Increased competition from low-priced imports has had a devastating impact on the profitability of American small businesses, particularly manufacturers. At a hearing this week, the Subcommittee on Government Organization, Efficiency and Financial Management, chaired by U.S. Congressman Todd Platts (PA-19) evaluated the effectiveness of federal programs designed to assist small- and medium-size businesses face this challenge.
"Small businesses are the key engines of new job creation and these companies are struggling in an increasingly competitive, globalized world economy," said Congressman Platts. "We need to address the severe economic dislocation that businesses today often face in trying to meet their bottom lines and ensure that we do right by all trade-impacted American companies."
The Trade Adjustment Assistance for Firms program (TAAF) is administered by the U.S. Department of Commerce's Economic Development Administration (EDA) to assist such U.S. companies stay competitive with overseas markets. TAAF support is provided to eligible firms through a network of eleven EDA-funded Trade Adjustment Assistance Centers located throughout the country. The program is currently authorized through 2013 at an annual spending level of $16 million.
Consultants at each TAAC work alongside eligible firms to develop business recovery plans, with EDA typically covering up to 50 percent of implementation costs. In 2011, 149 U.S. firms each with average sales of $20 million and employing approximately 100 workers received a total of $12 million in financial assistance through TAAF.
Yet questions about the effectiveness of this program remain. According to EDA's most recent annual report, firms receiving funds in 2009 now report that average sales have actually decreased by 1.6 percent, and average employment has decreased by 1.9 percent. Although that lower productivity is thought to be temporary, the U.S. General Accounting Office (GAO) has also raised concerns about the limited information available about TAAF's performance measures and data collection.
In a recent survey by GAO, the vast majority of firms that utilized the TAAF program have reported that it improved profitability and employment, with 73 percent of participating firms reporting that it helped their profitability. Patricia Britton, Vice President of Topflight Corporation in Glen Rock, testified that by 2009, competition against overseas companies with lower labor rates and more lax quality and regulatory standards had steadily eroded her company's profitability.
Working with Mantec, a York-based manufacturing consulting company, and the MidAtlantic Trade Adjustment Assistance Center (MATAAC), TopFlight utilized TAAF programs to strengthen its critical data and technology integration. Although still in the early stages of implementation, Britton said, TopFlight is on track to replace the revenue lost to overseas competition and has increased its revenue per employee by 20 percent.
Bryan Borlick, Director of TAAF programs, testified that EDA is focused on developing an improved performance measurement process over the next two years, which he said would result in more effective program management.