Some type of additional trade adjustment assistance will be part of any effort by the House and Senate to approve an extension of Trade Promotion Authority (TPA) for the President to send trade agreements to Congress for a vote without amendments. Trade Adjustment Assistance for Farmers (TAAF) for fiscal years (FY) 2003-2007 was included in the Trade Act of 2002 which authorized the current TPA.
The current program is modest in that payments are limited to $10,000 per applicant per year for all TAAF payments and further limited by a $65,000 per year cap on total payments under the counter-cyclical farm program and the TAAF. It covers producers of raw commodities adversely affected by import competition “from like or competitive products” based on the U.S. Harmonized Tariff Schedule. Producers also qualify for technical assistance from local USDA Extension Service offices to produce alternative products.
At least three affected growers are needed to file a petition with the Foreign Agricultural Service (FAS) of USDA on behalf of all producers. The producers can file their own petition or a grower association can file for them. A petition can apply to the entire country, a region or a state. The application must show that the average market price for the most recent marketing year was 80 percent or less of the average for the previous five marketing years. FAS must also establish that imports “contributed importantly” to the decline in market prices. Petitions are filed between August 15 and January 31 for payments in the fiscal year that ends on September 30.
The petition for certification is only two pages. It includes information about the producers filing the petition and the size of the impacted area. Price data are to be from the National Agricultural Statistics Service if available. It includes a section for the “basis for request of adjustment assistance.”
If a petition is certified by FAS, payments are equal to one-half of the difference between the market price for the year and 80 percent of the average price for the last five years and may be less if program funding is insufficient to cover all petitions. Producers in the defined area have 90 days after a petition is certified to apply for benefits at the local Farm Service Agency office. Producers must have a decline in income from farming, aquaculture or fishing and average adjusted gross income of less than $2.5 million per year. A new petition can be filed in subsequent years if imports increase and market prices stay below 80 percent of the five-year average.
According to information on the FAS website, in FY 2004, the first year of the program, 25 petitions were filed and 12 of those were certified. Shrimp and fish petitions were most often filed and the most certified. In FY 2005, 22 petitions were filed and 16 of those were certified. Shrimp and fish again led with the most petitions filed and certified. In FY 2006, 21 petitions were filed, but only four were certified. Shrimp and fish again led the list with nine petitions, but all nine were rejected. The four petitions certified included avocados from Florida, snapdragons from Indiana and two Concord grape petitions – one from Washington and the other from Michigan.
The Department of Commerce administers an assistance program for manufacturers that offers a 50-50 cost share program for consultants, engineers, designers or industry experts to improve the competitive position of import-impacted manufacturers. The Department of Labor provides services for workers that include income support, relocation allowances, job search allowances, a health coverage tax credit and retraining. About 120,000 workers were involved in the program in FY 2006.
The Administration’s proposed FY 2008 USDA budget does not include funding for the TAAF program. According to USDA’s budget summary, the department did a PART (Program Assessment Rating Tool) review of the TAAF and it received the lowest possible rating of “Results Not Demonstrated” because there was not sufficient performance information to assess whether the program has achieved it goals. The program is currently authorized at not more than $90 million per year, but only $4 million was spent in FY 2006, $21 million in FY 2005 and $16 million in FY 2004.
In December of 2006 the Government Accountability Office released a report on the Trade Adjustment Assistance for Farmers Program. They found that producers had difficulty meeting the requirement of the program. Of the 101 petitions submitted, 64 were complete and timely and 34 of those were certified. The number of petitions submitted declined by half from 2004 to 2006, while the number of petitions denied doubled because of the need to show a 20 percent decline in prices and continued increases in imports. As of the end of FY 2006, about 13,000 producers had received technical assistance and 8,000 had received cash payments. The median cash payments were as low at $1,600 in FY 2004 and $2,500 in FY 2005. Salmon and shrimp farmers received about 90 percent of the payment in those two years. USDA believes the need to show a reduction in total net farm income may keep some producers from receiving payments.
Some producers of raw agricultural products will be out of position in the market as trade barriers decline, and an assistance program is part of the political process of gaining the economic benefits of freer trade. The current program with its low benefit cap and need to show continued increases in imports and lower market prices has been of limited benefit to most farmers and ranchers. Congress will have the difficult task of designing a program that provides transitional help for producers who have lost significant income without loosening the rules to the point that producers who have suffered only minor financial dislocations receive substantial payments.