GAO

United States General Accounting Office

Report to the Chairman and Ranking 

Minority Member, Committee on Finance 

U.S. Senate

December 2000 TRADE 

ADJUSTMENT 

ASSISTANCE

Impact of Federal 

Assistance to Firms Is 

Unclear

GAO-01-12

Page 1 GAO-01-12 Trade Adjustment for Firms

Contents

Letter 3

Appendixes Appendix I: Objectives, Scope, and Methodology 22

Appendix II: Statistical Profile of Firms Certified to Receive Trade 

Adjustment Assistance 24

Appendix III: GAO Questionnaire for Certified Firms 31

Appendix IV: Comments From the Department of Commerce 37

Appendix V: GAO Contacts and Staff Acknowledgments 41

Tables Table 1: Distribution of Firms Interviewed, by Center and 

Category of TAA Participation 16

Table 2: Standard Industrial Classification Codes for Certified 

Firms, Calendar Years 1995-99 28

Table 3: Standard Industrial Classification Codes for Certified 

Firms GAO Interviewed 29

Table 4: Example of TAA Projects at Midwest TAA Center, 

October 1995-May 2000 30

Figures Figure 1: TAA Center Locations and Regional Coverage 7

Figure 2: Flowchart of the TAA Process 9

Figure 3: Trade Adjustment Assistance Centers’ Total Expenditures, 

Cooperative Agreement Years 1995-99 11

Figure 4: Certifications and Adjustment Plans Approved, by Trade 

Adjustment Assistance Center, Fiscal Years 1995-99 14

Figure 5: Distribution of Certified Firms, by Gross Annual Sales, 

Calendar Years 1995-99 24

Figure 6: Distribution of Certified Firms GAO Interviewed, by Gross 

Annual Sales 25

Figure 7: Distribution of Certified Firms, by Number of Employees, 

Calendar Years 1995-99 26

Figure 8: Distribution of Certified Firms GAO Interviewed, by 

Number of Employees 27

Abbreviations

EDA Economic Development Administration

TAA Trade Adjustment Assistance
Page 2 GAO-01-12 Trade Adjustment for Firms
Page 3 GAO-01-12 Trade Adjustment for Firms

United States General Accounting Office

Washington, D.C. 20548 Letr

December 15, 2000

The Honorable William V. Roth, Jr.

Chairman

The Honorable Daniel Patrick Moynihan

Ranking Minority Member

Committee on Finance

United States Senate

Congressional concerns about the impact of foreign trade on U.S. 

manufacturing have focused attention on federal programs designed to 

help domestic firms that have been adversely affected by imports. One 

such program, the Department of Commerce’s Trade Adjustment 

Assistance program, aims to help U.S. firms adopt strategies to become 

more competitive in a global economy. Commerce’s Economic 

Development Administration administers the program, which was 

established in 1962. The agency is responsible for certifying firms’ 

eligibility to receive assistance and approving the certified firms’ business 

plans for economic recovery. To become eligible to receive assistance, a 

firm must demonstrate that increases of imports have contributed 

importantly to decreases in sales or production and in its number of 

employees. Twelve regional Trade Adjustment Assistance Centers, which 

operate under cooperative agreements with the Economic Development 

Administration, help firms with the certification process, assess the 

viability of firms, and develop business recovery plans. The Centers also 

provide funding for and oversight of the work done by third-party 

consultants, who implement the projects detailed in the business recovery 

plans. Certified firms generally pay 25 percent of the cost of developing a 

recovery plan and no less than 50 percent of the total cost of the technical 

consulting services for projects that cost more than $30,000. The Economic 

Development Administration’s fiscal year 2000 Trade Adjustment 

Assistance appropriation is $10.5 million.

You asked us to review the nature and extent of Trade Adjustment 

Assistance as well as the outcomes of this assistance. Specifically, we 

(1) identified how the funding was used and the number and type of firms 

participating in the program and (2) examined the impact of the program 

assistance received by firms, including the views of participating firms and 

Center directors about the quality and impact of program services. 
Page 4 GAO-01-12 Trade Adjustment for Firms

To answer these objectives, we collected data on program operations from 

the Centers and the Economic Development Administration for the time 

period covered by the Centers’ cooperative agreement years 1995-99.1

 To 

determine the impact of program services received by firms, we relied on 

data provided by the Economic Development Administration and Center 

directors and also conducted interviews of 72 firms that were certified by 

the Economic Development Administration to receive program assistance. 

These firms fell into three categories: (1) 18 firms that were certified in 

1998 but later withdrew from the program; (2) 28 firms that were certified 

in 1998, had approved business recovery plans, and had one or more 

projects implemented; and (3) 26 firms that were nominated as “success 

stories” by their respective Trade Adjustment Assistance Center. Because 

our sample was small and not random, the results are not projectable and 

do not permit us to draw conclusions about all firms participating in the 

program. However, the interviews provide insight into the program and 

illustrate how firms used the Trade Adjustment Assistance program to help 

them meet their competitive challenges. We also interviewed Trade 

Adjustment Assistance program officials, including the 12 directors of the 

Centers, to obtain additional perspectives on the program. For a more 

complete discussion of our scope and methodology, see appendix I.

1

The annual time periods covered by the cooperative agreements vary among the Centers 

and do not necessarily correspond to the fiscal year.
Page 5 GAO-01-12 Trade Adjustment for Firms

Results in Brief The 12 regional Trade Adjustment Assistance Centers spent an annual 

average of about $9.8 million for cooperative agreement years 1995 through 

1999. Although Centers’ expenditures varied, most of these funds

(61 percent) were used to fund operational and administrative costs, 

including the cost of helping firms become certified and developing their 

business recovery plans. The remainder—an annual average of about 

$3.8 million, or approximately 39 percent of the total—was used to fund 

direct technical assistance to firms through the implementation of business 

recovery plans. For fiscal years 1995 through 1999, Commerce’s Economic 

Development Administration certified, on average, 157 firms annually as 

eligible for trade adjustment assistance and approved business recovery 

plans for about 127 firms each year. The median sales for certified firms 

was $3.2 million and the median number of employees was 45. The three 

industries most frequently represented among certified firms for 

cooperative agreement years 1995 through 1999 were industrial machinery 

and computers (14 percent), electronic equipment (13 percent), and 

apparel manufacturers (12 percent).2

 Examples of projects funded and 

implemented in conjunction with the business recovery plans included 

marketing, Web site development, standards certification, and production 

process improvement.

The impact of the program on firms is inconclusive because the Economic 

Development Administration does not formally monitor and track program 

outcomes of program recipients. Rather, the agency sets annual numerical 

goals for certifications and approved business recovery plans (outputs) for 

each of the Centers. As a result, the Economic Development 

Administration does not have the information necessary to systematically 

assess Center performance in helping firms adjust to import competition. 

Most (40) of the 54 firm managers we interviewed who used Trade 

Adjustment Assistance funds to implement projects reported that the 

assistance had a positive impact on their firms’ gross annual sales, and 

most (31) reported that the assistance had had a positive impact on 

employment. However, some (7) managers pointed out that the Trade 

Adjustment Assistance was small relative to the firm’s overall investments, 

and most (31) firm managers that had implemented projects told us that 

they had finished projects with their own funds. Eight of the directors of 

2

The data from one Center were not available for this analysis. Other categories included 

fabricated metals (10 percent), miscellaneous manufacturing (7 percent), and rubber 

(6 percent).
Page 6 GAO-01-12 Trade Adjustment for Firms

the regional Centers were generally satisfied with the Economic 

Development Administration’s overall management, but all 12 directors 

identified limited program funds as a problem affecting the Centers’ ability 

to deliver program services. In allocating the limited funds for project 

implementation, Centers use different mechanisms, such as “first-come, 

first-served” or funding at least one project in all recovery plans. This 

inconsistent approach to project funding raises questions about whether 

scarce resources are being used effectively. This is important because the 

12 Centers currently have a combined backlog of about $12 million in 

approved, but unfunded, projects. At the current rate of recovery plan 

funding at the Centers, it will take more than 3 years to fund these projects 

if no new companies are taken on as clients. 

This report contains recommendations to the Secretary of the Department 

of Commerce to improve program management by (1) developing better 

measures of program outcomes and (2) applying these outcome measures 

to evaluate the effectiveness of the Centers’ delivery of services to make 

the best use of the limited funding of this program. In written comments on 

a draft of this report, the Department of Commerce generally agreed with 

our findings and the recommendations.

Background The Trade Adjustment Assistance (TAA) program for firms was established 

by the Trade Expansion Act of 19623

 to assist firms that have been 

adversely impacted by import competition; and the program was expanded 

under the Trade Act of 1974, as amended.4

 Commerce administers the 

program through the Economic Development Administration (EDA). 

Although Congress originally authorized Commerce to assist firms by 

providing technical assistance, direct loans, and loan guarantees, the direct 

loan and loan guarantee provisions were eliminated in 1986.5

 The program 

lapsed in June 1999, but Congress reauthorized it in November 1999 

through September 30, 2001.6

 EDA receives a separate appropriation for 

TAA, which it uses to fund 12 regional Trade Adjustment Assistance 

3

Public Law 87-794, 19 U.S.C. 2341 to 2355.

4

Public Law 93-618.

5

19 U.S.C. 2344 (d).

6

Consolidated Appropriations Act of Fiscal Year 2000, Public Law 106-113, H.R. 3421, which 

was enacted into law by reference in H.R. 3194.
Page 7 GAO-01-12 Trade Adjustment for Firms

Centers, under renewable cooperative agreements. As shown in figure 1, 

the Centers cover geographical areas of different sizes. Funding for 

individual Centers varied from $660,000 to $1 million for cooperative 

agreement year 2000. Each Center funds technical assistance to firms 

within its region that have received EDA certification of eligibility and 

whose business recovery plans have been approved by EDA. 

Figure 1: TAA Center Locations and Regional Coverage

Source: GAO derived from Department of Commerce information.

A firm that seeks TAA benefits must petition EDA for certification of its 

eligibility. To be found eligible, a firm must demonstrate (1) that a 

significant number or proportion of the firm’s workers have become totally 

or partially separated from their employment, or are threatened to become 

totally or partially separated; (2) that sales or production overall have 

decreased, or that sales or production of a product that represents at least 

25 percent of its total production has decreased during the preceding 

W

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VA

TN

KY

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MA

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Great Lakes Center

New York Center

Southeastern Center

Mid-Atlantic Center

New Jersey Center

Rocky Mountain Center

Midwest Center

Northwest Center

Western Center

Southwest Center

New England Center

Mid-America Center
Page 8 GAO-01-12 Trade Adjustment for Firms

12-month period; and (3) that increases in imports of articles like or 

directly competitive with the firm’s product contributed importantly to the 

employment separations (or threat thereof) and the declines in sales or 

production. Trade Adjustment Assistance Centers’ staffs work with firms to 

develop the documentation. EDA requires firms to support claims of 

declining sales and employment and increases of imports competing with 

the products they produce. EDA is required to determine the firm’s 

eligibility within 60 days of receiving a petition. 

Once certified, a firm has 2 years during which it is to develop a business 

recovery plan in consultation with the regional Center. This recovery plan 

should detail the firm’s fundamental business operations, assess its 

competitive problems, and propose specific projects to be implemented by 

one or more competitively selected third-party consultants. After EDA 

approves the plan, the Center funds specific projects within the plan, 

subject to the Center’s available funds. Projects are limited to technical 

assistance such as marketing strategies, technical standards certification, 

product and process development, and computer system upgrades. TAA 

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

improvement or machinery upgrades. Firms are permitted to receive up to 

$75,000 in TAA funding but are required to match federal funds 

dollar-for-dollar to implement the technical assistance projects.7

 (See fig. 2 

for a summary of the TAA process.)

7

For projects budgeted to cost less than $30,000, Centers may fund up to 75 percent of the 

total cost. 
Page 9 GAO-01-12 Trade Adjustment for Firms

Figure 2: Flowchart of the TAA Process 

Source: GAO derived from Department of Commerce information.

Department of Commerce

Economic Development

Administration

•Certifies firms to participate in

program

•Approves adjustment plan

Trade Adjustment

Assistance Centers

• Help firms file certification

petition

• Assess firms’ viability

• Develop business recovery

plans with firms

• Provide oversight of project

implementation by

consultants

Firms

• Submit petitions for certification to Commerce

through Centers

• Following certification, submit recovery plans

through the Centers to EDA for approval

• Use consultants to implement recovery plans

Consultants

• Provide technical

assistance to firms to

implement projects in

the business recovery

plans

Commerce funds budgets for 12

regional Centers

Centers pay consultants 50 percent of

project costs (up to $75,000)

Firms pay

consultants 50

percent of

project costs

Firms typically pay Centers 25 percent of the

cost of developing a business recovery plan

$

$

$

$
Page 10 GAO-01-12 Trade Adjustment for Firms

Less Than Half of 

Center Expenditures 

Were Used to Fund 

Project 

Implementation by 

Consultants

Expenditures by the 12 regional Centers during cooperative agreement 

years 1995-99 totaled about $49 million, or an annual average of

$9.8 million. Between 1995 and 1999, the 12 regional Centers used about

39 percent (about $3.8 million annually), on average, of TAA funding to 

fund technical assistance from third-party consultants to eligible firms with 

approved business recovery plans. During the same period, Centers spent 

about 61 percent (about $6 million annually), on average, to fund 

operational and administrative costs associated with helping firms with the 

initial certification process, developing business recovery plans for 

certified firms, and funding the day-to-day operations of the Centers.8

However, the proportion of funds spent to fund consultants varied across 

Centers. As shown in figure 3, the New England and Western Centers spent 

over half of their program funds (about 59 percent and 58 percent, 

respectively) on technical assistance provided by consultants to eligible 

firms, while the Great Lakes Center spent about 12 percent. EDA officials 

told us that the Great Lakes Center is currently on probation due to its 

relatively few certifications and business recovery plans submitted to EDA 

in the last 2 years.

8

According to Center directors’ estimates, about 64 percent of their staffs’ time is spent on 

working with firms on developing certification documentation and business recovery plans.
Page 11 GAO-01-12 Trade Adjustment for Firms

Figure 3: Trade Adjustment Assistance Centers’ Total Expenditures, Cooperative Agreement Years 1995-99

Note: Operations and administrative costs include staff time spent assisting firms with the certification 

process and preparing adjustment plans, in addition to the cost of funding day-to-day operations.

Source: GAO derived from TAA Centers’ data.

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

New England

New York

Midwest

Rocky Mountain

Northwest

Mid-America

Southeastern

Great Lakes

Mid-Atlantic

New Jersey

Western

Southwest

Operations and administrative costs Consultant costs
Page 12 GAO-01-12 Trade Adjustment for Firms

Between fiscal years 1995 and 1999, EDA certified a total of 784 firms 

(about 157 firms annually, or about 13 each year for each of the 12 Centers) 

as eligible to receive trade adjustment assistance. EDA approved the 

business recovery plans for 633 certified firms (about 127 firms annually, or 

an average of 11 firms per year for each Center).9

 Firms participating in the 

program represent a broad array of industries that produce manufactured 

products. Such firms include manufacturers of auto parts, agricultural 

equipment, electronics, jewelry, circuit boards, textiles, log homes, and 

many others. Based on the data provided by the Centers for firms certified 

between cooperative agreement years 1995 and 1999, we found that about 

14 percent of firms produce industrial machinery and computers, about 

13 percent manufacture electronic equipment, and 12 percent produce 

apparel. For the 5-year period, firms had annual sales (at the time of 

certification) that ranged from a low of $1,563 to more than $219 million, 

with median sales of $3.2 million. The number of workers employed at the 

time of certification ranged from 1 to more than 3,000, but the median 

number of employees was 45. See appendix II for a statistical profile of 

firms that EDA certified as eligible to receive TAA benefits in cooperative 

agreement years 1995-99.

Certified firms receiving trade adjustment assistance developed business 

recovery plans that included a broad range of projects, including 

marketing, Web site development, standards certification, improvements to 

production processes, inventory control, and others. These projects, which 

were customized to meet each firm’s specific needs, were implemented by 

third-party private sector consultants selected jointly by the firm and the 

Center, and some firms used more than one consultant in the course of 

implementing its recovery plan. For more detail on types of projects 

undertaken at one Center, see appendix II.

Impact of TAA 

Program for Firms 

Unclear 

The impact of the TAA program for firms is unclear, based on our review of 

EDA’s data, our interviews of program participants who received TAA 

benefits, and our interviews of the 12 regional Center directors.

9

According to EDA data, EDA rejected only 2 of the total number of business recovery plans 

submitted for EDA approval between fiscal years 1995 and 1999.
Page 13 GAO-01-12 Trade Adjustment for Firms

EDA Does Little to Monitor 

Program Outcomes

Although EDA funds the Trade Adjustment Assistance Centers, it has not 

formally monitored and tracked program results. EDA establishes goals for 

each Center regarding the number of certifications and business recovery 

plans to be completed annually for EDA review (outputs). In addition, EDA 

program officials told us that they conducted site visits in the past but 

discontinued them in fiscal year 2000 because of budget constraints. 

However, EDA provides no oversight of project implementation and does 

not track the outcomes of firms receiving TAA funding. Additionally, we 

found that the Centers do not always collect the same information on 

clients and funded projects. Furthermore, not all Centers were able to 

provide us with information on the type of projects included in each client’s 

recovery plan, the status of each project, and changes in sales and 

employment. This lack of standardization and of a systematic collection of 

basic data hinders EDA’s ability to assess program effectiveness. As a 

result, EDA is unable to use any performance measures other than 

numbers of approved certifications and recovery plans to evaluate the 

performance of the Centers and of the program overall. According to the 

data EDA does collect, certifications by Center for fiscal year 1999, the last 

fiscal year for which data are available ranged between 6 and 24, while the 

number of approved recovery plans ranged between 2 and 22. As shown in 

figure 4, the number of certifications and business recovery plans approved 

varied across Centers for the fiscal year 1995-99 time period that we 

reviewed. 
Page 14 GAO-01-12 Trade Adjustment for Firms

Figure 4: Certifications and Adjustment Plans Approved, by Trade Adjustment Assistance Center, Fiscal Years 1995-99

Source: GAO derived from Department of Commerce data.

EDA officials have recognized some of the shortcomings in the available 

performance data, and, building on the requirements of the Government 

Performance and Results Act of 1993 (P.L. 103-62), have begun to collect 

client satisfaction data from participating firms. As of October 1999, these 

data are being collected through a one-question survey provided to 

program participants by the Centers. According to a Commerce TAA 

program official, the results of these surveys are not yet available. Although 

client satisfaction is one important dimension of program effectiveness, 

other measures of economic recovery, such as changes in sales, 

0

10

20

30

40

50

60

70

80

90

Southeastern

Southwest

New England

Mid-America

New York

Midwest

Northwest

Western

Rocky Mountain

Mid-Atlantic

New Jersey

Great Lakes

Certifications Business recovery plans approved
Page 15 GAO-01-12 Trade Adjustment for Firms

employment, and earnings, could potentially provide more meaningful 

indications of program impact. One Center Director told us that in October 

1999, he began to collect more extensive data from client firms. This Center 

has designed and implemented an electronic questionnaire to measure 

client satisfaction with the Center project manager and the private sector 

consultant. It also asks firms about changes in sales, employment and 

capital expenditures as a result of the project that was implemented by the 

consultant. According to the Director, the results are not yet available, but 

he expects to use them to report to EDA and his state government on the 

economic impact overall of projects that his Center funds. Although the 

Director has presented this questionnaire to other directors, the 

questionnaire is not used by all Centers because some Centers lack the 

necessary technology to implement the survey. 

Although Views of Private 

Sector Firms Are Positive, 

Overall Program Impact Is 

Uncertain 

We were unable to conclusively assess the impact of the TAA program 

because EDA does not track changes in the business condition of assisted 

firms. To obtain insight into program operations and effectiveness, we 

interviewed 72 firms certified by EDA. (See app. III for the questionnaire.) 

Table 1 shows the distribution of the types of companies we interviewed by 

Center and category of the firms’ participation in the program. 
Page 16 GAO-01-12 Trade Adjustment for Firms

Table 1: Distribution of Firms Interviewed, by Center and Category of TAA Participation

Of the 54 firm managers we interviewed that had implemented one or more 

projects, 53 indicated they were satisfied with the services they had 

received from the Centers, and 51 said they were satisfied with the

third-party consultants. Most of these managers also indicated that TAA 

had had a positive impact on increases in sales and employment (40 and 31, 

respectively). For example, one firm manager said that TAA funding helped 

the firm to redesign a key product. According to the manager, the 

TAA-funded project led to increases in gross annual sales and employment 

levels. However, we also found that some (5) of the 18 firms we interviewed 

that dropped out of the program after becoming certified also reported 

increases in sales and employment.

Despite these positive views of the program, firm managers also identified 

other factors that contributed to the successful recovery of their firms. 

Seven managers noted that the amount of TAA funding was small relative 

to the firm’s overall investments in its business recovery. For example, one 

manager explained that the firm’s business recovery project cost 

$5.5 million, of which $50,000 came from TAA funds. According to the 

Director of the Center serving this firm, the TAA funding facilitated the 

financing of the overall project but was not the only factor in its success. 

TAA Center

Firms designated as

“success stories” by

Centers

Firms that were

certified and had

approved business

recovery plans

Firms that were

certified, but withdrew

from the program Total

Great Lakes 2 2 1 5

Mid-America 2 2 2 6

Mid-Atlantic 2 4 0 6

Midwest 2 2 2 6

New England 3 1 1 5

New Jersey 3 3 1 7

New York 2 2 2 6

Northwest 2 3 2 7

Rocky Mountain 2 3 2 7

Southeast 2 2 1 5

Southwest 2 2 2 6

Western 2 2 2 6

Total 26 28 18 72
Page 17 GAO-01-12 Trade Adjustment for Firms

Some firm managers also said that other factors not related to TAA, such as 

a strong domestic economy or physical plant investments, had also 

contributed to increased sales and employment. 

Thirty-one firm managers said that they had finished approved projects 

with their own funds, and four firm managers specifically noted that the 

lack of funds from their respective Center impaired the timely 

implementation of projects. For example, one firm manager said that TAA 

program funding for the firm’s projects ran out several times during 

implementation and that the projects had to be delayed until the following 

year. The manager further noted that delayed funding for scheduled 

projects creates problems for businesses that must implement changes 

quickly in order to remain competitive in today’s economy.

The 18 firm managers we interviewed that withdrew from the TAA program 

cited a variety of reasons for dropping out of the program, including the 

lack of funds to cover the firm’s portion of the business recovery plan, or a 

decision that the firm did not want the type of technical assistance funded 

by the TAA program. Another firm withdrew after the manager responsible 

for overseeing the TAA process left the firm. 

Center Directors Identify 

Issues Affecting Program 

Implementation

A majority of the directors of the 12 Centers we interviewed said the Trade 

Adjustment Assistance program provides an excellent model for assisting 

firms but expressed concerns about a number of program issues. Although 

8 were generally satisfied with EDA’s program management, all 

12 directors reported frustration with current funding levels. According to 

the directors, they cannot fund all projects in approved business recovery 

plans due to the limited program funding. Six of the directors told us that 

they ration scarce funds across all approved business recovery plans, 

trying to fund at least one project of every approved plan. However, the 

other six directors indicated that they use predominantly a “first come”, 

“first-served” approach to fund projects. 

The 12 directors reported a combined backlog of $12 million for projects in 

business recovery plans approved by EDA that the Centers are currently 

unable to fund. Using the current rate of Centers’ funding of projects in 

approved recovery plans ($3.8 million annually over the 5-year time period 

we reviewed), it will take more than 3 years to fund all projects slated for 

implementation to help firms respond to the business pressures associated 

with import competition. 
Page 18 GAO-01-12 Trade Adjustment for Firms

Conclusion We identified two overall issues in the TAA program that suggest a need for 

reexamining how the program operates. First, Commerce’s Economic 

Development Administration has not developed appropriate outcome 

measures to conclusively demonstrate the value of the program in 

achieving its goal of assisting firms adversely affected by imports. This, 

combined with the lack of standardized data collected by the Centers, 

makes it difficult to judge the outcomes of the program. Second, there is a 

current backlog of about $12 million in approved but unfunded projects, 

and Centers use different approaches to allocate limited program 

resources. These variations among the Centers in how they allocate limited 

funds, combined with the lack of outcome measures, raise questions about 

whether available funds are being used in the most effective manner. 

Recommendations for 

Executive Action

To improve the effectiveness of the Trade Adjustment Assistance program 

in helping firms that are adversely affected by imports, we recommend that 

the Secretary of Commerce

• establish more effective measures of desired program outcomes and 

• apply these outcome measures as criteria to evaluate the effectiveness 

of the Centers in making the best use of the limited program funding to 

help trade injured firms adjust to import competition.

Agency Comments and 

Our Evaluation

We received written comments on a draft of this report from the 

Department of Commerce (see app. IV). Overall, the Department of 

Commerce agreed with our findings and recommendations and said that 

the Department is committed to implementing the most effective program 

in order to help U.S. trade-injured firms adjust to import competition. The 

Department of Commerce also provided technical comments, which we 

incorporated in the report as appropriate.

The Department of Commerce cited the finding in our report that 

39 percent of the program funds go to provide technical assistance to trade 

injured firms from third party consultants while the remaining 61 percent 

of the funds are used for operational and administrative costs, including 

the costs of certifying firms and developing business recovery plans. 

Commerce stated that the Economic Development Administration is 

confident the majority of administrative and operational costs actually 

support Center staff technical assistance to the trade injured firms and are 

not overhead costs as implied by sections of the report. We agree, as noted 
Page 19 GAO-01-12 Trade Adjustment for Firms

above and in our draft report, that the Centers use a portion of the 

administrative and operational costs to provide technical assistance to 

firms and believe that the Center’s role in assisting firms is clearly stated in 

our report. We acknowledge this fact in our report by characterizing these 

expenditures as administrative and operational—not overhead. However, 

we maintain that it is essential to note that less than half of the program’s 

expenditures are used to fund the implementation of business recovery 

projects for firms adversely affected by import competition. Because the 

Centers’ budget data only identifies expenditures for technical assistance 

provided by consultants, we reported the available data and cannot 

comment on Commerce’s view that the majority of the Centers’ operational 

and administrative expenditures are used to provide technical assistance to 

firms.

The Department of Commerce also stated that it was disappointed that the 

positive findings from our interviews with firms cannot be used to support 

conclusions about the overall program. Commerce cited a November 1998 

Urban Institute study commissioned by the agency that found statistically 

significant improvements in sales, employment, and survivability for firms 

receiving Trade Adjustment Assistance when compared to firms certified 

as eligible but which did not receive implementation assistance. Commerce 

also pointed to an “effectiveness report” prepared by the Centers annually 

that has consistently shown substantial increases in sales and employment 

for firms assisted by the Centers in comparison to the declines the firms 

reported prior to entering the program. 

Neither the Urban Institute study10 nor the Economic Development 

Administration’s “effectiveness report” demonstrates the impact of the 

trade adjustment assistance program. The Urban Institute study has some 

methodological shortcomings that served to undermine the validity of the 

study’s conclusions, including selection bias—an inherent bias in favor of 

the TAA-assisted firms. In order to receive Center services, eligible firms 

have to invest their own time and resources as part of the assistance. In 

addition, at least some Center directors further screen firms to select those 

most likely to succeed. As a result, firms qualifying for Center assistance 

10The Urban Institute study, prepared in November 1998, compares firms that actually 

received Center assistance with those that did not on three outcome measures: firm 

termination rate, firms’ total employment, and sales growth. Both groups of firms were 

certified as eligible to receive Center assistance. The study observed significant differences 

between the two groups of firms on all three outcome measures. These observed 

differences are attributed to the positive effect of the Trade Adjustment Assistance program.
Page 20 GAO-01-12 Trade Adjustment for Firms

are likely to be stronger, healthier, and more committed than the firms not 

participating in the program. While this may be an appropriate strategy for 

delivering scarce program funds, it complicates efforts to independently 

evaluate results as treatment and comparison groups must be selected in a 

manner that rules out any inherent bias in favor of either group. The design 

of the Urban Institute study did not do this. In addition, the study did not 

measure and test for other explanatory variables, such as the availability of 

other federal or state assistance, firms’ own investment in capital 

improvements or technology, or changes in human resource strategies that 

may account for or influence positive outcomes. Consequently, the study 

cannot attribute any observed differences between the groups compared—

those receiving TAA assistance and those that did not receive assistance— 

exclusively to the TAA program. Regarding the “effectiveness report” 

generated by the Centers, we note that it reports changes in sales and 

employment for all clients for each Center on an aggregate basis without 

reference to differences in firm size, number of employees, or phase of 

recovery for each client. As such, its usefulness in assessing effectiveness 

of trade adjustment assistance is limited.

The Department of Commerce stated in its letter that the Economic 

Development Administration has undertaken several efforts to monitor the 

TAA program and its impacts. Commerce points to a 1998 Urban Institute 

evaluation study, regular visits to Centers by EDA staff in fiscal year 1999 to 

monitor Center progress, and the use of a satisfaction query of assisted 

firms to demonstrate its monitoring efforts. We agree that Commerce has 

completed some monitoring efforts in the past and have included this 

information in our report. However, we still believe that the Economic 

Development Administration needs to introduce more systematic and 

focused monitoring to better judge program outcomes. In our view, 

effective monitoring should include establishing appropriate measures of 

success for each firm assisted, regular tracking of program outcomes by 

the Department of Commerce, and using that information to evaluate the 

success of each Center.

We are sending copies of the report to interested congressional committees 

and to the Honorable Norman Y. Mineta, the Secretary of Commerce. We 

will also make copies available to others on request. 
Page 21 GAO-01-12 Trade Adjustment for Firms

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

on (202) 512-4128. Other GAO contacts and staff acknowledgments are 

listed in appendix V. 

Susan S. Westin 

Managing Director 

International Affairs and Trade
Page 22 GAO-01-12 Trade Adjustment for Firms

Appendix I

Objectives, Scope, and Methodology ApApenednxidexiIs

The Chairman of the Senate Finance Committee, William V. Roth, Jr., and 

the Ranking Member, Daniel Patrick Moynihan, requested that we review 

the Trade Adjustment Assistance (TAA) program for firms. We 

(1) identified how the funding was used and the number and type of firms 

participating in the program and (2) examined the impact of the program 

assistance received by firms, including the views of participating firms and 

Center directors about the quality and impact of program services 

To determine how TAA funding was used and the number and type of firms 

participating in the TAA for firms program, we collected data from the 

Department of Commerce’s Economic Development Administration on 

certifications and approved adjustment plans from fiscal years 1995 to 

1999. We also contacted the 12 regional Trade Adjustment Assistance 

Centers, which provided data on their program expenditures and 

information about client firms, including gross annual sales, number of 

employees, and industry information made under their cooperative 

agreements years 1995-99.1

 To identify the nature of the assistance 

provided, we asked Centers to indicate projects contained in each client 

firm’s approved business recovery plans. Some Centers provided detailed 

information on actual projects, while others told us that they could not pull 

together this information for all clients in time for our analysis. Because the 

data on projects are limited, we present (in app. II) project information 

from a single Center to illustrate the variety of projects and the 

combinations of projects undertaken by firms to implement their business 

recovery plans.

To assess the impact of the program, we conducted interviews with EDA 

officials responsible for the program and reviewed EDA program files. We 

conducted on-site visits at three Centers in Atlanta, Georgia; San Antonio, 

Texas; and Los Angeles, California. We chose these sites because they 

represented different regions, and we were able to combine these visits 

with other TAA-related audit work. 

To report on the views of certified firms and the Center directors on 

program operations and the quality and impact of program services, we 

conducted telephone interviews with 72 certified firms, and interviewed 

the 12 Center directors. GAO selected about two-thirds of the firms that we 

interviewed, and the Centers chose the remaining third. For the 

1

 The annual time periods covered by the cooperative agreements vary among the Centers 

and do not necessarily correspond to the fiscal year.
Appendix I

Objectives, Scope, and Methodology

Page 23 GAO-01-12 Trade Adjustment for Firms

GAO-selected firms, we identified companies that had received TAA 

assistance from each of the 12 Centers. We selected companies certified in 

calendar year 1998 to ensure that the companies had sufficient time to 

become certified as eligible by EDA, decide whether to proceed with 

assistance, develop a recovery plan, and have some experience with 

implementing the recovery plan. We attempted to interview at least two 

companies from each Center that had developed an approved recovery 

plan and two companies that withdrew from the program. Based on data 

provided by the Centers, we attempted to identify four of each type of 

company to attempt to contact. When a Center’s number of clients that fit 

our specifications exceeded four, we chose companies randomly for our 

interviews. However, not all Centers had four firms in each category. One 

Center did not have any candidates for our “certified but withdrew” 

category. In those cases, we interviewed more firms in the “certified with 

recovery plan” category. For a few Centers, our interview strategy 

produced more than four interviews when more firms returned our calls 

than expected. For the Center-selected cases, we asked each Center to 

nominate companies that they considered “success stories,” and we 

interviewed at least two companies in this category for each Center. 

Because we did not select the firms that we interviewed randomly, the 

results do not permit us to draw conclusions about all firms participating in 

the program. However, the interviews allow us to illustrate how firms used 

the Trade Adjustment Assistance program to help them meet their 

competitive challenges.

We conducted our work from February through October 2000 according to 

generally accepted government auditing standards.
Page 24 GAO-01-12 Trade Adjustment for Firms

Appendix II

Statistical Profile of Firms Certified to 

Receive Trade Adjustment Assistance ApendxiI

We present in this appendix a series of figures and tables that provide 

statistical details of firms that were certified between cooperative 

agreement years 1995 and 1999, including a profile of firms by sales, 

employment levels, and Standard Industrial Classification code. Similar 

data are also provided for the firms that participated in our interviews. We 

also present information about projects of certified firms at one Trade 

Adjustment Assistance Center. 

Figure 5 shows the distribution of certified firms by gross annual sales at 

the time the firm was certified to participate in the TAA program for 

calendar years 1995-99. Figure 6 shows similar data for the firms that 

participated in our interviews. The firms we interviewed had median sales 

of about $3.5 million, and ranged from $3,229 to $90.9 million. The total 

population of certified firms had median sales of $3.2 million, and the sales 

ranged from $1,563 to $219.2 million. 

Figure 5: Distribution of Certified Firms, by Gross Annual Sales, Calendar Years 

1995-99 

Note: Sales data were provided by the TAA Centers for 655 firms.

Source: GAO derived from TAA Centers’ data.

0

50

100

150

200

250

300

350

400

450

0 to 5 5+ to 10 10+ to 15 15+ to 20 20+

Gross annual sales at certification (dollars in millions)
Appendix II

Statistical Profile of Firms Certified to 

Receive Trade Adjustment Assistance

Page 25 GAO-01-12 Trade Adjustment for Firms

Figure 6: Distribution of Certified Firms GAO Interviewed, by Gross Annual Sales

Note: Data were provided by the TAA Centers for 64 of the 72 firms we interviewed.

Source: GAO derived from TAA Centers’ data. 

Figure 7 shows the distribution of certified firms by number of employees 

at the time the firm was certified to participate in the TAA program for 

calendar years 1995-99. Figure 8 shows similar data for the firms that 

participated in our interviews. The median number of employees was 44 for 

the firms we interviewed, and the number of employees for interviewed 

firms ranged between 4 and 648. The median number of employees for total 

population of firms was 45, and the number of employees ranged between 1 

and 3,089. 

0

5

10

15

20

25

30

35

40

0 to 5 5+ to 10 10+ to 15 15+ to 20 20+

Gross annual sales at certification (dollars in millions)
Appendix II

Statistical Profile of Firms Certified to 

Receive Trade Adjustment Assistance

Page 26 GAO-01-12 Trade Adjustment for Firms

Figure 7: Distribution of Certified Firms, by Number of Employees, Calendar Years 

1995-99 

Note: Employment data were provided by the TAA Centers for 657 firms.

Source: GAO derived from TAA Centers’ data.

0

50

100

150

200

250

1 to 25 26 to 50 51 to 75 76 to 100 101 to 200 201 to 500 500 +

Number of employees at certification
Appendix II

Statistical Profile of Firms Certified to 

Receive Trade Adjustment Assistance

Page 27 GAO-01-12 Trade Adjustment for Firms

Figure 8: Distribution of Certified Firms GAO Interviewed, by Number of Employees

Note: Data were provided by the TAA Centers for 64 of the 72 firms we interviewed.

Source: GAO derived from TAA Centers’ data. 

Table 2 shows the distribution of Standard Industrial Classification codes 

for firms certified for calendar years 1995-99. Table 3 presents similar data 

for the firms included in our interviews.

0

2

4

6

8

10

12

14

16

18

20

1 to 25 26 to 50 51 to 75 76 to 100 101 to 200 201 to 500 500 +

Number of employees at certification
Appendix II

Statistical Profile of Firms Certified to 

Receive Trade Adjustment Assistance

Page 28 GAO-01-12 Trade Adjustment for Firms

Table 2: Standard Industrial Classification Codes for Certified Firms, Calendar Years 

1995-99

a

 Total does not add to 100 percent due to rounding.

Source: GAO derived from TAA Centers’ data.

Industry grouping

Standard

Industrial

Classification

codes (2-digit)

Number of

certified firms Percent

Agricultural production 01 10 1.4

Agricultural services 07 1 0.1

Food manufacturing 20 20 2.8

Textile mill 22 32 4.5

Apparel 23 82 11.5

Lumber 24 28 3.9

Furniture 25 23 3.2

Paper 26 10 1.4

Printing/publishing 27 5 0.7

Chemicals 28 12 1.7

Petroleum refining 29 1 0.1

Rubber 30 41 5.8

Leather 31 23 3.2

Stone/clay 32 16 2.3

Primary materials 33 17 2.4

Fabricated metals 34 68 9.6

Industrial machinery/computer 35 100 14.1

Electronic equipment 36 89 12.5

Transportation equipment 37 31 4.4

Instruments 38 39 5.5

Misc. manufacturing 39 50 7.0

Electrical services 49 1 0.1

Wholesale-durables 50 1 0.1

Wholesale-nondurables 51 4 0.6

Apparel stores 56 1 0.1

Eating and drinking 58 1 0.1

Business services 73 3 0.4

Public administration 95 2 0.3

Total 711 100a
Appendix II

Statistical Profile of Firms Certified to 

Receive Trade Adjustment Assistance

Page 29 GAO-01-12 Trade Adjustment for Firms

Table 3: Standard Industrial Classification Codes for Certified Firms GAO 

Interviewed 

a

 Total does not add to 100 percent due to rounding.

Note: TAA Centers provided Standard Industrial Classification code data for 66 of the 72 firms we 

interviewed

Industry grouping

Standard

Industrial

Classification

codes (2-digit)

Number of

certified firms

interviewed Percent

Agricultural production 01 1 1.5

Agricultural services 07 0 0

Food manufacturing 20 0 0

Textile mill 22 1 1.5

Apparel 23 3 4.6

Lumber 24 4 6.1

Furniture 25 1 1.5

Paper 26 0 0

Printing/publishing 27 1 1.5

Chemicals 28 1 1.5

Petroleum refining 29 0 0

Rubber 30 1 1.5

Leather 31 3 4.6

Stone/clay 32 3 4.6

Primary metals 33 1 1.5

Fabricated metals 34 5 7.6

Industrial machinery/computer 35 11 16.7

Electronic equipment 36 7 10.6

Transportation equipment 37 5 7.6

Instruments 38 10 15.2

Misc. manufacturing 39 7 10.6

Electrical services 49 0 0

Wholesale-durables 50 0 0

Wholesale-nondurables 51 0 0

Apparel stores 56 0 0

Eating and drinking 58 0 0

Business services 73 0 0

Public administration 95 1 1.5

Total 66 100a
Appendix II

Statistical Profile of Firms Certified to 

Receive Trade Adjustment Assistance

Page 30 GAO-01-12 Trade Adjustment for Firms

Source: GAO derived from TAA Centers’ data.

Table 4 lists projects funded by one Center— the Midwest TAA Center— 

for a sample of 10 firms. The example illustrates the breadth of projects 

funded and shows the combination of projects included in each of these 

firms’ business recovery plans. Some of these projects have been funded 

and completed. Others are still in the implementation phase, while other 

projects are awaiting funding.

Table 4: Example of TAA Projects at Midwest TAA Center, October 1995-May 2000

Source: GAO derived from Midwest TAA Center information.

Client Project 1 Project 2 Project 3 Project 4 Project 5

Firm #1 Technical certification 

consulting

New equipment 

selection

Market research Technical certification 

registration

Information system 

upgrade

Firm #2 Promotional materials Sales representative 

development

Productivity 

improvement

Firm #3 Strategic marketing Promotional materials Process consulting

Firm #4 Manufacturing 

technology study

Information system 

upgrade

Marketing materials Implement price 

quoting software

Firm #5 Market development Promotional materials Export market study

Firm #6 Strategic marketing Information system 

upgrade

Product design project Software upgrade

Firm #7 Web site and online 

catalog development

Manufacturing 

representative search

Strategic planning

Firm #8 Facility layout 

evaluation

Software upgrade Strategic planning Strategic planning

Firm #9 Paint process 

improvement

Dealer development Information system 

upgrade

Firm #10 Information system 

upgrade

Market research Distribution consulting Manufacturing 

technology
Page 31 GAO-01-12 Trade Adjustment for Firms

Appendix III

GAO Questionnaire for Certified Firms ApendxiI
Appendix III

GAO Questionnaire for Certified Firms

Page 32 GAO-01-12 Trade Adjustment for Firms
Appendix III

GAO Questionnaire for Certified Firms

Page 33 GAO-01-12 Trade Adjustment for Firms
Appendix III

GAO Questionnaire for Certified Firms

Page 34 GAO-01-12 Trade Adjustment for Firms
Appendix III

GAO Questionnaire for Certified Firms

Page 35 GAO-01-12 Trade Adjustment for Firms
Appendix III

GAO Questionnaire for Certified Firms

Page 36 GAO-01-12 Trade Adjustment for Firms
Page 37 GAO-01-12 Trade Adjustment for Firms

Appendix IV

Comments From the Department of 

Commerce ApendxiIV

Note: GAO comments 

supplementing those in 

the report text appear at 

the end of this appendix.

See comment 1.
Appendix IV

Comments From the Department of 

Commerce

Page 38 GAO-01-12 Trade Adjustment for Firms

See comment 2.

See comment 3.
Appendix IV

Comments From the Department of 

Commerce

Page 39 GAO-01-12 Trade Adjustment for Firms
Appendix IV

Comments From the Department of 

Commerce

Page 40 GAO-01-12 Trade Adjustment for Firms

The following are GAO’s comments on the Department of Commerce’s 

letter dated November 27, 2000.

GAO Comments 1. As we stated in our report, we conducted interviews with a small 

number of TAA participants to gain a better understanding of the 

program and to learn more about the firms’ perspectives on TAA 

program operations. The number of interviews that we conducted with 

client firms receiving assistance was small (72 firms), and the selection 

of those firms interviewed was confined to firms certified as eligible in 

1998 and those nominated by the Centers (with no constraint on the 

certification date), and not random. Thus, their responses can not be 

treated as representative of the views of all TAA participants.

2. Our report relates what TAA participants told us about factors other 

than TAA assistance that they said contributed to the overall success of 

the firms. We believe that, for these firms, factors other than TAA 

assistance also contributed to their ultimate success. Our report does 

not draw any conclusion about the TAA program’s success overall.

3. We highlighted this issue because Centers use inconsistent approaches 

in their efforts to allocate the limited program funds. We think this 

raises questions about whether program resources are being used 

effectively across all Centers.
Page 41 GAO-01-12 Trade Adjustment for Firms

Appendix V

GAO Contacts and Staff Acknowledgments ApendxiV

GAO Contacts Steve Lord (202) 512-4379

Judy Knepper (202) 512-8554

Acknowledgments In addition to those listed above, Carlos Evora, Matthew Helm, Phil Herr, 

Christian Hougen, Kathleen Joyce, and Tim Wedding made key 

contributions to this report.

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