What You Need to Know About Trade Promotion Authority

February 18, 2015 2:00 PM

Later this month, Senator Orrin Hatch, the new chairman of the Senate Finance Committee, is expected to table a bill to reauthorize Trade Promotion Authority (TPA). In an era of fractious political debate, TPA is critical to provide more open channels for congressional participation in the planning and execution of US trade policy. It is also one of the few issues where congressional Republicans and President Obama share common interests, so I expect the bill to become law later this spring.

The Background: Why Is TPA Needed?

Simply put, TPA will set US negotiating objectives for international trade initiatives, requirements for notification and consultation with Congress before and during trade negotiations, and reinstitute “fast-track” procedures that allow for expeditious ratification of trade pacts once talks conclude. With the Trans-Pacific Partnership (TPP) agreement on the horizon and the Transatlantic Trade and Investment Partnership (TTIP) negotiation in process, TPA is needed now to help bring those deals to fruition.

The prospective TPA bill will seek to update the requirements crafted to guide US trade policy at the turn of the century. In particular, it will require more extensive information-sharing and consultations between Congress and the Office of the United States Trade Representative (USTR)—a central criticism of past practice—and address new issues on the trade agenda like digital trade, regulatory practices governing financial services, and disciplines on state-owned enterprises.

Fast track has been a fixture of US trade policy since the Trade Act of 1974.  Forty years ago, fast-track procedures were not particularly controversial. Over time, however, TPA has become a harder political sell. Table 1 shows major congressional votes on fast-track negotiating authority since 1974. Passage has become more difficult since the early 1990s, due in large measure to the fractious US trade debate over the North American Free Trade Agreement (NAFTA). Fast track expired in 1994 and attempts to revive it in 1997–98 failed in the House of Representatives. Under the new title of TPA, the fast-track process was finally reinstated in 2002 but only after a perilously close vote on the House floor.

Table 1 Congressional votes on fast-track negotiating authority for US trade agreements
Congress Bill and title Votes
93rd Trade Act of 1974 Passed House
  H.R. 10710 / P.L. 93-618, enacted January 3, 1975 December 11, 1973 (272-140);
    Passed Senate
    December 13, 1974 (77-4)
     
96th Trade Agreements Act of 1979 Passed House
  H.R. 4537 / P.L. 96-39, enacted July 26, 1979 July 11, 1979 (395-7);
    Passed Senate
    July 23, 1979 (90-4)
     
98th Trade and Tariff Act of 1984 Passed House
  H.R. 3398 / P.L. 98-573, enacted October 30, 1984 June 28, 1983 (368-43);
    Passed Senate
    September 20, 1984 (96-0)
     
100th Omnibus Trade and Competitiveness Act of 1988 Passed House
  H.R. 4848 / P.L. 100-418, enacted August 23, 1988 July 13, 1988 (376-45);
    Passed Senate
    August 3, 1988 (85-11)
     
105th Reciprocal Trade Agreement Authorities Act of 1997 Failed House
  H.R. 2621 September 25, 1998 (180-243)
     
 107th Trade Act of 2002 Conference report passed
  H.R. 3009 / P.L. 107-210, enacted August 6, 2002 House July 27, 2002 (215-212);
    Conference report passed
    Senate August 1, 2002 (64-34)
H.R. = House of Representatives and represents bill number; P.L. = Public Law
SourceCarolyn C. Smith. 2014. Trade Promotion Authority and Fast-Track Negotiating Authority for Trade Agreements: Major Votes. CRS Report for Congress. Congressional Research Service.

Why Has TPA Become More Controversial?

Congress has responsibility for the development and implementation of trade policy, while the Executive Branch is responsible for the conduct of trade negotiations and the administration of US trade laws and regulations. The difference in these roles wasn’t too great in the immediate postwar era when trade policy mostly involved border measures such as tariffs and quotas. But this is no longer the case: As trade has become more important for the US economy, the agenda of trade negotiations has expanded dramatically to include things like nontariff barriers and regulatory issues.

Indeed, since the Tokyo Round of multilateral trade negotiations in the 1970s—the first trade talks covered by fast-track procedures—the ratio of trade to GDP has more than tripled and the trade agenda has etched deeper into the fabric of domestic economic policies that can affect trade and investment flows. As a result, many members of Congress now participate in the trade debate because their constituents are affected, for better or worse, by trade liberalization and policy reforms required by new trade pacts. Not surprisingly, trade politics has lost its bipartisan sheen and has become increasingly rancorous. TPA is designed to ensure that Congress and the president work together more effectively to promote US economic interests at home and abroad.

What TPA Does Not Do

It is also important to understand what TPA does not do. The legislation has always suffered from three types of constraints.

First, TPA doesn’t really set negotiating priorities. The previous draft authored by Senators Max Baucus and Hatch and Congressman Dave Camp in January 2014 put forward 19 distinct trade negotiating priorities: When you have 19 priorities, you effectively have no priority.

Second, TPA tells US negotiators what to ask for but rarely provides guidance on how to pay for it, in other words, where it’s ok to change US policies. That’s one of the reasons why US negotiators are so discrete about the specifics of emerging trade deals. This doesn’t have to be the case: In the Tokyo Round, when discipline on foreign subsidy practices was the key demand of Congress, US negotiators were advised that if they brought home the bacon, Congress would agree to change US countervailing duty law to add an injury requirement—the key demand of US trading partners. The deal was negotiated on that understanding and Congress approved the Tokyo Round implementing legislation in 1979 with only 11 votes in dissent combined in both Houses (see table 1)!

Third, TPA doesn’t preempt or short circuit debate. The actual debate over implementing legislation takes place before the formal bill is tabled and the “fast track clock” starts. The process of compiling the legislation is time consuming: In some cases, as with the Korea-US FTA, the implementing bill was not formalized until more than four years after the signing of the pact in June 2007. During the interim, congressional concerns were fully discussed and the agreement supplemented to accommodate them as much as possible.

In short, TPA does not require expeditious action by Congress, only expeditious votes once the debate over content has been concluded. Moreover, the negotiation between Congress and the Executive Branch about the terms of the implementing legislation usually yields some alterations in the FTA text. The TPA does not prevent the renegotiation or elaboration of US FTAs, but it does constrain the scope of such interventions—that is, the security provided to US trading partners by the fast-track procedures.

Prospects for TPA Legislation

President Obama supports TPA and has pledged to work with Republican leaders in Congress to expedite its passage. In plain English, that means he will press a small minority of fellow Democrats to vote for the bill in the House and the Senate. In return, the president will press for congressional action on priority issues for Democratic members including most importantly the reauthorization of the Trade Adjustment Assistance program (which provides federal aid for workers dislocated from jobs on account of import competition) and new measures to combat currency manipulation.

With the enlarged Republican majority in the House after the November 2014 election, House Speaker John Boehner doesn’t need a lot of Democrats to pass TPA. But Senate Majority Leader Mitch McConnell does need some Democratic support to break through the 60-vote barrier and avoid procedural delays. To be sure, some Republicans will vote against the bill based on constituent or ideological concerns. But, overall, TPA is a Republican priority and supports their constituent interests in advancing trade and investment liberalization. That is why I expect Congress to pass TPA later this spring to help President Obama conclude the path-breaking TPP, which was launched by his Republican predecessor in September 2008.

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