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Summary:
This testimony discusses the Trade Adjustment Assistance (TAA) for Firms program, which is administered by the Department of Commerce's (Commerce) Economic Development Administration (EDA). Over the past decade U.S. imports have almost doubled, reaching $2.7 trillion in 2011. During the same period, the United States entered into free trade agreements that liberalize trade with 14 partner countries. Further trade liberalization is being pursued, including a Transpacific Partnership among 11 nations in the Asia-Pacific region. Although trade expansion can enhance the economic welfare of all trade partners, many firms and workers experience difficulties adjusting to import competition. Congress has responded to concerns about these difficulties with trade adjustment assistance programs. Established in 1962, the TAA for Firms program provides technical assistance to help trade-impacted, economically distressed firms make adjustments that may enable them to remain competitive in the global economy. In fiscal years 2009 through 2012, EDA received $15.8 million annually for the TAA for Firms program. EDA uses its appropriation for the TAA for Firms program to fund 11 TAA Centers (center), which provide assistance to U.S. manufacturing, production, and service firms in all 50 states, the District of Columbia, and the Commonwealth of Puerto Rico. Congress amended the TAA for Firms program under that part of the American Recovery and Reinvestment Act of 2009 known as the Trade and Globalization Adjustment Assistance Act (TGAAA) of 2009 and mandated that we review the operation and effectiveness of these amendments. This testimony is based on our September 2012 report that examined (1) the results of the legislative changes on program operations and participation, (2) the performance measures and data that EDA uses to evaluate the program and what these tell us about the program's effectiveness, and (3) how program funding is allocated and spent. First, we found that the four changes mandated by the 2009 legislation contributed to improvements in program operations and increased participation: (1) Creation of director and other full-time positions: The creation of a director and other full-time positions for the program resulted in reduced firm certification processing times for petitions. (2) New annual reporting on performance measures: EDA has submitted three annual reports to Congress on these performance measures as a result of the legislation. (3) Inclusion of service sector firms: According to our analysis of EDA data, the inclusion of service sector firms allowed EDA to certify 26 firms not previously eligible for assistance from fiscal years 2009 through 2011. (4) Expansion of the "look-back" period from 12 months to 12, 24, or 36 months: Our analysis of EDA data shows that 32 additional firms participated in the program from fiscal years 2009 through 2011 based on the expansion of the look-back period from 12 months to 12, 24, or 36 months. Prior to the legislative changes, firms were only allowed to compare sales and production data in the most recent 12 months to data from the immediately preceding 12-month period. Second, we found that EDA's performance measures and data collection for the TAA for Firms program provide limited information about the program's outcomes, although our economic analysis found a statistically significant association between participation in the program and an increase in firm sales. EDA collects data to report on 16 measures to gauge the program's performance, such as the number of firms that inquired about the program and the number of petitions filed, but most of these measures do not assess program outcomes. EDA is exploring better ways to assess the effect of their efforts on firms. Third, in terms of how funds are allocated and spent, we identified key weakness pertaining to EDA's funding formula. EDA has allocated funding to the 11 TAA Centers using a funding allocation formula that comprises a set of weighted factors; however, the formula does not take into account the potential number of firms in need of the program and differences in costs across the centers. According to a key standard--beneficiary equity--a funding allocation formula should distribute funds according to the needs of respective populations and should take into account the costs of providing program services, so that each service area can provide the same level of services to firms in need.