of funds from the public sector to the private sector without providing any increment to the Gross National Product and constitutes an inflationary influence. This is the same as with any government expenditure which does not improve productivity. Adjustment assistance is no more than a public dole. Evidently, this view is also shared by staff officials of the Executive Branch for this is what an article in the Washington Post of March 21, 1977 had to say: "Officials in the Departments of Commerce and Labor administering the assistance program admit that it has been little more than a public dole for laid off workers, adding to unemployment compensation while retraining barely a handful. Few firms have received or even applied for the available loans to modernize or diversify. Only one community, Sedalia, Missouri, has ever sought the funds available for industrial development-and it was turned down last year." Even the most ardent supporter of adjustment assistance must admit the insufficiency of funding for the programs. The latest report on adjustment assistance released by the General Accounting Office March 4, 1977, notes that "the Office of Management and Budget allotted $20 million for the firms adjustment assistance program both in fiscal years 1976-77." Even so, by the close of calendar 1976, only $13.5 million was authorized for disbursement. In a remarkably candid assessment of the Trade Adjustment Assistance program for footwear producing firms, the Department of Commerce on March 5, 1976 noted its concern that present funds were not sufficient to meet needs which it estimated at over $120,000,000 "if trade adjustment assistance carries the entire load." The report also referred to an earlier 1973 Commerce study which had concluded: "That the Department could not expect to help the typical shoe company applicant become more viable through the mechanism of diversification into products other than footwear. Although a number of alternative industries with a less hostile environment than shoes were identified as offering some potential for diversification, the requirements for entry into new fields were considered to be beyond the capabilities of most applicant shoe firms. ITC Commissioner Ablondi, the only Commissioner recommending adjustment assistance as the relief mechanism for shoes, was himself concerned that only $20 million had been appropriated for the firms adjustment assistance program in fiscal year 1976 and he stated: "such an amount is not sufficient to carry out the intended mission of the program properly." To believe that the Executive Branch will recommend the very large sums which would be needed for any single import-impacted industry as large as the shoe industry or that Congress will appropriate such large funds is not realistic. Nor do I believe that for an industry as large as the non-rubber footwear industry with import injury as great and as pervasive as it is, it is good public policy to do so. Even were we to assume that adequate funds would be appropriated, the requirements of the statute and of the regulations which implement the law do not make it a feasible across-the-board solution to the problems of the non-rubber footwear industry and its workers. On March 21, 1977, the Washington Post reviewed some of the shortcomings of adjustment assistance for firms and workers in the shoe industry and it concluded: "For the shoe industry, such trade adjustment assistance instituted in 1962, expanded by Congress in 1974, and expedited by then President Ford a year ago, has failed-dismally." Let us look at some of the features of the program for firms which causes the Washington Post-and me to be so pessimistic. To obtain adjustment assistance in the form of technical and financial assistance (i.e., in direct loans and/or loan guarantees) two distinct steps have to be taken by applicant firms. One is the process of certification; the other is the process of approving adjustment proposals. In order to be certified eligible, a firm must demonstrate that: A. A significant number or proportion of its workers have become totally or partially separated or threatened with separation; B. Production and/or sales have decreased absolutely; C. Increased imports of articles like or directly competitive with those produced by the firm have "contributed importantly" to the separation of workers and the decline in sales or production. 88-681 O 77-9 In this context, here is how the Department of Commerce in a report on adjustment assistance for footwear firms released February 16, 1977 analyzed its criteria for the phrase "contributed importantly." The report states: "In determining whether imports 'contributed importantly' among possible causes for worker separation and decreases in sales or production for a petitioning firm, the influence of imports as a cause would be considered by the Department on the basis of the totality and interrelationship of all possible causes affecting the operations of the individual firm. "For purposes of certification of eligibility, the Department considers the operations of affiliates, subsidiaries and parents of the petitioning firm, and its principal owners. In cases where the petitioner has more than one affiliates, subsidiaries, or parents, the sales, production and employment data must be presented on a consolidated basis for all business entities related to the petitioning firm. “The likelihood of firms in the industry being able to meet the qualifying criteria for certification would depend on a number of unknown factors which could vary considerably in individual cases. Each case would have to be judged on its own merits and on the basis of whatever evidence the petitioning firm may adduce concerning its own operations and market situation." Furthermore, any temporary increase in production and employment, such as occurred in the shoe industry in the first half of 1976, will disqualify a firm from being certified if the temporary upturn is recent in relation to the time the application for certification is being considered. The Labor Department, however, looks at a longer time period in the certification process for workers. Is certification the end of the process? No; because the same Commerce Department report clearly states: "However, the fact that a firm is certified does not imply that such assistance will be furnished. The decision will depend on whether the firm's adjustment proposal meets all of the statutory criteria essential for approval." Once certified as eligible a firm can apply for adjustment assistance within two years. The application must include a proposed plan for economic adjustment of the firm. Approval of the firm's application is based on the following criteria: A. The firm has no reasonable access to financing through the private capital market; B. The firm's adjustment proposal is: (1) reasonably calculated materially to contribute to the economic adjustment of the firm; (2) gives adequate consideration to the interests of the workers of such firm; and (3) demonstrates that the firm will make all reasonable efforts to use its own resources for economic development. Financial assistance is not extended unless it can be shown there is reasonable assurance of repayment and that the funds provided are not available from the firm's own resources. These statutory criteria as implemented by Commerce Department procedures and requirements make for much bureaucratic red tape. This is both costly and time consuming to applicants and effectively discourages applicants. Indeed, the Commerce Department report dated February 16, 1977 has this to say: "It should be noted that for any firm suffering from extreme financial difficulties, the federal loan programs may not actually be viable solutions because of the loan repayment assurances required." Every government report assessing adjustment assistance, including the GAO report issued this month supports the contention that there is substantial uncertainty involved in interpreting what information is required in the petition process, how much information is adequate, whether all procedures have been complied with, and how, if at all, assistance can be obtained in the pre-proposal steps. Congressman Burke in a statement issued March 5 on the GAO study had this to say about the cumbersome governmental procedures and regulations: "A firm must show compliance with EPA regulations: file what amounts to a 14 point environmental impact statement; show evidence of an affirmative action plan; sign a civil rights statement indicating it will not discriminate on the basis of sex, race, or religion: submit financial records and tax returns for the past five years; undergo FBI checks on financial officers and stockholders; and document in full that imports have been a major cause of steadily declining financial conditions and prospects. All this amounts to time and money, two sorely lacking commodities in a business about to go under." Just how burdensome and discouraging all this is to any firm pursuing adjustment assistance is easily apparent in the list of material required by the Economic Development Administration to evaluate applications for financial assistance in phase 2, that is after a firm has been certified as eligible for assistance. The inventory is contained in EDA's form ED-272, a copy of which is appended hereto. The complexity of program procedures is also readily evident in two flow charts which the Government Accounting Office prepared to illustrate separately the certification process and the follow-up process of actual applications for financial assistance. These two flow charts are reproduced and also appended hereto. Clearly, receiving assistance under the Trade Adjustment Assistance Program involves many hurdles which are often overwhelming to both firm and worker applicants. Equally clearly, the record of specific accomplishments to date proves this program is not the appropriate tool to provide an effective remedy for the serious injury which the International Trade Commission, on two successive occasions, found the U.S. nonrubber footwear industry to be suffering as a result of increased import competition. There should be no dispute over the most recent ITC finding of injury on non-rubber footwear last month: From 1968 to 1976, imports rose from 182 to 370 million pairs. Production fell from 642 to 444 million pairs. Employment declined from 233,000 to 170,000 workers. The unemployment rate was 11.7 percent in the last half of 1976, 50 percent higher than the national average. Idle capacity in the industry is about 200 million pairs, 30 percent of the industry's capacity. The number of firms declined from 597 in 1969 to 376 in 1975, and probably less than 350 today. Levels of profitability are unreasonably low for a significant number of firms in the industry. Yet in the face of such indisputable evidence, one lone ITC Commissioner repeated his previous recommendation of adjustment assistance as a remedy, even though he tempered his decision by voicing concern again over the insufficiency of funding of the program. In this respect, the Commissioner stated in his latest decision: "As I noted in my opinion in the previous footwear investigation, I believe that insufficient funds have been made available to the Department of Commerce's Trade Adjustment Assistance Program. In fiscal year 1976, the Department of Commerce budgeted $17 million for financial assistance for firms and $3 million for technical assistance for firms. The same amounts have been budgeted for financial and technical assistance for fiscal year 1977 and for the proposed fiscal year 1978 budget. I consider these amounts insufficient to effectively deal with the problems of the footwear industry alone, not to mention the requirements of firms in other industries." This Commissioner would have us believe that adjustment assistance has not been tested sufficiently to date because the number of shoe firms applying for assistance has been small and the number of actual recipients to date even smaller. At the same time he admits that if all injured firms in the industry were to seek assistance, they would overwhelm the program. What a classic "Catch-22" situation! To get loans, a shoe firm must be able to prove that the loan will be repaid and at the same time it must also prove it is going out of business. All this in a program which is inadequately funded and fraught with expensive, timeconsuming and almost insurmountable operational hurdles for applicants both firms and workers. We in the nonrubber footwear industry say to those who recommend adjustment assistance as a remedy for the shoe industry's import injury, that adjustment assistance has been tested and tested adequately by any measures. It has failed. Only effective import relief will save the domestic footwear industry. President Carter has the authority to do so as a result of the ITC's recommendations of last month. The footwear industry and its workers are confident that he will. FORM ED-372 (Rev. 10-751 US DEPARTMENT OF COMMERCE OMB Approval Not Required APPLICATION REQUIREMENTS AND INDEX-TRADE ADJUSTMENT ASSISTANCE FOR FIRMS NAME AND ADDRESS OF APPLICANT 10 porBang Company/ PROJECT NO. PROJECT LOCATION !!! different from about! DATE INSTRUCTIONS FOR COMPLETION AND USE OF FORM ED-272 This form identifies the documentary material needed by EDA to evaluate applications for financial assistance to businessES under its trade adjustment assistance programs. Many items are included in this list, but only those items checked in Column (B) will be required to perfect an appucauon. Each project is unique; the specific documentary requirements for it are determined in a pre-application conference with the prospecure applicant, at which time an EDA representative shall: 1. Place a check mark in Column (B) to the left of each required item, except for those with pre-printed check marks which are required from all applicants, 2. Place the letter NR, instead of a check mark, next to each unneeded item; 3. Identify additional documentary requirements on the numbered, but otherwise blank, lines; 5. Give the prospective applicant a copy of the endorsed form as the index of the application. Using a copy of the checked form as an index (which shall be included in the application package), the applicant shall assemble in the order indicated the documentary material and mark each item for identification with its appropriate number/letter from this form. When the application is received, an EDA representative shall check each item to ensure that it provides the necessary information and shall indicate its acceptability by initialing the appropriate space in Column (A) and shall execute the second 1. Form ED-271, "Application for Trade Adjustment Assistance for Firma", or equivalent Form Did-316P The history of the firm must include a discussion of the basis of its certification as being 1. materially contribute to the economic adjustment of the firm, 2. give adequate consideration to the interest of the firm's workers, and 8. Form ED-503, "Assurances of Compliance with the Department of Commerce and the Form ED-524, "Certification of Compliance with the Clean Air Act and the Federal Water 10. Form CD-227, "Request for Name Check or Identification Record Check" for owners and/or 13. Pro forma income and cash flow projections (by quarters from the date of the most recent 14. 15. Pro forma balance sheets for the last date of each of the periods covered by the pro forma |