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 				 
								 

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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 Josï¿½.
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)

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