Trade Adjustment Assistance: Industry Certification Would Likely Make More Workers Eligible, but Design and Implementation Challenges Exist
Released: 2007-07-30T00:00:00

Letter

Background

The Trade Adjustment Assistance (TAA) program is the federal government’s primary program specifically designed to provide assistance to workers who lose their jobs as a result of international trade. In addition, to assist U.S. domestic industries injured by unfair trading practices or increases in certain fairly traded imports, U.S. law permits the use of trade remedies, such as duties on imported products.

TAA Certification Process and Eligibility Requirements

Currently, Labor certifies workers for TAA on a layoff-by-layoff basis. The process for enrolling trade-affected workers in the TAA program begins when a petition for TAA assistance is filed with Labor on behalf of a group of workers. Petitions may be filed by the employer experiencing the layoff, a group of at least three affected workers, a union, or the state or local workforce agency. Labor investigates whether a petition meets the requirements for TAA certification and is required to either certify or deny the petition within 40 days of receiving it.

The TAA statute lays out certain basic requirements for petitions to be certified, including that a significant proportion of workers employed by a company be laid off or threatened with layoff and that affected workers must have been employed by a company that produces articles. In addition to meeting these basic requirements, a petition must demonstrate that the layoff is related to international trade in one of several ways: Increased imports—imports of articles that are similar to or directly compete with articles produced by the firm have increased, the sales or production of the firm has decreased, and the increase in imports has contributed importantly to the decline in sales or production and the layoff or threatened layoff of workers.

Shift of production—the firm has shifted production of an article to another country, and either: the country is party to a free trade agreement with the United States; or the country is a beneficiary under the Andean Trade Preference Act, the African Growth and Opportunity Act, or the Caribbean Basin Economic Recovery Act; or there has been or is likely to be an increase in imports of articles that are similar to or directly compete with articles produced by the firm.

Affected secondarily by trade—workers must meet one of two criteria: Upstream secondary workers—affected firm produces and supplies component parts to another firm that has experienced TAA-certified layoffs; parts supplied to the certified firm constituted at least 20 percent of the affected firm’s production, or a loss of business with the certified firm contributed importantly to the layoffs at the affected firm.

Downstream secondary workers—affected firm performs final assembly or finishing work for another firm that has experienced TAA-certified layoffs as a result of an increase in imports from or a shift in production to Canada or Mexico, and a loss of business with the certified firm contributed importantly to the layoffs at the affected firm.

Labor investigates whether each petition meets the requirements for TAA certification by taking steps such as surveying officials at the petitioning firm, surveying its customers, and examining aggregate industry data. In the surveys, Labor obtains information on whether the firm is now importing products that it had once produced or whether its customers are now importing products that the firm produced. They also obtain information on whether the firm has moved or is planning to move work overseas and, to identify a secondary impact, whether the layoff occurred due to loss of business with a firm that was certified for TAA. When Labor has certified a petition, it notifies the relevant state, which has responsibility for contacting the workers covered by the petition, informing them of the benefits available to them, and telling them when and where to apply for benefits.

If Labor denies a petition for TAA assistance, the workers who would have been certified under the petition have two options for challenging this denial. They may request an administrative reconsideration of the decision by Labor. To take this step, workers must provide reasons why the denial is erroneous based on either a mistake or misinterpretation of the facts or the law itself and must mail their request to Labor within 30 days of the announcement of the denial. Workers may also appeal to the U.S. Court of International Trade for judicial review of Labor’s denial. Workers must appeal a denial to the Court within 60 days of either the initial denial or a denial following administrative reconsideration by Labor.

Trade Adjustment Assistance Benefits

Under TAA, workers certified as eligible for the program may have access to a variety of benefits: Training for up to 130 weeks, including 104 weeks of vocational training and 26 weeks of remedial training, such as English as a second language or adult basic education.

Extended income support for up to 104 weeks beyond the 26 weeks of unemployment insurance (UI) benefits available in most states.

Job search and relocation benefits fund participants’ job searches in a different geographical area and relocation to a different area to take a job.

A wage insurance benefit, known as the Alternative Trade Adjustment Assistance (ATAA) program, pays older workers who find a new job at a lower wage 50 percent of the difference between their new and old wages up to a maximum of $10,000 over 2 years.

A health coverage benefit, known as the Health Coverage Tax Credit (HCTC), helps workers pay for health care insurance through a tax credit that covers 65 percent of their health insurance premiums.

In addition, case managers provide vocational assessments and counseling to help workers enroll in the program and decide which services or benefits are most appropriate. Local case managers also refer workers to other programs, such as the Workforce Investment Act, for additional services.

Trade Remedies

The United States and many of its trading partners have used laws known as “trade remedies” to mitigate the adverse impact of certain trade practices on domestic industries and workers, notably dumping—when a foreign firm sells a product in the United States at a price below fair market value—and foreign government subsidies that lower producers’ costs or increase their revenues. In both situations, U.S. law provides that if dumped or subsidized imports injure a domestic industry, a duty intended to counter these advantages be imposed on imports. Such duties are known as anti-dumping and countervailing duties. In addition, in the event of an increase in imports of a certain product, safeguards, such as quotas or tariffs, may be applied to these products to provide an opportunity for domestic industries to adjust to increasing imports. As of March 30, 2007, there were 280 antidumping and countervailing duty orders, and according to officials at the ITC, there were no safeguard measures in place.

The process for imposing a trade remedy begins when a domestic producer files for relief or when the Department of Commerce (Commerce) initiates the process, followed by two separate investigations: one by Commerce to determine if dumping or subsidies are occurring, and the other by the ITC to determine whether a domestic U.S. industry is materially injured by such unfairly traded imports or, in the case of safeguards, experiences serious injury from a rise in imports. As a result of an affirmative determination by both Commerce and the ITC in an antidumping or countervailing duty investigation, a duty is imposed on the imported good that can reflect the difference in the price in the foreign market and the price in the U.S. market, known as the “dumping margin,” or the amount of the foreign subsidy. In the case of an affirmative determination in a safeguard investigation, the ITC provides the President with one or more recommendations for remedying the situation, such as a tariff or quota on an imported product. The President may implement or modify the recommendations, or take no action due to U.S. economic or national security interests.

Labor Certified Two- Thirds of Petitions Investigated and Generally Processed Petitions in a Timely Manner

Labor certified two-thirds of petitions that it investigated over the past 3 fiscal years, certifying nearly 4,700 petitions, covering an estimated 400,000 workers (see table 1). Over the past 3 fiscal years, the number of petitions certified has declined 17 percent, from nearly 1,700 in fiscal year 2004 to 1,400 in fiscal year 2006. This decline parallels a decline in the number of petitions filed.

Labor has generally processed petitions in a timely manner over the past 3 fiscal years. Labor’s average processing time has remained relatively steady, taking on average 32 days to conduct an investigation and determine whether to certify or deny the petition. Labor met the requirement to process petitions within 40 days for 77 percent of petitions it investigated during fiscal years 2004 to 2006 (see fig. 1). Labor most often took only an additional day to process the remaining petitions, and 95 percent were completed within 60 days. Labor officials said that they are not always able to meet the 40-day time frame because they sometimes do not receive necessary information in a timely manner from company officials.

In fiscal year 2006, the most common reason petitions were denied was that workers were not involved in producing an article, a basic requirement of the TAA program. Of the more than 800 petitions filed in fiscal year 2006 that were denied, 359 (44 percent) were denied for this reason (see fig. 2). Of those petitions denied because workers did not produce articles, most came from two industries, business services, such as computer programming, and airport-related services, such as aircraft maintenance (see app. II for the complete list of industries that had petitions denied by reason for the denial).

During the past 3 fiscal years, workers appealed decisions in 16 percent of the approximately 2,600 petitions that Labor initially denied, with the vast majority appealed to Labor. Labor’s decisions were reversed in one-third of the appeals (see fig. 3). Labor officials told us that appeals are often reversed because Labor receives new information from petitioners or company officials, as part of the appeals process, that justifies certifying the petition.

Although few denied petitions are appealed to the U.S. Court of International Trade—42 in the last 3 fiscal years—many of the recent appeals concern the issue of whether workers were involved in the production of articles. In fiscal years 2005 and 2006, Labor’s original denial was reversed in 13 cases appealed to the Court, and most of these cases addressed the issue of whether workers produced articles. Some of these cases concerned workers who produced software, which Labor had regarded as a service when the software was not contained in a physical medium, such as a CD-ROM. In 2006, Labor revised its policy, stating that software could be considered an intangible article because it would have been considered an article if it had been produced in a form such as a CD-ROM. Following this decision, a Labor official reported that Labor had certified 12 of 21 petitions investigated in the software and computer- related services industries.

Industry Certification Based on Multiple Certifications Would Likely Increase Eligible Population, but Some Implementation Challenges Exist

An industry certification approach based on three petitions certified within 180 days would likely increase the number of workers eligible for TAA, but presents some design and implementation challenges. For example, among the industries for which we could obtain complete data, we found that the number of additional workers eligible for TAA in those industries could more than double if no additional criteria were used or expand by less than 10 percent with relatively restrictive criteria. However, such an approach presents some design and implementation challenges. For example, designing the specific criteria an industry must meet to be certified could be challenging due to the possibility of making workers who lose their jobs for reasons other than trade eligible for TAA. In addition, it may be challenging to ensure that all workers in certified industries are notified of their potential eligibility for TAA, verify workers’ eligibility, and initiate the delivery of services to workers.

Extent of Increase in Eligible Workers Depends on How Additional Criteria Are Set

From 2003 to 2005, 222 industries had three petitions certified within 180 days and therefore would have triggered an investigation to determine whether an entire industry should be certified, if such an approach had been in place at that time. These industries represented over 40 percent of the 515 industries with at least one TAA certification in those 3 years and included 71 percent of the workers estimated to be certified for TAA from 2003 to 2005. The 222 are a diverse set of industries, including textiles, apparel, wooden household furniture, motor vehicle parts and accessories, certain plastic products, and printed circuit boards (see app. III for a list of the 222 industries).

The proposals for this approach include a requirement that an investigation be initiated after an industry meets the three certifications in 180 days criterion. This investigation would use some additional criteria to determine whether these certifications represent a broad industrywide phenomenon or just a collection of firms experiencing similar pressures from foreign trade. As a result, not all 222 industries would likely be certified industrywide. The additional criteria that an industry would have to meet to be certified have not yet been specified, but they could include factors such as the extent to which an industry has been impacted by imports, changes in production levels in the industry, or changes in employment levels.

The number of workers that would become eligible for TAA through an industry certification approach depends on what additional criteria are established. For example, we analyzed 69 industries in the manufacturing sector for which we had comprehensive data on petitions, unemployment, trade and production. These industries represent about one-third of the 222 industries that would have been eligible for industrywide certification (13 percent of industries with petitions certified). If there were no additional criteria beyond the 3 petitions criteria and all of the 69 industries had been certified, the number of workers eligible for TAA in these industries would have more than doubled over the number that were actually certified under the current layoff-by-layoff process. However, if certification were limited to those industries that also had a 10 percent increase in the import share of the domestic market over a 1-year period, we estimated that the increase in eligible workers in these industries would have been more modest, at roughly 70 percent. Under a slightly more restrictive criterion—a 15 percent increase in the import share of the domestic market—the increase in the number of eligible workers would be less, an estimated 39 percent in those 69 industries (see fig. 4). If we were able to analyze the program as a whole the magnitude of the increases would likely be different. This would occur, in part, because the number of workers would increase only in those industries that met the three petition criterion and would not increase in those that did not meet the criterion. Thus the multiplier we developed for the 69 industries could not be applied broadly to all 515 industries with certified petitions.

More stringent criteria would result in a smaller increase in the number of workers eligible for TAA. For example, if over a 3-year period, an industry were required to have a 15 percent increase in the import share of the domestic market in 1 year, as well as increases in the import share during the 2 other years, we estimated that there would have been a 9 percent increase in the number of workers eligible for TAA in the 69 industries we analyzed. (For further analysis of the 69 industries, see app. IV.)

Potential Design and Implementation Challenges Exist

Although industry certification based on three petitions certified in 180 days is likely to increase the number of workers eligible for TAA, it also presents several potential design and implementation challenges.

Designing additional criteria for certification. Any industrywide approach raises the possibility of certifying workers who were not adversely affected by trade. Even in industries that are heavily impacted by trade, workers could lose their jobs for other reasons, such as the work being relocated domestically. For example, Labor officials told us that they have denied petitions in the apparel industry, which has been heavily impacted by trade, because the layoff was not related to trade but occurred as a result of work being moved to another domestic location. The risk of certifying non-trade affected workers increases with more lenient criteria for industrywide certification. On the other hand, narrow criteria may limit the potential benefits of industry certification because few industries would be certified. Furthermore, using the same thresholds for all industries would not take into account industry-specific patterns in trade and other economic factors. For example, the import share of the domestic market may be volatile and change significantly from year to year in some industries, while other industries may experience smaller year-to- year growth in imports that could represent a significant impact over time.

Determining appropriate duration of certification. Determining the length of time that an industry would be certified may also present challenges. If the length of time is too short, Labor may bear the administrative burden of frequently re-investigating industries that continue to experience trade-related layoffs after the initial certification expires. In addition, a shorter duration may make it difficult for workers to know whether their industry is certified at the particular time that they are laid off. As a result, workers may not know whether they need to file a regular TAA petition to become certified. However, if the time period is too long, workers may continue to be eligible for TAA even if conditions change and an industry is no longer adversely affected by trade.

Defining the industries. How the industries are defined would significantly affect the number of workers who would become eligible for TAA through an industry certification approach. Our analysis defined industries according to industry classification systems used by government statistical agencies. However, some of these industry categories are broad and may encompass products that are not adversely affected by trade. On the other hand, certain products within an industry that, as a whole, does not show evidence of a trade impact may have been adversely affected by trade. For example, the men’s footwear industry might not be classified as adversely trade-impacted because it did not have a 15 percent increase in the import share of the domestic market over a 1-year period, but it is possible that certain types of men’s footwear, such as casual shoes or boots, could be adversely impacted by trade. More narrow definitions would reduce the possibility of certifying workers who are not adversely affected by trade, but doing so would cover fewer workers and could increase the administrative burden for Labor because it might have to investigate more industries.

Notifying workers and initiating the delivery of services. Notifying workers of their eligibility for TAA has been a challenge and would continue to be under industry certification. Under the current certification process, workers are linked to services through the petition process. The specific firm is identified on the petition application, and state and local workforce agencies work through the firm to reach workers in layoffs of all sizes. However, getting lists of employees affected by layoffs and contacting them is sometimes a challenge for states and would remain so under industry certification. For industry certification, however, there are no such procedures in place to notify all potentially eligible workers in certified industries. For large layoffs in a certified industry, state and local workforce agencies could potentially use some of the processes they currently have in place to connect with workers, but it is not apparent that there would be a built-in link to workers in small layoffs. In large layoffs, firms with 100 or more employees are generally required to provide 60-days advance notice to state and local workforce agencies, who then work with the firm to provide rapid response services and inform workers about the various services and benefits available, including TAA. However, in smaller layoffs in certified industries, or when firms do not provide advance notice, workforce agencies would not know that the layoff has occurred and therefore would not be able to notify the workers of their eligibility for TAA.

Verifying worker eligibility. Verifying that a worker was laid off from a job in a certified industry to ensure that only workers eligible for TAA receive TAA benefits may be more of a challenge under industry certification than under the current system. For example, it may be difficult to identify the specific workers who made a product in the certified industry if their employer also makes products that are not covered under industry-wide certification. In order to realize one of the potential benefits of industry certification—reduced processing time— this verification process would need to take less time than it takes workers to become certified through the layoff-by-layoff certification process. As we noted, Labor takes on average 32 days to complete its investigation of a petition, but it generally takes additional time for individuals to be notified of their eligibility. In addition, determining which entity would conduct this verification may also present challenges. A centralized process conducted by Labor would likely be unwieldy, while verification by state or local workforce agencies could take less time but ensuring consistency across the nation might prove challenging.

Certifying Industries Subject to Trade Remedies Could Increase Eligible Population, but Extent Is Uncertain and Potential Challenges Exist

Using trade remedies to certify industries for TAA could expand eligibility for workers in some industries, but the extent is uncertain and there are challenges associated with using trade remedies to identify trade-related job losses. Such an approach could expand eligibility because some trade remedies may cover areas in which there have been few or no certified TAA petitions. However, some trade remedies are for products that may already be covered by TAA petitions, so the number of workers eligible for TAA may not increase substantially in these areas. It is difficult to estimate the impact of this approach on eligibility because trade remedies are applied to specific products, and data on unemployment by product do not exist. In addition, this approach presents some of the same challenges as with an industry certification approach based on three petitions certified in 180 days. For example, workers who did not lose their jobs due to international trade could be made eligible for TAA in part because trade remedy investigations are focused on injury to an industry as a whole and not principally on employment impacts.

Extent of Increase in Worker Eligibility Difficult to Estimate Due to Overlap with TAA Petitions and Lack of Data

Using trade remedies for industrywide certification could result in expanded worker eligibility for TAA in a number of industries. For example, 280 antidumping and countervailing duty orders covering over 100 products were in place, as of March 30, 2007. The number of workers eligible for TAA would increase under this approach in areas in which there have been few or no TAA petitions. For example, even though the ITC found that the domestic industry producing certain kinds of orange juice had been materially injured by imports, there do not appear to have been any certified TAA petitions for workers producing orange juice.

However, the number of workers eligible for TAA may not increase substantially in certain areas in part because of overlap between trade remedies and TAA petitions. For example, over half of outstanding antidumping and countervailing duty orders are for iron and steel products, which have also received hundreds of petitions under TAA. However, even where the products covered by trade remedies and TAA overlap, eligibility could expand to some unemployed workers whose firms did not submit a petition or did not qualify under current TAA certification criteria. In addition, industries with trade remedies may not necessarily have experienced many trade-related job losses because the ITC investigates whether an industry as a whole has been injured and does not specifically focus on employment, according to an ITC official. Whereas Labor investigates whether increased imports contributed importantly to a layoff or threat of layoff, the ITC looks at a wide range of economic factors including but not limited to employment, such as sales, market share, productivity, and profitability.

It is difficult to estimate the extent that industry certification based on trade remedies would increase the number of workers eligible for TAA because trade remedies are imposed on specific products coming from specific U.S. trade partners, and data are not available on job losses at such a detailed level. The product classifications for a given trade remedy can be very narrow, such as “carbazole violet pigment 23” or “welded ASTM A-312 stainless steel pipe.” Estimating the increase in the number of eligible workers would require unemployment information categorized by individual product, and these data do not exist.

Potential Challenges Exist with Using Trade Remedies to Identify Trade-Related Job Losses

An approach using trade remedies presents some of the same challenges as an industry certification approach based on three petitions certified in 180 days. Workers who did not lose their jobs due to trade could possibly be made eligible for TAA under a trade remedy approach for several reasons. First, trade remedies are not necessarily an indicator of recent trade-related job losses, in part because the ITC’s process is not employment-focused and even recent injury determinations can be based on several prior years of data. For example, officials at Labor told us that trade remedies have not been useful in their investigations of TAA petitions because they are based on several years’ worth of information and can be unrelated to current industry and employment conditions. Furthermore, trade remedies are intended to mitigate the trade-related factors that caused the injury to the industry, so employment conditions in an industry could improve after the trade remedy is in place. In addition, as with the other industrywide approach, notifying workers in industries with trade remedies and connecting them with services would also be a challenge, as well as verifying that they were laid off from a certified industry. The verification process could be particularly challenging with an approach based on trade remedies because of the narrow product classifications of some trade remedy products. In firms that make multiple products, for example, more than one type of stainless steel pipe, it may be difficult to identify which specific workers worked on the products subject to trade remedies.

An ITC official also expressed concern that seeking a waiver to share information collected during injury investigations with Labor could hamper ITC’s ability to collect confidential business information from firms. By statute, the ITC cannot share with other government agencies business proprietary information submitted to it in a trade remedies investigation without a waiver from the submitter.

Agency Comments

We provided a draft of this report to the Department of Labor and the International Trade Commission. The Department of Labor did not comment. The International Trade Commission provided technical comments, which we incorporated into the report as appropriate.

As arranged with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution of the report until 30 days from its issue date. At that time, we will send copies of this report to the Secretary of Labor, the Chairman of the International Trade Commission, relevant congressional committees, and other interested parties. Copies will also be made available to others upon request. The report will also be available at no charge on GAO’s Web site at http://www.gao.gov.

Please contact me on (202) 512-7215 if you or your staff have any questions about this report. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of the report. Key contributors to this report are listed in appendix V.

Appendix I: Objectives, Scope, & Methodology

Our objectives were to determine: (1) trends in Labor’s certification of Trade Adjustment Assistance (TAA) petitions, (2) the extent to which industry certification based on three petitions certified within 180 days would increase the number of workers eligible for TAA, and (3) the extent to which certification of industries subject to trade remedies would increase the number of eligible workers. We also identified potential challenges with an industry certification approach. To address these questions, we analyzed Labor’s data on TAA petitions, the Bureau of Labor Statistics’ Mass Layoff Statistics data, the Census Bureau’s data on trade and production, and the International Trade Commission’s data on trade remedies. In examining recent trends in Labor’s certification of TAA petitions, we analyzed Labor’s petitions data from fiscal years 2004 to 2006. However, in estimating the extent to which industry certification would increase the number of eligible workers, we analyzed data from calendar years 2003 to 2005 because that was the most recent time period that trade, production, and Mass Layoffs Statistics data were all available. In addition, we interviewed officials at Labor and the International Trade Commission. We conducted our work from January to June 2007 in accordance with generally accepted government auditing standards.

Analysis of Labor’s Petitions Data to Determine Certification Trends

To determine trends in Labor’s certification of TAA petitions, we analyzed Labor’s data for petitions filed from fiscal years 2004 to 2006. We assessed the reliability of key data by interviewing Labor officials knowledgeable about the data, observing a demonstration of the database, reviewing our prior assessments of the data, and conducting edit checks. For a small number of petitions, we identified logical inconsistencies or missing values in the data. We brought these issues to the attention of Labor officials and worked with them to correct the issues before conducting our analysis. Complete data on reasons petitions were denied were only available for fiscal year 2006 because Labor only began to collect the data in 2005. As a result, we reported information on reasons petitions were denied for only fiscal year 2006.

In analyzing the number of petitions denied for TAA that were appealed to Labor, we did not include in our analysis petitions that were appealed only for a denial of Alternative Trade Adjustment Assistance (ATAA) wage insurance benefits. These petitions had been certified for TAA after Labor’s initial investigation but denied for wage insurance benefits. In analyzing data on petitions that were appealed to the U.S. Court of International Trade, we compared Labor’s data to Court documents. We determined that Labor’s data on appeals to the Court were not complete. As a result, we supplemented Labor’s data with a review of Court documents. At the time of our review, some petitions filed during fiscal years 2004 to 2006 may still have been undergoing an appeals process. Our analysis of petition decisions and appeals reflect the outcomes of petitions at the time of our review.

Despite these limitations, we determined that Labor’s petitions data were sufficiently reliable for the purposes of this report, which was to provide information on trends in Labor’s certification of petitions.

Estimate of Extent to Which Industry Certification Based on Three Petitions Certified in 180 Days Would Increase Worker Eligibility

To estimate the extent to which industry certification based on three petitions certified in 180 days would increase the number of workers eligible for TAA, we first analyzed Labor’s data on petitions certified from calendar years 2003 to 2005 to identify which industries would have had three petitions certified in 180 days in that time frame. We then analyzed the Bureau of Labor Statistics’ Extended Mass Layoff Statistics survey to determine the number of workers who had been laid off in those industries. We used this data as a proxy for the full number of workers that would have been eligible for TAA had an industrywide certification process been in place at the time. We also collected Census trade data (imports and exports) by industry and Census production data.

Of the 222 industries that had three petitions certified in 180 days from 2003 to 2005, we were able to analyze 69 industries for which we had comprehensive data. The available data sources used different industry classification systems which we matched to each other. Labor’s petitions data classified industries according to the Standard Industrial Classification System (SIC), while the Mass Layoff Statistics and Census’ trade and production data classified industries based on variations of the North American Industry Classification System (NAICS). In addition, our production data, from Census’ Annual Survey of Manufacturers, was limited to manufacturing industries. We were able to find complete and well-defined matches (one-to-one NAICS to SIC, or many-to-one NAICS to SIC) between the SIC- and NAICS-defined industries for 69 of the 222 industries. We could not use data on industries where a NAICS code corresponded to multiple SIC codes. Because the 69 industries were not drawn from a random sample, the results of our analysis are not necessarily representative of the entire 222 industries.

In analyzing Labor’s petitions data to identify the industries that would have met the three petitions certified in 180 days criteria during 2003 to 2005, we added an additional criterion to our analysis, that the three petitions had to be from three different companies. When companies lay off workers at multiple divisions or locations, they may file separate petitions for each division or location. We added the criterion to prevent an industry from becoming eligible to be considered for certification when the three petitions were from the same company.

In estimating the number of workers certified for TAA under the current program, we used estimates from Labor’s petitions data on the number of workers affected by a layoff at the time that TAA petitions are filed with the Department of Labor. At the time petitions are submitted, companies may not know exactly how many workers will be affected. The Department of Labor does not collect information on the number of workers ultimately certified. We used these data to estimate the increases in the number of workers who might be eligible for TAA with the addition of an industry certification approach. They should not be relied upon to support precise numbers on workers certified for TAA.

In estimating the increase in worker eligibility, we used data from the Bureau of Labor Statistics’ Mass Layoff Statistics program to estimate the number of unemployed workers in industries that could have been eligible for industrywide certification. The Mass Layoff Statistics program collects reports on mass layoff actions that result in workers being separated from their jobs. Monthly mass layoff numbers are from establishments which have at least 50 initial claims for unemployment insurance (UI) filed against them during a 5-week period. Extended mass layoff numbers (issued quarterly) are from a subset of such establishments—private- sector nonfarm employers who indicate that 50 or more workers were separated from their jobs for at least 31 days. We used Extended Mass Layoffs to reduce the possibility of including workers who were on temporary layoff and subject to recall.

Several limitations of the Mass Layoff Statistics data are relevant to this analysis. First, Mass Layoff Statistics only include workers from larger firms (workers with at least 50 employees). It also only includes workers laid off through larger layoffs (layoffs of at least 50 employees). In 2003, there were 1,404,331 initial claims in the Extended Mass Layoffs. In contrast, estimated unemployment due to permanent layoffs in 2003 was 2,846,000, and total unemployment in 2003 was 8,774,000. Thus, workers involved in extended mass layoffs represented 49 percent of permanent layoffs and 16 percent of total unemployment in 2003.

Second, the Bureau of Labor Statistics suppressed MLS data on the number of layoffs and the number of workers in the data they provided to us, when the number of layoffs in an industry was less than three.

Approximately 40 percent of the data were suppressed. The results reported here reflect the following imputation criterion. Suppressed values were imputed with the mean number of laid-off workers per layoff event within the broad industry group (by year), multiplied by 1.5. We also conducted sensitivity analysis where we used more conservative imputation criteria; results were not highly sensitive to the criterion we selected.

In order to identify changes in trade related to individual industries, we calculated the share of imports in the domestic market for each year between 2002 and 2005. We defined the domestic market as U.S. domestic production (measured by shipments) minus exports plus imports. We then calculated the change in the import share of the domestic market from 2002 to 2003, 2003 to 2004, and 2004 to 2005. We examined the distribution of these changes annually across industries and calculated sample statistics. The mean change for the 69 industries was 6.1 percent in 2003, 13.01 percent in 2004, and 3.5 percent in 2005. The standard deviation for these industries was 11.0 percent in 2003, 30.25 percent in 2004, and 13.74 percent in 2005. We also compared these statistics to those of the entire population of 222 industries and found that they were similar. Based on this analysis, we determined that using criteria of annual changes of 10, 15, and 20 percent for the share of imports in the domestic market was reasonable to illustrate the impact of changing criteria on the number of potential workers eligible for TAA. We also examined compound annual changes across all 4 years and found similar results.

Analysis of Trade Remedies

To determine the extent to which eligibility for TAA would expand if trade remedies were used to certify industries for TAA, we reviewed the industries and products covered by antidumping and countervailing duties. To the extent possible, we assessed areas of overlap between TAA petitions and trade remedies. We also compared the eligibility criteria for TAA with ITC’s process for determining if an industry has been injured.

Interviews with Labor and International Trade Commission

To identify potential challenges with industry certification, we interviewed officials at the Department of Labor and International Trade Commission.

Appendix II: Industries in Which Petitions Were Denied, Fiscal Year 2006

Appendix III: Industries with Three Petitions Certified in 180 Days, 2003 to 2005

Tables 5 and 6 list the 222 industries that had three petitions certified in 180 days from 2003 to 2005. Table 5 lists the 69 industries we were able to analyze with trade and unemployment data, and table 6 lists the industries we were not able to analyze due to data limitations.

Appendix IV: Additional Analysis of the 69 Industries

To assess the sensitivity of the criteria to changes in the trade threshold, we analyzed the 69 industries for which we had complete data using a range of thresholds. We found that more stringent criteria sometimes resulted in appreciable differences in the number of workers eligible for TAA in those industries. For example, if to be certified, an industry not only had to have a 10 percent increase in the import share of the domestic market in 1 year but also had an increase in the import share during the 2 other years between 2003 and 2005, we estimated that there would have been a 24 percent increase in the number of workers eligible for TAA in the 69 industries we analyzed (see table 7). Because the 69 industries for which we had comprehensive data were not selected randomly, the results cannot be generalized to the entire group of 222 industries that met the three petitions certified in 180 days criteria nor are they predictive of future levels of eligible workers.

Appendix V: GAO Contacts and Staff Acknowledgments

GAO Contact

Acknowledgments

Dianne Blank, Assistant Director Yunsian Tai, Analyst-in-Charge Michael Hoffman, Rhiannon Patterson, and Timothy Wedding made significant contributions to all aspects of this report. In addition, Kim Frankena assisted with research on trade remedies, and Rachel Valliere provided writing assistance. Christopher Morehouse, Theresa Lo, Mark Glickman, Jean McSween, and Seyda Wentworth verified our findings.

Related GAO Products

Trade Adjustment Assistance: Program Provides an Array of Benefits and Services to Trade-Affected Workers. GAO-07-994T. Washington, D.C.: June 14, 2007.

Trade Adjustment Assistance: Changes Needed to Improve States’ Ability to Provide Benefits and Services to Trade-Affected Workers. GAO-07-995T. Washington, D.C.: June 14, 2007.

Trade Adjustment Assistance: Changes to Funding Allocation and Eligibility Requirements Could Enhance States’ Ability to Provide Benefits and Services. GAO-07-701, GAO-07-702. Washington, D.C.: May 31, 2007.

Trade Adjustment Assistance: New Program for Farmers Provides Some Assistance, but Has Had Limited Participation and Low Program Expenditures. GAO-07-201. Washington, D.C.: December 18, 2006.

Trade Adjustment Assistance: Labor Should Take Action to Ensure Performance Data Are Complete, Accurate, and Accessible. GAO-06-496. Washington, D.C.: April, 25, 2006.

Trade Adjustment Assistance: Most Workers in Five Layoffs Received Services, but Better Outreach Needed on New Benefits. GAO-06-43. Washington, D.C.: January 31, 2006.

Trade Adjustment Assistance: Reforms Have Accelerated Training Enrollment, but Implementation Challenges Remain. GAO-04-1012. Washington, D.C.: September 22, 2004.