February 04,2002

Grassley, Others File Dissenting Views on Trade Adjustment Bill

WASHINGTON – Sen. Chuck Grassley, ranking member of the Committee on Finance, andother Republican members late today filed the following report with the Committee.


We reluctantly oppose S. 1209 in its current form. Our opposition is based upon substantiveconcerns with the bill and procedural irrerularities which occurred during consideration of the billbefore the Senate Finance Committee.

This is highly regrettable. Trade Adjustment Assistance has long enjoyed strong bipartisan supportin the Finance Committee. Unfortunately, this bill is a notable departure from our history ofbipartisanship in this area. We hope that the bill will be improved as it proceeds through thelegislative process.

Substantive Concerns
There are significant substantive concerns with the Majority report and the bill. First, we disagreewith the premise in the Majority report that globalization has resulted in downward wage pressurein the United States. In fact, a short report by the non-partisan Congressional Research Servicerecently concluded that "there is likely little causality running from a rising level of trade to poordomestic wage performance. Slow average wage growth is fully and credibly linked to poorproductivity growth. A small share of rising wage inequality can be linked to trade, but the great bulkof this trend is probably more soundly rooted in a rising relative demand for skill, growing out of achanged pattern of technological change." Craig K. Elwell, Is Globalization the Force Behind PoorU.S. Wage Performance?: An Analysis, Congressional Research Service Short Report for Congress,Updated January 12, 2001.

Second, we believe that international trade has proven to be a positive force in our economy. Onein ten Americans work at jobs that depend on the export of goods and services. Exports drive morethan one-fourth of our economic growth. International trade enhances the quality of life for the vastmajority of Americans. Conversely, restrictions on imports are like taxes. They raise the cost ofeveryday products like food, clothing, and electronic goods. Because of past trade agreements suchas the North American Free Trade Agreement and the Uruguay Round, the typical American familyof four realizes benefits of roughly $1,300 to $2,000 annually. We want to ensure that the Americanpeople continue to reap these benefits. That is why we strongly support renewing Trade PromotionAuthority for the President at the earliest possible time.

However, we understand that growth from trade creates change in an economy, and change resultsin the dislocation of some workers. We concur that the U.S. government can play a productive rolein ensuring that workers who are displaced receive the training they need to re-enter the workforceas quickly as possible. That is why we support Trade Adjustment Assistance. Still, there are somesignificant problems with S. 1209 as currently written which need to be addressed. A summary ofour concerns follows.

Secondary Workers
The current bill covers secondary workers in supplier or downstream firms that provide goods andservices to a firm certified as eligible for Trade Adjustment Assistance. We are concerned with thisprovision for a number of reasons. First, it is not clear that there is a need to expand TradeAdjustment Assistance to secondary workers. Most secondary workers are already covered underthe Workforce Investment Act. Second, we are concerned that including secondary workers inupstream and downstream industries with no limitations will make the program too costly and verydifficult to administer. For example, the current bill requires the Department of Labor to certifywhether primary and secondary workers are eligible for Trade Adjustment Assistance within 40 days,as opposed to 60 days under current law. Thus, the current bill not only reduces the time availablefor certifying primary workers, but it also vastly expands the pool of workers to be certified withinthat time frame. It is not at all clear that the Department of Labor can effectively administer theseprovisions without a substantial increase in its budget.

We would urge our Democratic colleagues to carefully consider limitations upon who can qualify asa secondary worker for purposes of Trade Adjustment Assistance benefits. We would also suggestthat there may be a need to differentiate between primary and secondary workers for purposes ofpetition review.

Consolidation of Eligibility Requirements
The current bill consolidates the eligibility requirements of the current Trade Adjustment Assistanceprogram and NAFTA Trade Adjustment Assistance but drops the current law requirement that a firmalso experience a decrease in sales or production to be eligible for Trade Adjustment Assistance.Dropping the requirement that a firm also experience a decrease in sales or production could resultin certification of workers whose firm is thriving but laying off workers due to technological changeor other reasons. Furthermore, eliminating the link between job loss and decrease in sales orproduction will make it more difficult to demonstrate that the workers are dislocated due to imports.Training Requirement Waivers

S. 1209 changes current law to create 11 conditions under which training requirements may bewaived. While we support reducing the number of conditions under which waivers can be granted,there is concern that some of the categories of waivers in the bill are overly broad and difficult todefine.

Supportive Services
The current bill grants states the authority to apply for and receive National Emergency Grant fundingto cover the costs of supportive services, including transportation, childcare, and dependent care.We believe it is inefficient and impractical to use National Emergency Grants to provide supportiveservices in this context. Instead of requiring a separate application process with a separate fundingsource we believe it would be more efficient to have dislocated workers dually enrolled in theWorkforce Investment Act dislocated worker program. This would give workers access to the fullarray of Workforce Investment Act transition services at no additional cost.

Performance Evaluation and Unfunded Mandates
We strongly support establishing a system to evaluate the performance of the Trade AdjustmentAssistance program. However, we believe that the performance criteria in S. 1209 emphasprocess over results and includes subjective measures of performance which are difficult to define andevaluate. We are also concerned that the performance evaluation requirements in the current billcould create an unfunded mandate on states by requiring a tremendous increase in data infrastructureat the state level. We believe that requiring states to design and implement a new wage insuranceprogram without providing additional resources for them to do so is also an unfunded mandate.

Health Insurance Coverage Options for Individuals Eligible for Trade Adjustment AssistanceWe believe the health insurance mechanisms in S. 1209 that require the creation of new federalentitlement programs and the expansion of others, are inappropriate. Trade Adjustment Assistancehas never provided health insurance assistance, temporary or otherwise, to eligible workers, and wecannot support doing so now.

S. 1209's health insurance coverage options are permanent. The bill’s subsidy program forces thoseeligible for COBRA coverage to keep it, even though those policies are inflexible and typically moreexpensive than others in the market. According to one recent study, families pay about $7,200 forCOBRA coverage each year. See Commonwealth Fund, How the Slowing U.S. Economy ThreatensEmployer-Based Health Insurance, November 2001. According to the non-partisan CongressionalResearch Service, the cost of an average policy in the individual market is about $2,400 per year. Webelieve creating a new federal entitlement program that subsidizes only the marketplace’s mostexpensive, least efficient insurance product is unacceptable.

For those workers not eligible for COBRA (and only 57 percent of non-elderly workers werepotentially eligible for COBRA in 1999 according to a recent report, see Urban Institute, CouldSubsidizing COBRA Health Insurance Coverage Help Most Low-Income Unemployed?, October2001), the bill gives states the right to open up their Medicaid programs to cover these workers.Medicaid programs are already under severe financial pressure, and we believe states are not likelyto take on the additional costs. Further, since each state legislature would have to act to amend itsstate Medicaid plan, delays would be substantial, and would leave workers with gaps in theircoverage. We believe expanding this already unstable entitlement program for eligible workers is alsonot acceptable.

We believe it would be a serious mistake to set a new standard for providing health insurancecoverage under Trade Adjustment Assistance. We especially oppose any approach that gives workersand their families a single "take it or leave it" option of purchasing COBRA or enrolling in Medicaidwhen more affordable policies exist.

Trade Adjustment Assistance for Communities
The current bill authorizes a new program to be administered by the Department of Commerce whichwould provide assistance to trade-affected communities. This is achieved by creating a new Officeof Community Trade Adjustment within the Economic Development Administration. We believe thatcreating such an office duplicates EDA’s long-standing Office of Economic Adjustment Assistanceand is therefore unnecessary and inefficient.

Harmonization of the NAFTA Trade Adjustment Assistance program and the Trade AdjustmentAssistance program is a goal which we support. We also support enhancing and improving thecurrent program. However, as outlined above, the proposal which passed the Committee takes theprocess in the wrong direction and is too costly. The Congressional Budget Office estimated that S.1209 would result in total direct spending of $12.4 billion over the 2002-2011 period, an increase of$8.6 billion more than the existing program over that same time period.

We remain open to working with our Democratic colleagues to improve the current bill in the hopesthat we can develop a bipartisan product which will not only be more effective and efficient, butwhich we can all support.

Procedural Irregularities
We are also concerned about a number of procedural irregularities which occurred duringconsideration of the bill. Due to time constraints, there were several amendments pending duringconsideration of the bill which were neither open to debate or were Senators allowed to request a rollcall vote. We believe that it is important for all Senators to have an opportunity to be heard and forevery Senator to have an opportunity to request a roll call vote on their amendment. We hope topreserve these rights during consideration of future legislation in the Finance Committee.

In addition, it is not at all clear that consideration of the bill was concluded within the time frameallotted to the Committee. We understand that the 2-hour rule was invoked during consideration ofthis bill. The 2-hour rule, if specifically invoked by a member, stipulates that no committee can meetfor longer than two hours once the Senate is in session. While there were attempts to completeCommittee consideration of the bill within two hours, there is some question as to whether theseattempts were successful.

Customs User Fees
I am pleased that the Chairman included my amendment expressing the Sense of the Senate thatCustoms User Fees should be used only for Customs purposes. However, the underlying billdisregards the amendment as I understand that the Chairman intends to re-authorize the collectionof Customs User Fees to pay for the expanded Trade Adjustment Assistance program which is clearlynot for Customs purposes. I am concerned about this approach for a number of reasons. First, thisis a continuation of a trend we have seen this year. Customs User Fees have already been used as anoffset for an unrelated program, S. 1052, the "Bipartisan Patients Protection Act."

Second, I have substantive concerns with this approach. When Congress first authorized customsfees the avowed purpose was to underwrite the costs of Customs commercial operations. I believethat if fees are to be extended they should be re-authorized for Customs purposes. And I an not alonein this view. The National Association of Foreign Trade Zones writes:

"[We] recently learned that the Trade Adjustment Assistance Bill...includes language that wouldprovide for extension of the Merchandise Processing Fee to offset the cost of the TAA program. Asyou are aware, the fee was originally established by Congress to offset the cost of the commercialoperations of the U.S. Customs Service. The [National Association of Foreign Trade Zones] isstrongly opposed to any extension or re-authorization of the [Merchandise Process Fee] that woulddivert the funds from their congressionally intended purpose."

And the National Association of Foreign Trade Zones is not alone. The National Customs Brokers& Forwarders Association of America writes:

"[We are] aware of pending legislation due for consideration regarding Trade Adjustment Assistance.While [we] support TAA, we cannot support the use of user fees to ‘pay for’ this program.

Merchandise processing fees need to be directed to the agency for which they were collected–theU.S. Customs Service."

I am afraid that many Senators are under the mistaken impression that extending these fees is simplykeeping a convenient money stream flowing. That is not so.

The Customs User Fee structure includes what those fees are spent on. By extending fees foradditional years, Congress is also extending those spending priorities for those years. If we keepextending the fees as a way to pay for unrelated activities, we extend the whole way the fee moneyis spent which by law is on commercial activities.

In fact, the Customs Service stated in a memorandum I received on June 20, 2001, that usingCustoms User Fees as an offset could harm its ability to offset Customs activities. The CustomsService is currently reviewing ways to restructure Customs User Fees which are set to expire in 2003.If we extend the fees in this bill, and that extension becomes law, we may never have an opportunityto effectively restructure these fees. I believe we should give the Customs Service the opportunityto review these fees, and not preempt their efforts by extending the fees before the review iscomplete.

Customs Reauthorization
I am pleased that S. 1209 includes Senator Kyl’s amendment re-authorizing appropriations for theU.S. Customs Service and for the Office of the United States Trade Representative. The Kylamendment is exactly like H.R. 3129, the Customs Border Security Act of 2001, except that twosections of that bill on Customs pay reform and immunity are not included.

The amendment authorizes the U.S. Customs Service, International Trade Commission, and Officeof the U.S. Trade Representative. It includes numerous provisions and funding authorizations to fightterrorism and illegal drug trafficking. The Administration has also requested that Customs be ableto search outgoing mail since U.S. mail is sometimes used to transmit laundered money out of thecountry. The amendment allows Customs, when appropriate, to search outbound mail to help stopterrorism and illegal drug trafficking. The amendment addresses privacy issues – no letter may beread by Customs officers unless a valid warrant is obtained. The amendment will get new, betterequipment and increased personnel to Customs for its air and sea interdiction programs ($360 milliontotal over two years), and for its U.S.-Mexico border operations ($90 million).

The amendment includes a provision to require advanced electronic manifesting on passengers andcargo, so that the Customs Service will have important information in advance on passengers andcargo.

The amendment will also authorize funding to reestablish the New York Customs offices destroyedon September 11.

The amendment authorizes funding for Customs’ new automation system, the AutomatedCommercial Environment. In 1998, Customs processed 19.7 million commercial entries. Thisvolume is expected to double by 2005. The current automation system is on the brink of continualbrownouts and possible shut downs. If this happens, it will cost American taxpayers millions ofdollars.

I am pleased that the Chairman recognizes the critical importance of authorizing appropriations forthe Customs Service. Including Customs authorization in this bill will help us track down terrorists,fight illegal drug trafficking, and strengthen our economy by facilitating cross-border trade.

Health Insurance Coverage Options for Individuals Eligible for Trade Adjustment AssistanceWhile I support a limited program to provide temporary health insurance assistance to individualseligible for Trade Adjustment Assistance, I believe the mechanisms in S. 1209, which require thecreation of new federal entitlement programs and the expansion of others, are inappropriate. I believethat any federal relief provisions in this area should be targeted, time-limited and should providemaximum flexibility for workers. More specifically, I believe it is important to ensure that thoseeligible for temporary health insurance assistance under S. 1209 have the option of using thatassistance to purchase health insurance products in the individual market that best suits their needs.