Trade Promotion Authority and the Unfinished Trade Agenda


In a letter to the Speaker of the House of Representative and the President of the Senate, President Bush on March 30 asked “that the Congress extend trade promotion authority procedures for two years.” The Trade Act of 2002 authorized trade promotion authority (TPA) for any trade agreement negotiated by July 1, 2005. The act allows the President to ask for a two year extension that would be granted unless it is disapproved before July 1 of this year by either the House or the Senate. TPA provides guidance from the Congress to the Administration on objectives for negotiations and for an up or down vote on an agreement in each house with no amendments.

The Administration has used the authority to launch an unprecedented level of trade negotiation activities. Prior to the latest TPA authority, the US had only three bilateral free trade agreements, NAFTA and the WTO agreement. According to the U.S. Trade Representative’s (USTR) annual report to Congress filed on March 1st, the U.S. has completed negotiations on agreements with 12 countries (negotiations with Jordan were completed before TPA was approved in August of 2002) and is currently in negotiations with 12 more countries. The 24 countries combined accounted for $78 billion in U.S. exports in 2004, the third largest export market for U.S. products.

The Congress has approved four of the bilateral agreements completed under TPA. Agreements with Chile and Singapore took affect on January 1, 2004, and with Australia on January 1, 2005. Total exports to Chile increased by a third in 2004 over 2003, while exports to Singapore increased by 18 percent. The Morocco agreement has been passed by the U.S. Congress and the Moroccan Parliament and will likely come into force sometime in 2005.

The Administration has moved forward in negotiations in the WTO and in regional agreements like the Free Trade Area of the Americas (FTAA). They have also worked in broader framework efforts like the Middle East Free Trade Area initiative, the Asia- Pacific Economic Cooperation forum and the ASEAN (Association of Southeast Asian Nations) initiative.

Under the Trade Act of 2002 the U.S. International Trade Commission (USITC) is required to provide to Congress within 90 days after conclusion of negotiations on a trade agreement an assessment on the likely affects of the proposed agreement. Its report on the Australian agreement states, “The immediate elimination of Australian tariffs on virtually all U.S. agricultural exports is expected to provide greater competitiveness for U.S. farmers. Tariff elimination will likely increase the competitiveness of U.S. manufacturers and farmers in the Australian market not only relative to Australian producers but also relative to other foreign suppliers. The FTA also will reduce Australian non-tariff barriers on U.S. agricultural exports.”

That statement provides a good summary of the benefits of bilateral trade agreements. Lower tariffs provide for a more competitive position in markets. Tariff rates in most agreements do not come down as rapidly as in the Australian agreement. This slows down economic progress, but does not change the ultimate outcome. The lowered tariffs for U.S. products also encourage third countries to seek progress in the WTO talks to achieve liberalization of trade across all countries which the Administration refers to as “competition for liberalization.”

These agreements also address non-tariff barriers like sanitary and phytosanitary issues, which have become increasingly larger stumbling blocks to international trade. While the WTO rules provide for a general framework for dealing with these issues, one-on-one country negotiations are often necessary to work out specific issues. U.S. export of pork to Australia is an example of how bilateral work is necessary to deal with some issues.

These agreements are not all one-way streets. The USITC report on the Australian agreement points out that both countries have efficient beef industries. While the U.S. focuses more on grain-fed beef and Australia more on grass-fed beef, the industries overlap and the U.S. industry will likely face more competition in the ninth year of the agreement as the over quota tariff rate begins to decline. U.S. dairy products will also face increased competition as quotas expand over the next 25 years. The long transition periods, which are generally inconsistent with the benefits of moving rapidly to free trade, do provide time for industries to adjust to increased trade.

While the Bush Administration has pursued an ambitious trade negotiations agenda, much is left to be done. Deputy USTR Peter Allgeier has pointed out that without TPA other negotiators would not have confidence that the U.S. can deliver on details of an agreement. Without renewed TPA, trade talks are likely to deal with only minor issues that are of limited economic value. With TPA the U.S. government speaks with one voice.

TPA requires the Administration to consult with the Congress and private industry as negotiations unfold on each agreement. That prevents the negotiators from getting too far adrift from both political and market realities. The resulting compromises often slowdown movement toward freer trade, but they assure interested parties a voice in the process.

Ross Korves

Ross Korves

Ross Korves served Truth about Trade & Technology, before it became Global Farmer Network, from 2004 – 2015 as the Economic and Trade Policy Analyst.

Researching and analyzing economic issues important to agricultural producers, Ross provided an intimate understanding regarding the interface of economic policy analysis and the political process.

Mr. Korves served the American Farm Bureau Federation as an Economist from 1980-2004. He served as Chief Economist from April 2001 through September 2003 and held the title of Senior Economist from September 2003 through August 2004.

Born and raised on a southern Illinois hog farm and educated at Southern Illinois University, Ross holds a Masters Degree in Agribusiness Economics. His studies and research expanded internationally through his work in Germany as a 1984 McCloy Agricultural Fellow and study travel to Japan in 1982, Zambia and Kenya in 1985 and Germany in 1987.

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