U.S. Congress poised to move forward on trade policy

U.S. Congress poised to move forward on trade policy

For the United States to successfully conclude the Trans-Pacific Partnership (TPP), Congress must first pass trade promotion authority. It is increasingly poised to do so.

Seven years ago, the United States began negotiations with the four original TPP signatories (Brunei, New Zealand, Singapore, and Chile) to forge a trans-Pacific free trade agreement. Since that time, the number of governments involved in negotiations has risen from five to twelve, and collectively constitute about 40% of global GDP and one-third of world trade. This agreement, if successful, would constitute the largest free trade agreement in history, and would serve as a boon for Pacific trade.

However, the United States Trade Representative (USTR) is hindered by the lack of a key negotiating prerequisite for U.S. trade liberalization agreements: trade promotion authority (TPA).

Trade promotion authority grants the USTR the ability to negotiate free trade agreements, with Congressional objectives as a guide in negotiations. Upon completion of the agreement, ratification by the United States Congress will go through an up-or-down vote, not subject to amendment.

This is the core element of TPA: if a free trade agreement were subject to amendment by the Senate or House, any amendments would have to be renegotiated with the other FTA countries. As a result, Congress would be able to re-write the trade agreement to the advantage of the United States after negotiating partners gave up their best bargaining position. Because of this, no rational government would ever agree to finalize a free trade pact with the United States without TPA.

Congress moves on granting TPA

Following President Obama’s January 20th State of the Union, in which he specifically called upon Congress to grant his administration trade promotion authority to conclude the TPP and TTIP negotiations, both the Senate and House moved to reinvigorate the process.

On January 27 2015, the Senate Finance Committee and House Ways and Means Committee held hearings with USTR Michael Froman to explore the pros and cons of TPA, as well as address a laundry list of concerns by members of Congress regarding the impact of the agreements on agriculture, pharmaceuticals, intellectual property, and financial services.

The chairmen of both committees, Senator Orrin Hatch and Congressman Paul Ryan, have come out forcefully in favor of TPA. The ranking members of both committees, Senator Ron Wyden and Congressman Sandy Levin, have been more measured in their remarks, and have pointed to concerns over transparency in calling for a slower approach to TPA and the agreements in general.

Political and economic challenges remain

There are, however, many reasons why it has taken so long to bring about TPA. And despite the much stronger engagement from the White House to push for TPA, including unleashing cabinet secretaries to lobby members of Congress, significant opposition remains among Democrats and some Republicans.

In the House, Congresswomen Rosa DeLauro and Louise Slaughter have worked to coalesce opposition from liberal Democrats and several Tea Party-affiliated Republicans to torpedo TPA. However, most estimates now place the whip count to include the vast majority of the 246 Congressional Republicans and as many as 40 Democrats, well above the 218 needed to pass legislation in the 435-member chamber.

In the Senate, if one assumes the 54 Republicans will vote in favor of TPA (and no Senate Republican has publicly come out against TPA), as well as the nine generally free-trade friendly Democrats, it appears sufficient supports exists to overcome a filibuster.

Economically, depending on the amendments introduced by members of Congress to the TPA bill, the U.S. negotiating hand in the TPP and TTIP talks could become complicated.

Senator Chuck Schumer has signaled his intention to introduce legislation either alongside or as an addition to the TPA bill that would provide for the pursuit of sanctions against China (which is not a party to the TPP negotiations) for currency manipulation.

In addition to this being difficult to determine objectively, such a position could draw opposition from TPP negotiators, particularly Japan and Vietnam (especially as Senator Schumer pointed to those countries as currency manipulators, too). Congressman Bob Brady pointed out that this strategy could backfire: “[Currency manipulation measures] creates risks for the United States where it could expose us to litigation in the trade agreement, particularly quantitative easing.”

There were also disputes on intellectual property provisions, with major TPA proponents asking for a 12-year data protection provision for biologics (no other TPP country has protection higher than eight years) in line with U.S. law, with Congressman Jim McDermott pushing for reduced biologics protection to ensure the distribution of medicine for major diseases like hepatitis.

Provisions relating to intellectual property protection and China currency sanctions would likely make TPA passage in Congress more politically popular, but it could make negotiations with TPP countries more difficult.

Next steps

Another round of negotiations on TPP is were held in late January in New York, with major stakeholders and government trade officials involved. Several self-imposed deadlines to conclude the talks have been missed, due in large part to the lack of U.S. TPA.

Although TPA seems very likely at this point, the Senate Finance and House Ways and Means committees have yet to publish a legislative timeline, nor has any bill been introduced. Senate Finance Chair Orrin Hatch and Senator Ron Wyden are working on a previous TPA bill from the last Congress, though Senator Hatch indicated at a speech at AEI on Friday that eventually he would move even if it meant he would be unable to accommodate all of Senator Wyden’s concerns.

Ultimately, there is a consensus among the TPP countries (as well as the TTIP countries) that if any deal is to come out, it must be in 2015. No government or trade official from any TPP country has given a formal deadline aside from 2015, so it is difficult to determine exact dates. However, both U.S. committees have focused on late February/early March to present bills, so this will be the time worth watching.

Categories: Economics, International

About Author

Brian Daigle

Brian is an energy and Latin America researcher at a political consulting firm in Washington, D.C. He is a London School of Economics (LSE) graduate in political science and political economy, where he focused on trade and transatlantic relations. Brian received his dual BA in political science and history at the University of California-San Diego.