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June 30, 2015

Why does Trade Promotion Authority Matter?

Over the past month, there has been a very public and heated debate over the future of trade policy in the United States.

On the one hand, you have those who see an increasingly globalized economy and want to see the United States engaged in negotiating the future of international trade rules and the elimination of tariff and non-tariff barriers that currently block or hinder exports of American products into many markets.  The produce sector is especially sensitive to non-tariff barriers, such as sanitary and phytosanitary measures a country may employ at various points, without any warning and without scientific basis.

On the other hand, you have those who respond to this increasingly globalized economy and use opposition to trade as a proxy for supporting labor unions, environmentalist objections, and increased isolation from the global economy.


Brief History of Trade Promotion Authority

The United States has played an integral role in shaping and forming the global trading system and its various rules ever since World War II. One of the key tools that has allowed for this leadership is the concept of Trade Promotion Authority (TPA) or “fast track authority” as it is often called.

The exchange and balance of constitutional authorities between the legislative and executive branches over negotiation and implementation of trade-related measures goes back 150 plus years.  Congress began granting some special authority for trade negotiations to the executive branch in the 1930s during the administration of Franklin Roosevelt.

Fast Track authority, as it is understood today, was first granted to the president by Congress in the Trade Act of 1974 and was subsequently renewed a number of times without any major lapses through the 1990s.  TPA expired in 1994 after the North American Free Trade Agreement was implemented and was not renewed again until 2002.

TPA expired again in 2007 and has not been renewed for nearly eight years, which is approaching the longest period this authority has been lapsed since its original inception. Further, to-date, President Obama is the first president since Richard Nixon to have not yet had this authority available to his administration.


Why Is It Important?

The express intent of this authority was clearly stated in report language accompanying the 1974 Trade Act, “Our negotiators cannot be expected to accomplish the negotiating goals…if there are no reasonable assurances that the negotiated agreements would be voted up-or-down on their merits.  Our trading partners have expressed an unwillingness to negotiate without some assurances that the Congress will consider the agreements within a definite time-frame.”

The rationale for why Trade Promotion Authority remains so critical is the same today.  The executive branch has constitutional authority to conduct foreign policy, including negotiating trade agreements, but the Congress maintains the authority to change the associated laws (primarily tariff rates) needed to implement these agreements.  Anyone who has purchased a home or car knows that conducting a negotiation with every supplier or subcontractor would be an almost impossible and highly inefficient way to get to a final price.

Likewise, there would be no way to achieve comprehensive and robust market opening agreements if the 535 members of the House and Senate could effectively re-negotiate every provision of potential agreements, because each of these individuals would only support what is in the best interest of their particular district, state or constituent interest.

While TPA requires that Congress can only take an up-or-down vote on legislation to implement a trade agreement (no amendments can be accepted), it also puts in place a number of negotiating objectives and significant consultation requirements that the executive branch must follow before an agreement can be sent to the Congress.


What We Can Expect Going Forward

In May, the Senate passed legislation on a bi-partisan vote of 62-37 that would renew TPA along with provisions to renew Trade Adjustment Assistance (TAA).  The House considered this legislation on June 12th and was able to pass one of the two components of what the Senate passed [see June 11th and 16th Spotlights that provide further detail on what occurred].

If Congress is able to complete consideration of TPA and renew this authority of the administration, there is optimism that we will see the conclusion of the Trans Pacific Partnership (TPP).  However, opponents of TPP are attempting to delay TPA to such a degree that conclusion of TPP before this administration finishes will not be possible  If TPA is not renewed before September, it will become very difficult for that agreement to be finalized and all consultation and legal requirements to be met prior to the beginning of the presidential primaries.

The fresh produce industry stands to benefit significantly from trade agreements that bring down barriers to exports in key foreign markets, and more robust mechanisms to enforce unfounded sanitary and phytosanitary measures that are erected in other countries.  We can only achieve these kind of results if TPA is renewed.


NOTE: When this column went to print, the House had not yet finished consideration of Trade Promotion Authority legislation.