Bipartisan deal results in trade promotion authority bills that could pave the way to major trade agreements

by Dentons
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On April 16, 2015, senior lawmakers reached a bipartisan agreement on a trade promotion authority bill: The Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (TPA-2015). The bill was marked up in record time by the Senate Finance Committee and House Ways and Means Committee and reported out of committee for floor consideration.  If passed, TPA-2015 will provide for a straight “up or down” vote, i.e., no Congressional amendment, with limits on time for debate, on any trade agreements (such as free trade agreements (FTAs), including the Trans-Pacific Partnership (TPP) and the Trans Atlantic Trade and Investment Partnership (TTIP), and World Trade Organization agreements such as those being negotiated on Environmental Goods and on Services), that are submitted by the President as long as they are deemed by Congress to have made sufficient progress toward meeting the objectives set forth in TPA-2015.  This so-called “fast track” authority was first created in 1974 and was instrumental in passing all major previous FTAs (including those with Canada, Mexico, Korea, Australia, Singapore, Colombia, Peru, Panama and other Central American countries).

TPA-2015 is viewed by many as critical to move the TPP negotiations past the finish line.  Absent “fast track” authority, US negotiating partners have stated that they are reluctant to table their best offers for fear that the agreement that is negotiated with the Administration will be subject to amendment by Congress.  Thus, TPA-2015 is a priority for the Administration and business community.  The vote is expected to be hard fought as labor and other groups have been vocal in their opposition to both “fast track” authority and trade agreements more generally.  If passed this would be the most significant piece of trade legislation in over a decade and would open the door to completion of the 12-nation TPP which will be the most comprehensive free trade agreement entered into by the United States.

TPA-2015 attempts to strike a balance between the roles that Congress and the Administration both have with respect to US trade policy.  Under the US Constitution, only the President can negotiate with foreign countries, but Congress has the Commerce Power and must be enlisted to implement trade agreements.  TPA-2015 establishes congressionally mandated objectives that the Administration must meet in negotiating trade deals.  The bill also provides for ongoing consultations with members of Congress and Congressional access to negotiating texts and public access to agreements before a vote takes place.  The negotiating objectives establish the parameters within which the Administration has the flexibility to negotiate the best deal possible.  The TPA bills as currently written provide significant flexibility in allowing the Administration to complete these trade negotiations.

TPA-2015 establishes 150 negotiating objectives. These include measures combating currency manipulation, strengthening rules on intellectual property protection, lowering barriers to agricultural exports, strengthening labor and environmental standards, providing for rules governing the commercial activities of state-owned enterprises, facilitating cross border data flow and promoting rule of law and human rights—including an amendment against human trafficking.

In exchange for meeting these negotiating objectives, once the Administration concludes the negotiations and submits the agreement to Congress, the agreement receives a prompt “up or down” vote and the submitted agreement cannot be amended by Congress.

If any agreement fails to meet these objectives, the House, by majority vote, or the Senate, via a 60-vote majority, can rescind “fast-track” authority and open the deal to amendment by treating approval of the agreement as legislation in the usual course. However, the committees of jurisdiction—Finance in the Senate, and Ways and Means in the House—would first have the opportunity to vote the deal out of committee with an unfavorable recommendation.  Therefore, the two Committees maintain their role as gatekeepers in this process.

The basic deal was struck by Senators Orrin G. Hatch of Utah, the Finance Committee chairman; Ron Wyden of Oregon, the committee's ranking Democrat; and Representative Paul D. Ryan, Republican of Wisconsin and chairman of the House Ways and Means Committee, to which were added a limited number of amendments.

The bill will provide the President trade promotion authority for three years (until July 1, 2018), with an option to renew for an additional three years (until July 1, 2021).

Sidecar package of additional trade legislation

In addition to TPA-2015, Congress has introduced bills covering Trade Adjustment Assistance (TAA), Customs Reauthorization and US unilateral trade preference programs (i.e., GSP and AGOA).  Traditionally, TPA has been accompanied by TAA for American workers whose jobs are displaced by global trade.  The current bill seeks to expand trade adjustment assistance to include service industry workers in addition to manufacturing workers.  While TPA-2015 is currently a stand alone bill, there are ongoing efforts to try to move the entire trade package (TPA, TAA, Customs Reauthorization, GSP and AGOA) at the same time.  There are currently differences in the Customs Reauthorization bills that may ultimately have to be resolved by a Conference committee of members of the House and Senate.  The primary difference is how the two bills approach the fight against evasion of trade remedy duties. The House version would shift the administrative process for pursuing complaints about the evasion of trade remedy duties to the Commerce Department, while the Senate version would leave it with Customs and Border Protection (CBP).

We summarize below the key congressional negotiating objectives included in TPA-2015

Promoting trade in agriculture

The principal negotiating objective with respect to agriculture includes obtaining competitive market access opportunities for US agricultural exports substantially equivalent to opportunities afforded foreign exports in US markets. It also encourages the adoption of international standards on sanitary and phytosanitary measures, and requires that a science-based justification be provided for a measure if it is more restrictive that the applicable international standard.

Facilitating digital trade in goods and services

The bill includes updated objectives to facilitate digital trade, and encourages the negotiation of an ambitious Trade in Services Agreement (TiSA). It also updates objectives to facilitate digital trade, including through protections for cross-border data flows.

Promoting human rights

This new negotiating objective emphasizes the importance of ensuring trade agreement commitments to strengthen good governance, transparency, the effective operation of legal regimes and the rule of law. This includes the human trafficking amendment offered by Sen. Robert Menendez (D-NJ) and approved by Senate Finance. That amendment would strip fast-track procedures from a trade agreement with any country listed under the most egregious category of a State Department report on human trafficking. Malaysia, which is participating in the Trans-Pacific Partnership (TPP) negotiations, currently falls into this category, known as Tier III.  This language was not included in the House version and may be stripped from the bill by amendment on the Senate floor.

Addressing currency manipulation

This new negotiating objective directs that trade partners avoid manipulating exchange rates in order to prevent effective balance of payments adjustment.  An effort to strengthen this language is likely to be one of the hardest fought when the bill reaches the Senate floor.  Sen. Rob Portman (D-OH) has said he intends to offer on the floor an amendment (which failed in the Committee) that would make it a US negotiating objective in trade deals to seek enforceable disciplines on currency manipulation. This effort is supported by some in the US business community such as the auto companies, but is expected to be opposed by the majority of the business community.

Addressing the impact of state-owned enterprises (SOEs)

This new negotiating objective calls for eliminating trade distortions and unfair competition from SOEs and ensuring that they act solely on commercial considerations.

Preserving trade remedies

Preserves the ability of the United States to rigorously enforce its trade remedy laws.  Included in the Senate bill is a provision to change the causation standard in the US International Trade Commission's (ITC) injury analysis in trade remedy cases, as well as a change to how the ITC should assess captive production in its analysis.  Also, included in the customs bill was an amendment that would encourage the Commerce Department to investigate undervalued currency as a countervailable subsidy.

Promoting global value chains

New provisions encourage US participation in global value chains and ensure trade agreements reflect the interrelated and multi-sectoral nature of trade and investment activity.

Seeking strong enforcement

Directs the President to secure strong dispute settlement mechanisms in agreements.  This includes an amendment to the customs bill to authorize the Interagency Trade Enforcement Center in USTR in statute. The ITEC was created in 2012 by executive action.

Strengthening labor and environmental standards

Updated provisions reflect the United States' most recent trade agreements, which require trading partners to adopt, maintain and not waive or derogate from measures implementing internationally recognized core labor standards.

Sovereignty

Reports, including findings and recommendations issued by dispute settlement panels convened pursuant to trade agreements, shall have no binding effect on the law of the United States. 

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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