The House of Representatives is nearing a vote on Trade Promotion Authority -- the procedure once called "fast-track" authority, in which Congress sets negotiating objectives for major trade agreements and commits to vote on the result without amendment. In the next weeks, it is expected to take up a bipartisan TPA bill drafted by Representatives Cal Dooley (D-CA), Bill Jefferson (D-LA) and John Tanner (D-TN), together with Ways and Means Committee Chairman Bill Thomas (R-CA).
As the vote approaches, progressives concerned about the contribution trade policy can make to growth and world political stability, and about finding the best ways for trade policy to contribute to progress on labor and environmental issues, should approach the issue with two questions in mind: (1) is TPA a good idea at all?; and (2) is this particular bill the right one? The answer to both questions is "yes."
As a general point, TPA is a good idea for two basic reasons. First, it protects the Constitutional power of Congress to guide trade policy, through a set of detailed negotiating objectives that trade agreements must reflect. (The bipartisan proposal has twelve such objectives, ranging from tariff reductions to agricultural subsidies, electronic commerce, services and trade-related labor and environmental policy.) It also gives U.S. negotiators credibility, by assuring our trading partners that commitments U.S. Administrations make in good faith will not later be fundamentally changed by Congress.
There are also two short-term reasons why passage of TPA now is especially important. On one hand, the U.S. is now beginning two strategic trade initiatives -- the Free Trade Area of the Americas (FTAA) and a new round of negotiations at the World Trade Organization (WTO). Passing TPA now is the best way to ensure that Congress -- in particular Democrats, as the opposition party -shapes these negotiations. On the other hand, TPA will provide an important short-term boost for market confidence during an economic slowdown.
A closer look at these two latter points follows.
A. Protecting Congress' Role in Trade Policy: First, the bipartisan proposal is Congress' best opportunity to shape U.S. trade policy goals for the coming years.
The major objectives set by President Clinton and endorsed by the Bush Administration are creation of a Free Trade Area of the Americas and completion of a new round of trade negotiations at the WTO. These (in contrast to China's integration into the WTO, as the main objective of the past five years) are the kind of complex, multinational agreements for which TPA is most important. These talks are set to begin in earnest very soon -- FTAA talks are set to begin drafting the formal agreement next spring -- and thus Congress has an especially important take in approving TPA now. If Congress waits to pass TPA, the Administration will be free to set its own initial objectives for the FTAA; these will then progressively become fixed in legal text. So the longer Congress waits to pass TPA, the less it will be able to influence the negotiations.
B. Strengthening Confidence During World Economic Slump: Second, TPA would have valuable short-term effects in the present world economic slump.
September's terrorist attacks coincided with and sharpened a worldwide economic slowdown. At such moments risks of panic and policy mistakes are high. In the 1930s, countries reacted to financial crisis by raising tariffs on one another; hoping to save themselves, each brought the others down. Most economists believe this deepened and lengthened the Depression. Passage of TPA would assure that governments will not repeat that mistake today: rather than trade protection, the likely policy trend would be toward liberalization. This would strengthen market confidence rather than creating new sources of concern, thus easing the path toward a return to prosperity.
On the second question -- is the Dooley-Tanner-Jefferson-Thomas proposal the right one -- the principles set out by the New Democrat Coalition in May of 2000 offer four benchmarks.
(1) A TPA bill should set an ambitious negotiating agenda;
(2) It should place trade-related labor and environmental objectives on par with achievement of more traditional trade policy goals.
(3) It should offer a "tool-box" of enforcement methods, and give any labor and environmental commitments the same access to these enforcement methods other commitments enjoy.
(4) It should enhance consultation with Congress as negotiations proceed.
A look at the bill shows that it reflects each of these principles. Of particular note, it represents a sharp Republican retreat from an initial position of opposing consideration of labor and environmental issues in trade agreements, and an acceptance of the labor and environmental formula of the U.S.-Jordan Free Trade Agreement -- the first U.S. trade agreement to include these issues in the core text -- which many Republicans had previously opposed. To look at the principles in more detail:
A. The Trade Agenda: First, the bipartisan proposal sets an ambitious agenda consistent with historic Democratic Party principles and goals. This includes:
- Free Trade Area of the Americas. The FTAA -- realizing a vision held by Franklin Roosevelt and completing a negotiation launched under Bill Clinton -- would go beyond market-opening to fundamental U.S. political and security interests. Uniting the democracies of the Americas in a permanent community of shared interest and benefit, the FTAA would form a counterpart to the U.S. alliances with Western Europe and Japan, and become a pillar of world security and prosperity throughout the 21st century.
- A new WTO Round. This would provide dramatic reforms to world trade, benefiting U.S. exporters, high-tech innovators and family living standards. Central goals would be reform of agricultural and services trade -- areas in which America is the world's most competitive nation -- and further reduction of trade barriers in manufacturing. In addition to creating opportunities for competitive U.S. exporters of goods such as auto parts, chemicals, agricultural equipment and other products, this will help the poor in the U.S., who suffer disproportionately as tariffs raise prices for shoes, clothes and other household necessities.
- Bilateral trade agreements, beginning with Free Trade Agreements with Chile and Singapore. These can both open markets directly and form foundations for larger regional trade reform projects.
B. Labor and Environmental Issues: Second, for the first time in any fast-track or TPA bill, the bipartisan proposal includes specific negotiating objectives on trade-related labor and environmental issues. Four main points include:
- Core Labor Standards: First, an overall, aspirational objective of encouraging countries to respect the International Labor Organization's core labor standards -- abolition of forced labor, abusive child labor, and workplace discrimination, and the rights to freedom of association and collective bargaining.
- Enforcement of National Laws: Second, a principal negotiating objective of ensuring enforcement of national labor and environmental laws. This provision, modeled on the recently approved U.S.-Jordan Free Trade Agreement, would let the U.S. seek redress through dispute settlement if foreign governments refuse to enforce these laws, and the failure affects trade or investment flows.
- "Win-Win" Policies: Third, a principal negotiating objective of lowering trade barriers that interfere with environmental protection. These include tariffs on environmental goods like power plant scrubbers or pollution monitoring equipment; restrictions on provision of services like waste management, recycling or efficient energy production; and reduction of environmentally destructive subsidies in fisheries, agriculture, forestry and other natural resource fields.
- Investment Policy Reform: Fourth, a principal negotiating objective of reform in investment provisions in trade agreements like Chapter 11 of the North American Free Trade Agreement. This would ensure that foreign investors in the U.S. receive no more protection against expropriation than U.S. laws allow; prevent frivolous suits like that filed by Methanex of Canada against California; and strengthen transparency and public access. It also maintains the broader goal of openness and the rule of law in investment -- which is important to the U.S., as the world's largest recipient of foreign direct investment.
These objectives go well beyond those of the 1997-98 fast-track bill, which specified only enforcement of national laws. In some cases -- notably the proposed revision to investment policy -- the Dooley-Jefferson-Tanner-Thomas proposal goes beyond linkages the Clinton Administration made between trade, labor and environmental policies. Before demanding more, progressives should both recognize how far Republicans have retreated on this issue -- the initial Republican TPA bill, HR 2149, essentially barred consideration of labor and environmental issues in trade policy; and understand how controversial even this approach will be.
Many developing countries, including democracies like India and Brazil, genuinely fear that addressing these issues in trade agreements will lead to discrimination against poor countries simply because they are poor. This is a widely shared concern -- South African Trade Minister Alec Erwin (who is not personally opposed to opening discussions on trade and labor) flatly predicts that "if you want to make labor standards an actionable issue in the WTO, you will blow the system apart."
The bipartisan proposal itself will be controversial for these countries. A maximalist approach -- in particular one which mandates sanctions for violating national or ILO standards -- will simply lead them to reject negotiations altogether, and thus impose an impossible mandate on U.S. negotiators. The balance struck by the bill avoids such a result, while still giving trade policy a greater role in promoting respect for labor rights and improved environmental protection.
C. Enforcement: Third, the bill envisions a flexible "toolbox" of methods for enforcing agreements, without mandating any one method in advance. This is the right approach for several reasons.
- First, the track record for implementing trade agreements is reasonably good. The last WTO negotiating Round, for example, included perhaps a million separate commitments to cut tariffs; in the six years since, the U.S. has found virtually no violations of these commitments.
- Second, the reasons for failure to implement commitments differ. At times it is simple bad faith or lack of political courage, and trade retaliation is justifiable. (Even in these cases, however, it is not always effective: the EU's refusal to import U.S. beef is an example.) In many other cases, the problem may not be bad faith but genuine difficulties with implementation. The WTO agreements on Sanitary and Phytosanitary Standards or Basic Telecommunications, for example, require scientific and technical expertise often lacking in poor countries. Here, technical assistance and capacity-building are more likely than retaliation to improve compliance. The bill thus, rightly, envisions use of different methods for different countries, different agreements and different policy problems.
- Third, as noted above, the bill is highly ambitious in seeking commitments on trade-related labor and environmental issues. If these commitments are to be realized, flexibility on enforcement is critical. Insisting on sanctions as a response to these issues would be more likely to cripple negotiations from the start than improve labor and environmental standards; Progressives who hope to see trade policy take a role in labor and environmental issues must accept that these are genuine feelings, which must be accommodated if their hopes are to be realized.
D. Congressional Consultation: Finally, the bill strengthens Congressional rights of consultation as agreements continue.
Any grant of TPA is a balance of concessions. As Administrations give up freedom to negotiate with whom they like in exchange for vote of confidence, Congress gives up freedom of amendment in exchange for an early voice in shaping policy. While both sides sacrifice in any such bill, however, the sacrifice in this version appears greater for Administrations than in the past. Three points are especially important:
- Congressional Oversight Group: The proposal creates a new means for direct oversight of negotiations -- as opposed to periodic consultations -- through a permanent, bipartisan Congressional Oversight Group, whose members are accredited as observers to U.S. negotiating delegations.
- Consultation Deadlines and Timetables: In each major agreement Administrations would have to follow a detailed timetable of consultations or lose TPA procedures. These would include Presidential notification 90 days before opening negotiations; a similar notification at least 90 days before concluding agreements; and continuous consultation throughout the talks.
- Escape Clause: Finally, the bill includes an escape clause, through which Congress could remove TPA procedures from any agreement on the grounds of Administration failure to consult.
As a vote approaches, Trade Promotion Authority remains controversial. But it also remains a valuable and reasonable procedure: one which helps Administrations negotiate with credibility, and enables Congress to fulfill its Constitutional responsibility to shape trade policy. The Dooley-Jefferson-Tanner-Thomas proposal is a good approach to it, and deserves progressive support.
1. In 2000, as U.S. companies invested $114 billion overseas, foreign firms put $273 billion into America.
2. Alec Erwin, Minister of Trade and Industry for Republic of South Africa, Remarks at Southern Africa Economic Summit, June 6, 2001
Edward Gresser is director of PPI's Project on Trade and Global Markets.
