during this 8 year period. Moreover, this period has witnessed the growth of the Supplemental Unemployment Benefit in collective bargaining contracts, i.e. the automobile industry, which, when added to state benefits (aided by federal payments), make up a package of unemployment benefits for some workers which is considerably in excess of 65% for 52 weeks. An increase in both the amount and the duration of adjustment allowances is thus clearly indicated if the adjustment assistance provisions are to serve their purposes. Indeed, despite the quietude of both the Roth Report and President Nixon's Trade Message of November 1969, and of the spokesmen for organized labor before 1970, the Ways and Means Committee surprised everyone by recommending in H.R. 18970 that the readjustment allowance, the major component of Adjustment Assistance, be enlarged from 65 percent of the worker's average weekly wage or 65 percent of the average weekly manufacturing wage, whichever is lower, to 75 percent for each. This is a significant step forward. While there appears to be little reason for not establishing the percentage 5 to 10 percent higher than that, the Ways and Means Committee has in this respect acted quite sensibly in the bill it has recently reported. Unfortunately, it did nothing positive in respect of the other worker's benefits which should have been improved, and nothing at all substantively for firms. The training benefits likewise appear to be less than sufficient in 1970. A maximum of six months beyond the 52 weeks adjustment allowances period appears to represent an inflexibility short duration in light of the fact that the most effective adjustment of the "factors of production" (here, labor) in the United States is in the direction of technologically advanced industries, which require workers with much more extensive training than has been considered normal hitherto. Undoubtedly, the six months maximum period of training is inadequate for a substantial number of the jobs which are, and will be, made available in such industries. Finally, the technical limitations contained in the legislation should be relaxed so that they are more consistent with a genuine intention to provide adjustment assistance, than with the spectre of fraudulant claims. Assistance to Firms.-The substance of adjustment assistance to firms provided for in the 1962 Act was much thinner than that which was to have been made available to workers: a highly complex, rather than an informal, "adjustment proposal" subprocedure following a determination of eligibility; financial assistance in the form of loans at an effective rate of between 7 and 8 percent, with no grace periods permissible in 26 states currently offer benefits of 50% or more of average state weekly wage; in 18 states there is no percentage maximum limit. These are supplemented by Federal payments, and will be increased by some 50% once P.L. 91-373 (the Federal-State Extended Unemployment Compensation Program, Aug. 10, 1970) becomes fully effective. See CCH Unemployment Insurance Reporter ¶¶ 4805, 4081. The Ford Motor Company agreement which expired on Sept. 14, 1970, for example, provided that such supplemental benefits would bring a worker's total benefits to 95% of his weekly after-tax pay. 1 CCH Labor Law Reporter ¶ 59, 923, at 86,069. respect of either interest or principal; and relatively minor tax benefits. this was not by any means a package of benefits calculated to induce wildly enthusiastic support for a liberal trade program even in 1962. Today even the marginal producer who would like to move into another business with promise of something better than a hand-to-mouth existence, to say nothing of aggravation at work and at home, no doubt greets such an “assistance" program with a Gallic shrug. A greatly simplified and informal adjustment proposal procedure would remedy one deficiency, but it would still be a procedural remedial measure. More needs to be done substantively. Here, the interest rate and duration and other terms on borrowing, and the prohibition on grants, appear to be the major current deficiencies. If the United States can make concessional loans for development purposes in less developed countries for terms up to 40 years, at a favorable interest rate of 3 percent, and with a 10-year grace period on principal repayment as it has been doing for many years in the interest of the successful conduct of the foreign relations of our country can it not offer analogous terms, for the same basic reasons, to those whose successful domestic adjustment and development is important to the continuation of liberal trade? If some mix of grants with loans is deemed desirable, in the circumstances of particular cases, is it not desirable to have sufficient legislative flexibility to be able to furnish assistance in that form as well? Again, foreign. aid legislation has for a long time permitted grants for technical assistance, and they have been utilized together with concessional loans in projects and programs looking toward economic development.8 Summary. Even with relaxed eligibility standards, it is difficult to believe that a substantial increase in workers' readjustment and training benefits and the extension of much more favorable concessional finance to firms would be an unduly burdensome cost to the United States. It would be a small price to pay for a sensible trade and foreign policy, as well as a decent recognition of the equities of those affected by impersonal forces. Such a liberalization of benefits would be an expression of the Government's earnest intention to really ease the transitional path for firms and industries. It would speak at least as loudly in those accents as the proposed relaxation of eligibility requirements and together with that relaxation, would represent a significant effort (1) to wean labor from its recent reversion from its stouthearted advocacy of liberal trade in the 1935-1967 period, to the short-sighted protectionism which has been embraced during the 1920's by the American Federation of Labor and (2) to give assurance to small business that extraordinary efforts to aid them to adjust to more economic endeavors would be forthcoming. Indeed, given the existing paucity of substantive adjustment assistance for firms, improvements along the lines suggested in all likelihood would be far more impressive of the Government's serious intention to facili * Secs. 234(c)-(e) Foreign Assistance Act of 1969, (P.L. 91-175) and predecessor legislation. tate the adjustment of firms than would be a mere relaxation of the eligibility requirements. Conclusion The improvements in the procedure and in the substance of adjustment assistance herein urged would, if effectuated, mark an impressive advance in our ability to assist firms and workers to adjust, as a dynamic society seeks to serve the needs of its people through the most efficient allocation of all of its resources, human and material. They would indicate that the Government is more prepared to recognize its obligation to provide for the general welfare by easing the path to economic health and well-being of those who are thrown out of work or enterprise by impersonal forces, regardless of the extent to which they are "internal" or "external", than it was in 1962. Eventually, it is believed, it should make no more difference in benefits or otherwise whether there is any alleged connection, however remote, between imports and adversity than when the cause of adversity lies elsewhere. These changes might hasten that day. It must be added, however, that a fundamental condition of adjustment assistance-indeed its raison d'etre is assistance to firms and workers to adjust to that increased import competition which a liberal trade policy attempts to encourage. In addition to the other multifarious casualties that a reversal or serious impairment of such a policy entails, such a reversal or impairment must inevitably make meaningless and eventually superflous assistance which is not connected with such adjustment. In short, firms and workers have no moral case for adjustment assistance if they are unwilling to adjust to increased import competition -and what they have no moral case for they will stand an excellent chance of losing, as a democratic society progressively understands its processes. TRADE ADJUSTMENT ASSISTANCE By Marvin M. Fooks I. INTRODUCTION. II. THE IMPORTANCE OF ADJUSTMENT ASSIST- XI. I. INTRODUCTION The United States has had a trade adjustment assistance program since 1962. The program has not achieved its major goals. It has failed to neutralize resistance to a liberal trade policy. And, the goal of economic adjustment intended by Congress has not been attained. The inability of many injured firms and workers to avail themselves of the benefits of the program in its early years has made it impossible for large segments of the business and labor community to endorse expansionist trade policies. More recently, workers unemployed because of import competition have not received the full range of benefits promised by the program, and only a few firms injured by import competition have received assistance. The causes of failure are evident and with varying degrees of difficulty can be eliminated. The barriers to successful program implementation most easily dealt with are those imposed by the Trade Expansion Act of 1962 (TEA) and agency regulations related to that law. The barriers more difficult to remove are those created by the inadequacies of other economic and social policies and institutions. The trade adjustment assistance program enacted by Congress in 1962 cannot be administered in the manner intended by Congress. The Trade Expansion Act's rules determining eligibility to apply for adjustment assistance, the Act's lengthy and complex procedures for determining whether those rules are met, and the manner in which a number Marvin M. Fooks is an International Economist at the Department of Labor and a staff member of the Commission on International Trade and Investment Policy. of different federal and state agencies are required to operate under those procedures rule out the swift and certain administration of adjustment assistance benefits to injured firms and workers. To meet the real concerns of those injured by import competition and to facilitate the desired economic change without prolonging and aggravating economic injury, workers and firms must be confident that they can qualify for assistance. Equally important is the need to assure injured workers and firms that public policy and public institutions are adequate to deal with the problems of economic injury, i.e., that equitable and effective benefits will be delivered. The Trade Expansion Act can be amended to make it easier for firms and workers to qualify for adjustment assistance benefits and to improve the benefit package and delivery system. But an improved trade adjustment assistance program will fail if economic conditions in the nation or a locality cannot generate alternative employment opportunities at least equivalent to those eliminated as a consequence of foreign competition. Similarly, the program cannot achieve its objective if the public employment system does not attain a high capability to match workers with suitable jobs, to prepare workers for available jobs, and to provide workers with specific job availability information on a national basis. If the national unemployment rate is low, it is likely that most economic displacement and unemployment resulting from import competition could be managed by a modest adjustment assistance program. Adjustment problems of older workers and non-diversified communities would remain to be dealt with in a direct and concentrated manner. However, with high unemployment levels, the problems of economic adjustment become increasingly general in nature and cannot be managed by a program, such as the adjustment assistance program, that cannot stimulate effective demand for resources. Appropriate monetary and fiscal policies, in addition to comprehensive labor and manpower programs and policies, are required to create the preconditions of a successful trade adjustment assistance program. In short, the present adjustment assistance program may work in a situation of relatively high labor demand and economic diversification. It is doubtful whether it can cope with economic dislocations that occur in significantly dissimilar situations. This paper contains suggestions for improvement of the adjustment assistance program. Some of the suggested improvements make no fundamental changes in the scope of the present program. Other alterations proposed do envision a more ambitious adjustment assistance effort that would facilitate the process of economic change. II. THE IMPORTANCE OF ADJUSTMENT ASSISTANCE Adjustment assistance policy logically falls within the framework of major domestic, economic and social policies. Recent history has con |