3rd Quarter 2009

(Click on graph for larger view.)

Tennessee TAA Petitions


TAA distribution to Tennessee


Recent Trends in Trade Adjustment Assistance

Signs of Stress in the Tennessee Economy?

by Steven G. Livingston

Tennessee workers and firms are increasingly exposed to international trade. Although growing trade lifts many boats, it also sinks more than a few. One of the few programs for those who are harmed by trade is the Trade Adjustment Assistance (TAA) program, enacted by Congress nearly 50 years ago.  The TAA provides a combination of job training, income support, and tax credits to workers who have lost their jobs as a result of increased imports competition or because production has been shifted overseas. (A similar program exists for specifically NAFTA-related trade as well.)  In this article, we use the TAA program as a sort of "canary in the coal mine" in order to examine the local economy. The larger the usage of the TAA, the greater the stress the local economy may be experiencing. From this perspective, let's look at the TAA trend in Tennessee.

TAA actions begin with a petition from the affected workers, the company, a union or other authorized representative, or a public agency (usually the state employment agency — in Tennessee, the Department of Labor and Workforce Development). The Labor Department's Office of the TAA then examines the petition.  If it is found to have merit, the TAA office issues a certification to that effect, and workers are eligible under the program's auspices. There is some dispute about the true relation between TAA petitions and international trade. Some argue that the number of petitions is inflated because firms and workers will seek help under the TAA even if trade was not really the primary problem. Others respond that the difficulty and length of the TAA process instead leads to fewer petitions than objective trade conditions would warrant. Without trying to judge this argument, one can say minimally that a TAA petition results from some kind of economic hardship and thus, in the aggregate, is signaling . This is probably true even if the petition is rejected.  Rejections are based not on hardship itself, but upon the demonstration of trade as the cause.

Over the past three years, 414 TAA petitions have been introduced from the state of Tennessee.  Petitions rose sharply beginning in mid-2008, spiking in the middle of 2009. This is not conclusive evidence of increasing difficulties, because a liberalization of the program this past May encouraged additional petitions. On the other hand, why was the program liberalized? Presumably due to worsening economic conditions! Nevertheless, the trajectory of the petitions appears, at the moment, to resemble more a sudden spike than it does a secular increase in petitions. The petitions have amounted to the equivalent of one per year for every 50 Tennessee manufacturing establishments. This is only a rough measure, however, because a minority of petitions falls outside the manufacturing sector (for Tennessee, about 13%) and it is possible for the same firm or group of workers to launch multiple petitions. The Armstrong Woods Products plant in Oneida generated seven petitions over the past three years, the most for any operation, and illustrative of the point.

continued on page 2 »