Congress is currently considering Trade Promotion Authority (TPA), legislation that is essential to the prospect of any US free trade agreement. Although the US Constitutional system of checks and balances makes TPA essential, no other country has the same reliance on a TPA type mechanism. This reliance puts the US at a disadvantage in the global competition to lower trade barriers and hurts local exporters. As a result, approval of TPA is not only a precondition for US trade, it is essential if America wants to be viewed as a genuine trading partner by the rest of the world.
While free trade opponents are characterizing TPA as Congress recklessly ceding its authority to the President, nothing could be further from the truth. Congress has delegated trade authority to the President since 1934, and has granted TPA to Republican and Democrat Presidents five times over the past 30 years. The proposed TPA bill contains strong oversight provisions and ensures that Congress always has the final say.
But TPA’s importance goes beyond providing the President with a set of guidelines and rules. Without TPA, trade agreements stand little chance of approval because members of Congress can, and will continually offer amendments when an agreement is being considered. This forces US negotiators to go back to table and restart negotiations on an otherwise concluded agreement.
TPA solves this problem by requiring Congress to consider trade agreements on an up-or-down vote, with no amendments allowed. However, the fact that TPA is needed at all puts the United States at a disadvantage in the global race for trade.
It goes without saying that having 535 negotiators, all with their own parochial objectives, does not work. In fact, no other country grants each and every representative such broad influence over trade agreements. At best, this uncertainty makes the US a difficult partner, at worst it discourages other nations from negotiating an agreement with them altogether.
Most countries already grant their executive the authority to negotiate trade agreements, or have mechanisms that allow the executive to secure approval in a straightforward way. Countries in the European Union have an efficient process that delegates negotiating authority to the European Commission and approval authority (with no amendments allowed) to the European Council. In fact, this streamlined process shortens the negotiating process substantially, with many EU trade agreements taking two to three years.
Parliamentary systems like Australia and Canada link their executive and legislative branches, and so the trade minister has clear authority from the political majority, making approval of trade agreements a streamlined process.
America’s method of approving trade agreements is convoluted and complex by comparison. In fact, the need for TPA puts the US at a significant disadvantage, because it makes the complexity of negotiating with the US a difficult partner to negotiate with. According to the World Trade Organization, over 400 trade agreements are in effect around the world. But despite being the world’s largest economy, the US is only part of 14 agreements with 20 other countries. In contrast, the EU has agreements with over 50 countries. As a result, the EU is the top trading partner for 80 countries while the US is the top trading partner for just over 20 countries. Clearly, America is falling behind.
When the US does not have barriers with a trading partner, the economic benefits are enormous. America’s 20 free trade partners purchased 12.8 times more US goods per capita compared to non-free trade partners. In addition, 46 percent of US exports go to a free trade partner, despite these agreements not covering some of the largest markets in the world such as China, India, Japan, Germany, and the United Kingdom. Despite substantial barriers existing with these and other major markets, trade already accounts for 1 in 5 jobs in America. Clearly, if the US had more free trade agreements, the economy would be much, much stronger.
If Congress is serious about free trade, TPA is an absolute necessity. It will provide strong guidelines and structure around the approval of pro-growth free trade agreements. But without TPA, the United States will continue to fall behind in the world economy.