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Trade Adjustment Assistance for Firms: Economic, Program, and Policy Issues, Date: August 9, 2002 1 (September 9, 2002)

handle is hein.tera/crser0167 and id is 1 raw text is: Order Code RS20210 Updated August 9, 2002 CRS Report for Congress Received through the CRS Web Trade Adjustment Assistance for Firms: Economic, Program, and Policy Issues J. F. Hornbeck Specialist in International Trade and Finance Foreign Affairs, Defense, and Trade Division Summary Although free trade provides benefits to all trading partners, reducing barriers to trade forces firms and industries in all countries to adjust to stiffer global competition. For some, the adjustment process can be difficult and Congress, in recognizing this problem, has authorized programs to assist trade-impacted firms, industries, and workers. This report focuses on the trade adjustment assistance program for firms and industries, which provides technical assistance to help them develop strategies to remain competitive in the changing international economy.' The TAA legislation expired on January 10, 2002, but the program continued to function with FY2002 appropriations until reauthorized by Congress. A new reauthorization was signed into law by President Bush on August 6, 2002 as part of the Trade Act of 2002 (P.L. 107-2 10). This report will be updated periodically to continue following the firm TAA program. Economics of Trade Adjustment Economists tend to agree that in defining the rules of exchange among countries, freer trade is preferable to protectionism. The theory of comparative advantage suggests that freer trade leads to mutual gains for countries because through exchange, they can specialize in producing those goods at which they are relatively more efficient, while trading for those at which they are relatively less so. Firm productivity increases through trade by reallocating resources to their more efficient use, while both firms and consumers gain by having a wider variety of goods to choose from at lower prices. It is also true that as countries adopt freer trade policies, often through negotiated trade agreements, economies must adjust to increased trade, creating both winners and losers. Some firms and industries will grow as they expand into overseas markets, whereas others will contract, merge, or perhaps even fail when faced with increased competition. While the adjustment process may be healthy from a macroeconomic Congressional Research Service *** The Library of Congress For a discussion of worker assistance and current legislation, see the CRS trade electronic briefing book: [http ://www.congress.gov/brbk/html/ebtral1.shtmll

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