Will Congress give Obama authority to negotiate trade agreements?

Guest post by William Krist

President Obama called on Congress to give him authority to negotiate trade agreements in last night’s State of the Union address. This authority, commonly called Trade Promotion Authority (TPA) or Fast Track Authority, was last granted to the President in 2002, but that authority expired in 2007. Under our Constitution, authority to regulate foreign commerce rests with Congress, but since the 1930s Congress has periodically delegated authority for trade negotiations to the President in legislation that sets out the objectives and specific conditions for consultations.

kristRight now the U.S. is engaged in two monumental trade negotiations. The farthest along, the Trans-Pacific Partnership (TPP), involves eleven other nations, including Japan, Vietnam, and Malaysia. The objective of the negotiation is to almost completely eliminate trade barriers among the twelve countries and develop strong rules on investment, protection of intellectual property, practices of state-owned enterprises, and other issues. The other enormous trade negotiation, the Trans-Atlantic Trade and Investment Partnership (TTIP), involves the European Union.

The U.S. hopes to complete the TPP negotiations early this year and the TTIP next year, but this will not happen unless Congress grants the President Trade Promotion Authority. TPA commits the Congress to vote up or down on a trade agreement—without the possibility of amendment— in a specified period of time. Without this commitment, our trade partners know that Congress may never consider the agreement, or if it does is likely to force changes to satisfy key members of Congress.

In the TPP negotiations, we are asking our trade partners to make major concessions; for example, we are asking the Japanese to open their market to U.S. rice, beef, and other products. Politically, Japan and our other partners simply will not make difficult concessions if they think Congress will diddle around with the agreement.

Major business groups will lobby aggressively for approval of TPA. The business group coordinating lobby activity, Trade Benefits America Coalition, has over 200 companies and associations and its membership reads like a who’s who of big business. However, gaining Congressional approval for TPA will be enormously difficult. In 2002 the House only approved this authority by three votes, and today Congress is far more divided than it was in 2002.

The Republicans have traditionally been strong proponents of TPA. However, the Republicans may now be divided. Seven Tea Party groups have come out in strong opposition to TPA, largely because of distrust of President Obama and because they see it as an abrogation of Congressional authority. For example, Tea Party Patriots has said that “President Obama has seized power time and again . . . Denying him Fast Track Authority sends a clear message that enough is enough.”

In addition to Congressional fissures, however, is the fact that U.S. trade policies are more controversial today than they were in 2002. Many blame our trade policies for some of the unemployment in America and for our increasing income inequality. Indeed, most economists believe that our trade agreements have contributed to both unemployment and income inequality, although probably less than other factors such as education and technology.

If Trade Promotion Authority is to be approved, the President and Congress will need to seriously address the concerns of the critics. Here are three measures that have to be addressed:

#1. TPA will have to include Trade Adjustment Assistance (TAA), which improves unemployment benefits and includes provisions to help people who lose their job because of trade agreements. This doesn’t fully offset the impact on labor, but it can go a long way if constructed right. Organized labor would likely still oppose TPA, but their opposition will be greatly reduced with TAA in the bill.

#2. TPA will have to require reform of the Investor-State Dispute Settlement (ISDS) provisions. Environmentalists, health advocates, and labor have long worried that these provisions, which enable companies to sue a government that it believes has indirectly appropriated its investment, are subject to abuse and can limit the ability of governments to regulate for health and safety. These fears have been enflamed by a Philip Morris suit against Australia.

#3. TPA will have to require that the President negotiate new trade rules to prevent countries from manipulating their currency to gain an unfair trade advantage. Some countries, notably China and Japan in the past, have deliberately undervalued their currency to gain a trade advantage, and this has contributed to the unemployment problem in America. If currency manipulation is addressed, the auto and steel industries likely would support TPA; if not, their opposition will be fierce.

William Krist is a senior policy scholar at the Woodrow Wilson International Center for Scholars and the author of Globalization and America’s Trade Agreements. During his career he was an Assistant U.S. Trade Representative, a legislative assistant for both a congressman and a senator, and an advocate for the high-tech industry.