News from the Tennessee Valley Business

Experts debate trade assistance program

By Eric Fleischauer · 340-2435

A program to assist workers who lose their jobs because of foreign imports is a compromise that some see as better than the possible alternative: an increase in U.S.-imposed trade barriers with foreign countries.

“It may be worth it to buy off the mob,” said Sallie James, a trade policy analyst at the libertarian Cato Institute.

Trade Adjustment Assistance will expire Sept. 30 absent congressional action.

The program has helped some employees in the Decatur area in recent years, but a proposed expansion could increase its significance.

Congress is considering expanding the program, which since 1962 has benefited only manufacturing employees, to cover service jobs.

That change would come after a proposed free trade agreement with South Korea that could impact North Alabama’s high-tech service industry.

Bills in the House and Senate would expand Trade Adjustment Assistance benefits to computer programmers, call-center staffers and other service-sector workers who make up the majority of North Alabama’s work force. Democrats hope to approve the expansion before the program expires Sept. 30.

Alabama impact

In fiscal 2007, Alabama workers received $3.1 million in trade adjustment benefits, 22nd in the nation. The biggest winner in trade adjustment benefits was Pennsylvania with $17.7 million, followed by North Carolina with $14.1 million. Tennessee received $3.2 million in fiscal 2007.

To collect benefits, laid off workers must show that foreign imports cost them their jobs, or they lost their jobs because of a decision to shift production to a U.S. trade partner under a free-trade agreement.

The benefits include retraining and income supplementation, similar to unemployment insurance benefits, conditioned on participation in retraining programs.

Economic conservatives argue the income-supplementation benefits undermine the economic advantages of globalization by reducing the incentive for retraining.

“These sorts of welfare programs interfere with people’s incentives to go out and get a job,” James said. “Research suggests people don’t start applying for work until the week before their benefits expire.”

Both the good and the bad of trade adjustment assistance, from the conservative perspective, is that it is linked to expansion of U.S. trade policy.

“Some proponents of trade adjustment assistance are free-trade economists,” James said. “What they say is that if job dislocation because of trade causes people to start getting protectionist, that slows the political process. It’s worth giving them money.”

In other words, trade adjustment assistance is a negative, but it’s better than a reversal in the U.S. policy favoring free trade.

Reaching people

“Trade adjustment assistance works,” said Harold Rosen, executive director of the Trade Adjustment Assistance Coalition. “The problem with it is it doesn’t reach enough people.”

Expanding eligibility to include service workers would increase the pool of eligible workers and would make the program fairer, Rosen said.

“I’m dealing with a case right now where a company produces furniture. Furniture is getting hit by imports. It was a slam dunk that people who lost their jobs got TAA,” Rosen said. “Part of that same company were people who delivered the furniture. The Labor Department denied those people because they were service workers.”

Limiting trade adjustment assistance to manufacturing employees is unfair, he said, when the service sector is just as vulnerable to foreign trade.

A likely free-trade agreement with South Korea — which has a robust service sector, particularly in computer services and other areas that employ many North Alabamians — makes the expansion of eligibility to service workers urgent, Rosen said.

Rosen said there is no evidence that payment of trade adjustment benefits after a layoff discourage workers from retraining. To the contrary, he said, the benefits facilitate retraining.

“There’s a perception that if you give people unemployment-type benefits, they’re going to sit home and watch TV,” Rosen said. “There is absolutely no empirical evidence to prove that.”

Providing any form of benefits to laid-off workers increases the cost of free trade, which James sees as a mistake.

“If this program was ever beneficial, it was only in association with further trade liberalization efforts,” James said. “If that’s not going to go forward, I don’t see what we’re buying off the mob for.”

Decatur-area companies

According to Department of Labor records, the most recent trade adjustment award for a Decatur company went to workers at Cargill Sweeteners after the company petitioned for benefits in November 2005. Workers successfully argued that increasing imports of sugar cane and other natural sweeteners cost them their jobs.

In 2002, the Department of Labor certified Solutia’s Acrilan employees for trade adjustment benefits.

Solutia’s certification came because one of its customers, a yarn manufacturer, obtained trade adjustment certification for its employees.

Trico Steel employees sought trade adjustment benefits in 2001, after the plant closed, but the Department of Labor denied the petition. Trico workers argued that illegal dumping of hot-rolled steel by China and other countries had cost them their jobs.

Not so, said the Department of Labor after surveying Trico customers. The customers reported they had minimal imports in advance of Trico’s shutdown.

Workers at VF Jeanswear, which had a plant at Holly Pond, fared better in 2001. The Department of Labor determined that the company had outsourced much of its production to other countries, contributing to layoffs.

Rosen said he doubts Congress has time to enact legislation covering service workers before the Sept. 30 deadline. He said he hopes Congress approves a short-term extension of existing legislation, and uses the extra time to add service employees to the list of eligible employees.

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