“Leveling the Playing Field Act” Hurts the Broader Economy

The Senate leadership is working hard to find the votes needed to support the trade agenda. Key to progress is passage of trade promotion authority (TPA), also known as “fast track”, which would commit Congress to vote up or down on a trade agreement rather than offering amendments. Opposition to trade liberalization has been a comfortable policy stance for senators beholden to organized labor and to the anti-growth left. Opponents on the right profess concern about the possible loss of national sovereignty and generally are reluctant to give President Obama greater authority of any kind.

Political realities sometimes require offering sweeteners to make a difficult vote more palatable. Trade adjustment assistance (TAA) has been legislated in the past to help workers and firms that are having difficulty dealing with competition from imports. Even though the economic and equity arguments in favor of trade-related unemployment benefits are relatively weak (Why treat people who are unemployed due to international competition differently than those who lose their jobs due to changes in technology, for instance?), the political rationale for TAA at times has been compelling. It’s not surprising that both the House and Senate have been searching for a way to pass both TPA and TAA. The president has expressed his preference to sign them at the same time.

With the outcome of the Senate vote on TPA not yet clear, it’s not surprising that there has been a search for additional sweeteners. The steel industry has pushed to include Sen. Sherrod Brown’s (D-OH) poorly named “Leveling the Playing Field Act” as part of the TAA package.  (My op-ed on the Act is available here.) Given the need to woo as many votes as possible, the Senate leadership has agreed to this request.

It’s not my intention to criticize pro-trade senators who are doing their best to pass TPA. Life can be complex, and political life all the more so. However, it may be worthwhile for free-trade proponents to think carefully about the implications of adding Sen. Brown’s measure as part of this effort to provide the president with negotiating authority.

Here’s the rub: the protectionist provisions of the “Leveling the Playing Field Act” would take effect as soon as the president signs the TAA legislation, but potential trade liberalization (if any ever gets enacted) would not be realized until sometime well in the future. The Trans-Pacific Partnership (TPP) – the first agreement that might be concluded once the president has negotiating authority – would not begin to be implemented until 2017 at the earliest, perhaps much later. Although details of the agreement are not yet public, restrictions on politically sensitive imports are likely to be phased in over perhaps as many as 20 years. Thus, the United States would be making its antidumping/countervailing (AD/CVD) regime more protectionist immediately in exchange for future liberalization that may or may not ever occur.

If possible, Senate leaders should remove the Leveling the Playing Field Act from TAA and let adjustment assistance be considered on its own merits. If that isn’t feasible, the effective date of Sen. Brown’s legislation should be changed so that it does not become operational until the eventual implementing legislation for TPP also becomes effective. That way there will at least be some growth-promoting liberalization to help offset the reduced economic welfare caused by the Leveling the Playing Field Act.