What’s Really in the New Trade Promotion Authority Bill?
Cato Institute - Monday April 20, 2015
by K William Watson
After months of internal wrangling, a trade promotion authority bill has finally been introduced in the Senate. If passed, TPA could prompt conclusion of the Trans-Pacific Partnership negotiations and facilitate the deal’s eventual ratification by Congress. The basic function of TPA is to affirm that future trade agreements will receive a timely up-or-down vote in Congress while setting negotiating objectives and procedures for congressional oversight.
Politically, the debate over TPA (and the TPP) has pitted the Obama administration and Republicans against congressional Democrats. The reason the current bill took so long to devise is that proponents needed the support of Senate Finance Committee ranking member Ron Wyden (D–OR) in order to get at least a handful of other Democrats on board.
So, any differences between this bill and one that was introduced but scuttled by Harry Reid last year is due to Wyden’s influence. His main concerns are not related to specific trade policy issues but to the role of congressional oversight and transparency in the negotiations. Wyden has given the current bill his seal of approval, as have the White House and Republican leaders.
The first thing we should keep in mind when talking about TPA is that while its basic function is beneficial in facilitating the passage of trade agreements, the bill is 113 pages long because it’s full of caveats and reservations.
The bill lays out negotiating objectives that focus on keeping U.S. protectionism in place and breaking down foreign barriers. There are objectives regarding textiles, antidumping, and agriculture that explicitly limit the president’s authority to liberalize trade.
Other negotiating objectives are more beneficial. TPA calls for provisions that limit restrictions on cross-border data flows and that remove special privileges for state-owned enterprises. These are good goals in and of themselves but it’s worth remembering that accomplishing them shouldn’t be a requirement for completing a trade agreement that lowers tariffs.
We should always keep that in mind when politicians claim that TPA is “ambitious” or “updated for the 21st Century.” Much of that updating is merely kowtowing to current protectionist sensibilities.
Aside from negotiating objectives, the rest of TPA deals with notification and oversight by Congress. There has been significant controversy from the Left over how much access members of Congress or civil society groups have to review negotiating proposals and drafts and to have their concerns heard by U.S. negotiators. These rules can be useful in promoting good governance and keeping the process open and, therefore, less susceptible to capture by narrow interests. But some oversight requirements exist merely to gum up the process and pressure negotiators to water down deals to appease protectionist constituencies.
As Congress prepares to debate the bill there will be a lot of statements made about its contents and their consequences. Let’s take an early look at some of the claims being made now and see how they match up with reality.
Transparency
This time, Trade Promotion Authority does much more than before. We have long questioned why, if somebody believes in trade and wants more of it, they would insist on keeping agreements secret. This time, TPA will require information about U.S. positions on future treaties to be publicized as they are made. There is more to be done, but we’re finally bringing sunlight into the trade process.
This is a genuinely new addition to TPA and to the trade agreement negotiating process. The current bill would require the administration to provide public summaries of its negotiating positions. This will give the public something concrete to debate without having to resort to conspiracy claims or wild theories. It will also help everyone see more clearly how negotiators intend to implement the negotiating objectives of TPA.
It will also require that every member of Congress has access to the full text of the negotiations from beginning to end.
This mirrors the current policy of the administration, which was written into the 2014 TPA bill in an effort to make it official. The current bill addresses an obvious complaint by additionally ensuring that not only members of Congress but some members of their staff can see the drafts as well. The fact that members of the President’s own party are clamoring for this privilege shows how much distrust there is between the White House and Congressional Democrats on this issue.
For the treaty currently under negotiation, the Trans-Pacific Partnership, as well as all future agreements, TPA will require that the entire text be made public for 60 days before the president signs it. That means a deal will be public for at least four months before Congress votes on whether to approve it.
This too is something brand new in the current bill. In the past, TPA has required various act be done prior to signing an agreement. These are still in place in the new bill. The President has to notify Congress of his intent to sign the agreement 90 days before doing so and has to provide Congress with a list of required changes to U.S. law more than 60 days before signing. There are also mandated delays between signing the treaty and introducing the implementing legislation in Congress.
All in all, the fast track process is not especially fast, and this additional requirement of publishing the text 60 days before signing won’t slow it down any. However, it will mean that the text is publicly available for longer before Congress votes.
Another new thing in this year’s TPA bill is the creation of a “Chief Transparency Officer” within the Office of the U.S. Trade Representative to “coordinate transparency in trade negotiations.” It will be very interesting to see whether and how this official impacts the negotiating process.
Human Rights
Senator Wyden and the White House are trumpeting the fact that this new TPA bill “makes human rights a negotiating objective of trade treaties for the first time in history.” The current TPA bill does indeed use the phrase “human rights” in one paragraph in a list of broad “overall” negotiating objectives:
(11) to ensure implementation of trade commitments and obligations by strengthening good governance, transparency, the effective operation of legal regimes and the rule of law of trading partners of the United States through capacity building and other appropriate means, which are important parts of the broader effort to create more open democratic societies and to promote respect for internationally recognized human rights
The italicized portion was added in the current bill but the rest was in the 2014 bill as well. This objective is sufficiently vague as to be completely meaningless. Various provisions in trade agreements could be considered as strengthening good governance. And it’s not clear what exactly any of that has to do with “internationally recognized human rights,” so this objective is really nothing more than political fluff.
That’s probably for the best. Trade agreements improve people’s lives on their own by reducing impediments to mutually beneficial exchange. The benefits of economic growth in improving justice and well-being around the world eclipse any accomplishments derived from the promotion of “human rights” through international treaties.
Labor and Environment
The new TPA bill has negotiating objectives on labor and environment regulation. According to Senator Wyden:
[TPA] directs our trading partners to adopt and maintain core international labor standards, rather than just assuming that countries’ existing labor laws are enough, as some past deals have done. It directs trade negotiators to obtain some of the strongest environmental protections to date across 40 percent of the global economy. For the first time, our trade policy will help raise the bar for core labor, environmental and human rights standards around the world, instead of letting our competitors race to the bottom.
Wyden correctly characterizes the U.S. negotiating position on labor and environment rules in trade agreements, but the claim that this is new is completely false. The current bill’s labor and environment objectives formalize U.S. policy that has been in place since Democrats forced it on President Bush in 2007. The last four trade agreements the United States negotiated (with Peru, Panama, Colombia, and Korea) all have labor and environment provisions in line with the current TPA bill’s negotiating objectives.
There is, however, no “race to the bottom” on these issues among U.S. trading partners. On the contrary, increased trade and investment that comes from reducing trade barriers leads directly to economic development, which leads to better working conditions and environmental quality. Nevertheless, the claim that trade will impoverish everyone if we don’t tax products made by poor foreigners remains a staple argument of trade skeptics.
It’s worth noting the Obama administration has been pushing for even more restrictive labor and environmentregulations in the TPP than are called for under the current TPA bill.
For example, another claim by Senator Wyden
We fought hard for these provisions not only because it was the right thing to do, but also because we have so much to gain. Illegal logging alone costs the U.S. timber industry $1 billion every year.
We know from leaked drafts that the TPP will likely require the criminalization of trade in lumber harvested without permission from foreign governments—similar to current law in the United States after amendments to the Lacey Act in 2008. Wyden’s mention of the U.S. timber industry aptly demonstrates the Baptists-and-bootleggers nature of this “conservation” law. In any event, while logging is being addressed in the TPP, doing so is not mandated by the new TPA bill, a fact which Wyden glosses over.
Internet Freedom
How trade agreements might impact the internet, and data flows more generally, has been an interesting new issue for trade policy. According to Wyden, the current TPA bill calls for the liberalization of cross border data flows:
Defending and expanding a free and open Internet is at the very core of this legislation, which is why this bill sets new priorities to ensure information can flow freely across national borders.
Most of the substance of TPA’s objective regarding data flows was in the 2002 TPA under an objective titled “Electronic Commerce.” The current TPA bill renames that objective “Digital Trade in Goods and Cross-Border Data Flows” and adds a specific demand that governments not “require local storage or processing of data.”
This is a laudable objective that seeks to prevent protectionist policies that could balkanize the global internet. It will be interesting to see how this objective translates into specific obligations under the TPP or a potential U.S.-EU trade agreement. Of course, one way that the United States could help prevent data-localization policies is by not spying on the communications of foreign nationals whose data travels through U.S. based servers.
Thankfully, Senator Wyden also addresses the issue of internet freedom and intellectual property enforcement:
That is far from the only digital issue at stake in upcoming trade deals. We worked with the Internet community to ensure that the United States will never ask for or accept a trade agreement that contains provisions like those in PIPA and SOPA, which would have broken the Internet to enforce copyright provisions. We successfully pushed U.S. trade negotiators to seek new provisions on limitations and exceptions on copyright in the Trans-Pacific Partnership negotiation, and we’re glad the administration has moved in a new direction on these policies. These are provisions that are consistent with what is known as “fair use,” and are vital for researchers, journalists, and an informed public.
As far as TPA goes, this bill includes only one divergence from the 2002 law by insisting that trade agreements promote strong IP enforcement “in a manner that facilitates legitimate digital trade.” It will be very interesting to see how the TPP ultimately deals with site-blocking and liability for internet service providers—key issues in the SOPA debate.
On fair use, this statement from R Streeton TPA’s IP objectives is informative:
“Although R Street supports TPA legislation in principle, we’re strongly concerned about how it may affect digital copyright in practice, and whether it will affect how ordinary citizens lawfully use copyrighted works,” said Mike Godwin, general counsel and director of innovation policy at R Street. “Current TPA language stresses ‘strong’ enforcement measures, but doesn’t mention important exceptions and limitations that apply under our copyright laws.”
Such exceptions could include access for the blind and disabled, fair use or temporary copies as required by computers, cloud services and other lawful digital uses.
The main complaint about U.S. trade policy regarding intellectual property is that U.S. negotiators push a one-sided agenda driven by rights holders to the detriment of users. Wyden seems to believe that the TPP will strike a good balance, but this TPA bill does nothing to challenge the current bias.
Sovereignty
This package for the first time states unequivocally that trade agreements cannot change U.S. law without congressional action.
This is new to TPA but not at all new to U.S. trade policy. U.S. trade agreements have always contained assurances that the treaty’s implementing legislation does not create private rights of action. You cannot sue the U.S. government in U.S. court for violating its trade obligations. There is no political movement to change this. Making the practice a formal demand of TPA will change nothing, but it might soothe the fears of some people who don’t understand the history of trade agreements in U.S. law.
ISDS
Senator Wyden jumps into the debate over investor-state arbitration:
And it ensures that foreign companies have no more rights in international tribunals than they do in the U.S. court system.
This is also nothing new. The same statement is made in the 2002 TPA law.
Revoking Fast Track
Here’s what the White House is saying about the option under the new TPA bill for revoking fast track if Congress doesn’t think the agreement adheres to TPA’s objectives:
It gives Congress new ability to revoke trade authority procedures from trade agreements if the Executive Branch has failed or refused to notify or consult with the Congress and the public in accordance with congressional guidelines.
The new TPA bill does lay out the procedures, in the Senate at least, that would govern a motion to revoke fast track privileges for a trade agreement. Specifically, the motion would need to be supported by a majority vote in the Senate Finance Committee and 60 Senators in a floor vote.
It makes sense to have some mechanism to check whether TPA’s negotiating objectives have been met. This scheme appears to provide that without unduly burdening the fast track process with obstructionist maneuvers. But it’s worth noting that TPA has never actually bound Congress to use fast-track procedures because each house of Congress maintains the power to change its procedures in violation of TPA. House Democrats did this in 2007 to prevent the U.S.–Colombia FTA from getting a vote.
Despite claims that the current TPA bill establishes a new procedure for revoking fast-track consideration, it would more accurately be described as merely recognizing that normal rules-setting procedures can be used to do derail a trade agreement if Congress wants to do that.
Currency
The White House also claims that the TPA bill “addresses currency matters as part of a broader effort to level the playing field for American workers and businesses.” Thankfully, this TPA bill, like the 2014 bill, does not actually require negotiators to push for disciplines on currency manipulation. It merely demands that currency manipulation be addressed somehow in the agreement.
Unfortunately, currency manipulation is the menace du jour of American protectionists, who claim incredulouslythat the ability to impose tariffs on countries with low currency values is essential for our economic wellbeing. Our trading partners in the TPP have vociferously resisted the inclusion of exchange rate or monetary policies in any trade agreement.
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