    Trade Adjustment Assistance: Experiences of Six Trade-Impacted
    Communities (24-AUG-01, GAO-01-838).

    This report reviews how trade adjustment assistance and other
    assistance programs, such as the North American Free Trade
    Agreement Transitional Adjustment Assistance (NAFTA-TAA) program,
    have helped distressed communities deal with the adverse impacts
    of trade. GAO conducted case studies in six such trade-impacted
    communities. The communities in GAO's case study all experienced
    major trade-related plant closures and layoffs in the mid- to
    late-1990s. Two communities lost a large percentage of local jobs
    in sudden plant closures and experienced economic crises. The
    other communities experienced rolling layoffs or a series of
    smaller plant closures that dislocated as many or more workers
    but did so gradually. Experiences in the communities GAO visited
    indicate that Temporary Adjustment Assistance (TAA) and NAFTA-TAA
    assistance to dislocated workers, while substantial, could be
    implemented more effectively. Program administrators and training
    providers in each community said that the programs have
    structural problems that impede effective service delivery. One
    factor that influenced the implementation of training benefits in
    many communities is that a significant percentage of dislocated
    workers needed to earn a high school equivalency degree or take
    remedial courses before they could even start a training program.
    Case study communities' experience with economic adjustment
    showed that the assistance available to them was limited and that
    there are no easy answers to community recovery, even when funds
    are available. These communities had relied on low-skilled
    manufacturing jobs, which are disappearing, and now face the
    difficult task of diversifying their economies while addressing
    fundamental human capital issues. These communities' experiences
    with efforts to assist dislocated workers and adjust to changing
    economic conditions offer several lessons. Program administrators
    and training providers said that bureaucratic rigidities in
    dislocated workers programs limited their flexibility in
    addressing dislocated workers' diverse training needs. Also,
    local officials believe that dislocated worker training programs
    are more effective and job placements much higher when strong
    links exist between training and local business needs.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-01-838
        ACCNO:   A01661
        TITLE:   Trade Adjustment Assistance: Experiences of Six
                 Trade-Impacted Communities
         DATE:   08/24/2001
      SUBJECT:   Community development programs
    	     Foreign trade agreements
    	     Economically depressed areas
    	     Employment or training programs
    	     International trade regulation
    	     Unemployment rates
    	     NAFTA
    	     North American Free Trade Agreement
    	     Transitional Adjustment Assistance
    	     Program
    	     Trade Adjustment Assistance Program
    	     Treasury Community Adjustment and
    	     Investment Program

    ******************************************************************
    ** This file contains an ASCII representation of the text of a  **
    ** GAO Testimony.                                               **
    **                                                              **
    ** No attempt has been made to display graphic images, although **
    ** figure captions are reproduced.  Tables are included, but    **
    ** may not resemble those in the printed version.               **
    **                                                              **
    ** Please see the PDF (Portable Document Format) file, when     **
    ** available, for a complete electronic file of the printed     **
    ** document's contents.                                         **
    **                                                              **
    ******************************************************************
    GAO-01-838

    Report to the Chairman and Ranking Member, Committee on Finance, U. S.
    Senate

    United States General Accounting Office

    GAO

    August 2001 TRADE ADJUSTMENT ASSISTANCE

    Experiences of Six Trade- Impacted Communities

    GAO- 01- 838

    Page i GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities
    Letter 1

    Results in Brief 2 Background 5 Trade- related Layoffs Hurt Case Study
    Communities 8 Assistance to Dislocated Workers Can Be Substantial, but

    Structural Problems Impede Service Delivery 13 Adjustment Assistance Does
    Not Match Communities? Challenges 22 Lessons Learned From Trade- Impacted
    Communities? Experiences 32 Agency Comments and Our Evaluation 34

    Appendix I Watsonville, California, Case Study Profile 36

    Appendix II Coushatta, Louisiana, Case Study Profile 41

    Appendix III Owosso, Michigan, Case Study Profile 46

    Appendix IV Washington and Chocowinity, North Carolina, Case Study Profiles
    51

    Appendix V El Paso, Texas, Case Study Profile 56

    Appendix VI Martinsville and Henry County, Virginia, Case Study Profiles 63

    Appendix VII Objectives, Scope, and Methodology 68

    Appendix VIII Comments From the Department of Commerce 71 Contents

    Page ii GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities
    Appendix IX Comments From the Department of the Treasury 74

    Appendix X GAO Contact and Staff Acknowledgments 78

    Tables

    Table 1: TAA- Certified Workers in Case Study Communities, Fiscal Years
    1995- 2000 10 Table 2: TAA and NAFTA- TAA Payments and Numbers of

    Recipients in Case Study Communities, Fiscal Years 19952000 14 Table 3:
    Profile of TAA and NAFTA- TAA Participants Compared to

    Total U. S. Workforce, Fiscal Years 1999- 2000 24 Table 4: Federal Economic
    Adjustment Assistance to Case Study

    Communities, Fiscal Year 1995- Early Fiscal Year 2001 28 Table 5: Profile of
    Watsonville, CA 36 Table 6: Profile of Coushatta, LA 41 Table 7: Profile of
    Owosso, MI 46 Table 8: Profile of Beaufort County, NC 51 Table 9: Profile of
    El Paso, TX 56 Table 10: Profile of Martinsville and Henry County, VA 63

    Figures

    Figure 1: Timeline for Receipt of TAA and NAFTA- TAA Benefits 7 Figure 2:
    Profiles of Six Case Study Communities 9 Figure 3: Photos of Watsonville, CA
    39 Figure 4: Photos of Coushatta, LA, and a Training Facility in a

    Neighboring Community 42 Figure 5: Photos of Owosso, MI 48 Figure 6: Photos
    of Washington and Chocowinity, NC 52 Figure 7: Photos of El Paso, TX 59
    Figure 8: Photos of Martinsville and Henry County, VA 65

    Page iii GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities
    Abbreviations

    CAIP Community Adjustment and Investment Program EDA Economic Development
    Administration GED General Equivalency Degree NAFTA- TAA North American Free
    Trade Agreement Transitional

    Adjustment Assistance PREP Proactive Reemployment Project TAA Trade
    Adjustment Assistance WIA Workforce Investment Act

    Page 1 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    August 24, 2001 The Honorable Max Baucus Chairman The Honorable Charles E.
    Grassley Ranking Member Committee on Finance United States Senate

    The rapid pace of economic change due to the globalization of national
    economies has heightened concerns about the efficacy of federal trade
    adjustment assistance. While the transition to the ?new economy? has meant
    an increase in technology and service sector jobs, it has also resulted in
    the loss of many manufacturing jobs as companies that cannot compete with
    lower- priced imports close or relocate to lower- wage countries abroad. The
    federal government recognizes that while the benefits of free trade are
    widely dispersed across the economy, the costs of worker dislocation effects
    are more localized. Accordingly, federal trade adjustment assistance
    programs are designed to target aid to dislocated workers through the Trade
    Adjustment Assistance (TAA) and North American Free Trade Agreement
    Transitional Adjustment Assistance (NAFTA- TAA) programs. There are also
    assistance programs to mitigate the adverse impacts of trade for businesses,
    the Trade Adjustment Assistance for Firms program, and for communities, the
    Community Adjustment and Investment Program. At the Committee?s request, we
    completed evaluations of these programs in 2000. 1

    As you requested, this review builds on our previous work by providing
    distressed communities? perspectives on how trade adjustment assistance and
    other assistance programs have helped them deal with the adverse impacts of
    trade. We conducted case studies in six trade- impacted communities where we
    examined (1) the impact of trade- related layoffs on these communities, (2)
    the experiences of these communities with traderelated dislocated worker
    assistance, (3) their experiences with trade

    1 These reports are Trade Adjustment Assistance: Trends, Outcomes, and
    Management Issues in Dislocated Worker Programs (GAO- 01- 59, Oct. 13,
    2000), Trade Adjustment Assistance: Impact of Federal Assistance to Firms Is
    Unclear (GAO- 01- 12, Dec. 15, 2000), and Trade Adjustment Assistance:
    Opportunities to Improve the Community Adjustment and Investment Program
    (GAO/ NSIAD- 00- 229, Sept. 29, 2000).

    United States General Accounting Office Washington, DC 20548

    Page 2 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    related economic adjustment and other assistance, and (4) the lessons
    learned from these communities? experiences.

    Between January and March 2001, we conducted case studies in Watsonville,
    Calif.; Coushatta, La.; Owosso, Mich.; Washington and Chocowinity, N. C.; El
    Paso, Tex.; and Martinsville and Henry County, Va. We chose these locations
    using a number of criteria designed to identify communities particularly
    hard hit by trade- related layoffs, including the numbers of workers
    certified for federal adjustment assistance between 1995 and 1999, local
    unemployment rates, and diversity of industry and geographic location. The
    communities we selected based on these criteria thus likely represent more
    difficult cases than typical communities that have experienced trade-
    related job losses. We visited each selected community and interviewed local
    government officials, community leaders, training providers, and workers
    receiving benefits from trade adjustment assistance programs. We also met
    with federal and state officials that administer trade adjustment assistance
    programs for workers and economic assistance programs for communities, and
    analyzed the data available on these programs. Appendixes I through VI
    contain profiles of the six case study communities. For further information
    on our scope and methodology, see appendix VII.

    The communities in our case study all experienced major trade- related plant
    closures and layoffs in the mid- to late- 1990s. Two communities-
    Martinsville/ Henry County, Va., and Coushatta, La.- lost a large percentage
    of local jobs in sudden plant closures and experienced economic crises. The
    other communities- Owosso, Mich.; Washington and Chocowinity, N. C.;
    Watsonville, Calif.; and El Paso, Tex.- experienced rolling layoffs or a
    series of smaller plant closures that dislocated as many or more workers but
    did so more gradually. This gave communities time to absorb the job losses,
    except for El Paso, where the number of job losses overwhelmed local
    services. Industries affected included apparel, electronics, furniture, and
    food processing. All the communities experienced short- term increases in
    their unemployment rates. The most dramatic were due to the sudden closures:
    Martinsville?s unemployment rate rose from 9 percent to 20 percent in the
    months immediately following the layoffs, while Coushatta?s rate went from
    13 to 23 percent. In addition, the plant closures or layoffs meant that
    local economies lost wage income, business tax revenues, and sales by firms
    that supplied or subcontracted to the closed plants. In addition, while many
    dislocated workers found new jobs, they often received lower wages. This
    caused concern in some communities that plant closures might lead to a
    Results in Brief

    Page 3 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    decreased standard of living for a large portion of the community, as well
    as concerns about additional job losses if more plants in these industry
    sectors closed or relocated abroad.

    Experiences in the communities we visited indicate that TAA and NAFTATAA
    assistance to dislocated workers, while substantial, could be implemented
    more effectively. These programs provided $85 million in assistance to the
    six communities during fiscal years 1995 through 2000, $66 million for
    extended income support and $19 million for training. However, program
    administrators and training providers in every community we visited said
    that the programs have structural problems that impede effective service
    delivery. Specifically, they said that

     the period of time dislocated workers receive income support versus
    training benefits is inconsistent (18 and 24 months, respectively), which
    local officials and workers said limited training options;  unstable
    funding for training benefits results in delayed approval of

    training requests; and  maintaining separate TAA and NAFTA- TAA programs is
    administratively

    inefficient and confusing. One factor that influenced the implementation of
    training benefits in many communities is that a significant percentage of
    dislocated workers needed to earn a high school equivalency degree or take
    remedial courses before they could even start a training program. There was
    also a debate in most communities about whether workers should enroll in 2-
    year degree programs or take shorter certificate programs and return to the
    workforce as quickly as possible. All these factors were particularly
    challenging in El Paso, Tex., where most of the 17,000 dislocated workers
    had low educational levels and limited English proficiency. A related
    problem is that outcome data on workers? use of training benefits,
    reemployment rates, and wages in a new job are incomplete. The continued
    lack of data on program outcomes makes it difficult to evaluate the efficacy
    of the varied training or job placement approaches used across communities
    and states.

    Case study communities? experiences with economic adjustment showed that the
    assistance available to them was limited and that there are no easy answers
    to community recovery, even when funds are available. These communities had
    relied on low- skilled manufacturing jobs, which are disappearing, and now
    face the difficult task of diversifying their economies while addressing
    fundamental human capital issues. As a result, many of these communities are
    attempting to attract higher paying

    Page 4 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    and more stable service industry jobs. However, 80 percent of the trade
    adjustment assistance participants had a high school education or less,
    compared to 42 percent in the U. S. workforce, which makes it difficult to
    attract higher- skilled jobs and higher- paying employers. Limited access to
    major transportation arteries also makes it difficult for these communities
    to attract new businesses. Community leaders found that there is limited
    federal and state assistance to help with economic adjustment. From fiscal
    year 1995 to early fiscal year 2001, federal assistance to these communities
    for economic adjustment totaled about $60 million, of which $44. 5 million
    went to one community, El Paso. Even when these communities received funds,
    the funds were narrowly targeted and not necessarily designed to address
    long- term human capital and infrastructure challenges.

    These communities? experiences with efforts to assist dislocated workers and
    adjust to changing economic conditions offer several lessons. Program
    administrators and training providers said that bureaucratic rigidities in
    dislocated worker programs limited their flexibility in addressing
    dislocated workers? diverse training needs. Local officials also believe
    that dislocated worker training programs are more effective and job
    placements much higher when strong links exist between training and local
    business needs. On the other hand, officials in El Paso, Tex., learned that
    additional funding does not guarantee success if the necessary training
    capacity does not exist to meet needs. The additional funding El Paso
    received was in the form of a supplemental $45 million Department of Labor
    grant, but local officials said that the lack of suitable training meant
    that many workers received extended income support without gaining needed
    job skills. One factor that contributed to the problems assisting workers in
    El Paso was the lack of bilingual training designed for adults. Economic
    adjustment assistance lessons are perhaps less clear, as communities
    struggle to address their needs. Many must decide whether to rebuild their
    prior economic base or retool it to compete in a changing national and
    global economy. Some communities have yet to come to grips with what course
    to pursue but know that if they do not take action, they may face further
    erosion of their economic base along with decreased standards of living.
    Three case study communities- Watsonville, Calif.; El Paso, Tex.; and
    Martinsville, Va.- saw the need to develop economic adjustment strategies,
    while the other three did not. Yet, even in communities engaged in formal
    planning, local officials said they continued to try to attract employment
    suited for low- skilled displaced workers, since their workforces were not
    suited to the higher- skilled ?new economy? employers they would like to
    attract.

    Page 5 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Trade adjustment assistance programs provide federal assistance to
    dislocated workers, firms, and communities. Economic adjustment assistance
    programs are also available for distressed communities, regardless of what
    has caused the adverse economic condition.

    The TAA and NAFTA- TAA programs assist U. S. workers displaced by foreign
    trade and increased imports. The current TAA program was created by the
    Trade Expansion Act of 1962 (P. L. 87- 794). It was substantially modified
    by the Trade Act of 1974 (P. L. 93- 618) and the North American Free Trade
    Agreement Implementation Act of 1993 (P. L. 103- 182). The TAA program
    covers workers who lose their jobs because of imports from any country,
    while the NAFTA- TAA program covers only workers who have lost their jobs
    because of increased imports from or shift of production to Mexico or
    Canada. These programs provide benefits such as trade readjustment
    allowances (extended income support beyond normal unemployment insurance
    benefits), services such as job training, and allowances for job search and
    relocation. The Department of Labor administers both programs and makes
    determinations regarding worker group eligibility. Groups of workers or
    their representatives can petition the Department of Labor for certification
    of eligibility to apply for services or benefits under the program. The
    Department then conducts an investigation to determine if increased imports
    or a shift in production to Canada or Mexico have contributed to their loss
    of employment. Once a TAA or NAFTA- TAA petition is approved covered workers
    must meet several tests regarding the timing of their layoff and their
    length of employment with the trade- impacted firm. Workers can be certified
    as eligible for both programs but can claim benefits from only one. The
    states play a major role by providing program services and benefits, such as
    job training and reemployment services. 2 The TAA and NAFTA- TAA programs
    together received about $407 million in fiscal year 2001 funding.

    Generally, TAA and NAFTA- TAA income assistance for a dislocated worker is
    equal to the weekly benefits of the state?s unemployment insurance program 3
    and may be paid for up to 52 weeks after the initial 26

    2 See Trade Adjustment Assistance: Trends, Outcomes, and Management Issues
    in Dislocated Worker Programs, for a more detailed discussion of TAA and
    NAFTA- TAA certification procedures and eligibility requirements.

    3 Unemployment benefits vary widely among the states. In 1999, the average
    benefit was an estimated $202 per week. Background

    Trade Adjustment Assistance for Dislocated Workers

    Page 6 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    weeks (30 weeks in Massachusetts and Washington State) of unemployment
    insurance benefits have been exhausted. Thus, eligible dislocated workers
    may receive up to 78 weeks (18 months) of cash payments if enrolled in
    approved training. Dislocated workers also are eligible for up to 104 weeks
    (2 years) of training. Therefore, workers do not necessarily receive income
    assistance during their entire period of training.

    The process by which workers receive assistance is often triggered when a
    company gives 60 days? notice of plant closure or layoffs. Generally, a
    state Rapid Response Team, comprised of employment service officials, meets
    with plant managers to obtain information about the prospective layoff or
    closure and the profile of the affected workers. If appropriate, the Rapid
    Response Team will suggest that the company apply for TAA or NAFTATAA
    certification, so that workers can receive these benefits after separation.
    The Rapid Response Team generally returns to the plant after the layoff or
    closure announcement to give workers information about available services.
    In some states, training providers may join the team. After separation, the
    dislocated workers can receive job placement assistance, and if suitable
    employment is not found, they can enroll in training. TAA and NAFTA- TAA
    provide extended income support and pay for training, within certain time
    limits and restrictions. Figure 1 illustrates the timeline for receipt of
    TAA and NAFTA- TAA benefits.

    Page 7 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Figure 1: Timeline for Receipt of TAA and NAFTA- TAA Benefits

    Note: This figure depicts the timeline for receipt of TAA or NAFTA- TA
    benefits in its simplest form. Workers may or may not receive a 60- day
    notice of layoff or plant closure; they may receive substantially less
    notification. Workers may not receive extended income support immediately
    following the receipt of unemployment compensation. Training also may often
    start somewhat later. Both extended income support and training benefits may
    be received for less than the maximum time shown here.

    Source: Based on information from the Department of Labor.

    The federal government has also established programs to assist tradeimpacted
    firms and communities suffering job losses due to changing trade patterns.
    The TAA program for firms, established in 1962 and administered by the
    Department of Commerce?s Economic Development Administration (EDA), provides
    assistance to firms that can demonstrate that increases in imports have
    contributed importantly to layoffs and declines in sales or production. The
    TAA for firms program was funded for $10.5 million in fiscal year 2000. The
    Community Adjustment and Investment Program was established as a result of
    the 1993 North American Free Trade Agreement Implementation Act. Under the
    program, loan guarantees, loans, and grants are provided to businesses and
    grantees Trade Adjustment

    Assistance for Firms and Communities

    Page 8 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    in eligible counties to help stimulate private sector employment and growth.
    4 An interagency committee chaired by the Department of the Treasury
    administers this program. Loan guarantees to local businesses have accounted
    for the preponderance of financing commitments to date. The program was
    established with an initial capitalization of $22.5 million and has received
    $20 million in additional appropriations to support and expand program
    activities. The Congress did not appropriate any additional funds for the
    program in fiscal year 2001.

    The federal government also offers assistance programs for any distressed
    community, regardless of whether the economic problems are trade related,
    through EDA. EDA?s mission is to help generate jobs; retain existing jobs;
    and stimulate industrial, technological, and commercial growth in
    economically distressed areas. EDA assistance is generally available to
    rural and urban areas of the nation experiencing high unemployment, low
    income, and severe economic distress. In addition to EDA assistance, a
    variety of other federal programs provide assistance to economically
    distressed areas. 5

    The six communities we selected for our case studies varied in size,
    demographics, and location, but they all had experienced major traderelated
    industry and job losses in the mid- to late- 1990s. The firms that these
    communities lost represent a cross section of the types of industries that
    have been affected by increased trade, as shown in figure 2.

    4 Businesses and potential grantees must apply for CAIP financing. CAIP does
    not provide funding directly to eligible counties, but rather offers access
    to competitively awarded grants or enhanced access to credit through loans
    and loan guarantees.

    5 See Economic Development: Multiple Federal Programs Fund Similar Economic
    Development Activities (GAO/ RCED/ GGD- 00- 220, Sept. 29, 2000). EDA?s
    Economic

    Adjustment Assistance Trade- related Layoffs Hurt Case Study Communities

    Page 9 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Figure 2: Profiles of Six Case Study Communities

    Note: Population figures are from the 2000 Census. The number of workers
    cited is based on TAA certifications.

    Sources: Department of Labor TAA and NAFTA- TAA certifications, Bureau of
    Labor Statistics, and Bureau of the Census.

    Although many layoffs in these communities occurred gradually as companies
    downsized to remain competitive with offshore producers, each community
    experienced at least one major plant closure that had an immediate impact on
    the local workforce and economy. For example, Tultex, an apparel
    manufacturer and one of the largest employers in Martinsville, Va., declared
    bankruptcy in December 1999 without prior notice and immediately closed all
    operations, leaving more than 2,000 workers without jobs. Likewise, in
    December 1996, Coushatta, La., lost 500

    Page 10 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    jobs when the Sunbeam small appliance plant, the city?s only manufacturing
    concern, closed as part of a corporate restructuring that moved many
    production operations offshore. Table 1 shows the total number of workers
    certified 6 under the TAA program when threatened by job loss in these
    communities, as well as the numbers certified in major layoffs.

    Table 1: TAA- Certified Workers in Case Study Communities, Fiscal Years
    1995- 2000 Location Major layoff

    TAA- certified workers in the community?s major

    layoff Total TAA- certified

    workers, fiscal years 1995- 2000

    Watsonville, California Dean Foods 600 738 Owosso, Michigan Johnson Controls
    270 616

    Washington/ Chocowinity, North Carolina

    Hamilton Beach Singer Furniture

    3,525 500

    3,880 500

    Coushatta, Louisiana Sunbeam 500 500 El Paso, Texas Levi- Strauss 3, 369
    16,150

    Martinsville/ Henry County, Virginia Tultex 1,771 3,523

    Total 10,535 25,907

    Note: To avoid the double counting that can occur due to dual certifications
    by TAA and NAFTA- TAA, these data reflect dislocated workers certified by
    the Labor Department under the TAA program only.

    Sources: Department of Labor and data supplied by local TAA and NAFTA- TAA
    program administrators.

    Trade- related plant closures and mass layoffs had serious economic impacts
    on these communities. In the short term, their unemployment rates rose
    dramatically. For example, as a result of the Tultex closure in
    Martinsville, the city?s unemployment rate went from about 9 percent to
    almost 20 percent in 1999. Similarly, in Coushatta, the closing of the
    Sunbeam manufacturing plant in 1996 caused the city?s unemployment rate to
    rise to almost 24 percent in 1997. Where the layoffs were

    6 Certification by the Department of Labor represents potentially affected
    workers- not actual jobs lost. Workers may be certified when they face
    potential job loss but are not laid off. In other cases, more workers than
    anticipated may lose their jobs. Program certification is thus an indication
    of job losses due to trade, not an actual count. While data are available
    showing the number of participants in the TAA and NAFTA- TAA programs, not
    all dislocated workers may have enrolled in these programs.

    Page 11 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    particularly severe, the communities were not prepared to deal with the
    workers? immediate needs, and local social service agencies were overwhelmed
    with requests for assistance. In Martinsville, many displaced Tultex workers
    were not eligible for assistance, such as food stamps, because they owned
    vehicles and other assets and could not meet requirements for assistance.
    These workers, who had also lost medical coverage as a result of the Tultex
    bankruptcy, were forced to find employment or seek assistance from
    charitable organizations such as the Salvation Army.

    Plant closures and layoffs also impacted local government revenues and hurt
    local businesses. Government officials in some communities said that they
    lost significant business tax revenues when companies abandoned their
    plants. For example, according to Martinsville officials, as a result of its
    bankruptcy, Tultex defaulted on more than $1 million in property taxes owed
    in 1999, and the city will continue to lose tax revenue from the property.
    In addition, Martinsville was forced to raise water and sewer service rates
    to compensate for the $1.4 million Tultex had paid annually for these
    services. The loss of income suffered by displaced workers also affected
    local businesses. Coushatta officials said that Sunbeam?s $10 million annual
    payroll represented about one- fifth of Red River Parish?s gross income.
    Such losses of income had a negative impact on retail sales in trade-
    impacted communities. Businesses that supplied or subcontracted for plants
    that closed also felt the impact. For example, in Martinsville, a plant that
    generated steam for the Tultex factory was forced to close after Tultex went
    bankrupt.

    Many dislocated workers found new jobs in their area, but most were paid
    lower wages, according to community officials. In Owosso, Mich., community
    officials said that many workers who lost their jobs in the trade- impacted
    automobile accessory industry eventually found lowerpaying service sector
    jobs. In Washington, N. C., some workers who were displaced when Hamilton
    Beach/ Proctor- Silex, Inc. moved its small appliance operation to Mexico
    found work in the local furniture- making industry, but at significantly
    lower wages. Similarly, in Coushatta, many former Sunbeam workers who were
    hired at a nearby compressor plant that had recently opened were paid less.
    In El Paso, the city had been successful in attracting some new
    manufacturing businesses, but many displaced apparel workers were not
    qualified for the jobs and either found employment in the service sector or
    remained unemployed. Based on available but incomplete Department of Labor
    data, nationally only 61.5 percent of dislocated workers who responded and
    entered new

    Page 12 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    employment reported that their new jobs paid at least 80 percent of their
    old job?s wages. 7

    Some communities feared that the loss of relatively well- paying, but
    lowskilled jobs could lead to a decline in the standard of living for a
    large segment of the population. Food processing jobs in Watsonville,
    California, and apparel manufacturing jobs in El Paso, Texas, have been
    considered a means of upward mobility for recent immigrants with limited
    English skills. Workers who had these jobs were paid union- scale wages and
    received fringe benefits, which provided an opportunity to buy homes and
    send their children to college. Officials in Watsonville and Washington said
    that, until recently, young people could count on a factory job after high
    school where they might stay for most or all of their working lives.
    However, workers who have lost manufacturing jobs in these communities have
    limited prospects for obtaining new jobs with similar wages and benefits,
    since the jobs now available require higher skills or more education,
    according to community officials.

    Communities we visited were also concerned about the threat of additional
    trade- related layoffs and plant closures. Washington and Martinsville
    community leaders said that they expect their textile and apparel industries
    to continue to decline because of increased foreign competition.
    Martinsville leaders also fear that the furniture industry, another large
    employer in their community, will begin to feel the impact of increased
    furniture imports. Watsonville leaders also expected that the city would
    continue to lose food processing jobs as more companies shift operations to
    Mexico.

    7 Research on dislocated workers has found that high- tenure workers
    separating from distressed firms suffer long- term earnings losses averaging
    25 percent per year. See L. S. Jacobson, R. J. LaLonde, and D. G. Sullivan,
    ?Earnings Losses of Displaced Workers,? The American Economic Review, 1993.
    vol. 83( 4), p. 685. More recent work found that importcompeting displaced
    workers who re- enter employment experience sizeable average weekly earnings
    losses of about 13 percent. This average masks considerable variation, with
    a quarter of displaced workers reporting earnings losses of 30 percent or
    more. This is similar to findings showing that older, less educated, lower-
    skilled production workers, with established tenures on the old job are more
    likely to experience earnings losses in excess of 30 percent. See Lori G.
    Kletzer, testimony presented before the Subcommittee on International Trade,
    Committee on Finance, U. S. Senate, on July 20, 2001.

    Page 13 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    The communities we visited had experienced serious adverse impacts from
    trade- related layoffs. The primary source of trade adjustment assistance
    they received came from Labor?s TAA and NAFTA- TAA programs for dislocated
    workers. TAA and NAFTA- TAA are widely available and can provide substantial
    assistance to trade- impacted dislocated workers through extended income
    support and training benefits. However, local program administrators told us
    that these programs have structural problems that hinder the effective
    delivery of services. The states also varied in how they implemented
    training benefits. Furthermore, it is difficult to evaluate the efficacy of
    the varied training or job placement approaches used across communities or
    states, because Labor?s outcome data for these programs are incomplete.

    The trade adjustment assistance that our case study communities received
    primarily came through the TAA and NAFTA- TAA programs for tradeimpacted
    dislocated workers. These are entitlement programs, available to dislocated
    workers whose eligibility had been certified by Labor. TAA and NAFTA- TAA
    provide substantial assistance, primarily by supplying extended income
    support after unemployment insurance is exhausted, as well as training
    benefits. 8

    TAA and NAFTA- TAA program data show that the largest benefit delivered to
    displaced workers was in the form of extended income support, primarily for
    partial wage replacement while in training. As shown in table 2, the two
    programs paid a total of just over $66 million in income support to
    individuals in these communities over 6 years. Of this amount, almost $44
    million was for ?basic? allowances, 9 or payments made in the 26 weeks after
    unemployment benefits are exhausted. About $22 million was for ?additional?
    allowances made after basic allowances are exhausted, if the dislocated
    worker is in training or has a training waiver. Thus about 78 percent of TAA
    and NAFTA- TAA assistance that went to workers in the case study communities
    was used for income support. In these communities, training courses, which
    can last up to 104 weeks, cost $19 million over the 6- year period, which
    was about 22 percent of total funding. Forty- four percent of all program
    recipients in these communities

    8 Nationwide, the TAA and NAFTA- TAA programs provided about $1. 2 billion
    for income support and $500 million for training benefits between fiscal
    years 1995 and 2000, according to Labor Department data.

    9 Called the Basic Trade Readjustment Allowance by the Labor Department.
    Assistance to

    Dislocated Workers Can Be Substantial, but Structural Problems Impede
    Service Delivery

    Most TAA and NAFTA- TAA Assistance Was Income Support

    Page 14 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    enrolled in training. Total payments for income support and training was $85
    million. Among the communities, El Paso had by far the highest number of
    recipients- 8,581- and the highest total payments- at almost $70 million. 10
    Watsonville, which received $390,000 in assistance payments for 27
    recipients, received the lowest amount of income support and had only 48
    individuals enrolled in training.

    Table 2: TAA and NAFTA- TAA Payments and Numbers of Recipients in Case Study
    Communities, Fiscal Years 1995- 2000 Watsonville,

    CA Coushatta,

    LA Owosso,

    MI Washington/

    Chocowinity, NC

    El Paso, TX

    Martinsville/ Henry County,

    VA Total

    Dollars in thousands

    Basic Trade Readjustment Allowance

    Payments $60 $308 $1,544 $1,428 $39,075 $1,241 $43,656 Recipients 27 105 400
    243 8,581 1,144 10,500

    Additional Allowance

    Payments $30 $192 $484 $591 $16,565 $4,543 $22,405 Recipients 12 72 46 57 3,
    343 6 3, 536

    Training

    Costs $300 $323 $916 $201 $14,250 $3,345 $19,335 Recipients 48 a 120 135 496
    9,803 1,343 11,945

    Total payments $390 $823 $2,944 $2,220 $69,890 $9,129 $85,396

    Notes: Recipients may appear in quarterly reports spanning more than 1
    fiscal year. Likewise, workers could have received more than one type of
    benefit in a fiscal year. a California program administrators said that many
    more displaced workers in Watsonville enrolled in

    training under the Job Partnership Training Act. Sources: GAO analysis of
    Department of Labor data collected quarterly from the states, except for
    data on training costs and recipients in Watsonville, which came from
    California?s Employment Development Department.

    The effectiveness of the TAA and NAFTA- TAA programs is hampered by a number
    of problems in the way the programs have been structured, according to state
    program administrators and program participants. In the communities we
    visited, we consistently heard concerns expressed about problems related to
    inconsistency between the length of income support and training benefits,
    which resulted in hardships and increased numbers of dropouts; funding
    problems resulting in training delays; maintaining two separate trade-
    dislocated worker programs; and

    10 This does not include a $45 million grant El Paso received from the Labor
    Department for extended trade adjustment assistance benefits for dislocated
    workers. Structural Problems

    Hinder Effective Delivery of Services and Benefits

    Page 15 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    programmatic requirements that hinder efficient delivery of services and
    benefits to workers.

    Program administrators, training providers, and workers in training
    consistently said that the TAA and NAFTA- TAA programs needed to close the
    gap between extended income support payments, which are provided for up to
    18 months, and training, which is provided for up to 24 months. Although
    there are mixed views and little data on the outcomes associated with
    shorter and longer training programs, as discussed below, the gap in income
    support is believed to create difficulties for workers in 2- year training
    programs because when income support payments stop, dislocated workers
    generally drop out of training because they cannot afford to remain in
    classes without financial assistance.

    The local administrator for the TAA and NAFTA- TAA programs in Washington,
    N. C., said that he and his staff advised workers to enroll in a course of
    study that would take no more than 18 months to complete, unless they had
    other sources of income. Dislocated workers we spoke with, most of whom were
    currently enrolled in training, frequently referred to workers who had to
    drop out of training due to financial constraints. Family responsibilities
    and the need to make mortgage or car loan payments had made it impossible
    for them to subsist without income support. Some workers we interviewed said
    they could afford to continue because they had a spouse who was working, but
    others said that they chose training that lasted 18 months or less. This
    choice precluded them from pursuing a 2- year Associate of Arts degree
    program, which could result in higher earnings or better skills, or any 2-
    year course of study involving initial remedial courses. 11

    Another problem cited by local program administrators with program structure
    was the lack of a stable funding stream for training benefits. Although
    training is a key part of a worker?s benefits, some states had difficulties
    providing consistent funding for training due to budgetary problems in the
    Department of Labor. The amount of funding the Department of Labor can
    provide is governed by legislatively set caps on training funds, with an
    annual limit of $80 million for TAA and $30 million for NAFTA- TAA.
    According to the Trade Act Coordinator in North Carolina, funding the trade
    programs has been an ?administrative

    11 Department of Labor program data show that about 12 to 16 percent of
    those entering training took remedial courses during fiscal years 1995-
    2000. Length of Time for Income

    Support Limits Training Options

    Funding Problems Lead to Training Delays

    Page 16 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    nightmare? and that state funds frequently must be used. 12 Generally,
    federal funding is provided to states quarterly and is based on prior
    expenditures. Because TAA and NAFTA- TAA certifications fluctuate, in some
    cases, states may not have received sufficient funding to cover workers
    enrolled during a quarter. In addition, state and local officials reported
    that insufficient federal funds are available for the programs toward the
    end of the fiscal year (Department of Labor officials said these problems
    primarily occur in the first and last quarters of the fiscal year). High
    levels of certifications from unanticipated layoffs and plant closures have
    resulted in states- Texas and North Carolina, for example- with large
    numbers of workers enrolled in training at the same time that program
    officials were informed that no additional federal funds remained. 13 As we
    noted in our recent report, although Labor has issued formal guidance that
    states should not stop enrolling workers in program services and benefits
    when funding is temporarily unavailable, agency officials report that few
    states have done so. 14

    In some cases, when federal training funds are depleted, states use
    Workforce Investment Act( WIA) 15 or other state monies. According to
    officials from case study communities, dislocated workers were frequently
    enrolled in training under WIA and then shifted to TAA or NAFTA- TAA after
    Labor approved their petitions and certified them as eligible for benefits.

    A basic structural problem exists from maintaining separate TAA and NAFTA-
    TAA programs, resulting in inefficiency, problems in administration, and
    confusion, according to state program administrators and program
    participants. Officials in every state administrative office and case study
    community we visited stated that the certification and training enrollment
    procedures of the two programs are different. They claimed

    12 North Carolina, statewide, also had the highest number of TAA and NAFTA-
    TAA certifications during fiscal years 1995- 99. 13 When this happens,
    states may apply for funding, such as National Emergency Grants from the
    Secretary of Labor, put workers on waiting lists, or suspend the training
    program. 14 Trade Adjustment Assistance: Trends, Outcomes, and Management
    Issues in Dislocated Worker Programs (GAO- 01- 59, Oct. 13, 2000), p. 15. 15
    The Workforce Investment Act of 1998, Title I, provides assistance to
    persons who have been laid off due to plant closures or mass layoffs and/ or
    meet the eligibility requirements outlined in the act. There is no special
    category of causation, such as that for tradeimpacted workers under TAA and
    NAFTA- TAA. Difficulties Stemming From

    Maintaining Separate Trade Programs

    Page 17 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    this hinders effective program administration- particularly because many
    workers are certified for benefits under both programs and must select one
    under which to take benefits. Officials said standardized requirements would
    make the program easier to administer. This reaffirms what state
    administrators from the 20 states with the largest TAA and NAFTA- TAA
    programs told us in 2000. 16 Maintaining two separate trade programs, with
    differing timeframes and provisions for training waivers (available under
    TAA but not NAFTA- TAA) is confusing to both program administrators and
    dislocated workers. Dislocated workers in El Paso and Owosso stated that the
    explanations about the differences that were provided by program officials
    before they had to choose between programs were inadequate and did not
    sufficiently clarify their questions. Officials in every state
    administrative office and case study community we visited thus consistently
    supported the consolidation of the TAA and NAFTA- TAA programs. These
    officials believed that consolidation would simplify program administration
    and rules and would be more efficient. The Department of Labor agreed with
    this position in its letter of October 5, 2000, commenting on our evaluation
    of these programs, stating that it supported measures to harmonize the
    requirements of the two programs. 17

    Other program requirements can also impede dislocated workers from
    successfully completing training, according to state program administrators
    and program participants. For example, to obtain income support assistance,
    the NAFTA- TAA program generally requires that the dislocated worker enroll
    in training by the last day of the 16th week following their layoff or by
    the last day of the 6th week after publication of the certification,
    whichever is later. State program administrators said this requirement can
    limit training options for workers seeking to study at community colleges
    because training courses may be semester- based and not begin within the
    enrollment deadline. As a result, according to program administrators,
    workers must sometimes enroll in less suitable courses to retain their
    eligibility for income support. The TAA and NAFTATAA programs also prohibit
    dislocated workers from receiving income support if there is a break in
    training exceeding 14 days. Program administrators we interviewed explained
    that community colleges generally have semester breaks lasting longer than
    14 days, which means

    16 Trade Adjustment Assistance: Trends, Outcomes, and Management Issues in
    Dislocated Worker Programs, p. 24. 17 Ibid., p. 35. Other Program
    Requirements

    Hinder Delivery of Benefits and Services

    Page 18 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    that dislocated workers cannot receive any financial assistance during that
    period. 18

    Other factors complicating service and benefit delivery include
    certification delays at the Department of Labor and federal paperwork
    requirements. As noted in our recent report, Department of Labor delays in
    certifying TAA and NAFTA- TAA petitions or state program administrative
    office delays in approving workers? training plans can limit workers?
    options. 19 Dislocated workers we interviewed in El Paso said that acquiring
    approval for their training plans had taken months. Training providers in
    North Carolina and Texas told us federal administrative and paperwork
    requirements were cumbersome, rigid, and highly bureaucratic. In North
    Carolina, the Trade Act Coordinator at the state Employment Security
    Commission must approve any request for a dislocated worker to change a
    community college class. Department of Labor officials said that nearly all
    states have centralized approval of workers? training plans because local
    officials have less experience with TAA and NAFTA- TAA regulations.

    A number of challenges influenced implementation of TAA and NAFTATAA
    training benefits in our case study communities. One issue is related to the
    profile of the dislocated workers, a significant percentage of whom were in
    their 40?s, had not finished high school, and needed remedial courses before
    they could start a degree or certificate program. Many in El Paso, Tex., and
    Watsonville, Calif., also had limited English proficiency. Given this
    dislocated worker profile, there was a debate in most communities about
    whether workers should enroll in 2- year degree programs or take shorter
    certificate programs and return to the workforce as quickly as possible.
    These issues were particularly challenging in El Paso, which had to contend
    with overwhelming numbers of dislocated

    18 Our most recent report on these programs included a Matter for
    Congressional Consideration regarding this issue. We noted that Congress may
    wish to consider permitting workers who experience an unavoidable break in
    training of more than 14 days (such as semester breaks) to continue to
    receive income benefits. See Trade Adjustment Assistance: Trends, Outcomes,
    and Management Issues in Dislocated Worker Programs,

    p. 26. 19 Ibid., p. 23. We found that in fiscal year 1999, 58 percent of
    NAFTA- TAA investigations exceeded the 40- day statutory requirements and 34
    percent of the TAA investigations exceeded the 60- day limit. Communities
    Face

    Significant Challenges in Improving Dislocated Workers? Skills

    Page 19 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    workers, many of whom had low educational levels and limited English
    proficiency.

    The profile of dislocated workers that emerged from our visits and
    discussions with program administrators, training providers, and small
    groups of dislocated workers is consistent with the Labor Department?s
    available national data on TAA and NAFTA- TAA dislocated workers. The
    Department?s data on these programs suggest that, nationwide, almost two-
    thirds of the participants were women, with an average age of 43, and
    generally low levels of education. Twenty- five percent had less than a high
    school education when laid off. According to available data and discussions
    with program administrators in El Paso and Watsonville, many program
    participants in their communities also had limited English proficiency.
    Officials in these two communities told us that the majority of these
    workers were Hispanic, spoke little or no English, and many had not gone
    much further than elementary or middle school. In Owosso, Mich., most
    dislocated workers were high school graduates. However, in Coushatta, La.;
    Washington and Chocowinity, N. C.; and Martinsville, Va., significant
    numbers of the dislocated workers had not finished high school, according to
    local officials.

    Many dislocated workers had been with their employers for a considerable
    number of years. We interviewed some dislocated workers in El Paso who had
    worked for Levi- Strauss- one for almost 30 years. Similarly, many workers
    at the Sunbeam plant in Coushatta and the Hamilton Beach/ Proctor- Silex,
    Inc., plant in Washington had worked there for more than 20 years when they
    were laid off. Program officials and training providers stated that these
    dislocated workers generally had an excellent work ethic and wanted to
    reenter the workforce as quickly as possible. However, many did not have a
    high school diploma or a General Equivalency Degree (GED), and few
    businesses would hire them without one or the other. Thus, many dislocated
    workers needed GED classes and sometimes English as a Second Language
    classes before entering occupational training and obtaining a job.

    As a result of these factors, moving these workers further on the
    educational or job skill continuum is a challenge. Moreover, considering
    that the participants who did complete high school may have been in the
    workforce for 2 decades, it is difficult for them to reenter the educational
    system. Given these factors and the maximum 2 years of training available,
    earning an Associate of Arts degree would represent a considerable
    achievement yet may still leave these participants short of the skills
    required for the new economy jobs. TAA and NAFTA- TAA

    Dislocated Workers Present Training Challenges

    Page 20 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    While program and training officials in most communities we visited were
    debating the best method for retraining trade- dislocated workers, limited
    outcome data on wages and employment outcomes make it difficult to assess
    which methods are most successful. Specifically, the debate centers on
    enrolling dislocated workers in 2- year degree programs to pursue an
    Associate in Arts, Science, or General Education, which may give them more
    options for a new, higher- skilled career, or enrolling them in shortterm
    certificate programs that provide specific occupational skills training. In
    El Paso, the County Judge and the director of a community- based training
    advocacy group told us that they believe the central problem facing these
    workers was underemployment and that training should ensure that dislocated
    workers have basic language skills and a 2- year degree so that they can get
    a better job with a living wage. They saw training as a way to help
    dislocated workers climb the employment ladder, rather than ending up in
    another low- skilled, low- wage job with little hope of advancement. The
    training advocacy group official said training should be viewed as an
    investment that would provide a good return to the local economy.

    Others pointed out that many dislocated workers need remedial courses to
    earn a GED, and in some cases they also need courses to gain proficiency in
    English, which would take up most, if not all, the allotted training time.
    They also pointed out that most dislocated workers need to complete training
    in 18 months, rather than the 24 months allowable, because income support
    ends at 18 months. They stated that it was important to ensure that
    dislocated workers could complete their training program and that shorter
    programs resulting in certification, such as those for certified nursing
    assistants or truck drivers, were more practical. Finally, an instructor we
    interviewed at El Paso Community College said it was best to take a flexible
    approach in meeting workers? needs. Some workers could manage a 2- year
    degree program, but most needed a realistic assessment of what they could
    accomplish in 18 or 24 months. For most, she believed a shorter certificate
    course was the best option.

    Program data suggest that most dislocated workers in these communities are
    taking shorter training courses. While 11,945 workers enrolled in training
    during fiscal years 1995 through 2000, only 3,536 workers (30 percent)
    received additional allowances, which provide income support during the 12
    to 18 months of program participation. (See table 2.) According to program
    administrators and training providers, workers generally do not continue
    training after income support benefits have stopped. Communities Debate
    Training

    Alternatives Without Adequate Outcome Data

    Page 21 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Determining how well various training alternatives assist dislocated workers
    is difficult, due to the lack of outcome data on wages and reemployment.
    Although the Labor Department instituted a system to measure performance in
    fiscal year 1999, the level of responses from workers who have left the TAA
    and NAFTA- TAA programs has been low. To address the low response rate, the
    Labor Department changed its reporting system in fiscal year 2001, requiring
    all states to match data on dislocated workers with state wage records to
    determine whether dislocated workers have reentered employment and at what
    wage.

    El Paso, Tex., faced a particular challenge in providing trade adjustment
    assistance training benefits to dislocated workers because of the large
    numbers involved. In 1994, nearly half of El Paso?s 50,000 manufacturing
    jobs were in the apparel and textile industry. According to Texas Workforce
    Commission data, from January 1994 to February 2001, a total of 17,069
    workers in El Paso were certified by the Labor Department for the TAA or
    NAFTA- TAA programs, with the majority of these jobs in the apparel and
    textile industry. Trade adjustment assistance program administrators in El
    Paso said that the sheer number of dislocated workers overwhelmed the
    system. In addition to the other types of assistance provided, about half of
    these workers enrolled in training during fiscal years 1995 through 2000.
    There were not enough case managers to handle the inflow, which averaged 475
    cases per case manager in fiscal year 1998 and 325 in fiscal year 1999. All
    the dislocated workers we interviewed in El Paso were critical of the
    service they received, saying they were given inconsistent information,
    little respect by case managers, and no vocational counseling. El Paso?s
    training providers did not have enough seats for all the dislocated workers
    at the peak of the layoffs, according to an El Paso Community College
    official, and the college was not prepared for the bilingual training most
    workers required. These dislocated workers eventually ran out of trade
    adjustment benefits but were no more employable than they had been before
    entering these programs, according to local program officials.

    In June 1998, the Labor Department awarded El Paso a $45 million grant to
    assist 4,500 workers displaced between January 1, 1994, and December 31,
    1998. This grant was used for the El Paso Proactive Reemployment Project
    (PREP), which was to provide retraining, readjustment services, and income
    support for workers who had not yet received occupational training under
    their initial TAA and NAFTA- TAA benefits. However, some officials said that
    PREP instead extended income support without requiring sufficient
    accountability for their progress. The result, according to the El Paso
    Community College official, was that the college was Some Officials Saw

    Supplemental Funding as Ineffective in El Paso?s Challenging Situation

    Page 22 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    basically ?warehousing dislocated workers? who needed to attend classes to
    obtain income support.

    Case study communities face fundamental challenges in restructuring
    economies, while the available adjustment assistance is limited, targeted,
    and short- term. Human capital challenges appear formidable, particularly
    helping workers in their mid- 40?s with a high school or less education to
    find employment in the new economy. Physical infrastructure needed to renew
    economic growth is a related obstacle. While each community we visited
    experienced adverse economic impacts as a result of trade- related layoffs,
    the severity of these impacts and the communities? responses varied.
    Martinsville, Va.; El Paso, Tex.; and Watsonville, Calif., have embarked on
    economic adjustment strategies aimed at diversifying their economies and
    attracting jobs to replace those that were lost. Alternatively, in
    Coushatta, La., and Owosso, Mich., where most tradedisplaced workers have
    found similar but lower- paying jobs in the area, community leaders have not
    settled on an economic adjustment strategy, although they recognize that in
    the long run such strategies may be necessary.

    As the communities we visited work to recover from the trade- related job
    losses they sustained, many face fundamental challenges that will make it
    difficult to attract new businesses. These challenges encompass the need to
    develop both their human capital and physical infrastructure in order to
    complete the economic adjustment of their communities.

    One challenge consistently cited by government and civic leaders in the
    communities was the issue of human capital. They said that they needed to
    improve local educational systems, which often had high school dropout rates
    much higher than the national average. In several communities, local leaders
    said that school facilities and curricula needed to be improved to better
    prepare students for high- skilled jobs and to develop a more attractive
    environment for companies that they would like to recruit. In some
    communities, local officials said that they were caught in a difficult
    situation in which local residents who graduate from college leave for
    better jobs elsewhere. At the same time, they were hampered in recruiting
    firms that needed a college- educated workforce, in part, because they had
    low numbers of such workers in their area.

    Table 3 illustrates another aspect of the human capital challenge facing
    these communities. The table compares trade- dislocated workers nationwide
    to the total U. S. workforce. Trade- dislocated workers include a Adjustment

    Assistance Does Not Match Communities? Challenges

    Communities Face Challenges to Economic Growth

    Communities Have ?Old Economy? Workforce

    Page 23 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    higher percentage of women, who had lower educational levels and lower
    average wages in the jobs they held before dislocation. While 42 percent of
    the nation?s total workforce has a high school education or less, 80 percent
    of trade- dislocated workers fall into this category. Among trade-
    dislocated workers, the average age was 43, and 59 percent were over the age
    of 40. These data suggest, and community leaders we interviewed confirmed,
    that trade- impacted workers tend to be less mobile and face difficulties
    reentering a workforce that increasingly requires more skills and training.

    Page 24 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Table 3: Profile of TAA and NAFTA- TAA Participants Compared to Total U. S.
    Workforce, Fiscal Years 1999- 2000

    Worker characteristics Nationwide TAA and

    NAFTA- TAA participants (percent)

    Total U. S. workforce (percent)

    Gender Male Female

    36 64

    53 47 Average age 43 years N/ A Limited English proficiency 12 N/ A Average
    old wage $12.13 per hour

    (at separation) $13.36 per hour

    (current wages for production workers) Average new wage $10.31 Not
    applicable Median tenure 7 years (at separation) 3.5 years Education

    Less than high school High school graduate Some post- high school College
    graduate

    25 55 17

    4 10

    32 28 a

    30 Legend: N/ A = not available. Note 1: TAA and NAFTA- TAA participant data
    based on data from 36,000 workers who left the TAA and NAFTA- TAA program in
    fiscal years 1999- 2000 and filled out a survey. Total U. S. workforce data
    come from Bureau of Labor Statistics Employment Situation Report for May
    2001, except for average wage and average tenure data, which are Bureau data
    for February 2000.

    Note 2: Totals may not add up to 100 percent due to rounding. a Some post-
    high school for total U. S. workforce includes some college, no degree, and
    associate

    degrees. Sources: GAO analysis of data from Department of Labor TAA and
    NAFTA- TAA programs, and Bureau of Labor Statistics.

    Another challenge faced by the communities was the lack of access to major
    transportation arteries and inferior transportation infrastructure.
    Officials in three of the communities, Washington, Martinsville, and
    Coushatta, believe that their economic growth was hampered because their
    communities are not located near interstate highways. There are no four-
    lane highways in Coushatta or Red River Parish. While Virginia and North
    Carolina are considering interstate extensions that would run near
    Martinsville and Washington, both projects are still in the early proposal
    phase and, even if approved, are years away.

    Local land- use policies pose additional challenges to economic development
    and growth in Watsonville and Owosso. Watsonville is surrounded by prime
    agricultural land, and Santa Cruz County has Communities Face

    Infrastructure and Land- Use Challenges

    Page 25 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    imposed stringent restrictions on the conversion of this land to other uses,
    including manufacturing and housing. Watsonville officials said that only a
    limited amount of land zoned for manufacturing is currently available in the
    area. To expand its manufacturing base to provide employment opportunities
    for displaced workers, Watsonville officials believe the community must
    annex agricultural land, which local officials said is rarely approved.
    Owosso also has limited land available for new industries within its city
    limits. Independently governed townships, comprised of residential
    neighborhoods that surround the city, want to limit industrial expansion.
    Owosso officials said that there has been limited collaboration on economic
    development among area jurisdictions. Recently, however, a local development
    corporation has initiated an effort to promote cooperation among business
    and civic leaders in Owosso and surrounding areas.

    These communities are struggling with difficult choices needed to rebuild
    their economic base and retool to better compete in the national and global
    economies. Watsonville, Martinsville, and El Paso have what could be termed
    ?middle path? strategies that aim for economic diversification while
    preparing their workforce for the high- skilled, well- paying jobs that they
    hope to attract. However, these communities realize that they still need
    jobs suitable for low- skilled displaced workers who will not qualify for
    new economy jobs. The other three communities have yet to come to grips with
    which economic adjustment course to pursue.

    El Paso received a $275,000 EDA grant to develop an economic adjustment
    strategic plan, which was adopted by the city in December 1999. The strategy
    encompasses a 10- year horizon and is linked to three principles: the value
    of human capital, access to Mexican and Latin American markets, and the
    radical transformation of the economy through technology. El Paso?s
    strategic plan recommends following a middle path between recruiting lower-
    wage industries to employ displaced workers and recruiting those that offer
    higher- wage employment. The plan?s authors argue that recruiting only
    lower- wage industries that could employ the current group of displaced
    workers would expose the city to companies concerned entirely with low- cost
    labor and risk further business closures if they relocate to Mexico. On the
    other hand, offering incentives only to higher- wage industries would create
    few opportunities for currently displaced workers and further strain the
    community?s social infrastructure. The strategy emphasizes the importance of
    making workforce development programs employer- driven and linking these
    efforts to businesses. Communities Have

    Differing Economic Adjustment Strategies

    El Paso, TX

    Page 26 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    In Martinsville/ Henry County, the Patrick Henry Development Council, which
    is the local economic planning board, received a $350,000 grant in 2001 from
    the U. S. Department of Housing and Urban Development to develop an economic
    development strategy. The strategy seeks to diversify the area?s economic
    base by recruiting both high- paying technology and heavy manufacturing
    companies. The strategy also focuses on human capital, and the council
    contracted for a worker profile survey to determine what skills the local
    workforce needs to develop to attract highpaying companies and to assess the
    local educational system?s ability to produce that workforce. Martinsville/
    Henry County is also part of an EDAdesignated Economic Development District
    and received a $60,000 grant in 2000 to prepare a regional strategy that
    focuses on mitigating adverse trade impacts. Both strategies propose and
    prioritize projects, such as industrial parks and business incubators,
    qualifying for state and federal assistance.

    Watsonville officials concluded that efforts to train many dislocated food
    processing workers have resulted in limited success. Their economic
    adjustment strategy thus has two goals: (1) to attract labor- intensive
    manufacturing jobs for which these displaced workers can qualify and (2) to
    improve job opportunities for the city?s youth by providing training in
    computer and other skills required by high- wage employers. 20 In addition,
    the county and community college are collaborating on a project to support
    the creation and retention of quality jobs. There is also a business
    incubator to facilitate new business start- ups.

    Owosso city officials have done little economic adjustment planning,
    although local business leaders have taken steps to attract new jobs.
    Because of Owosso?s proximity to the industrial centers of Lansing and
    Flint, where automotive industry jobs are available, the city has not
    developed an economic adjustment strategy. However, the private sector in
    the Owosso area has taken some steps to address job loss. Business and
    community leaders have begun work on a plan that looks to the area?s future
    economic development, part of which is to develop an industrial park.

    Coushatta and Washington have taken some action to improve their local
    economies. Coushatta officials said that the town, which has only 2,299
    residents, has limited resources for development, and has not developed a

    20 The ?high- tech? Silicon Valley area is about an hour?s drive from
    Watsonville. Martinsville/ Henry County, VA

    Watsonville, CA Owosso, MI Coushatta, LA and Washington, NC

    Page 27 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    comprehensive economic plan. The town, however, has spent $1 million to
    renovate the city- owned Sunbeam building and leased it to a pillow and
    mattress manufacturer that employs about 200 workers, including many former
    Sunbeam employees. The town has also contracted with a consultant to help
    attract new companies. In Washington, local officials said the Beaufort
    County Planning Commission would begin developing an economic adjustment
    strategy when it filled its Executive Director position. In the meantime,
    the Commission is considering acquiring a building to serve as a business
    incubator.

    Officials from the communities we visited generally reported that they had
    received modest assistance from federal and state governments, mostly
    federal loan guarantees. Table 4 shows that a total of $59.5 million in
    economic adjustment funding was received by the communities from federal
    assistance programs from fiscal year 1995 to the present. Reflecting the
    varied sizes of the communities and the impacts they experienced, this
    assistance ranged from $413,000 to Coushatta, La., to $44.5 million for El
    Paso, Tex. In addition, the largest source of adjustment funding for these
    communities-$ 42.3 million- was provided by Community Adjustment and
    Investment Program (CAIP) guaranteed business loans, most of which were made
    in El Paso ($ 38.7 million). 21 The second largest source of funding was
    from EDA, which provided $10.5 million to the communities.

    21 As noted earlier in this report, CAIP makes loans, loan guarantees, and
    grants available to trade- impacted communities. Assistance Available for

    Communities? Economic Adjustment Efforts

    Page 28 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Table 4: Federal Economic Adjustment Assistance to Case Study Communities,
    Fiscal Year 1995- Early Fiscal Year 2001

    Dollars in thousands

    Source of assistance Watsonville,

    CA Coushatta,

    LA Washington/ Chocowinity, NC

    Owosso, MI

    El Paso, TX

    Martinsville/ Henry County,

    VA Total

    CAIP loan guarantees $2,598 $413 a $0 $0 $38,693 $600 $42,304 CAIP direct
    loans 0 0 0 0 1, 180 0 1, 180 CAIP grants 0 0 0 0 900 0 900 Economic
    Development Administration 6,050 0 0 0 2, 975 1,460 10,485 Other federal
    economic adjustment assistance

    500 0 0 3,000 750 450 4,700

    Total $9,148 $413 $0 $3,000 $44,498 $2,510 $59,569

    Note: This table does not include all federal economic assistance funds. It
    includes only those funds linked to trade- related job losses and plant
    closures. The Trade Adjustment Assistance for Firms Program is not included
    because none of the case study communities received funds from the program.
    a CAIP guaranteed loan funds listed for Coushatta were used in a neighboring
    community impacted by Coushatta?s trade- related layoffs. Sources: CAIP,
    EDA, and case study community officials.

    Each community received some economic development assistance from its state
    government. The most common forms of state assistance were business tax
    abatements and refunds available to new and expanding businesses in
    economically distressed areas. A Martinsville city official said that, since
    1996, when the city was designated a State Enterprise Zone, all businesses
    that located or expanded in the city have taken advantage of these
    incentives. Some communities also received state economic development grants
    and loans. In Coushatta, the Louisiana State government helped fund
    improvements to the former Sunbeam building to make it more attractive to
    potential manufacturing tenants. Likewise in Martinsville, after the Tultex
    closure in 1999, the state of Virginia loaned the city $945,000 to construct
    a shell building 22 in its industrial park and provided a $250,000 grant to
    convert Tultex?s former headquarters building into a business incubator.

    22 A shell building is a structure equipped with basic utilities that can be
    leased to a business. Limited Assistance Provided by

    State Governments

    Page 29 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    The communities received limited assistance from the two federal programs
    designed to mitigate the adverse economic impacts of trade the Trade
    Adjustment Assistance program for firms and CAIP. The program for firms
    provides consulting services to trade- impacted firms to make them more
    competitive. According to Department of Commerce records, only one firm in
    the six communities, an El Paso wood cabinet company, received assistance
    from the program. While the program helped the company to develop an
    adjustment plan, the company did not implement it and did not receive
    funding, according to program records.

    Three of our case study communities received assistance from CAIP. Since
    1997, businesses in El Paso have applied for and received about $38.7
    million 23 in guaranteed CAIP loans, more than any other community in the
    country. 24 CAIP has also made two direct loans in El Paso, one in May 1999,
    for $1 million to the El Paso Workforce Collaborative to renovate a former
    Levi- Strauss factory to be used as a Workforce Development Center and a
    Business Resource Center. The second loan was made in March 2001, for
    $180,000 to La Mujer Obrera, an advocacy group for dislocated women workers,
    for equipment and working capital for a restaurant that is also a training
    facility. El Paso also received two CAIP grants of $450,000 aimed at
    improving workers? skills, one to a plastic injection molding training and
    contract center, and the second to retrain workers for health field jobs. In
    Watsonville, CAIP has guaranteed three loans totaling $2.6 million for plant
    nursery businesses. A business in Martinsville obtained two CAIP guaranteed
    loans totaling $600, 000. Near Coushatta, a portable building business
    received a CAIP guarantee for a $413,000 loan. Owosso was ineligible for the
    CAIP program because of its low unemployment rate, and while Washington was
    eligible, no businesses there received CAIP- guaranteed loans. Officials in
    most communities we visited said that CAIP assistance is not sufficient to
    spur economic recovery. We noted in our recent report 25 that CAIP adds
    marginal benefits to trade- impacted communities because it guarantees loans
    that would

    23 This amount was as of May 29, 2001. 24 In El Paso, most of the
    participating small business lenders and borrowers we talked to during our
    evaluation of CAIP in 2000 said that the program had been valuable in paying
    the guarantee fee for small business loans, thus freeing up needed operating
    capital.

    25 See Trade Adjustment Assistance: Opportunities to Improve the Community
    Adjustment and Investment Program (GAO/ NSIAD- 00- 229, Sept. 29, 2000), p.
    22. Federal Trade Economic

    Adjustment Assistance Mainly Provided by CAIP

    Page 30 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    likely have been made under existing Small Business Administration programs.
    26

    Other federal programs, although not targeted specifically at tradeimpacted
    communities, offer assistance to economically distressed areas. For example,
    EDA provides grants to communities in economic decline to upgrade or expand
    their economic infrastructure and to design and implement economic
    adjustment strategies. Most of our case study communities received some
    economic adjustment assistance from EDA and other federal agencies, but
    community leaders believed more was needed.

    In Martinsville/ Henry County, a team of federal officials from several
    agencies, working under the coordination of the President?s National
    Economic Council, went there after the Tultex bankruptcy in December 1999 to
    explain the federal assistance available and to assist the communities in
    filing grant applications. In 2000, the community was awarded about $800,000
    in EDA and Department of Agriculture grants for a business incubator. In
    2001, a $840,000 EDA grant for a water line for a new plant was approved. In
    addition, the West Piedmont Planning District received a $60,000 EDA grant
    to prepare its economic adjustment strategy.

    Regarding El Paso, the city was awarded about $2.6 million in EDA economic
    adjustment assistance during the period 1995 to present. This amount
    included a $1.4 million grant to aid in converting the former LeviStrauss
    plant and a $1.2 million grant to La Mujer Obrera, an advocacy group for
    dislocated women workers.

    Watsonville and El Paso, cities that historically have had high percentages
    of low- income residents, have had sections declared federal Enterprise
    Communities on the basis of their high poverty rates and low per capita
    income levels. Enterprise Communities received $3 million in block grants
    through this program, which is administered by the Departments of
    Agriculture or Housing and Urban Development. Businesses in these
    communities are eligible for tax- exempt bond financing to build or expand
    facilities. Enterprise Communities? applications for other competitive

    26 CAIP guarantees loans in partnership with the Small Business
    Administration and the Department of Agriculture. CAIP loans differ from
    conventional small business loans offered by these agencies because CAIP
    pays the loan guarantee fee. Many small businesses in the case study
    communities probably qualify for conventional small business loans. We did
    not determine how many of these loans were made in the communities. Some
    Assistance Available

    From Other Federal Programs Enterprise Community and Empowerment Zone
    Funding Also Used

    Page 31 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    federal economic and community development grants are given special rankings
    by the agencies that administer the grants. Watsonville, which was
    designated an Enterprise Community in 1995, devoted much of its grant,
    provided by the Department of Agriculture, to fund youth training programs.
    It has used other federal grants and loans to finance a downtown business
    incubator, two motels, and the expansion of a community college branch
    campus. El Paso, which also received its Enterprise Community designation in
    1995, is using its funds for human capital efforts such as job training and
    has offered tax- exempt bond financing as an incentive to attract and
    encourage business expansion.

    El Paso was also designated an Empowerment Zone by the Department of Housing
    and Urban Development in 1999, based on criteria similar to those used by
    the Enterprise Community program. As an Empowerment Zone, the city thus far
    has received $19 million. The funds are being used to promote projects
    similar to those under the Enterprise Community program.

    Officials in the communities believe that they are limited in their ability
    to obtain federal economic adjustment assistance and cite a number of
    reasons. Some officials said that, without a central source of information
    on available economic adjustment programs, they are not always aware of
    those for which their communities might qualify. For example, officials at
    the West Piedmont Planning District, which includes Martinsville, said they
    are familiar with EDA and Department of Agriculture Rural Development
    programs but have limited knowledge of other federal programs. Officials
    also cited the lack of financial resources to meet the federal grant
    matching requirements. El Paso officials said they primarily have sought
    assistance from programs with no or low matching requirements. Some
    officials described the grant application process as time- consuming,
    technical, and expensive. Officials in Owosso, Coushatta, and Washington
    said that their communities lacked the personnel and expertise necessary to
    secure federal grants. Local officials believe that the scope of programs
    targeted at trade- impacted areas is too limited to make a difference in
    their communities. Local Views on Trade- Impacted

    Communities? Access to Federal Funds

    Page 32 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    The six case study communities in our study pose a particularly severe test
    for the trade adjustment assistance programs since we used criteria that
    were designed to identify hard hit communities. As a result, these
    experiences may not be typical of communities affected by trade- related
    layoffs. Nevertheless, the lessons learned by these communities may be
    applicable to other hard hit communities, as well as to other communities
    where the impact of trade- related layoffs was not so severe. These lessons
    may also be relevant for communities where technology or other forces have
    led to significant job losses.

    These communities face long- term challenges in improving job skills and
    human capital of dislocated workers and developing physical infrastructure
    needed to attract new businesses. Those involved in worker adjustment
    assistance programs in the communities pointed to the need for more flexible
    training programs linked to the employment needs of local businesses.
    Community leaders working at economic adjustment efforts had a harder time
    drawing lessons from their experiences and have faced difficult choices and
    found few off- the- shelf answers. One of the fundamental challenges facing
    trade- impacted communities is helping dislocated workers- generally older
    workers with a high school degree or less- adjust to an increasingly
    globalized economy that requires different skills than were needed when
    these individuals entered the workforce. Trade adjustment assistance program
    administrators and training providers in the communities said that program
    rules regarding income support benefits limit their flexibility in
    addressing dislocated workers? training needs. Although administrators
    believed that limiting income support to 18 months presented financial
    hardships that discouraged workers from completing 2- year training
    programs, available data indicate that most workers leave training after 1
    year. However, even if these programs were more flexible, these relatively
    short- term training programs may not bridge the gap between these workers?
    current skills and the skills they need to enter the new economy workforce.
    Our discussions with training providers and workers indicated that enormous
    sacrifices are necessary for dislocated workers - many of whom have been out
    of school for 20 years or more - to be successful in an educational system
    that has become significantly more challenging while maintaining family and
    other responsibilities.

    Still, additional funding does not mean that these challenges are easily
    addressed, as indicated by El Paso?s experience with a $45 million
    supplemental grant from the Department of Labor. Local officials learned
    that the necessary training infrastructure must be in place to meet
    dislocated workers? needs. According to community leaders, supplemental
    Lessons Learned

    From Trade- Impacted Communities? Experiences

    Page 33 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    grant funds were used to place many workers in training programs that had
    not been evaluated. Further, insufficient bilingual training designed for
    adults was available. With no clear sense that training would improve their
    job prospects, some workers stayed in training to continue receiving income
    support benefits. Eventually, grant managers began offering workers monetary
    incentives to leave training and take available lowskilled jobs.

    One of the lessons that emerged from our discussions is the central role of
    education and training, which included training to provide basic language
    skills to laid off workers, strengthening the links between business and
    educational institutions, or emphasizing education for the next generation
    of workers. In Martinsville, the local planning authority, in conjunction
    with businesses, has contracted for a workforce survey that will identify
    the human capital needed to attract and retain businesses. The survey
    results will serve as the basis for developing training courses at the local
    community college. In Owosso, the local training provider, a private
    college, has local business leaders sit on an advisory board to ensure that
    the college?s curriculum includes needed job skills training. In El Paso, a
    training provider that specializes in training displaced workers has worked
    with local businesses to develop an internship program to give students work
    experience. Such efforts to define local needs, establish priorities, and
    link education and training with jobs is a common theme among our trade-
    impacted communities. 27

    Finally, one of the lessons that appeared in our discussions with many
    community leaders was that helping the dislocated workers is the immediate
    challenge but does not lead to- and may even detract from- the efforts to
    address the longer- term structural problems. Watsonville, Martinsville, and
    El Paso appear to have chosen the path of economic diversification and are
    emphasizing the importance of education for the generations now entering the
    workforce, since it is often much easier for them to acquire the skills that
    are necessary for higher- paying jobs in the new economy. However, leaders
    in these communities acknowledge that

    27 Guidelines to assist communities adjust to changing economic conditions
    have been prepared by the Departments of Labor and Defense, and provide a
    framework for developing a strategic plan. See Conducting a Community Audit:
    Assessing the Workforce Development Needs and Resources of Your Community.
    Office of Adult Services, Employment and Training Administration, U. S.
    Department of Labor, 2000, and Workforce Adjustment Strategies: Coping with
    the Human Aspects of Base Closure and Defense Industry Downsizing. Office of
    Economic Adjustment, U. S. Department of Defense, 1996.

    Page 34 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    they also need jobs suitable for low- skilled displaced workers who will not
    qualify for new economy jobs. Balancing these competing demands will
    determine how successfully these communities will adjust to changing
    national and global economic conditions.

    We received written comments on a draft report from the Departments of
    Commerce and the Treasury. The Department of Commerce said that the report
    fairly and accurately describes EDA assistance programs. The Department of
    the Treasury said that the report makes an important contribution to
    understanding the issues that a community faces when an abrupt change takes
    place in its economy as a result of job dislocations attributable to
    changing trade patterns. The comments we received and our evaluation of them
    are contained in appendixes VIII and IX. In addition, the Department of
    Labor provided technical comments, which we incorporated in the report as
    appropriate.

    The Department of Commerce said that our characterization of the
    difficulties of Martinsville, Virginia in obtaining economic adjustment
    assistance did not fully reflect EDA?s eligibility or competitive selection
    criteria for its Public Works and Economic Adjustment programs. We have
    revised the report to reflect EDA?s clarifications.

    The Department of the Treasury, while not disagreeing with our
    characterization of CAIP funding as limited, stated that more CAIP financing
    for communities was available if the communities requested it. We clarified
    the report by stating that businesses and potential grantees must apply for
    CAIP financing. CAIP does not provide funding directly to eligible counties,
    but rather offers access to competitively awarded grants or enhanced access
    to credit through loans and loan guarantees. The Treasury also disagreed
    with our statement that CAIP loan guarantees made in partnership with the
    Small Business Administration would likely have been made anyway without
    CAIP?s participation. We based these statements on our recent evaluation of
    CAIP. Our position, which remains unchanged, is that outcome measures and a
    monitoring system are needed to demonstrate the benefits CAIP has brought to
    communities.

    We are sending copies of this report to appropriate congressional
    committees. We are also sending copies of this report to the Secretary of
    Commerce; the Secretary of Labor; and the Secretary of the Treasury. Copies
    also will be made available to others upon request. Agency Comments

    and Our Evaluation

    Page 35 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    If you or your staff have any questions about this report, please contact me
    on (202) 512- 4128. Additional contacts and staff acknowledgments are listed
    in appendix X.

    Loren Yager Director, International Affairs and Trade

    Sigurd Nilsen Director, Education, Workforce and Income Security

    Appendix I: Watsonville, California, Case Study Profile

    Page 36 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Located in the center of the El Parajo Valley, in Santa Cruz County,
    Watsonville is on the central California coast, 48 miles from San Jos�.
    Latinos comprise 75 percent of the population, most of whom are recent
    immigrants who came to work in the area?s agricultural sector. The second
    largest city in the county, Watsonville has an unemployment rate that is
    twice that of the county. Table 5 provides more details on the community?s
    characteristics.

    Table 5: Profile of Watsonville, CA Community characteristics

    Population, as of 2000 44,265 Population, percentage change, from 1990 to
    2000 42% High school graduates, persons 25 years and over, 1990 54% College
    graduates, persons 25 years and over, 1990 11% Median household income, 1997
    estimate $44,607 a Persons below poverty, percentage, 1997 estimate 13%
    Unemployment rate, 2000 annual average 12% Major employment sectors Farming
    Percent of population employed in manufacturing, 1997 estimate 11% a Data
    for 1997 are only available for Santa Cruz County. The most recent data
    available are for 1989 and indicate that Watsonville?s median household
    income is $27, 980,which is 75 percent of the Santa Cruz County 1997 median
    household income.

    Sources: U. S. Bureau of the Census and U. S. Bureau of Labor Statistics.

    Watsonville?s economy has been severely impacted by increased imports of
    frozen vegetables and natural disasters over the last two decades, according
    to local officials. Imports of low- cost vegetables from Mexico, Guatemala,
    and other countries have resulted in the reduction of Watsonville?s frozen
    vegetables industry. Thus, the industry?s decline was already well under way
    before the North American Free trade Agreement (NAFTA) was enacted in 1994.
    According to the University of California, Los Angeles, North American
    Integration and Development Center, 510 permanent and 440 seasonal
    processing workers lost their jobs between 1983 and 1994. This was followed
    in 1996 with the closure of Dean Foods plants and the loss of 600 jobs.
    Natural disasters have also hurt the community, which is still recovering
    from the Loma Prieta earthquake of 1989. Further, in 1995, the community
    experienced a major flood and suffered agricultural losses.

    The closures of the frozen vegetable plants have had a major impact on
    Watsonville. Since the mid- 1980s, Watsonville has lost more than 5,000
    Appendix I: Watsonville, California, Case

    Study Profile Impact of TradeRelated Job Losses

    Appendix I: Watsonville, California, Case Study Profile

    Page 37 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    frozen food and cannery jobs, many of which were mid- level union positions
    that paid about $8 an hour and provided fringe benefits. For the community?s
    many migrant farm workers, these jobs provided an opportunity for upward
    mobility but were replaced with poorly paid seasonal or part- time work. The
    unemployment rates in Watsonville for the last 10 years (1990 through 1999)
    has been in the double digits, averaging 16.5 percent. In 1993, the
    unemployment rate peaked at 20.8 percent and declined to a low of 11. 9
    percent in 2000, when the annual average for the United States and Santa
    Cruz County was 4 percent and 5.6 percent, respectively. Nevertheless, the
    food processing and production industry still remains the largest employer
    in the area, providing employment for more than 18,000 workers. However,
    since 1994, the number of jobs in food processing has declined at an average
    annual rate of 6.8 percent. Many residents and leaders believe that unless
    the city can reduce its dependence on low- skilled, low- income, seasonal
    jobs, the community will see further economic decline.

    Watsonville has not experienced a large, trade- related layoff of workers
    since 1996, and the results of efforts to assist earlier trade- impacted
    workers are limited. Several local officials said that one of the main
    problems with the Trade Adjustment Assistance (TAA) program was that the
    allowance of 2 years of training might not be long enough when dealing with
    workers who only speak Spanish or are illiterate in their native language.
    They said that considering these individuals? remedial education needs, it
    would probably take 3 to 5 years to train them for new jobs.

    For workers who had enrolled in a local training school or community
    college, local officials had no data on wages earned after graduation and
    did not know the number of workers who had found jobs in areas of their
    training. Rather than relocate, however, most dislocated workers have chosen
    to remain in the Watsonville area. Some share homes with multiple families
    and have found employment in plant nurseries, farms, or small businesses. To
    help reemploy these people, city officials said that they have focused on
    attracting assembly jobs that are appropriate to the local population?s
    skill level. They recruited a company that makes bike and snowmobile parts,
    which opened in 2001. Assistance to

    Dislocated Workers

    Appendix I: Watsonville, California, Case Study Profile

    Page 38 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    The city of Watsonville has received a wide range of federal, state, and
    county economic adjustment assistance to help implement its strategic plan.
    Federal agencies have worked to deliver a variety of assistance to
    Watsonville. The Department of Agriculture has assisted the city with loans
    and grants through local partnerships with financial organizations and local
    economic organizations. It has also provided loans for several business
    projects, such as the Red Roof Inn and Holiday Inn Express hotels, a small
    business incubator building with office and retail space (see fig. 3), and a
    warehouse facility. The city was also awarded almost $200,000 from the
    Department of Agriculture and $500,000 from the Department of Health and
    Human Services to help the El Pajaro Community Development Corporation with
    development of the business incubator building. The El Pajaro Development
    Corporation is one of several local corporations working with federal
    agencies to improve Watsonville?s economy. Economic Adjustment

    Efforts

    Appendix I: Watsonville, California, Case Study Profile

    Page 39 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Figure 3: Photos of Watsonville, CA

    Source: City of Watsonville.

    Appendix I: Watsonville, California, Case Study Profile

    Page 40 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Watsonville was included in the first round of cities the Department of
    Agriculture designated as Federal Enterprise Communities in January 1995.
    This designation will result in about $3 million in federal grant funds over
    the next 10 years and will improve the city?s ability to qualify for
    additional federal program funds. In its Enterprise Community application,
    Watsonville officials listed unemployment and the school dropout rate as
    their most severe community problems. Local officials also acknowledged that
    most training efforts are targeted at the younger population, conceding that
    they have largely given up on training older workers now unable to work in
    the local agricultural industry, primarily with strawberry production.

    Watsonville also has participated in the Community Adjustment and Investment
    Program (CAIP). Under this program, Watsonville received about an additional
    $2.6 million in guaranteed loans in fiscal years 1998 through 2000 to
    support several plant nursery business projects.

    Watsonville has also received more than $6 million in grants from the
    Economic Development Administration?s (EDA) Public Works and Economic
    Development Program. The funds can be used to support (1) new building
    construction, (2) business incubators, (3) industrial parks, (4) roads and
    streets, and (5) water and sewer systems. Watsonville applied for the EDA
    program under the Santa Cruz County Economic Adjustment Strategy plan. The
    projects are funded with federal, state, and local agency funds. Some of the
    projects EDA has approved include a new Cabrillo College satellite campus
    (see fig. 3), a youth training center, and a parking garage in a downtown
    commercial building.

    Watsonville?s designation as one of 39 state Enterprise Zones located
    throughout California went into effect in 1997 and will be active until
    2012. As a state Enterprise Zone, the city?s industrial area will receive a
    wide array of incentives to retain, expand, and attract businesses, to
    diversify the community?s economic base.

    However, local land use decisions are frequently contentious and sometimes
    challenged by farmers and environmental groups in the area. According to
    Watsonville officials, Santa Cruz County has an ordinance prohibiting the
    conversion of agricultural land to industrial uses or housing developments.
    The county ordinance is used to encourage new development efforts to locate
    in urban areas to protect agricultural land and natural resources in the
    rural areas. Also, environmental groups are against the development of the
    area because of the potential effects on the Monterey Peninsula and Bay.

    Appendix II: Coushatta, Louisiana, Case Study Profile

    Page 41 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    The town of Coushatta in Red River Parish in northwest Louisiana is
    approximately 50 miles southwest of Shreveport (parishes are comparable to
    counties). Red River Parish has a small industrial base and no multilane
    highways or public port facilities. Table 6 presents a demographic and
    economic profile of Coushatta.

    Table 6: Profile of Coushatta, LA Community characteristics

    Population, as of 2000 2, 299 Population, percentage change, from 1990 to
    2000 26.6% High school graduates, persons 25 years and over, 1990 51.7%
    College graduates, persons 25 years and over, 1990 9.3% Median household
    income, 1997 estimate $21,928 a Persons below poverty, percentage, 1997
    estimate 26.0% a Unemployment rate, 2000 annual average 9.1% Major
    employment sectors N/ A Percentage of employees in manufacturing, 1997
    estimate N/ A

    Legend: N/ A = Not available a Data for 1997 are only available for Red
    River Parish. The most recent available data are for 1989

    and indicate that Coushatta?s median household income was $12,756 and that
    42.3 percent of residents are below poverty level.

    Sources: U. S. Bureau of the Census and U. S. Bureau of Labor Statistics

    In late 1996, the Sunbeam- Oster Corporation, a manufacturer of small
    appliances such as toasters and irons, announced the closure of its
    Coushatta, Louisiana, plant after 31 years of operation (see figure 4). The
    closure, effective December 31, 1996, was part of a nationwide downsizing by
    Sunbeam that cut more than 6,000 jobs due to increased imports. With the
    closure of the Sunbeam plant, a major employer in Coushatta, the
    unemployment rate for Red River Parish rose to 23.7 percent in 1997. A total
    of approximately 520 workers lost their jobs, many with more than 20 years
    of service. According to local officials, most workers affected by the
    closure were white, female, and approximately 40 years of age. The closure
    of the Sunbeam plant also meant the loss of a $10 million annual payroll, a
    decrease by one fifth of Red River Parish?s gross income, and the erosion of
    its tax base. Coushatta?s unemployment rate was 9.1 percent in 2000.
    Appendix II: Coushatta, Louisiana, Case

    Study Profile Impact of TradeRelated Job Losses

    Appendix II: Coushatta, Louisiana, Case Study Profile

    Page 42 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Figure 4: Photos of Coushatta, LA, and a Training Facility in a Neighboring
    Community

    Source: GAO.

    The workers who were laid off from the Sunbeam plant received a severance
    package and health insurance coverage for 26 weeks. Some dislocated workers
    have since reentered the workforce and are employed at the same wage or
    higher. Some found jobs in the service sector, Assistance to

    Dislocated Workers

    Appendix II: Coushatta, Louisiana, Case Study Profile

    Page 43 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    including retail stores or restaurants, while others found jobs in
    manufacturing plants in nearby towns. For instance, soon after Sunbeam
    closed, another company opened a plant in a nearby town hired 80 dislocated
    workers. Company officials said that more dislocated workers would have been
    hired if they had applied. Because the company requires a high school
    diploma or General Equivalency Degree (GED), it offers a computer- based
    training program to aid interested applicants in preparing for the GED and
    other training geared at third grade through the first year of college.
    Company officials said they have a strong incentive to train workers well.
    Local officials also said that the local education system is very poor, so
    some companies prefer to conduct on- the- job training for workers. As noted
    in table 6, in 1990, about 52 percent of people 25 years and over had
    graduated from high school.

    The TAA and NAFTA- TAA programs made one- on- one vocational counseling and
    career assessments available to participants by the TAA and NAFTA- TAA
    programs. After the Sunbeam plant closure, about 130 workers attended
    various classroom training programs during 1996 to 1997. Eleven of the
    former Sunbeam workers began on- the- job training, and 54 received
    Certificates of Continuing Eligibility forms, which can be redeemed for
    training for 2 years. The local training provider is a state technical
    college that provides vocational training in certificate and diploma
    programs and offers an associate degree program. Local program
    administrators told us that there is a clear trend that dislocated workers
    will drop out of training as soon as they can find a job rather than waiting
    to complete training at this school, which they said is not well regarded
    and has a low job placement rate. Another training provider, a private
    institute, located more than 50 miles from the impacted community, also
    trained some of the dislocated workers (see fig. 4). This school offered
    training in tractor- trailer driving and clerical skills and reported a
    96percent job placement rate. School officials attribute their success to
    the students? commitment, stating that dislocated workers who commute to
    attend the institute are serious about wanting to be reemployed.

    After June 1997, active enrollment in training programs declined because
    those who had completed their training programs had found employment.
    Enrollment continued to fluctuate as more of the Sunbeam workers? income
    support benefits ended. Some dislocated workers interested in onthe- job
    training were referred to companies that had active on- the- job training
    contracts. According to officials, most of the Sunbeam workforce requested
    referrals to a new company that opened in Natchitoches in early 1997.

    Appendix II: Coushatta, Louisiana, Case Study Profile

    Page 44 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Economic and community development needs in Coushatta are met by the
    Coordinating and Development Corporation, a nonprofit entity that provides
    specialized services to northwest Louisiana?s parishes, municipalities,
    other industrial and economic development groups, and public organizations.
    The Coordinating and Development Corporation also provides assistance to
    individuals, especially dislocated workers. It conducted local workshops on
    job relocation, job skills, interviews, and resumes with the Louisiana
    Department of Labor. The corporation invited various training vendors to
    participate by presenting programs on the training options available to
    displaced workers. These programs were held throughout December 1996 and
    continued as needed over the next year. When the Sunbeam closure occurred,
    the Coordinating and Development Corporation provided emergency assistance
    by setting up an office for 2 years in the Coushatta courthouse, because its
    closest permanent office was 35 miles away.

    Coushatta does not have its own comprehensive economic development plan but
    is included in the Red River Parish plan. Although no single organization
    focuses on economic development in Coushatta, numerous officials and
    entities are involved in economic development efforts. For example, the
    Coordinating and Development Corporation prepared a needs assessment for
    northwest Louisiana for the year 2000 that identified barriers to economic
    development for each parish. Some new plants in the vicinity need water and
    sewer lines extended or expanded. In addition, following the Sunbeam plant
    closure in Coushatta, Louisiana Tech University prepared an estimated impact
    analysis for the corporation as a public service. The report estimated the
    probable economic impact of the plant?s closure on the economies of
    northwest Louisiana at almost $30 million. It said that Red River Parish
    will bear over $16 million of the burden and will likely lose 35 ?secondary?
    sector jobs, 175 trade and service sector jobs, and 81 government sector
    jobs.

    The Sunbeam facility was owned by the town of Coushatta and leased to
    Sunbeam. When the plant closed in 1996, the town took the building back and
    maintained it until another business was brought in to take over the
    facility. In 1999, a mattress and pillow factory opened at the Sunbeam site.
    Economic development officials and the Mayor were instrumental in getting
    the factory to locate in Coushatta. The company now employs approximately
    200 workers from the Coushatta area.

    Many communities within Red River Parish- including Coushatta- are located
    within the state?s Enterprise Zones, which provide economic Economic
    Adjustment

    Efforts

    Appendix II: Coushatta, Louisiana, Case Study Profile

    Page 45 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    incentives to businesses that locate there, including tax credits and sales
    and use tax rebates to businesses hiring at least 35 percent of their new
    employees from targeted groups. In addition, a $2,500 tax credit is
    generated for each new job created. An additional $2,500 tax credit may be
    generated in the second year of employment, if the new employee is certified
    as removed from state financial assistance rolls.

    Appendix III: Owosso, Michigan, Case Study Profile

    Page 46 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Owosso is located in Shiawassee County between two major cities, Lansing and
    Flint, and near major interstate highways connecting Canada to Mexico. About
    20 percent of Owosso?s workforce works in manufacturing. Service sector
    growth has been concentrated in lowerpaying jobs, particularly the retail
    sector, the second lowest paying sector in the state. Table 7 provides a
    profile of Owosso.

    Table 7: Profile of Owosso, MI Community characteristics

    Population, as of 2000 15,713 Population, percentage change, from 1990 to
    2000 -3.7% High school graduates, persons 25 years and over, 1990 75.5%
    College graduates, persons 25 years and over, 1990 11.3% Median household
    income, 1997 estimate $38,430 a Persons below poverty, percentage 1997
    estimate 10.1% a Unemployment rate, 2000 annual average 4.1% a Major
    employment sectors Manufacturing, services a Percentage of employment in
    manufacturing 20% a a Shiawassee County.

    Source: U. S. Census Bureau and U. S. Bureau of Labor Statistics.

    Owosso lost several automobile parts manufacturers to Mexico in the
    mid1990s. A total of 583 workers lost their jobs and were certified for TAA
    benefits. The owner of an airbag and seatcover manufacturing company closed
    his Owosso plant and laid off 362 workers because his firm was unable to
    compete with Mexican competitors. He also closed other manufacturing
    facilities in Michigan, laying off a total of 2,000 workers. He believed
    that NAFTA- related trade was a contributing factor to the closures.

    Civic and business leaders we interviewed said that the jobs lost did not
    have a major impact on Owosso?s economy because the jobs lost were replaced
    by retail and food service jobs. However, a civic leader we spoke to was
    concerned with the decline in wage rates in Owosso. For example, according
    to this official, someone who once made $12 to $14 per hour in the
    automotive parts industry now may be earning $6 to $8 per hour. People
    wanting better wages must commute to Lansing or Flint, Mich. Appendix III:
    Owosso, Michigan, Case Study

    Profile Impact of TradeRelated Job Losses

    Appendix III: Owosso, Michigan, Case Study Profile

    Page 47 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Owosso has a satellite office of Career Alliance Inc., headquartered in
    Flint, Mich., which is designated by the state of Michigan to administer the
    TAA, NAFTA- TAA, and other dislocated worker programs in the area. The
    state?s Rapid Response Team informs dislocated workers that Career Alliance
    Inc., representatives are available to help them with job counseling,
    assessment, placement, and supportive services. In addition, Career Alliance
    staff visit companies where there are expected layoffs and brief workers
    about the types of assistance they offer. Figure 5 provides photos of
    downtown Owosso and the sign for the One Stop Career Center that served the
    dislocated workers. Assistance to

    Dislocated Workers

    Appendix III: Owosso, Michigan, Case Study Profile

    Page 48 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Figure 5: Photos of Owosso, MI

    Source: GAO.

    Appendix III: Owosso, Michigan, Case Study Profile

    Page 49 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    A local, private nonprofit college in Owosso also provides training services
    for the TAA and NAFTA- TAA programs. When they are notified that a plant
    intends to close, college personnel go to the plant to inform the

    workers about the occupational training programs they operate at the college
    and help them prepare resumes and applications for unemployment
    compensation. The college offers academic degree and certificate programs. A
    college official told us that the college?s primary goal is to make students
    employable. The college has an advisory board comprised of business leaders
    who help the college determine the training individuals need to obtain
    employment in the area. According to college officials, they place 100
    percent of their students in jobs when they graduate, and about 87 percent
    obtain jobs in the field for which they were trained.

    In addition, a trucking company in nearby Corunna operates an on- the- job
    training program for the college to train dislocated workers to drive
    trucks. The 26- week training course provides students with a combination of
    classroom training at the college and hands- on training at the trucking
    company. The company owner said that trainees who completed this program
    have been successful in finding jobs.

    According to an Owosso civic leader, the community is enjoying a low
    unemployment rate and does not see a need to develop an economic development
    or job growth plan. Moreover, there have been difficulties in getting the
    local, township, and county officials together to develop joint and
    comprehensive approaches to economic development. He said that people do not
    organize at the local level to apply for assistance from the state and
    federal governments. In addition, there is no one entity at the local level
    that identifies and seeks out financial assistance. An Owosso business
    leader told us that about 3 years ago, several business and government
    leaders joined together to plan and develop an industrial park in Owosso. It
    has taken 3 years to bring parties from neighboring Corunna and Owosso to
    the point that they can work on a project that would benefit them all. This
    group will be receiving financial assistance from the Michigan Economic
    Development Corporation to help fund water, sewer, and road connections to
    the park.

    Owosso?s community development director said that the town has taken
    advantage of federal and state grants and tax incentives to help stimulate
    Economic Adjustment

    Efforts

    Appendix III: Owosso, Michigan, Case Study Profile

    Page 50 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    economic growth in the community over the last 5 years. For example, Owosso
    received federal Urban Development Action Grant funds to improve the city?s
    retail sector and a $3 million loan from a Department of Agriculture Natural
    Resource Conservation Service program to build a downtown hotel. Owosso also
    uses local and state tax incentives to attract new businesses. To help
    promote economic development in Owosso, companies are offered tax abatements
    when they locate in Owosso or increase the number of employees they employ.
    They also have a tax increment and financing program, in which the community
    takes certain corporate taxes and uses them to upgrade the city?s road,
    sewer, and water systems.

    Appendix IV: Washington and Chocowinity, North Carolina, Case Study Profiles

    Page 51 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    The communities of Washington and Chocowinity are located on the Pamlico
    River in Beaufort County in eastern North Carolina (see fig. 6). Washington,
    the largest town in the county, has a population of just over 10,000.
    Chocowinity, its immediate neighbor, has a population of less than 1,000.
    The unemployment rate for Beaufort County is 7.6 percent. Between 1997 and
    1999, 3,880 workers were certified by TAA or NAFTA- TAA due to layoffs and
    plant closures at several companies, including Singer Furniture in
    Chocowinity (see fig. 6) and Hamilton Beach/ Proctor- Silex, Inc., in
    Washington. About 85 percent of dislocated workers from these companies
    lived in Beaufort County. Table 8 provides more details on the community
    characteristics.

    Table 8: Profile of Beaufort County, NC Community characteristics

    Population, as of 2000 44,958 Population, percentage change, from 1990 to
    2000 6.3% High school graduates, persons 25 years and over, 1990 65.9%
    College graduates, persons 25 years and over, 1990 10.8% Median household
    income, 1997 estimate $28,614 Persons below poverty, percentage, 1997
    estimate 17.4% Unemployment rate, 2000 annual average 7.6% Major employment
    sectors Lumber, small electronics Percentage of industry represented by
    manufacturing 30.5%

    Sources: U. S. Census Bureau and U. S. Bureau of Labor Statistics.

    Between 1997 and 1999, Beaufort County experienced massive traderelated
    layoffs of workers. The closure of two manufacturing companies resulted in
    the displacement of more than 1,500 workers, many of whom were female,
    between 40 and 50 years of age, with minimal skills and low educational
    levels. The community?s unemployment rate rose immediately following these
    layoffs and has since declined. Community officials said that many workers
    have obtained employment, generally at a lower wage in service sector
    businesses such as retail stores or restaurants. Economically, Beaufort
    County ranks lower than most North Carolina counties, with a lower per
    capita income, lower educational levels, higher unemployment, and higher
    poverty rates. Appendix IV: Washington and Chocowinity,

    North Carolina, Case Study Profiles Impact of TradeRelated Job Losses

    Appendix IV: Washington and Chocowinity, North Carolina, Case Study Profiles

    Page 52 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Figure 6: Photos of Washington and Chocowinity, NC

    Source: GAO.

    Appendix IV: Washington and Chocowinity, North Carolina, Case Study Profiles

    Page 53 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    In the past few years, Beaufort County has experienced plant closures and
    layoffs in excess of 1,500 workers. Several manufacturing companies or their
    employees filed petitions with the U. S. Department of Labor and were
    certified for NAFTA- TAA and TAA benefits following initial certification by
    the North Carolina Department of Commerce Employment Security Commission.
    Singer Furniture employees were the first to file a TAA petition in Beaufort
    County. Hamilton Beach/ Proctor Silex, Inc. workers shortly followed. Once
    the petition was approved, dislocated workers met with a group of community
    and program officials to discuss financial assistance and employment and
    training options. However, program officials in Beaufort had not dealt with
    the Department of Labor?s trade adjustment assistance programs prior to
    these layoffs, and initially they were unsure what benefits were available
    to workers or how to administer the programs. As a result of these problems
    and the length of time it takes for certification, many workers were
    provided benefits under other programs such as the Workforce Investment Act
    dislocated workers program.

    In Beaufort County, the local one- stop service center, or JobLink Career
    Center, located in Washington, provides counseling services, resume writing,
    needs assessment, training, labor market information, and employment
    opportunities. The JobLink Career Center houses and coordinates services
    provided by numerous agencies in North Carolina. JobLink officials strongly
    encourage dislocated workers to enroll in GED programs or adult basic skills
    training as soon as possible.

    Officials stated that approximately 22 percent of dislocated workers enroll
    in training; however, little data are available on the number of individuals
    that complete training. Officials estimated that only about 25 percent of
    the dislocated workers that enter GED programs ever continue further. One
    reason for this high dropout rate is that the local community college
    requires students to obtain their GED before entering any other type of
    training at the college. However, Beaufort County Community College does
    provide GED training and adult basic skills training free of charge prior to
    entering certificate or associate degree programs. Another reason for the
    high dropout rate is that income support benefit payments do not coincide
    with the period allowed for training, and dislocated workers drop out of
    training as soon as their income support benefits are exhausted. Numerous
    officials in Beaufort County stated that a major problem with TAA and NAFTA-
    TAA is that the program allows for 104 weeks of training, but financial
    benefits are provided for only 78 weeks. They said that this situation
    contributes significantly to dislocated workers dropping out of training
    before completing the course. Assistance to

    Dislocated Workers

    Appendix IV: Washington and Chocowinity, North Carolina, Case Study Profiles

    Page 54 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Officials said that they strive to train dislocated workers for new
    occupations because, in their view, dislocated workers are no better off
    taking another job in industries threatened by increased trade, like
    textiles. However, opportunities to train for new occupations are limited
    because the community does not have any private training institutes, and
    Beaufort County Community College is the only training facility within a
    reasonable commute for county residents. The community college has developed
    courses to meet the needs of the dislocated workers for training to enter
    other occupations. However, many of the programs offered are for college
    students earning associate degrees and are semester based. In addition, an
    estimated 25 percent of the dislocated workers from Hamilton Beach/ Proctor-
    Silex, Inc., and more than 50 percent of the dislocated workers from Singer
    Furniture did not have high school degrees or GEDs; however, many of these
    individuals were reemployed immediately following the layoff at very low-
    paying, low- skilled jobs, according to local officials.

    Economic development is the most important issue for Beaufort County,
    according to county economic development officials, because the industrial
    base is changing. Community officials recognize the need to bring in other
    types of industries, since much of their business has been manufacturing.
    This is shifting due to changes in the global economy. Yet, the area has few
    economic development efforts currently under way. However, the county has
    recently created the Beaufort County Economic Development Commission to
    begin addressing emerging needs. The commission does not yet have a
    strategic plan.

    Beaufort County has received state Industrial Recruitment Competition Funds,
    which are designed to provide incentives for companies to locate in
    economically distressed areas. Specifically, four companies in the county
    received a total of $400,000 in commitments that provided $1,000 for each
    job created.

    Beaufort County did not apply for any Community Development Block Grant
    funds over the last few years even though, as the Director of the state
    Department of Commerce?s Finance Center explained, Beaufort may have been
    eligible for them. He told us that these funds frequently come with ?too
    many strings attached,? citing the stringent requirements that generally
    accompany these funds and the fact that community officials want more
    flexibility than the funds offer. In addition, the Community Development
    Block Grant application is about 40 pages long, is extremely time consuming,
    and is difficult to prepare. Generally, small communities Economic
    Adjustment

    Efforts

    Appendix IV: Washington and Chocowinity, North Carolina, Case Study Profiles

    Page 55 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    such as Beaufort County hire a contractor to write the grant application.
    Community officials said that Beaufort County applied for but was denied a
    CAIP grant. Officials also said they did not have sufficient staff resources
    to adequately develop the CAIP grant proposal.

    Officials stated that Beaufort County?s most pressing economic development
    needs are infrastructure and natural gas. Insufficient roadways to carry
    vehicles and trucks through Beaufort County, combined with the long distance
    from Interstate 95, contribute greatly to the slow economic development of
    Beaufort County. In addition, the county needs to build additional gas lines
    for industries before they will move into the area, according to local
    officials.

    One avenue of potential economic development is that the community of
    Washington and Chocowinity is becoming a popular area for retirees from
    northern states. Officials explained that both towns are located along the
    Pamlico River, which has drawn a great number of boaters. The community has
    built a major retirement community with large and expensive homes, a marina,
    a golf course, and a restaurant. As a result, the community is now also
    building a supermarket and drugstore to meet the needs of these new
    residents.

    Appendix V: El Paso, Texas, Case Study Profile

    Page 56 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Located at the western tip of Texas, El Paso borders New Mexico and the
    Mexican state of Chihuahua. It is the fourth largest city in Texas (see fig.
    7), with a population of 563,662, 77 percent of whom are Hispanic or Latino.
    Ciudad Juarez, El Paso?s sister city across the border, has about 1.2
    million in population. In 2000, their combined population was an estimated
    1.9 million. Additional community characteristics are shown in table 9.

    Table 9: Profile of El Paso, TX Community characteristics

    Population, as of 2000 563,662 Population, percentage change, from 1990 to
    2000 9.38% High school graduates, persons 25 years and over, 1990 65.3%
    College graduates, persons 25 years and over, 1990 16.2% Median household
    income, 1997 model- based estimate a $25,866 Persons below poverty,
    percentage, 1997 model- based estimate a 27.8% Unemployment rate, 2000 8.2%
    Major employment sectors Manufacturing, retail

    trade a Available data are for El Paso County.

    Source: U. S. Census Bureau.

    In 1994, nearly half of El Paso?s 50,000 manufacturing jobs were in the
    apparel and textile industry. Since January 1994, 17, 069 workers in El Paso
    have been certified as dislocated by NAFTA, with the majority having lost
    jobs in the apparel and textile industry. Jobs were also lost in other
    sectors, such as electronics assembly and plastic injection molding, which,
    like apparel, involved labor- intensive, low- skilled jobs. El Paso?s
    proximity to Mexico further accentuated this nationwide trend. As a result,
    El Paso has the unfortunate distinction of having experienced the greatest
    number of NAFTA- related job losses in the United States.

    While El Paso has experienced a net increase in jobs since 1994, these new
    jobs have required skill levels and language abilities beyond the capacity
    of most dislocated workers in El Paso, who were Hispanic, female, single
    heads of household, over the age of 40, with less than a high school
    education and limited English proficiency. Most had worked for years in the
    apparel industry, earning relatively good wages and benefits at companies
    like Levi- Strauss (see fig. 7). When their factories closed and relocated
    abroad, they could not get similar jobs to replace them. At the same time,
    they were not qualified for the new jobs being created in El Appendix V: El
    Paso, Texas, Case Study

    Profile Impact of TradeRelated Job Losses

    Appendix V: El Paso, Texas, Case Study Profile

    Page 57 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Paso, most of which required high school or postsecondary degrees and
    English proficiency. One dislocated worker told us that he had been earning
    $13.65 an hour plus benefits at Levi- Strauss and it was difficult to find
    another job at that pay rate with his limited education and English. In this
    regard, El Paso faced its greatest challenge in assisting its dislocated
    workers: it was not just a matter of training dislocated workers for new
    occupational skills. Many workers first had to attain basic English
    proficiency and make up for many years of missed education to earn a GED
    before they could start to learn a new occupational skill.

    By the end of 1996, more than 7,000 dislocated workers had filed for TAA or
    NAFTA- TAA benefits. At the same time, concern was growing that many
    dislocated workers who were coming to the end of their TAA or NAFTA- TAA
    benefits were still trying to learn English and earn their GED and had not
    received any occupational training that would help them get another job.
    These concerns escalated in 1997 and 1998 as the layoffs and plant closures
    continued, becoming ?traumatic? as Levi- Strauss closed four El Paso plants
    in 1997, displacing 1,959 workers, and another two plants with 796 workers
    in 1999. At the same time, Sun Apparel, American Garment, and other apparel
    firms also closed plants in El Paso. The Chief Executive Officer of the
    Upper Rio Grande Workforce Development Board said that in prior years,
    garment workers had always been able to get a job in another plant. By the
    summer of 1998, he said that there was virtually nowhere to go for a new
    apparel job.

    In April 1997, the Texas Workforce Commission instituted the El Paso
    Reemployment Pilot Project to address the needs of massive numbers of
    dislocated workers. It served 450 dislocated workers who had been identified
    as needing intensive case management, job development, bilingual vocational
    training, intensive work- based language training, and needs- related
    payments (extended income support) as elements of a program that would
    increase the likelihood of employment for these workers. The project was
    designed to serve workers who had exhausted their trade benefits but had
    never entered vocational skills training. It also identified the need to
    bring employers into the project. However, with 72 trade- certified closings
    between January 1, 1994, and March 1, 1998, affecting 8,173 workers, it soon
    became clear that a far larger effort than the Texas state Pilot Project
    would be needed.

    In March 1998, the Upper Rio Grande Workforce Development Board submitted a
    grant application for a Department of Labor National Reserve Account Grant.
    It was for 2- year funding in the amount of $55.5 million to Assistance to

    Dislocated Workers

    Appendix V: El Paso, Texas, Case Study Profile

    Page 58 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    provide administration, retraining, readjustment, supportive services, and
    needs- related payments to 3,500 eligible trade- dislocated workers in El
    Paso. The El Paso Proactive Reemployment Project, as finally approved,
    provided $45 million over 3 years for 4,500 dislocated workers. Workers who
    had been laid off between January 1, 1994, and December 31, 1998, and who
    had not yet received occupational skills training were qualified.

    The other component of the community?s response to the overwhelming numbers
    of dislocated workers was to develop the former Levi- Strauss Lomaland plant
    as a comprehensive One- Stop Workforce Preparedness Center and a One- Stop
    Capital Shop. The Greater El Paso Chamber of Commerce took the lead in this
    physical infrastructure project, which had broad community support and
    participation. The Chamber Foundation purchased the facility from Levi-
    Strauss in 1998 and converted it into the One- Stop Center. In addition, the
    Chamber also received a $1 million direct loan from the Community Adjustment
    and Investment Program 1 and a $1.4 million grant from the Economic
    Development Administration to rehabilitate the building. In addition, Levi?s
    also gave the Chamber a $250,000 grant to fund its Workforce Development
    Division, which would oversee the implementation of the strategic plan for
    the center.

    1 The President of the Greater Chamber of Commerce told us that CAIP told
    the Chamber that it could later request that the $1 million direct loan be
    converted into a grant. Currently, the loan remains interest free as long as
    the Chamber continues to use the building as a workforce development center.

    Appendix V: El Paso, Texas, Case Study Profile

    Page 59 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Figure 7: Photos of El Paso, TX

    Source: GAO.

    The results of the efforts in El Paso to assist the trade- dislocated
    workers were mixed at best. Local officials said the trade adjustment
    assistance programs were overwhelmed by the large numbers of workers that
    continually entered the system. According to these officials, the Texas

    Appendix V: El Paso, Texas, Case Study Profile

    Page 60 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Workforce Commission did not have enough case managers to handle the inflow,
    and when they hired new case managers, they were not experienced enough to
    handle their heavy caseloads. Another problem was that all training had to
    be approved by commission headquarters in Austin, causing delays. In 1997,
    the commission finally delegated approval authority to the commission?s
    local El Paso Trade Unit when it became logistically impossible to refer
    every case to Austin for approval. El Paso?s Trade Unit is the only one to
    have this approval authority, and the waiting time for approval of training
    declined from 12 weeks to 4 to 6 weeks. Commission officials said the
    current wait is about 3 weeks, which is due to the funding flow. Officials
    said that the funding stream available to El Paso could not keep up with
    their needs and that they frequently ran out of training funds.

    Perhaps the greatest criticism of assistance efforts we heard related to the
    ineffectiveness of the training. According to program officials, El Paso?s
    training efforts were hindered by the lack of sufficient training
    infrastructure to meet the needs of its displaced workers. Many of these
    workers had low educational levels and little English proficiency. They
    needed bilingual training designed for adults. One private training
    institute we visited, cited as a model bilingual training provider by Texas
    Workforce Commission officials, used a training method of intensive English
    as a Second Language classes and GED classes in Spanish in the mornings, and
    occupational skills training in the afternoon. The occupational training
    started out in Spanish and shifted gradually to English as students?
    proficiency increased. However, there were few such bilingual training
    programs in El Paso, and many dislocated workers languished in English as a
    Second Language and English- language GED courses without making enough
    progress to move on to occupational training courses, according to local
    program officials.

    El Paso received a $275,000 grant from EDA in 1998 to have an economic
    adjustment strategic plan developed by an economic consulting company. The
    plan, published in December 1999, confirmed that El Paso was following the
    national trend in making a transition to a service economy. The plan focused
    on encouraging job growth in the near term in demandrelated industries such
    as retail trade, healthcare, services, and construction, all industries that
    could potentially employ displaced workers. Over the longer term, the plan
    focused on the need for skilled workers and access to technology, especially
    information technology, as the principal components of adding value to the
    city?s economy. Economic Adjustment

    Efforts

    Appendix V: El Paso, Texas, Case Study Profile

    Page 61 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    The city also received other assistance from EDA. EDA had previously awarded
    a grant of $500,000 for a revolving loan fund that had lain dormant. Working
    together with a newly elected mayor, this grant was reactivated, and
    matching funds of $167,000 were obtained from El Paso County. The revolving
    loan fund has provided 6 loans to small businesses, helping to create or
    retain 45 jobs, according to city economic development officials.

    The EDA grant of $1.4 million to the Greater El Paso Chamber of Commerce
    Foundation to rehabilitate the former Levi- Strauss Lomaland plant,
    mentioned above, was the centerpiece of its economic adjustment assistance
    efforts in El Paso. The EDA Regional Director stated that this project was a
    successful model of a public- private partnership that addressed important
    economic adjustment needs. EDA, CAIP, the Greater El Paso Chamber of
    Commerce, and Levi- Strauss all participated in this effort.

    In addition, EDA also awarded a grant of $1.2 million to a local advocacy
    group for dislocated women workers, La Mujer Obrera, that had initiated its
    own community development corporation, based on a community selfhelp model.
    The group obtained the needed matching funds from the city of El Paso and
    the Rural Development Finance Corporation to acquire and rehabilitate the
    building. CAIP also provided a $180,000 direct loan to this group for
    equipment and working capital for a Mexican restaurant they started in part
    of the building. The group also plans a business incubator, a Mexican
    market, and other initiatives designed to create training opportunities and
    new jobs for displaced workers. In addition, the Hispanic Chamber of
    Commerce received a grant for $750, 000 over 5 years from the Small Business
    Administration for a Women?s Small Business Border Center, which will be
    located at the group?s facility.

    CAIP has been very active in El Paso. Besides the two direct loans already
    mentioned, since 1997 it has provided more than $38.7 million in loan
    guarantees made in El Paso through its partnership with Small Business
    Administration loan guarantee programs. Of this amount, CAIP provided 145
    loan guarantees with a gross loan amount of $36.6 million under the Small
    Business Administration 7( a) program and 4 loan guarantees under the Small
    Business Administration 504 program valued at $2.1 million. 2 El Paso also
    received two CAIP grants of $450,000 for two private training

    2 Data are as of May 29, 2001.

    Appendix V: El Paso, Texas, Case Study Profile

    Page 62 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    programs to train dislocated workers in locally needed occupations and place
    them in private sector jobs.

    Appendix VI: Martinsville and Henry County, Virginia, Case Study Profiles

    Page 63 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    The city of Martinsville, which lies in Henry County, is located in
    southwestern Virginia near the North Carolina State line. In Virginia,
    cities and counties are separate governmental entities. The economies of
    Martinsville and Henry County are highly dependent on the manufacturing
    sector, which mostly offers low- skill jobs in the textile and furniture
    industries. Table 10 presents a demographic and economic profile of
    Martinsville and Henry County.

    Table 10: Profile of Martinsville and Henry County, VA Community
    characteristics Martinsville Henry County

    Population, as of 2000 15,416 57,930 Population, percentage change, from
    1990 to 2000 -4.6% 1. 7% High school graduates, persons 25 years and over,
    1990 62.9% 53.9% College graduates, persons 25 years and over, 1990 15.8%
    6.7% Median household income, 1997 estimate $28,344 $30,843 Persons below
    poverty, percentage, 1997 estimate 17.3% 13.0% Unemployment rate 2000 annual
    average 12.1% 7.4% Major employment sector Manufacturing Manufacturing
    Percentage of jobs in manufacturing 33% 62%

    Sources: U. S. Census Bureau and Bureau of Labor Statistics.

    The manufacturing sector in Martinsville and Henry County has been in
    decline in recent years due in large part to increased foreign competition,
    which has resulted in a large number of job losses. Since 1993, Martinsville
    and Henry County have lost more than 6,000 jobs, the majority of which were
    in manufacturing. Most of these job losses were traderelated, as indicated
    by the fact that more than 3,500 of the laid- off workers were certified as
    eligible for TAA or NAFTA- TAA benefits.

    The manufacturing decline in the Martinsville and Henry County economy
    culminated in December 1999 when one of the area?s largest employers, the
    Tultex Corporation, unexpectedly went bankrupt and closed its operations.
    Tultex, which manufactured knit goods, employed over 1,700 workers in
    Martinsville, all of whom lost their jobs. Most workers were given only a
    few days? notice. None of the workers received severance packages, and most
    lost their health benefits. The Virginia Employment Commission sent its
    Rapid Response Team to assist the Tultex workers, making sure they were
    quickly enrolled for unemployment insurance and informed of available
    benefits (see fig. 8). Appendix VI: Martinsville and Henry County,

    Virginia, Case Study Profiles Impact of TradeRelated Job Losses

    Appendix VI: Martinsville and Henry County, Virginia, Case Study Profiles

    Page 64 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    The Tultex and other plant closings and layoffs have had a tremendous impact
    on the local economy. Unemployment in Martinsville went from 9.3 percent
    before the layoffs to 19.7 percent immediately afterward. Henry County also
    experienced a spike in unemployment, although not as severe as in
    Martinsville. In addition to massive job losses, the Tultex closure also
    significantly impacted Martinsville? s finances. For example, according to a
    city official, as a result of the Tultex bankruptcy, Martinsville lost $1.1
    million in tax revenues in 1999. According to a local real estate agent, the
    housing market also declined, because homeowners have left the area for new
    jobs, and there are few buyers for these homes. In addition, local community
    leaders said that decreased incomes have had a negative effect on retail
    sales in the area. Local businesses that supplied Tultex and other closed
    plants also suffered.

    We found that many trade- impacted workers did not enroll in training.
    According to our analysis of Virginia Employment Commission data, less than
    20 percent of workers certified for TAA and NAFTA- TAA benefits in the
    Martinsville/ Henry County area during 1999 and 2000 had enrolled in
    training. Virginia Employment Commission officials said that some workers
    decided to forgo training to search for new jobs to support their families.

    A number of trade- impacted workers who enrolled in a training program did
    not complete it. Most workers took classes at Patrick Henry Community
    College in Martinsville, which offers 1- and 2- year programs (see fig. 8).
    According to officials at the Virginia Employment Commission and the
    community college, some workers who enrolled in 2- year programs were forced
    to drop out when their extended income support benefits ended after 18
    months. Other workers, many of whom had never completed high school, were
    required to take remedial classes before entering occupational training.
    Several of these workers could not complete remedial classes and 1- year
    occupational training before their income support benefits ran out.
    Assistance to

    Dislocated Workers

    Appendix VI: Martinsville and Henry County, Virginia, Case Study Profiles

    Page 65 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Figure 8: Photos of Martinsville and Henry County, VA

    Source: GAO.

    To give employers an incentive to hire unskilled workers eligible for trade
    adjustment assistance who do not participate in classroom training, the
    Virginia Employment Commission offers an on- the- job training program.

    Appendix VI: Martinsville and Henry County, Virginia, Case Study Profiles

    Page 66 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Under this program, employers are reimbursed for half of a worker?s wages
    for a training period of up to 26 weeks. Employers eligible for the program
    must agree to employ the worker for at least 26 weeks after the training
    period has been completed. Virginia Employment Commission officials told us
    that few workers have chosen such on- the- job training. One reason they
    cite for low participation is that many of these positions are in the
    furniture and textile industries, where long- term job security is a
    concern.

    Virginia Employment Commission officials and several community leaders told
    us that there are few jobs in the area for workers who complete training. In
    some cases, workers who trained for traditional jobs such as bookkeeping
    could not find work, because all existing jobs were filled. In other
    instances, workers received training in high- tech occupations that do not
    yet exist in Martinsville and Henry County. Workers we interviewed who are
    currently enrolled in training said that they were resigned to the fact that
    they may have to seek jobs in their chosen professions in larger cities such
    as Greensboro, North Carolina, which is about 50 miles from Martinsville.

    Martinsville and Henry County have undertaken a number of economic
    development efforts to help the community recover from the massive layoffs
    of recent years. As part of an Economic Development District designated by
    the Economic Development Administration, the community is required to
    prepare an annual comprehensive economic development strategy. It also
    received extensive attention from the National Economic Council, which
    coordinated visits to the areas by federal officials. The Economic
    Development District also has received a $60,000 grant from EDA to prepare a
    regional economic adjustment strategy that focuses on the adverse impacts of
    trade. Both strategies propose and prioritize projects, such as industrial
    parks and business incubators, that qualify for state and federal economic
    assistance. Since 1999, Martinsville and Henry Country have received $1.7
    million in EDA and Department of Agriculture grants. The communities also
    have been awarded $1.6 million in state grants and loans, and they qualify
    for special state tax incentives for businesses to locate or expand in the
    area. In addition, the local economic planning board, the Patrick Henry
    Development Council, has developed a strategy to promote economic
    development in Martinsville/ Henry County that centers on recruiting and
    retaining industries, attracting new capital investment, and increasing tax
    revenues. Economic Adjustment

    Efforts

    Appendix VI: Martinsville and Henry County, Virginia, Case Study Profiles

    Page 67 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    A number of efforts to implement plans for economic development are ongoing
    in Martinsville and Henry County. The Patrick Henry Development Council
    recently contracted with two consulting firms to develop a profile of the
    local workforce. The profile is intended to promote the workforce skills
    currently available in the area to prospective new businesses and to point
    out skill gaps that need to be filled to bring in new businesses offering
    stable, well- paying jobs. The council also has an ongoing campaign to
    attract new businesses, including running an ad in the Wall Street Journal
    and distributing a CD- ROM that promotes the area. The council has financed
    these projects through a $350,000 grant it received from the Department of
    Housing and Urban Development.

    Martinsville and Henry County have seen a net increase in jobs in recent
    years, according to the Economic Development District, but local officials
    are quick to point out that many new jobs are low skilled and low wage.
    Since 1993, Martinsville and Henry County have lost 6,364 jobs, mostly in
    the textile and furniture industries. During the same period, 7,043 new jobs
    were announced for a net gain of 679.

    Appendix VII: Objectives, Scope, and Methodology

    Page 68 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    The Chairman and Ranking Member of the Senate Committee on Finance asked us
    to follow up on our prior evaluations of federal trade adjustment assistance
    programs with case studies focused on the experiences of trade- impacted
    communities. Specifically, we examined (1) the impact of trade- related
    layoffs on these communities, (2) the experiences of these communities with
    dislocated worker assistance, (3) their experiences with economic adjustment
    assistance, and (4) the lessons learned from these communities? experiences.

    To address all of these objectives, we conducted case studies in six
    communities. Between January and March 2001, we visited Watsonville,
    California; Coushatta, Louisiana; Owosso, Michigan; Washington and
    Chocowinity, North Carolina; El Paso, Texas; and Martinsville and Henry
    County, Virginia. We chose these locations on the basis of criteria designed
    to identify communities hardest hit by trade- related layoffs. First, we
    identified the total number of workers certified for trade adjustment
    assistance for fiscal years 1994 to 1999. We then analyzed the top industry
    sectors and divided cases by community, state, economic sector, and number
    of certified workers from fiscal years 1994 to 1999. We then added the
    number of workers certified across communities for these fiscal years; this
    yielded a list of about 300 communities that had more than 500 workers
    certified to receive TAA benefits. Next, we obtained 1999 population data
    for these communities from the Bureau of the Census Web site and calculated
    the percentage of individuals potentially affected by trade- related
    layoffs. Then by considering this factor, as well as region, industry
    sector, and presence of federal program activity such as CAIP, we pared the
    list to 48 communities. After that, we obtained city and county unemployment
    data for fiscal years 1994 to 1999 and October 2000 from the Bureau of Labor
    Statistics Web site in order to determine whether the trade- related layoffs
    had influenced local unemployment levels and the current local unemployment
    level. We then ranked the communities on three dimensions: (1) the current
    unemployment rate, (2) the percentage of the local population that was
    covered by a Department of Labor certification, and (3) the communities with
    the biggest change in their peak unemployment rate following a trade-
    related layoff from 1994 to the present. We called state and local officials
    to verify the nature and extent of trade- related job losses in these
    communities and the types of assistance that had been used, that is,
    training, community assistance, or grants provided by Commerce?s Economic
    Development Administration, CAIP, and the Department of Labor. We dropped
    one community from our list because their employer had recalled the trade-
    certified workers. Appendix VII: Objectives, Scope, and

    Methodology

    Appendix VII: Objectives, Scope, and Methodology

    Page 69 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    When we visited each community, we interviewed local government officials;
    community leaders; training providers; and, if available, workers receiving
    benefits from trade adjustment assistance programs. During our visit to
    Watsonville, we also interviewed Department of Agriculture field officials
    regarding Agriculture?s economic assistance in the area. We also obtained in
    each of these communities, if available, information on worker training
    programs, economic planning documents, and documentation regarding state and
    federal economic assistance.

    To further address the first three objectives, we met with federal and state
    officials who administer trade adjustment assistance programs for workers
    and economic assistance programs for communities and reviewed reports on
    worker and economic adjustment assistance. In Washington, D. C., we met with
    officials from several agencies, including the Department of Labor, which
    administers the TAA and NAFTA- TAA programs; the Department of the Treasury,
    which is the lead agency administering CAIP; and the Economic Development
    Administration, which administers the Trade Adjustment Assistance program
    for firms and provides economic assistance to distressed communities. We
    also discussed economic adjustment efforts in communities affected by
    military base closures with staff from the Office of Economic Adjustment in
    the Department of Defense to determine lessons learned that could be applied
    to our case study communities. In addition, we met with the Director of
    CAIP?s Los Angeles office to discuss CAIP assistance to potential case study
    sites. We also interviewed a number of state officials to discuss their
    administration of the TAA and NAFTA- TAA programs, as well as the state
    economic assistance available to case study communities. We reviewed our
    prior reports on trade adjustment assistance to workers and economic
    assistance to communities, as well as reports by other organizations on the
    impact of trade on workers and communities.

    In addressing the first three objectives, we also obtained and analyzed data
    from several sources. For the first objective on the impact of trade-
    related layoffs on the case study communities, we first obtained and
    analyzed Department of Labor data on the number of workers certified for TAA
    benefits in the six communities from 1995 through 2000. These data only
    represents workers potentially displaced for trade- related reasons, not
    actual jobs lost. 1 However, it is the best indicator available on the
    potential

    1 In some cases, workers certified faced potential job loss but had not been
    laid off. Thus, program certifications are not an accurate count of job
    losses due to trade.

    Appendix VII: Objectives, Scope, and Methodology

    Page 70 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    effect of trade on workers. As an indicator of the impact of trade- related
    layoffs on the communities, we examined Bureau of Labor Statistics
    unemployment data for the periods before and after trade- related layoffs in
    the communities. For the second objective on the experiences of the case
    study communities with dislocated worker assistance, we obtained and
    analyzed information from two other Department of Labor databases. To
    determine the number of recipients and costs of trade readjustment allowance
    payments and training under TAA and NAFTA- TAA in the six communities, we
    obtained and analyzed Department of Labor data on services provided to
    participants under the programs for fiscal years 1995 to 2000. We also
    obtained participant outcome data for the six communities and nationwide
    collected by Labor for 1999 and 2000 and analyzed it, focusing on
    demographic characteristics, wages, training, and reemployment. For the
    third objective on the communities? experiences with economic adjustment
    assistance, we obtained and analyzed information from EDA, the Department of
    Agriculture, and Department of Housing and Urban Development on the amount
    and types of assistance that the agencies provided to each community. We did
    the same with information from the Treasury on CAIP assistance to the
    communities.

    We conducted our work from November 2000 through June 2001 in accordance
    with generally accepted government auditing standards.

    Appendix VIII: Comments From the Department of Commerce

    Page 71 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Appendix VIII: Comments From the Department of Commerce

    Note: GAO comments supplementing those in the report text appear at the end
    of this appendix.

    See comment 2. See comment 1.

    Appendix VIII: Comments From the Department of Commerce

    Page 72 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Appendix VIII: Comments From the Department of Commerce

    Page 73 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    The following are GAO?s comments on the Department of Commerce?s letter
    dated August 17, 2001.

    1. The statement in the draft report on page 29 said that this grant was
    pending as of May 2001, which was consistent with the information provided
    to us by EDA. We have updated the text to reflect that it has since been
    awarded.

    2. Based on clarifications provided by EDA, we have dropped this statement
    from the text. GAO Comments

    Appendix IX: Comments From the Department of the Treasury

    Page 74 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Appendix IX: Comments From the Department of the Treasury

    Note: GAO comments supplementing those in the report text appear at the end
    of this appendix.

    Now on p. 29. See comment 1.

    Appendix IX: Comments From the Department of the Treasury

    Page 75 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    See comment 3. See comment 2.

    Appendix IX: Comments From the Department of the Treasury

    Page 76 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Appendix IX: Comments From the Department of the Treasury

    Page 77 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    The following are GAO?s comments on the Department of the Treasury?s letter
    dated August 16, 2001.

    1. The Department of the Treasury agreed with our characterization of CAIP
    funding as limited, but pointed out that more CAIP financing for communities
    was potentially available, if the communities requested it. We clarified the
    report by adding a statement that businesses and potential grantees must
    apply for CAIP financing. CAIP does not provide funding directly to eligible
    counties, but rather offers access to competitively awarded grants or
    enhanced to credit through loans and loan guarantees.

    2. We revised the text to add that the restaurant was also being used as a
    training facility.

    3. The Treasury disagreed with statements in the draft report that are based
    on our recent evaluation of CAIP, that CAIP loan guarantees made in
    partnership with the Small Business Administration would likely have been
    made anyway without CAIP?s participation. Our position, which remains
    unchanged, is that outcome measures and a monitoring system are needed to
    demonstrate the benefits CAIP has brought to communities. GAO Comments

    Appendix X: GAO Contact and Staff Acknowledgments

    Page 78 GAO- 01- 838 Trade Adjustment Assistance in Case Study Communities

    Phillip Herr, (202) 512- 8509 In addition to the person named above, Leyla
    Kazaz, Ed Laughlin, Chris Shine, Larry Thomas, Bill Hansbury, Bob DeRoy,
    Kathleen Joyce, and Lynn Cothern made key contributions to this report.
    Appendix X: GAO Contact and Staff

    Acknowledgments GAO Contact Staff Acknowledgments

    (320011)

    The first copy of each GAO report is free. Additional copies of reports are
    $2 each. A check or money order should be made out to the Superintendent of
    Documents. VISA and MasterCard credit cards are also accepted.

    Orders for 100 or more copies to be mailed to a single address are
    discounted 25 percent.

    Orders by mail:

    U. S. General Accounting Office P. O. Box 37050 Washington, DC 20013

    Orders by visiting:

    Room 1100 700 4 th St., NW (corner of 4 th and G Sts. NW) Washington, DC
    20013

    Orders by phone:

    (202) 512- 6000 fax: (202) 512- 6061 TDD (202) 512- 2537

    Each day, GAO issues a list of newly available reports and testimony. To
    receive facsimile copies of the daily list or any list from the past 30
    days, please call (202) 512- 6000 using a touchtone phone. A recorded menu
    will provide information on how to obtain these lists.

    Orders by Internet

    For information on how to access GAO reports on the Internet, send an email
    message with ?info? in the body to:

    Info@ www. gao. gov or visit GAO?s World Wide Web home page at: http:// www.
    gao. gov

    Contact one:

     Web site: http:// www. gao. gov/ fraudnet/ fraudnet. htm  E- mail:
    fraudnet@ gao. gov  1- 800- 424- 5454 (automated answering system) Ordering
    Information

    To Report Fraud, Waste, and Abuse in Federal Programs
    *** End of document. ***