As the new Congress begins, one issue that both the Republican leadership and the Obama Administration have highlighted as an opportunity for cooperation is trade, which is likely to be a centerpiece of executive and Congressional action in 2015.
For President Obama, the passage of massive trade bills before the end of his term has tremendous legacy-setting potential. For most Congressional Republicans, working with the Administration to advance market-stimulating free trade agreements both showcases their ability to govern and gratifies a key constituency in the U.S. business community.
But for any progress on trade to occur, President Obama and the new Republican-controlled Congress must first come together to pass a prerequisite priority: Trade Promotion Authority (TPA). First passed in 1974, TPA has since been renewed multiple times but expired in 2007. While some have tried to downplay its importance, TPA is intricately intertwined with the success of the U.S. trade agenda and the agreements now in progress.
From an economic development standpoint, the major trade agreements currently under negotiation with Asia and Europe – the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (T-TIP), respectively – represent more than 60 percent of global economic output and are expected to boost both U.S. exports and export-related jobs, which generally pay 13-18 percent more than the national average wage.
Both agreements are also integral to broader U.S. foreign policy interests. In the face of a rising China and Russian activity in Eastern Europe, the negative geopolitical implications of a failure to complete either TPP or T-TIP are very real. Moreover, with an increasing number of bilateral Free Trade Agreements (FTAs) being negotiated worldwide, the inability to complete these large agreements will create openings for smaller bilateral FTAs among our negotiating partners (and likely other nations) that will leave us at a competitive disadvantage and provide less responsible actors the opportunity to shape trade agreements that do not reflect our values.
Most observers – including our negotiating partners – agree that as a practical political matter, Congress must first pass TPA before TPP and T-TIP can be completed. Both procedurally and substantively, TPA is critical.
First, TPA provides the Administration with the ability to negotiate trade agreements and bring them back to Congress for an up-or-down vote without amendment. Without it, trade agreements would be open to amendment and likely significantly changed by Congress before being approved, requiring the Administration to go back to its negotiating partners before finalizing an agreement. In recent months, U.S. Trade Representative Michael Froman has acknowledged that U.S. trading partners are unlikely to put their “best and final offers on the table” unless TPA is in place.
Second, TPA serves as a mechanism by which Congress can provide input (both positive and negative) into the substance and structure of ongoing trade negotiations. Accordingly, TPA legislation could have a profound impact on pending (and, potentially, future) trade agreements. On a positive note, both branches of government have appeared to learn their lesson from prior trade agreements (the procedural history of the US-Colombia FTA is discussed in more detail below), and the Office of the US Trade Representative (USTR) has already begun consulting with Congress on the pending FTAs – despite not being required to do so under TPA.
The procedural history of the U.S.-Colombia FTA demonstrates the risk of allowing Congress to consider a final TPP or T-TIP agreement without first securing TPA. Signed before TPA expired in 2007, President Bush sent implementing language to Congress in 2008 – without first engaging in the substantive consultations with Congress that have long been part of the implementation process.
As a result – and in the midst of ongoing disagreements with the White House on myriad issues – the then-newly-elected Democratic majority in the House voted to eliminate the procedural rules under TPA requiring Congress to approve or reject the Colombia FTA within 90 legislative days.
The result was a disaster for American trade policy. After suspending the time limit required for passage, House Democrats forced the White House to re-negotiate parts of the agreement before its final passage three years later in 2011.
The unprecedented violation of trust by both the Republican Administration and the Democratic House came under heavy criticism by many in the U.S. trade community, who feared long-lasting negative implications for U.S. trade policy. Though a similar situation is unlikely to unfold for TPP or T-TIP, the importance of TPA to the conclusion of carefully negotiated FTAs was an important lesson.
Yet even if TPA does in fact become a bipartisan priority for 2015, potential hurdles to its passage remain.
While the compromise TPA bill introduced in early 2014 will presumably serve as the foundation for new legislation, incoming Senate Finance Committee Chairman Orrin Hatch (R-Utah) and House Ways and Means Committee Chairman Paul Ryan (R-Wisconsin) have indicated that they may want to alter the bill before reintroducing it in the 114th Congress.
On the other side of the aisle, some Democrats have already expressed opposition to the bill, and TPA may become a lightning rod for progressive opponents of trade, some of whom want an “open amendment” process for considering the TPP and T-TIP in order to stall their progress. Moreover, although Trade Adjustment Assistance – a bill seen as a potential rider to TPA to assuage labor concerns – was already included in the Fiscal Year 2015 “cromnibus” appropriations bill, Senator Sherrod Brown (D-Ohio) has said he will try to incorporate other trade policy measures into any forthcoming TPA legislation (potentially including his recently introduced trade remedy bill).
Still another hurdle might be the complacency of stakeholders in Europe. For example, I recently had the pleasure of speaking about the impact of the U.S. mid-term elections on American trade policy at business gatherings in Frankfurt, Germany, and Warsaw, Poland. Despite a keen appreciation for and knowledge of the benefits of a bilateral free trade agreement between the United States and the European Union under the auspices of T-TIP, the lack of interest and understanding of the need for extending TPA was striking.
One European business attendee dismissed any talk of TPA with a wave of his hand: “We’ll let the American politicians handle the details of trade negotiating authority,” he said. “We’re only interested in the details of the Free Trade Agreement.” Clearly, both here and abroad, there is still much work to be done to explain the relevance and importance of TPA and its impact on any future trade agreements.
Nevertheless, letting TPA legislation slip much later into the year risks further delays caused by 2016 presidential politics and the subsequent stagnation of ongoing TPP and T-TIP negotiations. Let’s hope that seizing the opportunity to pass TPA and laying the foundation for the completion of two major, modern trade deals rises firmly to the top of priorities for the Obama Administration and the 114th Congress.
With major trade deals – and resulting new American jobs – hanging in the balance, Congress and the Obama Administration should come together early in 2015 to pass TPA.
Frank R. Samolis is a Partner and the Co-Chair of the International Trade Group at Squire Patton Boggs LLP. Taryn F. Frideres, Associate, Squire Patton Boggs LLP contributed to this piece.