Trade Adjustment Assistance: New Program for Farmers Provides Some Assistance, but Has Had Limited Participation and Low Program Expenditures

Trade Adjustment Assistance: New Program for Farmers Provides
Some Assistance, but Has Had Limited Participation and Low
Program Expenditures (18-DEC-06, GAO-07-201).

While tens of thousands of manufacturing workers have received
services through the Trade Adjustment Assistance (TAA) program,
until 2002, farmers and fishermen impacted by imports did not
have access to similar assistance. The Trade Act of 2002 (Trade
Act) established a new program, TAA for Farmers, administered by
the U.S. Department of Agriculture (USDA) to provide technical
assistance, a cash payment of up to $10,000 a year, and access to
Department of Labor (Labor) training and reemployment services
for farmers and fishermen who face significant price declines due
to increased imports. The Trade Act provides for up to $90
million each year through fiscal year 2007 for the costs to carry
out the program. Trade Act programs are due for reauthorization
in 2007. To be eligible for benefits, farmers and
fishermen--called producers--must complete a two-part process
each year. First, a group of producers of a commodity must submit
a petition to USDA on behalf of all producers in one or more
states. The petition must demonstrate that the price of the
commodity for the most recent marketing year declined by at least
20 percent from the average price for the previous 5 years and
that imports contributed importantly to the decline in price. If
USDA certifies the petition, any producer of that commodity in
the region covered by the petition may then apply for benefits
under the program. Individual producers must meet additional
conditions to receive cash payments. For example, their net farm
or fishing income must be less in the petition year than it was
in the previous year. The TAA for Farmers program was first
authorized in 2002, and no comprehensive review has been
completed to guide reauthorizing the program. To help prepare for
reauthorization, you asked us to assess the status of
implementation of the TAA for Farmers program. Specifically, we
examined: (1) how the USDA promotes the TAA for Farmers program
and the extent to which the agency has received and certified
petitions from producers, (2) the extent to which participants
have received benefits, including technical assistance and cash
payments, and (3) what is known about the results of the program.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-07-201
ACCNO: A64244
TITLE: Trade Adjustment Assistance: New Program for Farmers
Provides Some Assistance, but Has Had Limited Participation and
Low Program Expenditures
DATE: 12/18/2006
SUBJECT: Agricultural programs
Eligibility criteria
Federal aid programs
Prices and pricing
Program evaluation
Surveys
Technical assistance
Farmers
Trade Adjustment Assistance Program

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GAO-07-201

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Report to the Committee on Finance, U.S. Senate

United States Government Accountability Office

GAO

December 2006

TRADE ADJUSTMENT ASSISTANCE

New Program for Farmers Provides Some Assistance, but Has Had Limited
Participation and Low Program Expenditures

GAO-07-201

Contents

Letter 1

Appendix I Briefing slides 7
Appendix II Cash Payment Formula 45
Appendix III GAO Contacts and Staff Acknowledgments 47
Related GAO Products 48

Tables

Table 1: Adjustment Assistance Payment Formula 45
Table 2: Examples of USDA Cash Payments 46

Figure

Figure 1: Salmon and Shrimp Producers Received 92 Percent of Payment
Funds, Fiscal Years 2004 and 2005 4

Abbreviations

CSREES Cooperative State Research, Education, and Extension Service
ERS Economic Research Service
FAS Foreign Agricultural Service
FSA Farm Service Agency PRC Petition Review Committee
TAA Trade Adjustment Assistance
USDA United States Department of Agriculture

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United States Government Accountability Office

Washington, DC 20548

December 18, 2006 December 18, 2006

The Honorable Charles E. Grassley
Chairman

The Honorable Max Baucus
Ranking Minority Member
Committee on Finance
United States Senate

To be eligible for benefits, farmers and fishermen--called producers--must
complete a two-part process each year. ^1 First, a group of producers of a
commodity must submit a petition to USDA on behalf of all producers in one
or more states. The petition must demonstrate that the price of the
commodity for the most recent marketing year declined by at least 20
percent from the average price for the previous 5 years and that imports
contributed importantly to the decline in price. If USDA certifies the
petition, any producer of that commodity in the region covered by the
petition may then apply for benefits under the program. Individual
producers must meet additional conditions to receive cash payments. For
example, their net farm or fishing income must be less in the petition
year than it was in the previous year.^2 ^12To be eligible for benefits,
farmers and fishermen--called producers--must complete a two-part process
each year. First, a group of producers of a commodity must submit a
petition to USDA on behalf of all producers in one or more states. The
petition must demonstrate that the price of the commodity for the most
recent marketing year declined by at least 20 percent from the average
price for the previous 5 years and that imports contributed importantly to
the decline in price. If USDA certifies the petition, any producer of that
commodity in the region covered by the petition may then apply for
benefits under the program. Individual producers must meet additional
conditions to receive cash payments. For example, their net farm or
fishing income must be less in the petition year than it was in the
previous year.

^1Producers include qualified fishermen or owners, operators, landlords,
tenants, or sharecroppers who share in the risk of producing a commodity
and are entitled to share in the crop available for marketing from the
farm.

^2 For recertified petitions, the term "previous year" is the year before
the first petition was approved.

The TAA for Farmers program was first authorized in 2002, and no
comprehensive review has been completed to guide reauthorizing the
program. To help prepare for reauthorization, you asked us to assess the
status of implementation of the TAA for Farmers program. Specifically, we
examined: (1) how the USDA promotes the TAA for Farmers program and the
extent to which the agency has received and certified petitions from
producers, (2) the extent to which participants have received benefits,
including technical assistance and cash payments, and (3) what is known
about the results of the program. To respond to these issues, we
interviewed USDA program officials involved with implementing TAA for
Farmers, analyzed USDA program data on petitions, payments, and technical
assistance from fiscal years 2004-2006, and reviewed the results from a
2006 survey of TAA for Farmers participants conducted by Washington State
University Extension for USDA's risk management education centers.^3 We
conducted our work from August 2006 to October 2006 in accordance with
generally accepted government auditing standards.

On October 24, 2006, we briefed your staffs on the results of our work.
This report formally conveys the information provided during that
briefing. Appendix I contains the briefing slides.

In summary, we found that, while USDA uses various means to promote TAA
for Farmers, the numbers of both petition submissions and certifications
are lower in fiscal year 2006 than they were in 2005. USDA officials
attribute the decline to the difficulty farmers and fishermen have in
meeting the eligibility criteria. Out of 101 petitions submitted for the
program to date, USDA reviewed the 64 that were complete, appropriate and
timely. Of these, 30 petitions were certified and 34 were denied.
Producers of Concord grapes, lychees, olives, wild blueberries, fresh
potatoes, Florida avocados, snapdragons, shrimp, salmon, and catfish were
among those that were certified under the program. The number of petitions
submitted by producers declined by nearly half from fiscal year 2004 to
2006, while the number of petitions USDA denied more than doubled between
2005 and 2006. Most of the petitions that were denied were up for
recertification and no longer met key program eligibility criteria.
Officials attribute this to two factors--the requirement to demonstrate a
20-percent price decline and the requirement to show a further increase in
imports for petitions up for recertification. For example, in 2006, 14 of
the 15 petitions that were denied were up for recertification and were not
recertified because imports did not increase over the previous year's
level.

^3 USDA's Cooperative State Research, Education, and Extension Service
(CSREES) operates the risk management education centers.

While USDA provides technical assistance to producers, the amount of cash
payments made to producers has been relatively small and, according to
program officials, some program eligibility criteria may limit their
participation. To date, about 13,000 producers have received technical
assistance; USDA has provided about 8,000 cash payments; and few
producers--estimated at 3 percent or less--have taken advantage of Labor's
training and reemployment services. ^4, ^5 USDA's Cooperative State
Research, Education, and Extension Service (CSREES) provides technical
assistance through various means-in person, online, and through training
materials-to producers nationwide, and has implemented a basic and an
intensive technical assistance curriculum. The basic curriculum, which is
mandatory for all certified producers who wish to receive a cash payment,
provides a brief overview of world trade, business improvements producers
can make, and other resources. The intensive curriculum, which was
implemented in 2006, is optional, and provides individual one-on-one
counseling to help producers develop and implement changes to their
business. Of those who applied to receive cash payments, two-thirds
received it. The median cash payment was relatively low: $1,605 in fiscal
year 2004 and $2,520 in 2005, but fewer payments were made in 2005
compared to 2004. About 1,000 payments, out of a total of about 8,000
payments, were at the maximum of $10,000. Salmon and shrimp producers
received more than 90 percent of all payments in fiscal year 2004 and 2005
(see fig. 1).

^4 The estimate of participation in Labor's reemployment services is based
upon the survey of TAA for Farmers participants conducted by Washington
State University Extension for USDA's risk management education centers.
Labor does not routinely track this information.

^5 The survey collected information on all producers who applied for
benefits in fiscal years 2004 and 2005, and analyzed the data using
commodity-based groups. The estimate of 3-percent is based on respondents
in the majority of groups who reported receiving training from Labor. Some
commodity groups, for example, salmon and shrimp fishermen generally
reported higher participation.

Figure 1: Salmon and Shrimp Producers Received 92 Percent of Payment
Funds, Fiscal Years 2004 and 2005

Note: Payments for fiscal years 2004 and 2005 totaled $28,056,454.

Agency officials identified certain criteria in the legislation as factors
that may affect individual participation. In particular, the net farm
income test--that requires producers to show that income was less in the
petition year than the previous year--may disqualify some producers who
seek cash payments. In addition, the payment formula, which resulted in
most producers receiving less than $3,000, may also discourage producers
from participating.^6 Low producer participation and low payments have
resulted in USDA spending falling far below the $90 million provided for
by the Trade Act--program spending totaled about $16 million in fiscal
year 2004 and $21 million in 2005. Given the low expenditures, USDA only
requests about one-third of the $90 million in its annual budget request.

Producers were generally satisfied with the technical assistance and
thought applying for the cash payment was worthwhile, according to a USDA
survey of producers who applied for benefits in fiscal years 2004 and
2005. Overall, at least half of the respondents found that the basic
technical assistance training was worthwhile, and about a quarter of the
respondents reported making changes to their business as a result of the
assistance. Generally, respondents were satisfied with the quality of
technical information they received on issues such as how to improve the
marketing of their commodity. However, a substantial number of respondents
reported that the basic curriculum provided inadequate information on some
topics, such as how to evaluate other commodities as substitutions for
their own. According to USDA officials, it was the need to provide
additional assistance tailored to a specific business that resulted in the
development of the intensive technical assistance curriculum. Regarding
the cash payment, about 80-percent of respondents said the payment was
worth the effort of applying, though slightly more than half of the
producers said they experienced some difficulty in applying for and
receiving a cash payment. However, the survey provides no insight into why
some producers did not apply for benefits at all.

^6 See appendix II for more information on the payment formula.

In conclusion, TAA for Farmers is a new program and we have only an early
view of how this program is working. While the cash benefits and technical
assistance appear to assist farmers and fishermen in adjusting to the
effects of import competition on a limited, short-term basis, the cash
payments are relatively low and must be approved each year. Furthermore,
the criteria for program eligibility are difficult for many farmers and
fishermen to meet and the low cash payments may discourage others from
applying. As a result, USDA spending for this program is well below the
amount provided for by the Trade Act.

We provided a draft of this report to officials at USDA for their
technical review and incorporated their comments where appropriate.

As arranged with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution of the report
until 30 days from its issue date. At that time, we will send copies of
this report to the Secretary of Agriculture, relevant congressional
committees, and other interested parties and will make copies available to
others upon request. The report will also be available at no charge on
GAO's Web site at http://www.gao.gov .

If you or your staff have any questions about this report, please contact
me at (202) 512-7215. You may also reach me by e-mail at
[email protected] . Key contributors may be found in appendix III.

Sigurd R. Nilsen
Director, Education, Workforce, and Income Security
Issues

Appendix I: Briefing slides

Appendix II: Cash Payment Formula

A cash payment is one of three benefits producers may receive through the
TAA for Farmers program. Each eligible producer may receive a cash payment
of up to $10,000 each federal fiscal year.

The amount of money a producer receives is based on how much of the
commodity he or she produced and how steeply the national price fell from
the previous 5 marketing years.^1 One program requirement is that the
price declines at least 20 percent as a result of imports of a like or
directly competing commodity.

Specifically, payments are calculated on the basis of the following
formula:

Table 1: Adjustment Assistance Payment Formula

Half of the difference between 80
percent of the average national price
of the commodity for the 5 previous
Total units of the years and the national average price
commodity produced Multiplied by (X) for the most recent year
# Units X [(Ave. price for 5 years x 80%) -
current price]

Source: GAO analysis of adjustment assistance payment formula.

Table 2 gives some examples of how cash payments for several commodities
may be calculated and how the payments compare to the price decline.

^1 For petition recertification USDA uses the average of the 5 years in
the original petition. For example, the Alaska salmon 2005 petition used
the 5-year average of years 1997-2001. In addition, the "marketing year"
means the marketing season or year as defined by the National Agriculture
Statistic Service, or a specific period as proposed by the petitioners and
certified by the Administrator of the Foreign Agricultural Service.

Table 2: Examples of USDA Cash Payments

Half of the
Total units Multiplied difference in Total Price
Commodity produced by (X) prices = payment decline
Concord 100 tons X [($272 x 80%) - = $980.00 $74.00
grapes $198] per ton
($9.80 per
2 ton)
Lychees 10,000 X [($2.61 x 80%) -- = $5,540.00 $1.63
pounds $0.98] per
($0.554 per pound
2 pound)
Alaska 95,000 X [($0.403 x 80% -- = $2,916.50 $0.142
salmon pounds $0.261)] per
($0.0307 pound
2 per pound)
California 100 tons X [($598 x 80% -- = $2,320.00 $166.00
olives $432)] per ton
($23.20 per
2 ton)

Source: GAO analysis of USDA payment rates.

Appendix III: GAO Contacts and Staff Acknowledgments

GAO Contact

Sigurd R. Nilsen (202) 512-7215, [email protected]

Staff Acknowledgments

Dianne Blank, Assistant Director

Kate Blumenreich, Analyst-in-Charge

Guisseli Reyes-Turnell made significant contributions to the report in all
aspects of the work. In addition, Amy Sweet served as team member; Wayne
Sylvia served as technical advisor; David Dornisch advised on methodology
issues; Rachael Valliere advised on report preparation; and Jessica
Botsford advised on legal issues. Arthur Merriam verified our findings.

Related GAO Products

Trade Adjustment Assistance: Labor Should Take Action to Ensure
Performance Data Are Complete, Accurate, and Accessible. [11]GAO-06-496 .
Washington, D.C.: April 25, 2006.

Trade Adjustment Assistance: Most Workers in Five Layoffs Received
Services, but Better Outreach Needed on New Benefit. [12]GAO-06-43 .
Washington, D.C.: January 31, 2006.

Federal Programs with a Financial Eligibility Component. [13]GAO-06-292R .
Washington, D.C.: December 14, 2005.

Health Coverage Tax Credit: Simplified and More Timely Enrollment Process
Could Increase Participation. [14]GAO-04-1029 . Washington, D.C.:
September 30, 2004.

Trade Adjustment Assistance: Reforms Have Accelerated Training Enrollment,
but Implementation Challenges Remain. [15]GAO-04-1012 . Washington, D.C.:
September 22, 2004.

(130622)

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References

Visible links
11. file:///home/webmaster/infomgt/d07201.htm#http://www.gao.gov/cgi-bin/getrpt?GAO-06-496
12. file:///home/webmaster/infomgt/d07201.htm#http://www.gao.gov/cgi-bin/getrpt?GAO-06-43
13. file:///home/webmaster/infomgt/d07201.htm#http://www.gao.gov/cgi-bin/getrpt?GAO-06-292R
14. file:///home/webmaster/infomgt/d07201.htm#http://www.gao.gov/cgi-bin/getrpt?GAO-04-1029
15. file:///home/webmaster/infomgt/d07201.htm#http://www.gao.gov/cgi-bin/getrpt?GAO-04-1012
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