Obama's trade dilemma

During the president’s trip to Asia, he will undoubtedly promote the US agenda in the ongoing Trans-Pacific Partnership (TPP) trade agreement negotiations. But to what end? Many in Congress, especially those in his own party, are vehemently opposed to the issue. And without Trade Promotion Authority (TPA), congressional approval of an eventual agreement is virtually impossible.

In his State of the Union Address, President Obama called for the enactment of TPA. Through TPA, Congress provides the administration with goals and guidelines to use during trade negotiations. In return for adhering to those objectives, and in exchange for close collaboration with Congress, Congress agrees to grant a president a speedy up or down vote on a completed agreement.

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In his effort to get TPA passed, Obama knew he could count on the support of two critical players in the trade debate, Sen. Max Baucus (D-Mont.) and Rep. Dave Camp (R-Mich.), the respective chairs of the Senate Finance and House Ways & Means committees, who introduced TPA legislation in January. But on the day after his address, the president saw any hope of immediate action on TPA disappear when Senate Majority Leader Harry Reid (D-Nev.) said the President would be well-advised not to push the legislation. Other significant opposition was voiced by House Minority Whip Steny Hoyer (D-Md.), Ways & Means Committee ranking Democrat Sandy Levin (D-Mich.), and the Tea Party caucus.

None of this is particularly surprising. Trade bills are viewed with skepticism by Democrats who view trade agreements as creating greater import competition, which cost Americans jobs.

Trade Promotion Authority, or its predecessor, “fast track,” is a recent development in congressional history. Article I, Section 8 of the U.S. Constitution gives Congress authority over foreign trade through the power to regulate foreign commerce and to set import duties. The Constitution does not assign authority to the president relating to foreign trade, but does give the president exclusive authority to negotiate treaties and international agreements. The conclusion of trade agreements therefore requires a delicate balance through which Congress delegates some of its constitutional prerogative to the President to negotiate trade agreements.

In early instances of trade negotiations, the primary objective was to lower the most tangible barriers to trade – import tariffs. In 1967, however, the Kennedy Round Agreement included several commitments that went beyond tariff reduction, including agreements on antidumping and customs valuation. Provisions that go beyond tariffs required changes in U.S. law and regulations, and many in Congress believed that the president had overstepped his authority by including them. As it became clear that future agreements would focus increasingly on non-tariff barriers and trade rules, it also became clear that Congress should have a greater role in their negotiation and implementation.

Congress created that role in 1979, through the enactment of fast track negotiating authority. It was re-authorized in 1984, 1988, and 2002, when it was redubbed “trade promotion authority.”

The substance of the bill now pending before Congress differs little from the 2002 version. It provides fast track procedures to agreements entered into before July 1, 2018, and will be extended automatically to July 1, 2021, unless either house of Congress objects through the passage of a resolution of disapproval. Substantively, the authority would apply to the ongoing Trans-Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (TTIP), Trade in Services Agreement (TISA), and perhaps the Doha Development Round of WTO negotiations.

One key factor affecting the bill’s prospects is the departure of Baucus, a long-time free trade supporter. His successor, Sen. Ron Wyden (D-Ore.), who has supported past TPA legislation, is revisiting the bill and has his own ideas about how to proceed. He has even suggested that a new voting procedure for trade bills be adopted – not fast track or regular voting procedures, but something he dubs “smart track.”

Another factor affecting passage is the change in the Republican caucus. Several Tea Party members, led by Rep. Paul Broun (R-Ga.) and Sen. Rand Paul (R-Ky.) oppose granting Obama negotiating authority, which they call “Obamatrade.” Republicans have in the past tended to support free trade agreements, however, this group believes that fast track circumvents Congress’ role in implementing trade agreements, and cedes too much power to the Executive Branch.

Passage of TPA this year is also complicated by mid-term elections as Democratic leaders – especially in the Senate, will be reluctant to force a vote on TPA over the string objections of much of the democratic base.

The safest bet is that TPA will not be enacted this year. However, as the TPP negotiations move forward, there will be a strong incentive for Congressional proponents of free trade to move a TPA bill, which may be packaged with other trade provisions to attract Democratic votes, like Trade Adjustment Assistance and meaningful currency manipulation legislation.  While unlikely to occur before the mid-terms –trade legislation could occur during the lame duck session.

Spulak is a King & Spalding partner and chair of its Government Advocacy and Public Policy Practice Group. He served as staff director and general counsel of the House Committee on Rules, and as general counsel to the House.Byers is an international trade economist in the Washington, D.C. office of King & Spalding. She has 30 years’ experience in trade litigation, trade policy, and the trade aspects of international investments.

 

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