The Fast Track to Free Trade

BY CHRIS GIBSON

As the United States draws closer to completing a major trade agreement with eleven Asian and Latin American countries including Japan and Australia, attention is turning away from the negotiating table and towards Congress.  When the Trans-Pacific Partnership (TPP) is completed, each individual member country must pass the agreement according to its own legal guidelines.  In the United States, the President must send trade agreements to Congress, where they are voted on using the same process as any other bill, needing only a simple majority in both chambers to pass.  Unsurprisingly, Congressional involvement leads to potential problems.

Once a potential trade agreement reaches the floors of Congress, it becomes vulnerable to the polarizing politics of Washington.  Members of Congress who find the agreement displeasing can attempt to amend the trade agreement.  It is important to emphasize that amendments to any trade agreement render them useless; if the U.S. does not sign the exact same agreement as all other member countries, then the U.S. is not part of the trade agreement.  Knowing this, combining the vulnerability of trade agreements with our polarized and opinionated Congress may seem like a recipe for disaster.

There is a remedy to this problem, however.  Trade Promotion Authority (TPA), informally known as fast track authority, is a compromise between the executive branch and Congress.  TPA prohibits Congress from amending or filibustering any trade agreement, but allows members of Congress to set goals for the executive branch’s negotiating team.  When restricted by TPA, Congress can only debate the agreement and vote it either up or down.  TPA is extremely important in trade negotiations: foreign negotiators must be certain that Congress will not amend a trade agreement before they can trade concessions with the United States.  TPA was created in the Trade Act of 1974 and has been used to pass every free trade agreement since then.  TPA is not, however, a permanent part of U.S. law; the most recent TPA bill, the Trade Act of 2002, expired in 2007 and has not been renewed.

Without TPA, the TPP’s chances of surviving Congress unscathed are slim.  Despite the positive economic outcomes of free trade, an unlikely coalition of Democrats and Tea Party Republicans are blocking the path of TPA through Congress, refusing to give the executive branch TPA without concessions.

Many members of Congress are concerned with the lack of transparency in the TPP negotiations.  Currently, only the executive branch and a select group of Trade Advisory Committee members, the vast majority of whom are in the corporate sector, have had access to the text of the agreement.  Echoing concerns voiced in a letter written this summer by Senator Elizabeth Warren (D-MA) to U.S. Trade Representative Michael Froman, members of Congress would like to see the Obama administration publish the bracketed text of the TPP, which is a compilation of proposals being brought to the negotiating table by both the U.S. and foreign countries.  Since trade negotiations are a series of proposals, counter-proposals, and concessions being offered strategically, the Obama administration has been unwilling to publish the text and risk compromising its negotiators’ positions.  Releasing the text, however, would not be without precedent; President Bush released an edited bracketed text of the Free Trade of the Americas agreement in 2001, leaving out certain compromising details while still increasing transparency.  In her letter, Senator Warren asks Froman for either the full or edited text, so that members of Congress and the public can better understand the nature of the TPP and offer suggestions to U.S. negotiators on how to craft the TPP so that Congress will pass it.

Another hurdle to passing TPA is the demand of a bipartisan group of 60 Senators that the TPP include a section restricting currency manipulation, a form of protectionism that makes imports more expensive and promotes domestic job and industry growth.  In a letter to Froman and Treasury Secretary Jack Lew, the Senators cite a study by the Peterson Institute that currency manipulation has increased the U.S. trade deficit by $200-500 billion per year and cost us one to five million jobs.  However, the study also identifies only three of the eleven TPP partners as currency manipulators, Singapore, Malaysia, and Japan.  Of the three, Singapore and Malaysia have GDPs of barely $300 billion, and Japan “has been an occasional manipulator in the past but has not intervened recently.”  Though the Japanese yen has become devalued recently under Prime Minister Shinzo Abe, this is as a result of a quantitative easing program not unlike the one currently being enforced in the U.S., not a malicious desire to manipulate currency at other nations’ expenses.  Currency manipulation does have an effect on the U.S. economy, but it seems that the main culprits are countries like China and Switzerland, not members of the TPP.  At such a late stage in the process, introducing currency manipulation to the TPP would likely prolong negotiations for months and force the U.S. to concede other, more important objectives.  Although including language on currency manipulation in the TPP would be a strong message to other countries, it does not seem like a non-negotiable for members of Congress to hold against TPA.

With the final rounds of TPP negotiations beginning later this month, passing TPA is more crucial than ever.  Key figures in Washington including Froman, Lew, and President Obama himself have been working to educate members of Congress about TPA and urge them to draft a bill with bipartisan support.  Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT) have reportedly begun drafting a bill, with Baucus stating “It’s time to do our part. We must introduce a bill and quickly pass it.”  As of now, however, no such legislation has been introduced in either chamber.

The importance of TPA is impossible to understate.  According to a study by the Peterson Institute, the TPP could increase U.S. GDP by $78 billion annually, which translates to growth of nearly 0.5% per year.  Perhaps more importantly, however, should the U.S. fail to pass TPA and as a result drops out of the TPP, the U.S.’s reputation as a trade negotiator would be almost irreparably harmed.  Other countries would be unwilling to negotiate with the U.S. in the future, eliminating the chance of future economic growth through trade.  Congress has already done enough to slow the U.S. economy with an endless cycle of debt ceiling and shutdown crises, and we are in great need of a more reliable and external source of growth.  In short, TPA is a must-pass bill, and its supporters in both the executive and legislative branches must do whatever it takes to get the bill to the floor and pass it through.  In all likelihood, this will require the Obama administration to release some form of the bracketed text of the TPP to assuage Congressional fears that the TPP is in fact a good deal for America.  Without TPA, the U.S. will miss out on a huge opportunity for economic growth and will lose its reputation as a leader in world trade.