The Trade Promotion Authority’s Pending Renewal

By: Nor Powanda

On January 9th, the Senate Finance Committee Chairman Max Baucus introduced the Bipartisan Congressional Trade Priorities Act of 2014 to renew the Trade Promotion Authority (TPA), which expired in June 2007 and has not been renewed since. As the United States negotiates two historic trade agreements, the Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP), with the European Unions and Pacific Rim countries it is crucial that Congress renew the TPA.

The TPA (also known as fast track) is the authority Congress grants to the President to negotiate trade agreements with foreign nations. Doing so means Congress cedes some of its authority to the executive as Article I Section 8 of the Constitution gives Congress, not the executive, the authority to “regulate commerce with foreign nations…” In addition to the politics of liberalizing trade, controversy over the TPA’s renewal also spills into a constitutional debate over the separation of powers. This debate, however, has not derailed TPA’s renewal in the past or threatened its existence since its inception in 1974; it is not likely to be an issue this time either.

Before the Great Depression, trade agreements almost exclusively dealt with tariffs, and Congress set these tariffs on foreign imports. This changed with the Great Depression when Congress enacted the Smoot-Hawley Act of 1930, which set very high tariffs on foreign imports. American trade partners responded in kind and these policies led to strong protectionism. The disastrous effects of protectionism led Congress to enact the Reciprocal Trade Agreement Act of 1934. This Act authorized the president to enter into reciprocal agreements that would allow the lowering of tariffs, but within preapproved levels.

Congress renewed this statutory-based authority eleven times until 1962. As the nature of trade negotiations changed from bilateral to multilateral and tariff levels declined, the Reciprocal Trade Agreement Act’s authority and relevance declined. In 1962, Congress passed the Trade Expansion Act, which gave the President the power to continue negotiating lower tariffs and expanded Congress’ role by mandating that the President submit all concluded trade agreements to Congress for review.

As barriers beyond tariffs became pressing issues in world trade negotiations, it became clear that the Trade Expansion Act’s authority was no longer sufficient for the President to negotiate trade deals without overstepping granted authority. Because of this, Congress did not renew the law when it expired in 1967. After seven years, as the Nixon Administration was negotiating the Tokyo Round of trade talks, Congress passed the Trade Act of 1974. As with previous laws, this Act allowed the President to enter agreements reducing or eliminating tariffs. The Act also allowed the President to negotiate trade agreements beyond tariffs, but those would go into force only after Congress passed implementing legislation.

The latter requirement, subjecting trade deals by the President to the regular congressional process, defeated the whole purpose of giving the President this authority in the first place. Moreover, other countries would be reluctant to enter into trade agreements with the President if those deals would be subject to changes and amendments in Congress. As a compromise, Congress agreed that trade agreements would not go through the regular congressional process, but instead receive expedited treatment in both chambers. Specifically, these trade agreements would only receive limited debate time in Congress and no amendments would be allowed; a simple majority will be required for passage. However, in the process of negotiating trade agreements, the President must notify Congress ninety days before concluding an agreement and ten members of Congress would act as advisors to the negotiations. This would later be known as “fast track trade negotiating authority.”

This fast track law has been renewed four times since 1974. However, it expired in 2007 and is under renewal consideration now. While some provisions have varied over the past 30-years, the Act’s core elements have remained the same: outlining Congress’s negotiating objectives, establishing the requirement that the President consult with Congress in negotiating trade agreements, setting out terms that must be met for the President to enter such agreements, and establishing the expedited legislative process.

In addition to preserving these core elements, the current renewal legislation also addresses many other pressing issues. It updates labor and environment provisions to reflect the current standards and challenges. It provides for strong and enforceable rules against barriers to U.S. agricultural products and, for the first time, the current legislation deals with currency manipulation by setting up a directive on currency manipulation. It also addresses restrictions on cross-border data flows, which, in the aftermath of the Edward Snowden disclosures, have become a serious problem as countries in Europe and Latin America are moving to establish cross-border data restrictions.

Updating U.S. law to address these issues is important to the current trade deals the U.S. is negotiating with the Eurozone and Asian Pacific countries. These two trade agreements, the TTIP and the TPP, offer tremendous opportunities for U.S. exports. The TTIP countries purchased $460 billion in U.S. goods and services in 2012 while the eleven TPP countries, the fastest growing economics in the world, represented 40% of the entire U.S. exports for the same year.

According to the office of the U.S. Trade Representative, every $1 billion dollars in exports of U.S. goods and services support 5,000 American jobs. The $460 billion exports to the Eurozone supported 2.4 million jobs in the U.S. in 2012. Expansion in American exports since 2009 has added an additional 1.3 million jobs to the economy.

These two trade agreements are crucial opportunities for the U.S. in this ever-competitive globalized economy. Achieving them expeditiously requires renewal of the TPA.

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