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Congress Needs to Prioritize TPA Passage

Today, U.S. Trade Representative Michael Froman will address the 114th Congress regarding the necessity of passing Trade Promotion Authority (TPA) as a predicate for completion of the ambitious U.S. trade agenda. TPA allows the President to “fast-track” trade agreements for approval or disapproval by Congress; essentially, TPA asks the House and Senate to accept or reject a trade agreement, without amendment, within 90 days of its submission to Congress by the President. The process enables the United States to negotiate more beneficial trade agreements with other countries, in part because of the reduction in approval time compared to other pieces of legislation (that often languish in committee markup) and because it incentivizes foreign countries to make good faith trade negotiations with the United States, since they know that Congress cannot rewrite the deal.

Presidents need fast-track negotiating authority because the simple reality is that finding consensus on trade agreements becomes nearly impossible if all 535 members of Congress get a chance to rewrite the terms of trade agreements American officials have spent painstaking years negotiating with multiple foreign partners. And as Representative Froman wrote in a recent Foreign Affairs article, The Strategic Logic of Trade, “By ensuring that Congress will consider trade agreements as they have been negotiated by the executive branch, TPA gives U.S. trading partners the necessary confidence to put their best and final offers on the table.” At the same time, TPA increases transparency in U.S. trade policy, for it establishes consultation and notification requirements for the President and USTR to follow throughout the trade agreement negotiation process—ensuring that Congress, interested stakeholders, and the general public are closely involved before, during, and after the conclusion of trade agreement negotiations.

TPA thus constitutes an effective mechanism for Congress to delegate its Constitutional authority to U.S. negotiators to “regulate commerce with foreign nations” as stipulated in Article 1, Section 8 of the U.S. Constitution. And that’s why, since the TPA’s inception in 1974, it has been used successfully by both liberal and conservative Presidents and Congresses to complete many of the agreements that we have now: Clinton and the North American Free Trade Agreement, Bush and free trade agreements with Colombia, Panama and South Korea. In short, without TPA, the United States risks sacrificing its ability to effectively shape the terms on which globalization and future global trade occurs, as ITIF Senior Analyst Stephen Ezell argued at a recent ITIF event discussing the need to reauthorize trade promotion authority.

And with the United States currently negotiating ground-breaking trade deals with Asia-Pacific and European trade partners in the Trans-Pacific Partnership (TPP) and Trans-Atlantic Trade and Investment Partnership (T-TIP) trade agreements, part of what Deputy United States Trade Representative Robert Holleyman calls “the most ambitious trade agenda in history,” the necessity of TPA could not be clearer. That’s why President Obama’s 2015 State of the Union address forcefully called on Congress to pass TPA: “I’m asking both parties to give me trade promotion authority to protect American workers, with strong new trade deals from Asia to Europe that aren’t just free, but fair.”

This puts the ball squarely in Congress’s court, hence today’s House and Senate hearings, including Representative Froman’s testimony. ITIF encourages policymakers from both parties to put aside their partisan differences and work together to reauthorize this important legislation which will assist in promoting American competitiveness and economic growth for years to come.

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  • 4Gbill

    “The Intellectual Basis of U.S. Trade Policy Trench Warfare” is an excellent ITIF report that describes the major flaws in the two common doctrines of trade policy, neoclassical (NC) and neo-Keynesian (NK), and describes the greatly improved doctrine of innovation economics (IE). However, the report has a gap in the
    definition of trade as transactions that only measure tangible capital (TC) in goods
    and services. The report largely ignores trade in intangible capital (IC)
    including the theft of IC as theft of intellectual property (IP) and the report
    completely ignores the theft of public investments in IC which occur in

    Mercantilist policies exist at the firm level and include the theft of public investments in IC lost in offshoring. The trade deficit ignores IC and the theft of IC that is
    enabled by mercantilist policies at multiple levels. Offshoring has also facilitated tax avoidance that is part of mercantilism at the firm level. For example, Apple offshored their manufacturing to FoxConn in China after Apple in the late 1980’s pioneered the standard tax avoidance method that is now taught in law schools as a “Double Irish Dutch Sandwich”.

    Trade is intended to produce economic growth and jobs in America. But jobs are being lost as a result of bad trade policy. Even worse, the middle class income
    inequality problem is driven by a lack of good paying jobs for the middle class
    in America. The root cause of the problem is a gap in economics and foreign
    trade policy that encourages offshoring without penalties.

    The first step in a solution is to recognize that offshoring is THEFT of the public investments in IC which are American public property in an innovation, social and business ecosystem based on IC driven by government funding (local, state and federal) that supports public and private education with subsidies and nonprofit status, R&D at universities, R&D at businesses with tax credits, commerce with
    technology transfer, IP administration in patents and trademarks, and commerce
    with infrastructure and national security. Offshoring is similar to environmental
    pollution which is also theft of public property. Pollution and offshoring are
    both negative externalities in economics.

    The second step in a solution is to change public policy to tax or fine the offshoring as theft just like the EPA uses fines to discourage pollution.

    The third step is an upgrade to economics and financial accounting to measure IC. The largest component of IC is knowledge of workers, but IC has many more components than described in the ITIF report, “The Limits of the Knowledge-Based Capital Framework”. IC is beginning to be measured in the international initiative which is Integrated Reporting. IC needs to be measured, managed and protected
    with new laws recognizing IC as both private and public property.

    Before the Executive Branch asks for Trade Promotion Authority (TPA) to “fast track” proposals through Congress, both the proposed Trans-Pacific Partnership (TPP) and Trans-Atlantic Trade and Investment Partnership (T-TIP) trade agreements need to enable strict penalties for offshoring as theft of public IC that includes theft of intellectual property (IP).