The Obama Administration is pursuing an aggressive trade policy agenda by simultaneously trying to complete a twelve nation Trans-Pacific Partnership (TPP) agreement, beginning negotiations on the U.S.-EU Transatlantic Trade and Investment Partnership (TTIP) agreement, preparing for a WTO Ministerial Meeting next month and calling on Congress to pass legislation authorizing the Administration to negotiate on behalf of Congress. This has caused trade policy overload for Congress and interest groups involved in trade policy issues.
The trade policy debate is far different from earlier negotiations that involved mostly tariff reductions on physical goods traded among developed countries. Issues like sanitary and phytosanitary rules and other nontariff barriers were then just becoming prominent. Intellectual property rights were joining the debate and the internet was still off the radar screen. Currency manipulation and harmonizing regulations were not thought of as issues for trade agreements. Multinational value chains largely did not exist. With this broad array of first-time issues, the uneasiness of many participants is not surprising. It is time to slow down and focus on four critical points for a couple of months.
First, this new set of trade policy issues requires establishing common ground between the Executive branch and the Legislative branch. That has traditionally been the function of what is now known as trade promotion authority (TPA). While the up-or-down, no-amendments vote in Congress is the best known feature, its biggest value is working out by the two branches of government a common set of negotiating objectives. While this has been a far from perfect system, it has required back and forth discussions and words on paper that were passed by both houses of Congress and signed by the President.
TPA was designed to deal with the constitutional issues of the Congress regulating commerce with foreign nations and the President’s executive powers and authority to conduct foreign affairs. Congress delegates to the President the authority to negotiate trade agreements and requires the President to consult with Congress. Twenty-three Republicans Representatives recently sent a letter to President Obama opposing TPA on constitutional grounds. That is an issue for Congress to decide, not the President. Those members of the House and Senate promoting TPA can either accept their concerns and modify the legislation or reject them and look for votes elsewhere. That is a strategy issue.
A much larger strategy challenge is the 151 House Democrats, over three-fourth of their caucus in the House, who demand new TPA legislation that creates a stronger role for Congress than previous versions of the law. Their concerns have to be addressed or supporters have to rely mostly on Republicans to pass a bill. The same is true for continuation of Trade Adjustment Assistance (TAA) which most Democrats support and Republicans oppose. If supporters want a bipartisan TPA, which they should to avoid a small minority from either party in either house from holding up TPA or the final trade agreements to achieve what they could not otherwise, the inclusion of TAA should be based on votes gained and lost and which party they come from.
Second, a provision that would narrow the disagreements between the two branches is to have the TPA legislation apply only to the TPP and the TTIP. That should allay fears in both parties that President Obama or some future President will do something totally unanticipated beyond TPP and TTIP.
Third, once those issues have been dealt with, the Administration will need to truly be a promoter of TPA. The President has asked the Congress for the authority, but has not entered into negotiations on the exact language or promoted the general concept. TPA is only as good as the compromises made that allow the President to negotiate knowing that Congress has put his team on the right track. The compromises may lessen the scope of the final agreements and produce less of what the President and free-traders want, but it will reduce the chances of a crack-up in U.S. trade policy where no one wins.
The last change is to extend the deadlines for completing the TPP and the TTIP agreements. The TTIP negotiations have just begun and will be slow moving and detail oriented, at best. The current EU Commissioners wants the talks complete by late 2014 when their leadership terms expire. That is not going to happen and the Administration needs to disavow any hope for a quick deal.
The leaders of the countries involved in the TPP negotiations once talked of an agreement by the end of 2012 and then 2013. The Japanese joining the talks this year was not supposed to slow the timeline for completion. That was not realistic. Accepting the Japanese into the talks was the right decision, but it added at least a year to the talks. In agriculture alone, Japan has high import barriers inconsistent with the original TPP goal of reducing all tariffs to zero. Japan will need to go through an internal process of responding to other countries repeated rejections of their offers of tariff reduction before a deal is completed.
The Japanese are not the only ones holding up an agreement. Dairy product access to Canada is an issue, as is sugar access to the U.S. Time is needed to move ahead. The issues are solvable, but not in a month.
According to Inside U.S. Trade, the U.S. International Trade Commission (ITC) will need at least five months to analyze the economic impact of the TPP agreement after a final text is agreed on. The ITC was required under the now expired Trade Act of 2002 to present such evaluations to Congress and the White House within 90 days. The administration continues to follow the act’s timelines. This pushes the TPP timeline for Congressional approval into the second half of 2014 or later.
Making these changes is not a guarantee of success and there are other possible alternatives. New trade agreements may not be doable at his time. It is tough to negotiate a trade agreement in a slow growing economy. The political mix in this Congress may not allow an agreement on TPA. The President may not want to spend his political capital on trade. The issues may be too complex to have them all sorted out in one agreement. The only sure thing is that the current process is not likely to lead to policies that expand trade and improve incomes.