Maintaining authority

With less than three months before the June 30 expiry of the US’s trade promotion authority (TPA), the Bush administration’s all-important and aggressive trade agenda – and potentially the legacy of eight years of Republican trade policy – hangs in the balance. The White House and the Democratic Congress stand at an historic crossroads to strike a deal to extend TPA and to keep alive and possibly conclude the Doha Development Round, and pave the way for congressional approval of the US-Colombia, Peru, Panama and Korea free trade agreements.

If successful, this deal would be an act of bipartisanship between Capitol Hill and Pennsylvania Avenue not seen before the November 2006 elections and, arguably, not likely to be matched in the remaining 20 months of president George W Bush’s term in office. Can this happen and will this happen remain the burning questions of the day and, for the next few weeks, for the Washington and international trade policy establishment.

TPA (formerly called fast-track authority) is a legislative procedure: a prescribed set of rules by which Congress, in close consultation with the administration’s executive branch, establishes specific negotiating objectives for key trade agreements and then agrees to a straight up or down vote within a set period of time. Both entities make power-limiting concessions: the executive on adhering to congressional direction and input on trade objectives in advance of negotiations, and the legislative branch (Congress) on agreeing to not pick apart the agreement and commitment to a vote.

Presidential power

Another reason why TPA is so important is that it provides the president with a green light to negotiate and gives the rest of the US’s trading partners the assurance that the trade deals it strikes are sacrosanct, will be voted on and will not be amended in Congress. Without this assurance, many important trading partners, big and small, would refuse to negotiate with the US. Without it, the US could never exercise the kind of global leadership it plays in the world trade system, and major multilateral trade negotiations, such as Doha, would probably never happen. With TPA, the US can signal that it is fully committed to negotiating and concluding meaningful market opening trade agreements with its trading partners. Simply put, the international trade system depends on it and the US must deliver on that commitment.

This power-sharing arrangement over trade deals between Congress and the White House has been in place since the 1974 Trade Act. Since then, fast-track authority has been approved five times for five presidents. The results have been remarkable, starting with approval of legislation implementing the Tokyo Round of the GATT in 1979 to the most recent approval of the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) in 2005. In that time, the US has successfully negotiated and Congress approved bilateral or multilateral trade agreements with 16 countries in addition to the 1994 Act approving the Uruguay Round Agreement.

Critical tools

Through one form or another, fast track and TPA have become critical tools behind the US’s free trade commitment to expand markets around the world. Global trade liberalisation is and has been one of the hallmarks of US foreign economic policy leadership in a world that is growing wary of US diplomacy abroad. Trade is one of the few truly international consensus issues that most countries now agree is the key driver to sustained economic development for the world’s poorest people.

The US is firmly committed to this; witness the enormous US investment in reaching a deal on the Doha Development Round of the World Trade Organization (WTO). US trade ambassador Susan Schwab made clear in her recent speech to US business groups: “Failure to renew trade promotion authority would signal to the world that the US has lost faith in Doha. We must not let that happen. Doha is an historic opportunity to alleviate poverty and create economic opportunities in developed and developing countries around the world. We must not let it slip away.”

Fortunately for the Doha negotiations and the Bush trade agenda, the new Democratic congressional leadership may be in sync with the premise that these critical trade deals are too important to let go of. What has emerged since the landslide November elections is a surprising consensus on trade policy that seems to have developed between the White House and the new trade leaders in Congress: to forge a working partnership on trade anchored by a renewed TPA. No-one could have thought this possible given the prominence of the anti-trade platform in last year’s Democratic electoral victory. However, clearly a new political dynamic has emerged in the trade arena that seems to buck past conventional trends and both sides – Republicans and Democrats – seem increasingly willing to subscribe to it.

New reality

There are several reasons for this new reality. The first is that the administration badly wants congressional approval of the Peru, Colombia and Panama FTAs. The White House notified Congress on March 30 that it would sign the Panama FTA, meeting the March 31 TPA deadline. Notification on Peru and Colombia was made earlier this year.

Trade with those countries has nearly doubled over the past four years. To win that approval they will have to accept inclusion of new labour rights language in the agreements, and the White House is working hard with the key trade committees to reach a deal. As fDi went to press, Congress and the office of the US trade representative continue to negotiate terms of a new policy framework that would permit passage of the pending FTAs and set the stage for TPA renewal. In this regard, Congress is in the driver’s seat and the administration accepts that. In addition, a growing majority of Democrats support or are likely to support the FTAs that are important to strengthening democracy in the region and opening new markets to US farmers and manufacturers.

The second reason for the new reality is that most of the Democratic leadership agrees that there is too much at stake in the Doha Round and too much to lose for the developing world to have the negotiations lapse again or fail. US leadership is critical to Doha’s success. Although it may depend on the final position on agriculture of the EU, India, Brazil or the G20 countries, ultimately it will be the US that can broker the final compromise.

Congress should have as much stake in the success of such a potentially groundbreaking multilateral agreement as the administration does. Renewed TPA that includes even closer consultation between both ends of Pennsylvania Avenue can be approved by this Congress and will further showcase a bipartisan commitment to successful US trade policy.

Market access

The third reason for the new reality is that, against many political odds and into the final hours of March 31, the US reached agreement with South Korea on an FTA, the most significant bilateral economic agreement since the passage of the North American FTA. Because South Korea is the 10th largest economy in the world and the third largest in Asia, behind China and Japan, this FTA holds tremendous commercial opportunities for meaningful market access for US business and for enhancing US economic and security interests in Asia.

The administration will have to work hard to sell the agreement as it is written, however, due to congressional concerns over market access for autos and agriculture. But, if successful, and Congress does approve this landmark agreement, arguably it would mark another example of the new bipartisan trade policy consensus in Washington.

TPA renewal should be closer to reality if this happens. This should have an impact on efforts to revive the US-Malaysia FTA negotiations, which also have significant economic implications for key US manufacturing and agribusiness sectors.

Trade handicap

Without TPA – and therefore without the ability to conclude agreements with these important Asian allies – the US will continue to lose out to many of its principal trading competitors, namely China and the EU, in the race for market access in Asia. Moreover, many of these key countries, Indonesia, Philippines, Thailand and Cambodia, are forging ahead with trade agreements with China, South Korea, India and Japan, and at the expense of the US. The US cannot afford to let this trend continue and Congress would be wise to get in the game to ‘level the playing field’, to use an oft-stated Washington phrase.

The fourth reason for the new reality is the fundamental belief that all presidents, no matter what their political stripe, deserve the comprehensive authority to negotiate market-opening trade agreements. Trade policy is not and should never be the domain of one political party or another. TPA helps to keep it that way by serving as the ultimate contract between the legislative and executive branches of government, by establishing that both have a constitutional role in setting trade policy.

Stronger hand

The Democratic leadership knows how fundamentally important this is, especially in further establishing its credibility as the firm majority in both Houses of Congress. Again, TPA strengthens Congress’s hand in the trade debate; again witness the ‘quiet conversations’ that the White House is having with Capitol Hill on labour and environment provisions in the pending Latin American FTAs.

If there is one ray of hope for a true breakthrough among the myriad policy issues between Congress and the White House this spring and summer, it may be on reaching a deal to extend TPA. This would be significant for many political reasons at home and abroad, not the least of which is that it would reinforce a shared commitment to ensuring US leadership in world trade. A TPA deal could give a much-needed boost to efforts to reach a final deal on Doha, as well as confirm that hard-fought, market-opening bilateral and multilateral agreements with key US trade partners will be brought to a vote in Congress.

No matter what the terms, TPA should be renewed both to encourage further progress on the Bush administration’s ambitious trade agenda (legacy or not) and to reinvigorate the new Congress’s role in shaping US trade policy. Ultimately, TPA embodies that crucial partnership, which is critical for preserving US leadership in global trade.