Introduction

Chairman Manzullo, I would like to thank you and Representative Napolitano for the opportunity to appear at this field hearing of the House Committee on Small Business and to discuss the Economic Development Administration’s (EDA) Trade Adjustment Assistance (TAA) program for firms. My comments will briefly summarize the history, process, and results of the program.

History

EDA’s Trade Adjustment Assistance for firms program was originally authorized under the Trade Act of 1974, as amended. Congress recently extended the authorization of the program through September 30, 2007, under the Trade Act of 2002, which President Bush signed into law last month, on August 6.

The purpose of the TAA for firms program is to help manufacturing and producing firms that have lost sales and employment as a result of increased imports of similar or competitive goods. The program is a unique federal response for mitigating the problems that firms encounter as a result of changing trade patterns. It is also fully consistent with the concepts of free trade. Rather than relying on quotas, tariffs, or other trade barriers, the TAA for firms program helps trade-impacted firms become more efficient and competitive within the global marketplace.

Since 1978 the Department of Commerce has supported a national network of Trade Adjustment Assistance Centers (TAACs) to help injured firms in navigating through this process. Currently, there are twelve TAACs in the network. California, for example, is served by the Western TAAC, which is sponsored by the University of Southern California. It is located at 3716 South Hope Street, Suite 200, Los Angeles, California 90007, and may be contacted at telephone number (213) 743-2732. This contact information, along with a summary of my remarks about the Trade Adjustment Assistance for firms program will be available in paper form for all who are interested and will be provided to Representative Napolitano’s office.

Process

There are three steps that a firm must undertake to attain assistance under the TAA for firms program: certification, preparation and approval of an adjustment proposal, and implementation of the adjustment proposal.

In the first step, EDA determines if a firm is eligible for assistance under the TAA program. The firm submits to EDA a petition and other information, which documents how it has been adversely impacted by increased imports. A TAAC will assist a firm, at no cost, in preparing this petition, in assembling the necessary supporting documentation, and in submitting it to EDA for consideration. EDA, essentially using a “reasonable person test,” must find that a firm reduced employment by 5 percent or 50 employees (whichever is less) and lost sales, and that increased imports of goods similar or competitive with the goods made by the petitioning firm contributed significantly to those losses. If EDA makes those findings, it issues the firm a certificate of eligibility to apply for assistance under the TAA program.

The second step involves the preparation of the firm’s adjustment proposal and its approval by EDA. A certified firm must have an adjustment proposal approved by EDA before it can receive assistance under the TAA program. A TAAC will assist a firm in preparing and submitting the adjustment proposal to EDA. The firm must pay the TAAC at least 25 percent of the preparation cost of adjustment proposal, and the TAAC will pay the remaining share out of the funding it receives from EDA. The adjustment proposal is essentially a strategy for guiding the firm’s recovery. EDA expects the adjustment proposal to include an unbiased diagnosis of the firm’s strengths, weaknesses, threats and opportunities, and to identify specific technical assistance tasks that will help the firm in its recovery efforts. Among other things, the tasks may include technical assistance in such areas as marketing, product development and diversification, computer system enhancements, production and industrial engineering, and export promotion.

The third step in the TAA program is the implementation of the firm’s adjustment proposal. Once EDA approves a firm’s adjustment proposal, the firm may request assistance from the TAAC in paying for the implementation of its adjustment proposal. Usually, the firm selects a private consultant to provide the technical assistance tasks outlined in its adjustment proposal. In most cases the certified firm pays 50 percent of the consultant’s fee and the TAAC pays the other 50 percent. A TAAC may pay up to $75,000 as its total share of the technical assistance implementation costs for the tasks outlined in a firm’s approved adjustment proposal.

Results

Let me take a moment to share with you examples of the success some firms have had using the TAA Program. We have seen instances of firms that have increased their sales between 13 and 40%, and have decreased their production material costs by almost 40%. The following examples, however, are actual firms that were assisted by the Western TAAC:

· A contract manufacturer of printed circuit boards received assistance in developing a strategy to focus its marketing efforts on customers needing more complex printed circuit boards with higher quality standards and in gaining an ISO-9002 certification standard for its products. Since completing the TAA program, the firm’s sales have increased by 40 percent.

· A die casting firm received assistance in developing and implementing an improved computerized process monitoring and control system to enhance the firm’s flexible manufacturing capabilities. Since completing the TAA program, the firm’s sales have increased by 13 percent and its production material costs have decreased by almost 40 percent.

A 1998 evaluation by the Urban Institute compared certified firms that prepared and implemented adjustment proposals with certified firms that did not. Those firms that implemented their adjustment proposals survived at statistically significant higher rates, added as opposed to losing more employees, and achieved an almost double increase in sales. For the TAA dollars invested in technical assistance implementation, the Urban Institute concluded that by the fifth year after certification, the program: supported one job for every $3,451 invested, and generated $87 in sales for every dollar invested.

Conclusion

Finally, I would like to point out that interested parties may wish to visit the web site of the trade adjustment assistance for firms program, www.taacenters.org, for a more detailed description of the program and its administration. This web site also provides the addresses, telephone numbers, web site addresses and service areas of the twelve TAACs. Questions may also be directed to EDA’s Planning and Development Assistance Division at (202) 482-2127.

Thank you, again, Mr. Chairman, for the opportunity to briefly discuss EDA’s TAA for firms program. I would be happy to answer any questions.