The TAA-FTA "Deal": Spending, Ctd.

[UPDATE: The revised merchandise processing fees for the TAA and KORUS legislation are laid out here.]

Since I blogged on Monday about the dubious spending provisions in the White House's proposed joint TAA-FTA legislation, there have been a few noteworthy developments:

First, on the question as to whether the legislation's increase in Customs Users Fees is consistent with WTO rules (first raised by your humble correspondent, btw), it appears that the White House and its supporters are utilizing the vaunted "because I said so" defense that my parents successfully employed throughout the 1970s and 80s.  Reports Inside US Trade [$]:

Supporters of renewing the lapsed Trade Adjustment Assistance (TAA) program are defending the increase of customs user fees to offset its costs as complying with World Trade Organization rules, which stipulate that customs user fees cannot be higher than the cost of the services rendered at the border.

The TAA deal as unveiled this week would increase the merchandise processing fee from 0.21 percent ad valorem to 0.329 ad valorem as one of a variety of funding offsets. 

Congress has not altered merchandise processing fees since 1995. Several sources noted that the cost of processing goods has gone up since that time, and one source said there is currently a "shortfall" between the costs of border services provided and the money collected through customs user fees.

One source also noted that since the terrorist attacks in 2001, the United States has placed a greater emphasis on security, and suggested that this could be one factor why processing costs have gone up.

In its draft Statement of Administrative Action (SAA) accompanying the draft implementing bill for the U.S.-Korea free trade agreement, the White House provides little explanation for how the fee increase would comply with WTO rules. The TAA compromise is included in the Korea FTA implementing bill.

"The change in rate addresses the increased costs Customs and Border Protection has incurred as a result of the increased volume of trade and additional operational initiatives since the last legislative change to the merchandise processing fee in 1995," the SAA states. 

The current merchandise processing fee of 0.21 percent ad valorem is generally assessed on "formal" entries, or those imports that have a commercial value of $2,000 or more. U.S. importers are required to pay this fee to Customs and Border Protection at the time of presenting the entry summary.

According to Article VIII of the General Agreement on Tariffs and Trade (GATT), all fees and charges imposed by WTO members on or in connection with importation "shall be limited in amount to the approximate cost of services rendered and shall not represent an indirect protection to domestic products or a taxation of imports or exports for fiscal purposes."

That means Congress can determine the level of the merchandise processing fees so long as they are commensurate with the costs of the services rendered.

So to summarize the White House's argument: Legislation that expressly raises revenues by increasing Customs users fees in order to fund TAA expansion doesn't actually raise revenues (and thus violate WTO rules), but instead simply pays for a longstanding "shortfall" in current fee collections (and thus is, like, totally WTO-consistent).   And this "shortfall" has persisted for more than a decade without anyone in the White House or Congress ever proposing to end it in standalone legislation because the US government is apparently so flush with cash that it was simply willing to keep subsidizing US importers to the tune of billions of dollars.  And it was just a coincidence that the big shortfall will be terminated in the joint TAA/KORUS legislation.  Oh, and something about 9/11 and terrorists.

Even shorter: The customs users fees provisions are WTO-consistent because the SAA says they are.  Now what WTO panel could argue with that?  (Rrrriiiiiight.)

Second, and speaking of those billions of dollars, the CBO has released its preliminary estimates of the revenue impact of the joint TAA/KORUS legislation.  You can check out the full score here, but the highlights are as follows:

• Projected amount of import tariffs eliminated (thus saving American consumers) between 2011 and 2016: $2.085 billion.

• Projected cost of TAA expansion over the same period: $1.17 billion.

• Projected increases in customs users fees over the same period (thus costing American consumers): $2.167 billion.

So according to CBO's (admittedly preliminary) projections, in this deal's first five years, American consumers will pay more in new Customs fees than they'll save in reduced or eliminated tariffs on Korean imports, and we'll pay another billion dollars for TAA expansion.

What a bargain!

But, hey, maybe TAA is some super-awesome program that's totally worth this fiscal and political expense.  Wouldn't it be great if some federal government agency released a long-overdue report on that very issue that would settle the TAA debate once and for all?  Umm, well:

As a divided Congress moves closer to a decision on three big international trade pacts, the Labor Department is four years late in delivering a study that is supposed to measure the efficacy of a program to provide extra benefits to workers who lose their jobs through globalization.

The deals with Colombia, South Korea and Panama, which could add billions in exports, are on a knife-edge over disagreements between Republicans and Democrats over Trade Adjustment Assistance, taxpayer funds paid to workers who lose their jobs as a direct result of trade.

The lack of up-to-date government data on how effective the $1 billion-a-year program is at helping the unemployed find well-paying work has hobbled efforts to identify and make improvements....

Labor Department officials say their research on TAA, originally due in 2007, won't be ready until the end of the year. That's likely to be after the fate of the proposed U.S. trade deals has been decided, at least until after the 2012 election. Thus far, the TAA study has cost $8.9 million, the Labor Department estimated.

"The data used for the study is long-term data on individual participants, which was collected over several years; therefore completion of the study is a long process," said Department of Labor spokeswoman Gloria Della.

Howard Rosen, resident visiting fellow at the Peterson Institute for International Economics, helped write 2002 reforms to TAA while he was a congressional aide that also called for a comprehensive evaluation of the program, and he has complained about the Labor Department's failure to deliver it.

"We need to make reforms based on what will work, not what will fly" politically, Mr. Rosen said.

Reports from Labor and the Government Accountability Office have led to changes, for example, in improving worker access to the program. Last year, 235,000 workers—or less than 2% of the nation's 14 million unemployed—were receiving benefits under the TAA program at a cost of $975 million.

In 2009, the program was expanded to include service, not just manufacturing workers, who now make up less than one-fifth of TAA recipients....

According to a Labor-sponsored study of TAA applicants in 2008-09, about one-third of eligible workers belong to a trade union; about half of those in the program are union members.

Gee, I wonder what possibly could be delaying the Labor Department study?  What a shame that it won't be ready in time for the current congressional debate.  Fortunately, IBD today points us to other studies on the TAA program, and let's just say that American taxpayers are definitely not getting their money's worth:

For starters, TAA is wasteful. Sen. Tom Coburn, R-Okla., released a report earlier this year showing that the $18 billion the government already spends on job training programs are full of waste, fraud and abuse.

A 2008 American University study by Kara Reynolds and John Palatucci concluded the same, declaring TAA "of dubious value in terms of helping displaced workers find new, well-paying employment opportunities."

Meanwhile, a 2003 study from the Office of Management and Budget called TAA downright "ineffective."

Also, it duplicates other programs. Trade-blogger David Almasi cites a GAO report earlier this year that shows, as of 2009, there were already 47 different federal jobs programs administered by nine different federal agencies. And 44 of those duplicated other efforts.

Finally, it cheats workers. The GAO study found that workers in the TAA program made less money in their new jobs than workers who hadn't benefited from the 156-week program.

A Heritage Foundation study of academic papers also found that TAA training tends not to boost wages.

On Monday I said of the White House's TAA-FTA proposal, "it's the spending, stupid."  Yet after reading all of these updates, I think I need to issue a slight correction:

It's the stupid spending.