Trade and the real labor issue

Over the last several weeks, the Bush administration and some of the Democratic leaders in the House of Representatives have been negotiating over the fate of four new Free Trade Agreements (FTAs) awaiting congressional approval. Those talks were ultimately successful, with the primary focus on how to integrate labor issues into international trade agreements.

Securing minimum standards of treatment for workers in the countries with which the U.S. establishes preferential trading relationships is an understandable objective. It is doubtful, however, that many Americans would rate this objective as nearly as high a priority as attending to the needs of American workers adversely impacted by international trade — particularly when the primary federal program to address those needs expires in a few months and urgently needs retooling.

The Trade Adjustment Assistance (TAA) program was created by President Kennedy in 1962 to provide income support and training benefits to workers who lost their jobs due to imports. At the time, TAA was a forward-looking program that made good sense as the United States moved to lower tariffs and generally open itself to foreign trade. Understandably, it was designed to deal with the problems of the 1960s, not those of the 2000s.

But trade and the needs of workers displaced by trade have changed a great deal since 1962. At the time, trade focused primarily upon physical goods — steel, automobiles and other manufactured products. Today, trade often involves services ranging from computer programming to telephone customer support rather than physical products. The issue also is often more one of facilities — production plants or call centers — moving outside the United States rather than of increasing imports forcing closures and layoffs.

Unfortunately TAA has not changed with the times. At least in the opinion of the Bush administration’s Department of Labor (DoL), which administers TAA, the program’s benefits cannot generally be extended to service workers. Bipartisan legislation to extend TAA to service workers has been introduced in both houses of Congress, but it has not been acted upon. The Bush administration has expressed reservations.

In a major revision of TAA in 2002, the Congress and the president agreed to extend TAA to some workers who lose their jobs when the plant they work at moves overseas.  Unfortunately, the DoL has implemented the provision in a very stingy manner and turned down many petitions for plants and facilities that have moved to China and India, two of the most common destinations for plant moves — though the law allows them to extend benefits to these workers.

The 2002 revisions also included two new concepts: 1) providing older TAA recipients, as an alternative to traditional training, the opportunity to accept wage insurance — a government payment to workers who begin work at a new job at a lower wage on the theory that the on-the-job training may be the most effective way to get back into the workforce, and 2) providing a special tax credit for TAA recipients to defray the costs of obtaining health insurance while participating in TAA.

These innovative ideas still have great promise, but the DoL has been slow to release data on the programs and even slower to publicize these possibilities to TAA recipients. There are probably only a relative handful — perhaps 2,500 workers receiving wage insurance and 6,000 receiving the tax credit for healthcare — participating in these new programs. The General Accountability Office suggested that the abysmal outreach effort was a reason for the limited utilization of the new programs.

The DoL’s handling of TAA has also been roundly criticized by the courts that have reviewed and often overturned its decisions. The Court of International Trade described the DoL process as riddled with “flaws and dysfunctions” and expressed the Court’s “mounting frustration” with the DoL.

Of even more immediate concern, the TAA program is set to expire on Sept. 30 this year. If new legislation is not enacted by that date, the program literally stops. This would immediately impact the pool of around 60,000 workers who receive TAA and tens of thousands more who are applying for it at any given time.

In their recent agreement, congressional leaders and the administration indicated that they hope to work toward a broad worker adjustment/education program. That concept holds promise — though it is impossible to judge until it is actually converted into detailed legislation. And — in the meantime — TAA cannot simply be allowed to disappear as the “perfect” program is sought. As President Kennedy knew well in 1962, if the U.S. government is not willing to make a serious, ongoing effort to address the problems created by trade, working Americans can be forgiven for their deep concerns about new trade agreements and free trade, in general.

Mastel is an adviser to the Trade Adjustment Assistance Coalition, a nonprofit group, and a senior adviser at the law firm Akin, Gump, Strauss, Hauer & Feld.