Emergency Committee For American Trade - Publications

ECAT 2008 AGENDA

SECTION II.3: RENEWAL OF TRADE-NEGOTIATING AUTHORITY

ECAT strongly supports the renewal of the trade-negotiating-authority framework – first established in the Trade Act of 1974 as “fast track” and most recently extended as so-called Trade Promotion Authority in the Trade Act of 2002. This framework creates an Executive-Congressional partnership that defines negotiating objectives, establishes consultation requirements and provides for an up-or-down vote in Congress within a time certain to approve and implement trade agreements. As discussed below, this authority has resulted in a number of important trade agreements that have produced substantial and concrete economic benefits for the United States. This authority is also critical to promote U.S. leadership, empower U.S. negotiators, improve Congressional consultations and oversight, and provide effective Congressional consideration of trade agreements. This section reviews the trade-negotiating-authority process and the need for its renewal as quickly as possible this year.

History of Trade-Negotiating-Authority Procedures

Trade-negotiating-authority procedures were developed following former President Johnson's failure to win Congressional approval of the Kennedy Round agreements negotiated under the auspices of the General Agreement on Tariffs and Trade (GATT), which dealt with non-tariff, as well as tariff, measures and needed to be implemented by U.S. statute. Congress' rejection of these agreements poisoned the atmosphere for future trade negotiations domestically and internationally. In particular, U.S. trading partners believed that the United States was incapable of implementing its international trade commitments. In order to assure U.S. trading partners that new GATT agreements could not be similarly rejected, trade-negotiating procedures were developed in the Trade Act of 1974, essentially as a compromise between Administration and Congressional constitutional prerogatives: The Constitution grants the President authority to conduct foreign policy negotiations, including negotiations related to international trade agreements, yet directly provides Congress the authority "to regulate Commerce with foreign nations."

Trade-negotiating-authority legislation was legislatively extended three times with strong bipartisan support and remained in force almost continuously between January 3, 1975 and the end of the Uruguay Round negotiations on April 15, 1994. Throughout this period, this legislation remained essentially the same. Trade-negotiating-authority legislation limited Congress' legislative procedures for considering trade agreements in three primary ways in return for extensive consultations by the Administration prior to and during the negotiation of bilateral and multilateral trade agreements. First, the procedures guaranteed an up-or-down vote within a time certain. Second, the procedures limited the length of the debate. Third, the procedures prevented consideration of any amendments to the implementing legislation once it had been introduced (to avoid the need to renegotiate an agreement if Congress were permitted to amend the implementing legislation). In return, a trade agreement and its implementing legislation were only granted these special procedures as long as the President consulted with Congress before and during the negotiation of the agreement and on the drafting of the implementing legislation.

In the 1990s, the United States led trade and investment liberalization efforts with the North American Free Trade Agreement (NAFTA), as well as several WTO agreements, including the Uruguay Round Agreements that established the WTO in 1995. That agenda was almost quiescent following the expiration of trade negotiating authority in 1994, with no substantial trade-liberalizing trade agreements reached or passed by Congress during that period. Following Congressional approval of Trade Promotion Authority (TPA) in 2002, the United States was able to accelerate and conclude ongoing negotiations and initiate several new ones. That authority was extended in 2005 for agreements concluded before July 1, 2007.

Since its enactment in 2002, TPA procedures and authority have been used to begin, pursue and conclude negotiations with numerous countries and sub-regional country groups, as well as to implement seven U.S. free trade agreements – with Chile, Singapore, Australia, Morocco, Bahrain, Central America and the Dominican Republic, and Oman. The trade agreements with Colombia, Panama and Korea are eligible for consideration for TPA treatment, as they were all signed prior to July 1, 2007.

These agreements and negotiations are important not only for the trade and investment liberalization that they bring, but also in maintaining a level playing field, as many of the United States’ trading partners, particularly the European Union (EU), Canada and Mexico, have embarked on a series of bilateral, sub-regional and regional free trade agreements that provide special benefits to their farmers, manufacturers, service providers and workers, excluding the United States from these special benefits. While progress at the global level, i.e., the WTO, is the greatest prize, the United States’ bilateral, sub-regional and regional efforts have been helpful to spur those global negotiations forward by creating support for higher-standard liberalization commitments by developed- and developing-country partners.

Trade-Negotiating-Authority Framework

Almost 10 years after its expiration in 1994, Congress passed and the President signed into law trade-negotiating-authority legislation as part of the Trade Act of 2002, Pub. L. 107-210. The Bipartisan Trade Promotion Authority Act of 2002 revived and extended trade-negotiating-authority legislation (formerly called “fast track”), which was developed over three decades ago as part of the Trade Act of 1974.

TPA establishes negotiating authority for global, bilateral and regional trade negotiations, consultation requirements and Congressional procedures guaranteeing an up-or-down vote, without amendments, in a time certain for agreements meeting the requirements of TPA. Under the two-year renewal of TPA in 2005, TPA procedures govern agreements concluded before July 1, 2007.

TPA serves several purposes, including setting forth:

Congress’ overall and principal negotiating objectives;
procedures for Presidential consultation with Congress;
procedures for Congressional consideration of legislation to implement a trade agreement; and
procedures for extending TPA.

Major Provisions of 2002 Trade Promotion Authority

Duration: Provides TPA authority for free trade and tariff-only agreements entered into force before July 1, 2005, with potential two-year extension. TPA procedures were extended for two years in 2005 to cover agreements concluded prior to July 1, 2007.

Negotiating Objectives: Provides the most extensive negotiating objectives ever included in a trade-negotiating-authority bill and specifically directs the Administration to seek agreements that:

eliminate and reduce barriers to trade in manufacturing, services, electronic commerce, and agriculture;
eliminate and reduce barriers to investment, while also providing strong protections for investments abroad;
promote adequate and effective protection of intellectual property rights, reflecting a standard of protection similar to U.S. law;
obtain broader application of transparency and anti-corruption principles;
achieve full implementation of WTO agreements and extend their coverage;
achieve increased transparency and non-discrimination in foreign government regulation;
promote the effective enforcement of a country’s labor and environmental laws; reduce or eliminate government practices that unduly threaten sustainable development and seek market access for U.S. environmental technologies, goods and services;
seek effective and timely resolution of disputes with respect to all principal negotiating objectives, including the ability to use dispute settlement and the availability of equivalent procedures and equivalent remedies;
preserve the ability of the United States to enforce rigorously its trade-remedy laws, avoid agreements that lessen the effectiveness of such laws; and address and remedy market distortions that lead to dumping and subsidization;
obtain a revision of WTO rules related to the treatment of border adjustments for internal taxes;
obtain reciprocal market access for U.S. exports of textiles and apparel; and
seek commitments to vigorously enforce a country’s laws prohibiting the worst forms of child labor.
Promotion of Other Priorities: Directs the President to pursue additional priorities, including to:
- seek greater cooperation between the WTO and the International Labor Organization (ILO);
- establish consultative mechanisms to strengthen the capacity of countries to promote respect for core labor standards and to implement standards to protect the environment and human health based on sound science;
- conduct labor and environmental reviews of future trade and investment agreements;
- take into account legitimate domestic objectives, including the protection of legitimate health, safety, essential security and consumer interests;
- provide technical assistance with respect to other countries’ labor laws;
- report to Congress on the labor rights of countries with which the United States is negotiating and on the extent to which a country has in effect laws governing exploitative child labor;
- promote consideration of multilateral environmental agreements;
- report to the House Ways and Means and Senate Finance Committees on the effectiveness of penalties or remedies imposed under a trade agreement; and
- seek to establish a consultative mechanism on unanticipated currency movements.
Progress Towards Negotiating Objectives: Provides that no trade agreement may qualify for expedited procedures (described below) unless it “makes progress” in meeting the applicable negotiating objectives and the President fulfills the consultations requirements. The President is also required to report to Congress on how the final agreement makes progress towards the bill’s objectives.
Congressional Consultations: Provides extensive provisions for Congressional consultations beyond that included in prior trade-negotiating-authority legislation, including the establishment of a permanent Congressional Oversight Group (COG) to provide ongoing oversight of negotiations. The TPA Act provides that TPA procedures are not applicable if both Houses separately agree to procedural disapproval resolutions (under expedited floor procedures) for lack of notice or consultations within 60 days of each other.
Expedited Procedures: Authorizes expedited procedures as contained in the original trade-negotiating-authority legislation for implementing bills that contain provisions “necessary or appropriate” to implement the underlying trade agreement. Procedures require that 45 session days after an implementing bill is introduced, the relevant House committee(s) must report the implementing bill (without amendment) or be automatically discharged. The Senate committee(s) must report the bill (without amendment) or be automatically discharged 15 session days after its receipt from the House or 45 session days after its introduction, whichever is later. The implementing bill can be considered for up to 20 hours, without amendment on both the House and Senate floors. A chart showing the TPA timeline is provided below.

TPA TIMELINE

Pre-Negotiations

90 calendar days before initiating negotiations – Notify Congress of intent to initiate FTA negotiations.

Consult with Congressional Oversight Group (COG), Finance and Ways and Means and other committees before and after notification and meet with COG before initiating negotiations if majority of COG requests meeting. Additional consultations required if initiating agriculture, fishery or textile negotiations.

Initiation of Negotiations

Consult with COG, Finance and Ways and Means, Agriculture (if relevant) and other committees during negotiations, immediately before initialing agreement and before signing agreement.

180 calendar days before agreement signed – Administration must report to Finance and Ways and Means Committees on trade-remedy-law issues.

90 calendar days before agreement signed – President must notify Congress of intent to enter into the agreement and provide details of the agreement to the International Trade Commission (ITC) and request preparation of ITC assessment.

30 calendar days after notification – Advisory Committees to submit reports on the proposed agreement.

After Agreement Is Signed

60 calendar days after agreement signed – President must submit description of changes to existing laws required to bring United States into compliance with agreement.

No later than 90 calendar days after agreement signed – ITC submits report of its assessment to the President and Congress.

No deadline – President submits final text of agreement, draft implementing bill, statement of administrative action and supporting information on day when House and Senate are both in session.

After Implementing Bill Introduced

Implementing bill introduced in House and Senate on same day it is submitted by the President.

45 session days after implementing bill introduced – House committee(s) must report implementing bill or be automatically discharged.

15 session days after Committee reporting or discharge – Vote must take place on House floor.

15 session days after Senate’s receipt of the implementing bill from the House or 45 session days after its original introduction in the Senate, whichever is later – Senate Committee(s) must report out bill or be automatically discharged.

15 session days after Committee reporting or discharge – Vote must take place on Senate floor.

20 hours each of House and Senate floor debate, followed by final votes on the implementing bill.

Usage of Trade-Negotiating Authority

Prior to the renewal of TPA in 2002, trade-negotiating-authority procedures were used by Congress to consider five different trade agreements, all of which were approved and implemented: the GATT Tokyo Round Agreements (implemented by the Trade Act of 1979), the U.S.-Israel Free Trade Agreement (1985), the U.S.-Canada Free Trade Agreement (1989), the North American Free Trade Agreement (NAFTA) (1993), and the Uruguay Round Agreements (1994). Trade-negotiating-authority legislation expired in 1994 and was not renewed until 2002 with the Trade Act of 2002. During that interim, the only free trade agreement concluded was with Jordan, a relatively small commercial partner of the United States.

After its enactment on August 6, 2002, TPA procedures were used extensively by U.S. negotiators and the U.S. Congress:

2 on-going FTA negotiations were concluded (Chile and Singapore).
13 new sets of negotiations with a total of 23 countries were commenced; of which 10 negotiations (with a total of 14 countries) have been concluded.
9 new FTAs with a total of 14 countries have been signed.

Following the renewal of trade-negotiating authority in 2002, TPA procedures were used by Congress to consider and approve the following seven free trade agreements with 12 countries, of which FTAs with 10 countries have now entered into force, creating important new opportunities for U.S. farmers, manufacturers, service providers and their workers and benefits for U.S. consumers:

Trade Agreements Considered Under TPA Procedures
(2002-2007)

Congressional Approval Entry into Force

Chile July 2003 2004

Singapore July 2003 2004

Australia July 2004 2005

Morocco July 2004 2005

El Salvador (CAFTA) July 2005 March 1, 2006

Honduras (CAFTA) July 2005 April 1, 2006

Nicaragua (CAFTA) July 2005 April 1, 2006

Guatemala (CAFTA) July 2005 July 1, 2006

Dominican Rep. (CAFTA) July 2005 March 1, 2007

Costa Rica (CAFTA) July 2005 Expected in 2008

Bahrain Dec. 2005 August 1, 2006

Oman Sept. 2006 Expected in 2008

Peru Nov./Dec. 2007 Expected in 2008

The U.S.-Colombia and U.S.-Panama Trade Promotion Agreements and the U.S.-Korea Free Trade Agreement are also eligible for consideration under TPA procedures as they were signed before the expiry date of the current TPA.

Importance of Renewing Trade-Negotiating Authority as Soon as Possible

Renewal of trade-negotiating authority is critical for several reasons, including to:

Enhance U.S. Leadership. Renewal of trade-negotiating authority is critical for the United States to retain its leadership role in international trade negotiations. Following their experience in the Kennedy Round negotiations and the adoption of the trade-negotiating-authority procedures in 1975, U.S. trading partners have sought assurances that the President would have such authority to implement future trade agreements without their being reopened and renegotiated. Although only technically necessary to facilitate implementation of a final agreement by Congress, these procedures have taken on a much greater role in the eyes of U.S. trading partners, many of which have refused to take U.S. negotiators seriously (particularly in the context of multilateral negotiations) during periods that the authority expired. Others have used the expiration of this legislation as an excuse to stall negotiations and not make important concessions.
The expiration of this authority represents a serious impediment to the United States' ability to lead on trade issues, particularly with respect to the WTO Doha Development Agenda negotiations. These negotiations, discussed in depth in section II.2 are at a critical stage, with countries seeking to put forward a framework of modalities to set the stage for the final negotiations. Some countries are using the United States’ lack of trade-negotiating authority as an excuse not to move the negotiations forward. Once a breakthrough on modalities is achieved, however, it will become increasingly important for the United States to have trade-negotiating authority in order to conclude the negotiations successfully.
Empower U.S. Negotiators. Trade-negotiating authority is particularly critical to provide U.S. negotiators the clout necessary to extract concessions and successfully bring back the best possible agreements. While setting forth detailed negotiating objectives, trade-negotiating authority has never mandated any particular outcomes or tied U.S. negotiators' hands. As a result, U.S. negotiators have the flexibility to negotiate complex trade agreements and the authority to bring back agreements that must be accepted or rejected in a timely manner and without amendment. This balance strengthens the U.S. negotiating position and the ability of U.S. negotiators to conclude the best possible agreements. Without trade-negotiating authority, our trading partners have little interest or incentive to put down their final offers and negotiations stall. Since 1974, every major trade agreement concluded by the United States was done with trade-negotiating authority. The only free trade agreement concluded without trade-negotiating authority was the U.S.-Jordan FTA, which was a relatively small agreement, with long phase-in periods and the lack of state-of-the-art dispute settlement procedures.
Improve Executive-Congressional Consultations and Congressional Oversight in an Area of Overlapping Constitutional Authority. Trade-negotiating authority procedures also require the Administration to consult extensively with Congress and seek Congressional input on the conduct of trade negotiations. These consultation mechanisms were greatly expanded in the Trade Act of 2002, including through the creation of a Congressional Oversight Group, comprised of members from all relevant committees, who will be briefed regularly, have access to negotiating documents and become accredited members of the U.S. delegation to ongoing trade negotiations. The Trade Act of 2002 also provides Congress with the ability to limit the application of TPA procedures as a result of an Administration's failure to consult. At the end of every negotiation, the full Congress retains the most important protection against an agreement that it deems is not in our country's interest - the ability to approve or disapprove that final agreement.
Promote Effective Congressional Consideration of Trade Agreements. Equally important is the role that TPA plays in facilitating Congress' implementation of trade agreements, particularly in the U.S. Senate where filibusters and amendments are part of the normal order of business. With Congress' assent, trade-negotiating-authority legislation has limited certain Congressional prerogatives, thereby, expediting Congressional consideration and implementation of trade agreements, preserving their integrity and preventing their renegotiation.
Promote New Economic Opportunities and Economic Growth. Most essentially, trade-negotiating authority is vital to promote trade agreements that open markets and promote new economic opportunities for U.S. farmers, manufacturers, service providers and their workers.

The economic and commercial benefits of trade-negotiating authority are evidenced by the development of the WTO and the many benefits it has produced for the United States, as discussed in depth in section II.2. It is also apparent from the growth in U.S. trade with our 14 FTA partners, which now accounts for approximately $1,069 billion or 34 percent of total U.S. trade and 41 percent of U.S. exports.

U.S. exports to each of its major FTA partners have increased significantly after each FTA has entered into force.

U.S. goods exports to the NAFTA countries more than doubled between 1993 and 2007, from $142 billion to $385 billion, growing faster than U.S. exports to the rest of the world.
U.S. goods exports to Chile increased by more than 200 percent between 2003 and 2007 increasing from $2.7 billion to $8.3 billion in just four years.
U.S. goods exports to Singapore increased by 62 percent, from $16.6 billion in 2003 to $26.3 billion in 2007.
U.S. goods exports to Australia increased almost 35 percent, from $14.3 billion in 2004 to $19.2 billion in 2007.
U.S. goods exports to the five CAFTA-DR countries where the agreement has entered into force have increased 15 percent in just one year to nearly $18 billion.

U.S. exports to countries with which the United States has concluded an FTA since 2001 have increased by 70 percent. U.S. services exports have also increased. In particular, U.S. services exports to the NAFTA countries more than doubled between 1993 and 2006, from $27.4 billion to 61.8 billion. As well, U.S. investment has expanded following the entry-into-force of FTAs with major trading partners, supporting greater economic growth, better paying jobs and greater productivity here in the United States. Imports from U.S. FTA partners have also increased significantly, expanding the variety and choice of products available to U.S. consumers at competitive prices, lowering costs to U.S. manufacturers and dampening inflationary pressures.

Contrary to critics’ claims, a relatively small portion of the U.S. trade deficit is with countries with which the United States has FTAs. Indeed, the goods-trade deficit with the 14 countries with which the United States has had FTAs in force for more than a full calendar year, represents less than 13 percent of the total U.S. trade deficit, which represents a reduction from 2006.

The timing of trade-negotiating-authority renewal is highly important, particularly given the status of the WTO negotiations. As discussed in more depth in section II.1, a potential breakthrough and acceleration of the negotiations remains possible and—strongly desired—later this year. If trade-negotiating authority is not renewed, the United States will face much difficulty in helping these once-in-a-generation negotiations move forward. Without substantial forward progress by summer, these negotiations are likely to remain stalled for several years, denying new economic opportunities and major development benefits throughout the world.

ECAT Position: ECAT strongly supports the timely renewal of trade-negotiating authority to enable the United States to continue to negotiate and implement comprehensive, high-standard global, bilateral, sub-regional and regional trade agreements.