Tag: trade promotion authority

Strange Bedfellows, Schisms, and Subterfuge: Where Does the Trade Agenda Stand?

The Trans-Pacific Partnership is a still-evolving trade agreement that would reduce tariffs and other barriers to goods and services trade between the United States and 11 other countries. It also would likely include provisions designed to protect certain U.S. industries from the full effects of competition.  A TPP agreement, then, would likely increase our economic freedoms in some realms and reduce them in others.  How these pros and cons would be manifest is unclear at the moment, given the fact that the deal is not done.  But it would a mistake to forego the opportunity to evaluate a completed trade deal that could deliver significant benefits. 

It is broadly understood that the TPP negotiations cannot be concluded without the Congress passing, and the president signing, Trade Promotion Authority legislation.  Without TPA, the president could not be sure that any trade deal brought home reflected the official wishes of Congress, and the likelihood that foreign negotiators would put their best and final offers on the table—knowing that Congress could unravel the deal’s terms—is close to zero.

The Senate passed TPA legislation (along with language reauthorizing the Trade Adjustment Assistance program) on May 22.  The House is likely to take up the bill this week.  At the moment, the president is in lockstep with a large majority of congressional Republicans, who support trade liberalization and see TPA as essential to the process.  But some Republicans (mostly from the conservative wing), who are wary of giving this president any more power, have joined ranks with the vast majority of congressional Democrats in opposition to TPA.  Meanwhile, Democratic presidential frontrunner Hillary Clinton—an architect of the TPP as Secretary of State and a potential heir to the trade agenda—has refused to take a position on TPA.

The spotlight on trade policy has generated much more heat than light.  Misinformation abounds.  Rationalizations masquerade as rationales.

This new Cato Free Trade Bulletin is intended to dispel some of the nonsense that has been circulating and to present a brief, objective assessment of what has transpired and what lies ahead for TPA and TPP.

Republicans Should Welcome Trade’s “Burgeoning Bromance”

The skepticism was evident in conservative talk-show host Laura Ingraham’s voice when she referred to the working relationship between President Obama and Senate Majority Leader McConnell as a “burgeoning bromance.” Her sentiment is shared by a number of Republicans in Congress, who are unhappy that Senate and House leadership is working with the president to secure Trade Promotion Authority.

Perhaps it’s no longer axiomatic that trade divides Democrats and unites Republicans.  According to Politico, “about 40 to 45 of the 245 Republicans in Congress are hard ‘nos’ on [TPA]” with many asking: Why would Republicans want to give this president, who has aggrandized his authority and disregarded congressional prerogatives, any more power?  Well, they shouldn’t.  However, TPA would not give the president any power to make mischief.

Trade Promotion Authority is neither a congressional capitulation nor an executive power grab.  It is a compact between the branches, which effectively deputizes the president to negotiate trade agreements on behalf of Congress, which meet parameters and fulfill objectives spelled out by Congress, which are put to votes in both chambers of Congress. 

If the concluded trade agreement meets Congress’s parameters and fulfills its objectives, legislation to implement the agreement is considered without amendments on an expedited timetable by an up-or-down vote.  If the agreement fails to meet Congress’s parameters or fulfill its objectives, it can be taken off the so-called fast-track through a resolution of disapproval.  And, ultimately, members and senators can always vote “no” if they don’t like the deal.  

Bridging the Hatch-Wyden Divide Over Trade Promotion Authority

The eyes of the international trade community are fixed on Senators Orrin Hatch (R-UT) and Ron Wyden (D-OR), upon whom responsibility for crafting bipartisan Trade Promotion Authority (TPA) legislation has fallen. At last report, Senate Finance Committee Chairman Hatch and Ranking Member Wyden were at an impasse over some important components of the bill, passage of which is widely considered necessary to concluding the long-gestating, 12-nation Trans-Pacific Partnership (TPP) agreement. That agreement must be concluded before the Transatlantic Trade and Investment Partnership (TTIP) negotiations make any progress. Those negotiations will have far-reaching implications for the multilateral trading system, including China, India, Brazil and other countries not currently party to these mega-regional trade agreements. Hence, TPA’s outcome is of worldwide interest.

Trade Promotion Authority has been maligned as a congressional capitulation or executive power grab.  It is neither. The U.S. Constitution grants Congress the authority to “regulate commerce with foreign nations” and to “lay and collect taxes, duties, imposts, and excises” and grants the president power to make treaties with the advice and consent of the Senate. Accordingly, the formulation, negotiation, and implementation of trade agreements require the involvement and cooperation of both branches. TPA is a compact between the branches that obliges these respective constitutional authorities, while guaranteeing an up-or-down vote by Congress, on an expedited basis, of any trade agreement negotiated by the executive branch with foreign governments, provided that the agreements meet the objectives spelled-out by Congress in the legislation. This conditionality is often ignored or brushed over by news reporters, who either spend too much time with trade skeptics or who are looking to economize on words.

Without such a compact, trade agreements would be nearly impossible to conclude because foreign negotiators – knowing that any agreement reached would be subject to congressional revisions – would never put their best offers on the table.  The process of negotiating and renegotiating with 535 officials (instead of one agency, the Office of the U.S. Trade Representative) would make for an interminable process too cumbersome and costly to pursue.  For practical purposes, negotiations have to occur between small parties vested with the authority to speak on behalf of those whom they represent. Trade Promotion Authority is the solution.

Congress Should Decide Whether Trade Agreements Abide the Terms of Trade Promotion Authority

Trade Promotion Authority (TPA or Fast-Track Negotiating Authority) is not an executive power grab.  It is a compact between the legislative and executive branches, which each have distinct authorities under the Constitution when it comes to conducting trade policy. The purpose of forging such a compact is that negotiations would be impracticable – and likely interminable – if each provision were subject to the whims of 535 legislators.

Opponents of trade liberalization have smeared TPA as a wholesale capitulation to the president, who allegedly is freed of any congressional oversight and given a blank check to negotiate unamendable trade deals in secret without any input from Congress – only the capacity to vote up or down on the final deal. In reality, though, TPA is the vehicle through which Congress conveys its trade policy objectives, conditions, and demands to the president, who negotiates with those parameters in mind. Provided the president concludes a negotiation that abides those congressional parameters, the deal is given fast track consideration, which means essentially that legislative procedures are streamlined and expedited.

The trade committees are reportedly close to introducing trade promotion authority legislation, although there remains some debate about what it should include. Enforceable provisions to discipline currency manipulation would be a bad idea, as would be including provisions to reauthorize the ineffective and misguided Trade Adjustment Assistance program (which is widely acknowledged to be a payoff to organized labor).

But one important provision (or set of provisions) that has created a bit of an impasse between Senate Finance Committee Chairman Orrin Hatch (R-UT) and its Ranking Member Sen. Ron Wyden (D-OR) concerns certification that an agreement abides the requisite congressional conditions to be afforded fast track treatment. Those of us who argue that TPA is not an executive power grab, but a practical, constitutional solution to a policymaking quandary must acknowledge the propriety of such a provision – or a provision that accomplishes as much. There must be a mechanism through which the president is held to account – that the deal reflects the broad wishes of Congress.

Selling Trade Liberalization Like the Measles Vaccine

President Obama is presiding over what may prove to be the most significant round of trade liberalization in American history, yet he has never once made an affirmative case for that outcome. Despite various reports of intensifying outreach to members of Congress, the president’s “advocacy” is couched in enough skepticism to create and reinforce fears about trade and globalization.

Politico reports:

On Tuesday, Obama sent a letter directly to Rep. Ruben Gallego (D-Ariz.), arguing that reaching new trade agreements is the only way to stop China from dominating the global markets and letting its lax standards run the world.

“If they succeed, our competitors would be free to ignore basic environmental and labor standards, giving them an unfair advantage against American workers,” Obama wrote Gallego in a letter obtained by POLITICO. “We can’t let that happen. We should write the rules, and level the playing field for the middle class.”

Certainly, playing the China card could help win support for Trade Promotion Authority and, eventually, the Trans-Pacific Partnership, but it needn’t be the first selling point.  Pitching trade agreements as though they were innoculations from an otherwise imminent disease betrays a profound lack of understanding of the benefits of trade. With TPP near completion and the Transatlantic Trade and Investment Partnership talks expected to accelerate, the president’s stubborn refusal to make an affirmative case for his trade initiatives to the public and the skeptics in his party is disconcerting. Bill Watson was troubled by the president’s feeble advocacy of trade liberalization in his SOTU address.

Trade Promotion Authority Is not an Executive Power Grab

With the Trans-Pacific Partnership (TPP) negotiations reported to be nearing completion and the Transatlantic Trade and Investment Partnership (TTIP) talks kicking into higher gear, Congress is expected to turn its attention to Trade Promotion Authority (TPA) legislation in the weeks ahead.

That’s where opponents of trade – mostly from the Left, but some from the Right – have decided to wage the next battle in their war against trade liberalization. Tactically, that makes some sense because, if they succeed, the TPP and the TTIP will be sidelined indefinitely. But, as observed by the Greek Tragedians and countless times in the millennia since, truth is the first casualty of war.

Trade opponents characterize TPA as an executive power-grab, a legislative capitulation, and a blank check from Congress that entitles the president to negotiate trade deals in secret without any congressional input except the right to vote “yea” or “nay” on an unalterable, unamendable, completed and signed agreement. But the truth is that TPA does not cede any authority from one branch to the other, but makes exercise of that authority more practicable for both branches.

Under the Constitution, Article I, Section 8, Congress is given the authority to “regulate commerce with foreign nations” and to “lay and collect taxes, duties, imposts, and excises.” While the president has no specific constitutional authority over trade, Article II grants the president power to make treaties with the advice and consent of the Senate. Accordingly, the formulation, negotiation, and implementation of trade agreements require the involvement and cooperation of both branches.

Trade-Skeptical Harold Meyerson Makes One Valid Point

Harold Meyerson, with whom I’ve rarely found occasion to agree, makes one point in today’s column (“Go Slower on Free Trade”) that didn’t cause my eyes to roll: that the Obama administration has been relentlessly secretive about the goings-on in the Trans-Pacific Partnership trade negotiations.

I cannot corroborate Meyerson’s claim that the administration has granted access to the negotiators and the negotiating text to “roughly 600 trade ‘advisers’ from big businesses,” but has excluded everyone else, including Congress. It may be true, but then again… Certainly, Congress (by which I mean Congress, and not just a few Senate Democrats) is very much in the dark about the details of these negotiations, and that presents an enormous logistical problem.

Article I, Section 8 of the Constitution vests power in the Congress “To regulate Commerce with foreign Nations,” which covers trade agreements. Traditionally, Congress has temporarily extended that authority to the executive branch, given the impracticability of having 535 trade representatives with 535 different agendas negotiating with foreign governments. That temporary grant of “fast track” or “trade promotion” authority is not a blank check. It comes with a list of congressional demands – items that can, cannot, must, and must not be included in the agreement. It is like doing the legislative process in reverse in the sense that amendments are articulated as conditions BEFORE the agreement is reached. Ideally, those congressional demands would be formalized before the negotiations BEGIN so that there are no false starts.

But with the administration still aiming to conclude negotiations in October, no fast track legislation in sight, and anti-trade legislation metastasizing in a Congress that has largely been excluded from shaping the deal’s terms, there are long battles ahead.  Meyerson’s counsel that we “go slower on free trade” is probably already a done deal.

As to the rest of Meyerson’s claims that trade is a boon for big business, which comes at the expense of workers and consumers, we have harvested countless forests here at Cato explaining why that is just false. The most persistent U.S. trade barriers are imposed on food (tariffs and tariff-rate quotas), clothing (tariffs), and shelter (trade remedies restrictions on lumber, steel, cement, paint, nails, appliances, flooring, furniture, etc.), making them the most regressive taxes in the U.S. system.  Lower-income Americans (those for whom Meyerson claims to speak) devote larger shares of their budgets to these basic necessities than do white-collar fat cats.

I’ll leave you with these three charts, which demonstrate positive relationships between import and jobs, price decreases over time for heavily traded items, and price increases over time for less frequently traded services, all exposing the errors of Meyerson’s claims.