The fair track to expanded free trade: making TAA benefits more accessible to American workers.

• Author: Mateikis, William J.
• Position: Trade adjustment assistance

1. INTRODUCTION II. THE POLITICS OF U.S. TRADE LIBERALIZATION A. U.S. Trade Liberalization After Smoot-Hawley B. The Quid Pro Quo of Trade Adjustment Assistance for Fast Track Authority III. THE DEFECTIVE CERTIFICATION PROCESS AND UNSUITABLE SCHEME FOR JUDICIAL REVIEW A. DOL's Flawed Investigative Process B. The Inapt Scheme for Judicial Review IV. MAKING TAA BENEFITS MORE ACCESSIBLE TO ELIGIBLE WORKERS A. Administrative Improvements B. Legislative Changes V. CONCLUSION I. INTRODUCTION

   The trade adjustment assistance (TAA) that American production workers are entitled to--if they are certified by the U.S. Department of Labor to have lost their jobs due to increased imports or shifts in production to foreign countries--might appear to be little more than a token provision of extended unemployment benefits and training of questionable value. (1) When considered in light of the political economy of trade liberalization, however, TAA is the primary method of compensating workers for trade-related job displacement. (2) At times over the past three decades, TAA has been the quid pro quo for fast track authority; the political bargain struck on behalf of American production workers with free trade advocates. (3) Without fast track negotiating authority, the Executive branch would have great difficulty reaching multilateral, regional, and bilateral trade agreements. (4) And once reached, Congress would have no practical chance of passing those agreements as negotiated without an up-or-down vote with limited congressional debate and no amendments. (5) Because of the changing nature of U.S. trade politics, TAA remains an important feature in the political economy of U.S. trade liberalization. (6)

   This paper does not claim that further trade liberalization is impossible without changes to the TAA program. It is not a political assessment of whether workers hurt by expanded free trade have enough power to block fast track. Nor is it an economic assessment of the efficacy of the TAA program. Instead, this paper builds the case, from a legal perspective, for how and why the Department of Labor (DOL or the Agency) can and should improve the process of certifying workers' eligibility to apply for TAA benefits and suggests how Congress could amend the Trade Act of 1974 (7) to make certification of production workers and--if the program is expanded to cover them--service workers easier. The central thesis of this paper is: if Congress again wants to use the TAA program in a bargain for fast track authority, then DOL must fix its broken certification process and Congress should amend the TAA Act to reduce worker resistance to expanded free trade.

   The inadequacies of the program cast doubt on whether it truly assists workers, and hence, whether it is really adequate compensation to those hurt by expanded free trade. The Agency's certification process nevertheless needs repair so long as it remains the principal mechanism in place to help workers adjust to job loss caused by expanded free trade. This paper demonstrates how and why the certification process is defective and suggests how to fix it. Moreover, the broken certification process is compounded by an inapt scheme for judicial review of the Agency's negative determinations by the U.S. Court of International Trade (CIT) (8) and the U.S. Court of Appeals for the Federal Circuit (Federal Circuit). (9) Therefore, this paper also explains how and why the scheme of judicial review is unsuitable for TAA cases. More importantly, this paper advocates changes to that scheme.

   Since fast track negotiating authority expired on June 30, 2007, (10) and the current authorization of the TAA program ended on September 30, 2007, (11) now is the right time for DOL to fix its broken certification process. Now is also an opportune time for Congress to amend the Trade Act of 1974 to make it easier for workers displaced by trade to access TAA benefits. (12) If DOL improved its administration of the TAA certification process and Congress amended the statute as suggested here to reduce worker resistance to expanded free trade, Congress could once again use the TAA program as the quid pro quo for renewal of fast track authority. (13)

   Part II of the paper outlines the politics of U.S. trade liberalization since the mid-1930s and shows that, at times over the past three decades, TAA has been the quid pro quo for fast track authority. Part III then explains how and why DOL's certification process is defective, and how and why that broken process is compounded by an unsuitable scheme of judicial review. Part IV recommends what the Agency can and should do to repair the defects, and suggests how Congress could amend the Trade Act of 1974 to make it easier for workers displaced by expanded free trade to get TAA benefits. Part V concludes the discussion with a brief reminder of what is at stake if the TAA program is not made usable as the quid pro quo for the renewal of fast track benefits and gives a short summary of the less attractive alternatives advocated by others.

2. THE POLITICS OF U.S. TRADE LIBERALIZATION

   As used interchangeably in this paper, the term "trade liberalization" or "expanded free trade" means: the reduction of barriers to trade in goods and services accomplished through voluntary commitments made by sovereign countries in multilateral, regional, and bilateral trade agreements--the international law mechanisms that have facilitated the integration of the world's economies and the globalization of commercial relations. (14) Broadly speaking, trade liberalization or expanded free trade involves making global commerce in goods and services free of trade barriers, trade-distorting restrictions, protectionism, and, indeed, any regulation or commercial tax that burdens international commercial activity. (15)

   1. U.S. Trade Liberalization After Smoot-Hawley

      Since the mid-1930s, the United States has pursued a consistent and deliberate policy of expanded free trade. (16) Before World War II, the United States began reducing the high tariff rates that Congress had imposed on imports under the Smoot-Hawley Act of 1930 (17) through bilateral trade agreements. (18) In 1947, the United States and twenty-two other countries formed the General Agreement on Tariffs and Trade (GATT), (19) which was designed to propel free trade and prevent backsliding through the voluntary reduction of trade-distorting tariffs and export subsidies on nonagricultural goods. (20) Since 1947, eight rounds of GATT negotiations have been completed. (21) The first five rounds substantially reduced tariffs on industrial goods through parallel, bilateral trade agreements. (22) The last three GATT rounds resulted in multilateral agreements to further reduce tariffs and subsidies on industrial and agricultural goods, as well as nontariff barriers to trade:

      * the Kennedy Round, completed in 1967, reduced average, world-wide tariffs by roughly 35% through an across-the-board 50% reduction in tariffs on most industrial goods by developed countries; (23)

      * the Tokyo Round, completed in 1979, further reduced tariffs on industrial goods through a more complex formula, and established new codes to address nontariff barriers to trade; (24)

      * the Uruguay Round, completed in 1994, cut the average tariff imposed on goods by developed countries yet another 40%--from 6.3% to 3.9%--and established a framework for reducing quotas, tariffs, and subsidies on agricultural goods, while phasing out quotas on textiles and clothing previously protected under the Multi-Fiber Arrangement. (25)

      The Uruguay Round was the most far-reaching of all GATT negotiations. (26) The World Trade Organization (WTO) was created during the Uruguay Round, in part, to settle trade disputes among member countries. (27)

      Since the Trade Act of 1974, the United States has also pursued a policy of trade liberalization through nonreciprocal, preferential trading arrangements, such as the Generalized System of Preferences. (28) More recently, the U.S. has expanded free trade through reciprocal, bilateral, and regional preferential free trade agreements, such as the Canada-U.S. Free Trade Agreement of 1988 and, most notably, the 1993 North American Free Trade Agreement (NAFTA). (29)

   2. The Quid Pro Quo of Trade Adjustment Assistance for Fast Track Authority

      Fast track authority has been "the central domestic political prerequisite" for the leadership role the United States has assumed on global trade liberalization since Smoot-Hawley. "By delegating responsibility to the executive and by helping fashion a system that protected legislators from one-sided restrictive pressures, Congress made it possible for successive presidents to maintain and expand the liberal trade order." (30)

      And, as demonstrated below, Congress has often appeased workers' interests, at least in part, by improving the TAA program in exchange for support of major trade legislation, which has included fast track authority. (31)

      Until NAFTA and the Uruguay Round, U.S. trade liberalization generally rested on a broad consensus, based on the unambiguous economic theory that the gains from trade outweighed the costs and, therefore, the net welfare effect of expanded free trade was generally positive for consumers and exporters, even though it produced "losers" in import-competing sectors:

      The central notion that governed the conception of the relationship of trade policy to domestic policy generally was that wherever trade barriers such as tariffs had direct price-distorting effects in the market of the importing country, removal of those barriers enhanced aggregate domestic welfare in that the total gains to consumers could be shown always to exceed the total losses to producers/workers. Put in this crude way, the case for trade liberalization appeared to be totally indifferent to any notion of a just distribution of benefits and burdens from the removal of trade restrictions. (32) The implied...