to specify a model that 

corrected for panel-specific autocorrelation. The FGLS model structure can also 

accommodate unbalanced panel data with missing observations as we have in our sample 

of data and other non-time-varying variables of interest. Use of the technique improved 

model fit, and our primary variables of interest, including the TAA for Firms policy variable, 

were significant and had the expected signs.

Results of Our Analysis
Appendix III: Economic Analysis of the Effect 

of Trade Adjustment Assistance Policy on Firm 

Market Performance 

Page 56 GAO-12-930 Trade Adjustment Assistance

FGLS estimators are appropriate when one or more of the assumptions of 

homoskedasticity and noncorrelation of regression errors fails.

Model 1, which uses log of sales as the dependent or outcome variable, 

without the import penetration ratio, used 2,572 observations and 572 

panels in the regression. Model 2, which included the import penetration 

ratio explanatory variable, reduced the sample to 2,086 observations and 

466 panels or firms.4

Table 6: Semi-log Model Coefficients for TAA for Firms Regression Models

Model 3 included productivity as the outcome 

variable, defined as the log of firm sales divided by firm employment, 

along with the other control and macroeconomic variables in the other two 

specifications; it contained the full sample of observations. The 

coefficients and Z values for the TAA for Firms policy variable are 

consistent across the 3 model specifications. In addition, the Wald Chisquared test for model significance showed that all model specifications 

were statistically significant overall.

(1) (2) (3)

Log sales Log sales

Log productivity

(sales/employment)

Firm age 0.0192***

(8.81)

0.0166***

(6.86)

-0.00162

(-1.06)

Firm age2 -0.000118***

(-6.88)

-0.0000932***

(-4.78)

0.0000132

(1.05)

Employment 0.00852***

(41.15)

0.00864***

(35.33)

Employment2 -0.00000393***

(-30.06)

-0.00000394***

(-26.81)

TAAF policy 0.0464**

(3.07)

0.0573**

(3.27)

0.0354*

(2.46)

Market growth -0.0294

(-0.48)

-0.0318

(-0.45)

0.00747

(0.13)

Market growth lagged 1 

year

0.220***

(4.74)

0.197***

(3.66)

0.183***

(4.15)

Policy*Growth 0.172*

(2.37)

0.129

(1.54)

0.0355

(0.50)

 

4

This specification included the 486 missing observations, owing to the fact that about 15 

percent of our NAICS industries were missing from the ITC trade data for our unique firm 

IDs NAICS industries when we created this variable.
Appendix III: Economic Analysis of the Effect 

of Trade Adjustment Assistance Policy on Firm 

Market Performance 

Page 57 GAO-12-930 Trade Adjustment Assistance

(1) (2) (3)

Log sales Log sales

Log productivity

(sales/employment)

Multiplant firm 0.632***

(14.51)

0.670***

(13.94)

0.399***

(11.90)

Level of product market -0.157***

(-5.51)

-0.138***

(-4.46)

-0.114***

(-5.49)

Size of market 0.0809***

(5.17)

0.0707***

(3.96)

0.0457***

(4.13)

Public/private 0.215**

(2.82)

0.486***

(4.10)

0.310***

(4.67)

Unemployment rate -0.0226***

(-3.70)

-0.0211**

(-3.01)

-0.00300

(-0.53)

Year 0.0299***

(5.51)

0.0314***

(5.04)

0.0294***

(6.13)

Import penetration ratio -0.170**

(-2.88)

Constant -45.51***

(-4.19)

-48.60***

(-3.89)

-47.25***

(-4.92)

N 2572 2086 2572

Wald Chi2 5592 3169 375

Z statistics in parentheses

* p < 0.05, ** p < 0.01, *** p < 0.001 

Source: GAO analysis of firm data from Commerce and industry data from the Bureau of Labor Statistics, the U.S. Census Department, 

Annual Survey of Manufacturers, and the U.S. International Trade Commission.

Note: Semilog model coefficients are shown in the row with each variable, with the z-values in 

parentheses. Coefficients that are statistically significant at the 0.05, 0.01, and 0.001 percent are 

noted by *, **, and ***, respectively. 

The TAA for Firms policy indicator variable, which is 0 prior to 

participation in the TAA for Firms program and 1 thereafter, is positively 

and significantly related to log of firm sales in our model specifications at 

the 1 and 5 percent levels. This implies an average of a 5 percent to 6 

percent increase in sales when the firm participates in the program, with 

all else constant. However, these model coefficients are relatively small 

(0.046 to 0.057 for the sales models) in comparison with other variables 

such as the multiplant firm variable, the public/private ownership of the 

firm, and the lagged growth variable. Further, the TAA for Firms policy 

variable is also positively related and statistically significant at the 5 

percent level in our productivity specification. This result translates into 

about a 4 percent increase in the level of productivity, on average, for 

participation in the program for firms in our sample, all else remaining 

constant. The interactive variable—growth—with the TAA for Firms policy 

variable is also positively and significantly related to the log of firm sales 

in Model 1. The model suggests that participation in the TAA for Firms 
Appendix III: Economic Analysis of the Effect 

of Trade Adjustment Assistance Policy on Firm 

Market Performance 

Page 58 GAO-12-930 Trade Adjustment Assistance

program had an effect on sales that was greater in industries that were 

experiencing growth than in those that were not. As Mueller and Rogers 

point out, there is more room for expansion by fringe firms in the market 

when there is greater growth in market demand.5

Model 2, which included the import penetration variable as well as the 

same control variables, produced similar results. The trade penetration 

variable was negatively related to firm sales, as expected, and statistically 

significant at the 1 percent level. When this result is retransformed back 

into the marginal effects on sales, we estimate that this translates into 

about a 16 percent decrease in sales, on average, for every 1 percentage 

point increase in the industry import penetration ratio, all else equal.

We checked for overall multicollinearity using the Variance Inflation 

Factor analysis and found no overall problems in our model. However, we 

note that the use of the TAA for Firms policy variable and the year trend 

variable in the models was collinear at the 0.49 percent level. With the 

exclusion of one or the other of these two variables, the coefficient and 

statistical significance of the remaining variable became much higher.

Since one of the variables, employment, could be endogenous in our 

specifications, we also estimated our regressions with and without this 

variable to see whether this changed the estimates. We found no major 

changes in our estimates or significance levels.

 

5

Mueller, Willard F. and Richard T. Rogers, “Changes in Market Concentration of 

Manufacturing Industries, 1947-1977,” University of Wisconsin, Madison, and the U.S. 

Department of Agriculture, March 1983.

Limitations of Our Analysis
Appendix IV: Data That EDA Uses for Its 

Funding Allocation Formula and Share of 

Funding by Center

Page 59 GAO-12-930 Trade Adjustment Assistance

The Economic Development Administration’s (EDA) funding allocation 

formula includes five factors to allocate funding to each of the 11 TAA 

Centers, in addition to base funding divided equally across all of the 

centers. Table 7 shows the data that EDA used to measure each of these 

five factors to allocate $15.4 million among the centers for the 1-year 

2011 cooperative agreement period. The table shows for each factor the 

data by center as well as each center’s share of the total. For example, 

the Great Lakes Center accounted for 3.8 percent of geographic size, 9.7 

percent of the total number of firms, 11.7 percent of the total number of 

employees in the program’s approved business recovery plans, and 8.1 

percent of the total number of firms that achieved expected results. Table 

8 shows the resulting allocation to each of the centers for cooperative 

agreement year 2011.

Table 7: Data Used for TAA for Firms Funding Allocation Formula and Each Center’s Share of Funding Based on Each Factor, 

Cooperative Agreement Year 2011 

TAA Center

Geographic size

(square miles)

Number of firms in 

manufacturing, 

mining and 

agriculture 

sectors

Number of 

approved business 

recovery plans 

(FY2009-2010)

Number of 

employees in 

approved business 

recovery plans 

(FY2009-2010)

Number of firms 

that achieved 

expected results

Great Lakes 133,619 (3.8%) 46,563 (9.7%) 41 (11.7%) 4,622 (11.7%) 30 (8.1%)

Mid-America 202,769 (5.7%) 20,331 (4.2%) 33 (7.5%) 3,233 (8.2%) 36 (9.7%)

MidAtlantic 127,695 (3.6%) 46,314 (9.6%) 45 (10.2%) 3,500 (8.9%) 48 (13.0%)

Midwest 245,400 (6.9%) 51,026 (10.6%) 67 (15.3%) 8,525 (21.7%) 46 (12.4%)

New England 62,809 (1.8%) 23,181 (4.8%) 82 (18.7%) 3,926 (10.0%) 46 (12.4%)

New York State 47,214 (1.3%) 21,761 (4.5%) 23 (5.3%) 2,355 (6.0%) 9 (2.4%)

Northwest 962,792 (27.2%) 32,723 (6.8%) 32 (7.3%) 2,707 (6.9%) 37 (10.0%)

Rocky Mountain 626,050 (17.7%) 25,974 (5.4%) 36 (8.2%) 5,317 (13.5%) 49 (13.2%)

Southeastern 372,685 (10.5%) 86,003 (17.8%) 37 (8.5%) 2,562 (6.5%) 24 (6.5%)

Southwest 374,026 (10.6%) 57,377 (11.9%) 29 (6.6%) 1,458 (3.7%) 31 (8.4%)

Western 385,843 (10.9%) 71,072 (14.7%) 13 (3.0%) 1,148 (2.9%) 14 (3.8%)

Total 3,540,902(100%) 482,325 (100%) 438 (100%) 39,353 (100%) 370 (100%)

Source: GAO presentation of Commerce data.

Appendix IV: Data That EDA Uses for Its 

Funding Allocation Formula and Share of 

Funding by Center
Appendix IV: Data That EDA Uses for Its 

Funding Allocation Formula and Share of 

Funding by Center

Page 60 GAO-12-930 Trade Adjustment Assistance

Table 8: Funding Allocation to TAA Centers Based on EDA’s Funding Formula, Cooperative Agreement Year 2011

Dollars in thousands

TAA Center

Base 

funding

Funding based on 

number of firms 

in manufacturing, 

mining and 

agriculture 

industries

Funding based 

on geographic 

size (square 

miles)

Funding 

based on 

number of 

approved 

business 

recovery plans 

(FY2009-2010)

Funding based 

on number of 

employees in 

approved 

business 

recovery plans 

(FY2009-2010)

Funding 

based on 

number of

firms that 

achieved 

expected 

results

Total 

allocation

Great Lakes $841 $74 $6 $159 $199 $150 $1,429

Mid-America $841 $33 $9 $128 $139 $180 $1,330

MidAtlantic $841 $74 $6 $174 $151 $240 $1,486

Midwest $841 $82 $11 $259 $367 $230 $1,790

New England $841 $37 $3 $317 $169 $230 $1,598

New York State $841 $35 $2 $89 $101 $45 $1,113

Northwest $841 $52 $42 $124 $117 $185 $1,361

Rocky Mountain $841 $42 $27 $139 $229 $245 $1,523

Southeastern $841 $137 $16 $143 $110 $120 $1,368

Southwest $841 $92 $16 $112 $63 $155 $1,279

Western $841 $114 $17 $50 $50 $70 $1,141

Total $9,251 $771 $154 $1,696 $1,696 $1,850 $15,418

(60%) (5%) (1%) (11%) (11%) (12%) (100%)

Source: GAO presentation of Commerce data.

Note: Because of rounding, columns may not sum exactly to totals shown. 
Appendix V: Comments from the Department 

of Commerce

Page 61 GAO-12-930 Trade Adjustment Assistance

Appendix V: Comments from the Department 

of Commerce
Appendix V: Comments from the Department 

of Commerce

Page 62 GAO-12-930 Trade Adjustment Assistance
Appendix V: Comments from the Department 

of Commerce

Page 63 GAO-12-930 Trade Adjustment Assistance
Appendix V: Comments from the Department 

of Commerce

Page 64 GAO-12-930 Trade Adjustment Assistance
Appendix V: Comments from the Department 

of Commerce

Page 65 GAO-12-930 Trade Adjustment Assistance
Appendix VI: GAO Contact and Staff 

Acknowledgments 

Page 66 GAO-12-930 Trade Adjustment Assistance 

J. Alfredo Gomez, (202) 512-4101 or gomezj@gao.gov

In addition to the contact named above, Kim Frankena (Assistant 

Director), Christina Bruff, David Dayton, Leah DeWolf, David Dornisch, 

Barbara El Osta, Etana Finkler, Bradley Hunt, Ernie Jackson, Erin 

Preston, Kelly Rubin, and Andrew Stavisky made key contributions to this 

report. 

Appendix VI: GAO Contact and Staff 

Acknowledgments 

GAO Contact 

Staff 

Acknowledgments 

(320855)
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