Can NAFTA Stay on the Fast Track?
A May 17 NAFTA deadline has been in the news. Why May 17? Because Congressional leaders have advised the Trump administration that, to have a vote on NAFTA 2.0 in this Congress under so-called “fast track” voting procedures, the administration needs to take the step of sending Congress a formal letter of intent to enter into the agreement by May 17. There are all sorts of steps on the timeline built into the Trade Promotion Authority legislation (TPA) for expedited approval of trade agreements. Here’s a short version of the history, context, and essentials of how it all works.
Congress to the Executive: “Here are the Keys to Trade Deals, On One Condition – Make That Several Conditions”
Recall that the Constitution confers the power to set tariffs and to regulate commerce with foreign nations to the Congress, but Congress wielded the power sloppily, catering overly to certain constituents and horse trading tariffs for votes in the process that gave us Smoot-Hawley back in 1930. With the 1934 Reciprocal Trade Agreements Act, Congress offered itself what American Trade Politics author, Mac Destler, has called a “pressure valve” from trade politics: It delegated responsibility to the executive branch to negotiate trade liberalizing deals.
This act was the foundation for modern legislation called Trade Promotion Authority (TPA), which to this day governs the congressional-executive relationship for negotiating and approving U.S. free trade deals. In this arrangement, Congress isn’t relinquishing its responsibility or oversight of trade. Congress sets guidelines, parameters, procedures, and exceptions—the authority it gives the executive to represent its interests in trade negotiations has always been conditional and has always been temporary. TPA must be reauthorized every few years.
The Original Driver of Trade Deals – Cordell Hull
Before there was an Office of the U.S. Trade Representative, trade deals were negotiated by the Secretary of State. Cordell Hull, a Southern Democrat from Byrdstown, Tennessee serving as Secretary of State in 1934, set American trade policy on a new course. Hull saw trade agreements and tariffs being used as an economic weapon by some European nations, and conversely, believed negotiations to increase market access were a strong and positive diplomatic tool. Reading the politics of the day, he understood that reciprocity in trade is associated with the concept of fairness – it is still today.
Congress granted Cordell Hull authority on behalf of the executive to negotiate reciprocal tariff reductions, and even then, he was only authorized to cut U.S. tariffs by up to fifty percent. In this early form of trade promotion authority, Congress gave its pre-approval with pre-defined parameters for the final deal. In the next decade before the General Agreement on Tariffs and Trade (GATT), Congress renewed this authority three times, and the executive closed bilateral trade deals with 25 countries, mostly in Europe and the Western Hemisphere.
You’ll Need a Different License to Operate that Trade Vehicle
Once the GATT was agreed, Congress renewed executive trade negotiating authority twelve times through 1967. As the U.S. focus shifted to negotiating multilateral agreements, rather than serial bilateral deals, the authority was applied to agreements under the GATT. Over time, GATT negotiations expanded beyond tariffs into other disciplines on global trade.
When the Kennedy Round of GATT negotiations concluded in 1967 with commitments in the non-tariff areas of antidumping and customs valuation, some lawmakers complained the president had overstepped his authority. The debate over how to allow room to expand negotiations while maintaining congressional oversight continued for seven years until Congress granted negotiating authority in 1974 for the Tokyo Round of GATT talks. But this time, Congress would withhold final approval over non-tariff agreements until it could see the deal, laying the foundation for TPA’s construct today.
New Rules of the Road
In the 1974 Trade Act, Congress mandated that non-tariff agreements (ones that include commitments beyond tariff reductions) be implemented only through legislation. Congress would take a more active role in providing advice throughout the negotiations, but would also establish new procedures to ensure the final agreement could receive expedited, amendment-free votes. This is the creation of the so-called “fast track” procedures, the same procedures in place today that can be used to approve NAFTA 2.0. While the procedures endure, the ability to use them must be renewed, like renewing your driver’s license.
Fast track authority was renewed or extended several times prior to its use in 1994 to approve the Uruguay Round agreement that established the WTO, and to also approve the original NAFTA. But this was the end of the road for another eight years as the Clinton Administration tried, but failed, to secure fast track authority, in part due to party line disagreements over the inclusion of labor and environmental commitments in trade agreements. When a new round of WTO talks failed to launch as expected in 1999, the sense of urgency to renew fast track fell away.
In 2002, after 9-11, the Bush Administration made a successful case to Congress for pursuing trade deals to shore up security and economic alliances and found a compromise to include “new issues” such as labor and environment. The Bush Administration made extensive use of the authority to close and seek approval for seven bilateral trade deals.
Buckle Up, It’s Going to be a Bumpy Ride
Expedited procedures and a promise not to amend the deal after it’s done are valuable “gives” to the executive from the Congress. So TPA legislation engenders controversy and significant debate when it comes up for renewal. As the content of trade agreements expands, the opportunities for disagreement over substance expands and the debates over TPA renewal become a proxy for these fights.
In 2007, partisan disagreement manifested itself in a dramatic break in a pattern of congressional-executive partnership on trade policymaking. As TPA was set to expire, the Bush Administration went into overdrive to satisfy congressional demands on labor commitments associated with the U.S.-Colombia Free Trade Agreement, even renegotiating after the deal was done as far as our trading partners were concerned. Frustrated that Members appeared to be moving the goal posts to avoid a vote, they did something unprecedented. Whereas the timing would normally be mutually agreed between the branches, the administration took the step of sending an implementing package to Congress to start the fast track clock, attempting to force Congress to take a vote.
Nancy Pelosi as House Speaker at the time said, “It’s all a question of who has the leverage,” and in a quiet, rapid-fire move, House Democratic leadership called a vote to enact a rules change to withdraw use of fast track procedures for the Colombia deal. Trading partners took note that TPA might not be a sure thing, and that changes may indeed be asked for after the deal has been signed. The increasingly difficult and partisan debates over fast track have worn some serious potholes in the process for approving trade deals, and puts strain on the credibility of U.S. negotiators.
Drive Carefully: The TPA Rules of the Road
Congress expresses its views about what U.S. trade agreements should achieve by defining in TPA a set of negotiating objectives – some are broad and directional, but most are specific and written in a way meant to encourage negotiators to include the bill’s language in the trade agreement itself. TPA has been an opportunity for Congress to signal its desire to tackle new issues in trade agreements such as currency manipulation, competition from state owned enterprises, and expansion of digital trade in goods and services.
TPA requires the administration to notify milestones in the negotiations, consult with committees on special issues such as sensitive agricultural products, fishing, textiles and apparel, and to report on a variety of issues that were important to Members of Congress. For example, the President must report any proposals that could change U.S. trade remedy law, conduct an environmental review, prepare an employment impact report, examine the labor rights in the trading partner, and submit a plan for how the agreement will be implemented and enforced.
Slugging it Out
Most of the time, to get in the fast lane today – at least in DC – you have to ride with someone in the High Occupancy Vehicle (HOV) lane. People will pick up strangers to accomplish this. It’s a DC phenomenon of instant carpooling with strangers for convenience, called slugging. Apparently, there’s a tacit rule that limits conversation during the ride.
In the case of TPA, you can’t have too many conversations. Consultation requirements abound. The administration works to keep Congress well briefed, but quality counts over quantity and Congress frequently complains the administration hasn’t shared enough information or asked for enough input throughout the negotiations. This is a squishy area of TPA compliance that appears to be in the eye of the beholder.
But Officer, I Was Only Going Five Miles Over the Speed Limit
If Congress perceives that the executive failed to follow TPA’s prescribed procedures during the negotiating process, Congress can decide not to apply TPA to a vote on the trade deal before it. Did the executive hit every negotiating objective in the way Congress hoped it would as expressed in TPA? Probably not. It’s a negotiation, and every trading partner has a different economy, different trading and investment relationship with American businesses, differing levels of development, and different political and security considerations. Trade agreements may not address every negotiating objective in TPA in the same way.
Closed for Construction?
The current authority enshrined in the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 is authorized through July 1, 2021 unless the Congress moves to enact a resolution disapproving its extension within 60 days of July 1, 2018. It’s not a serious risk, but an opportunity for Congress to let the executive know what it thinks of the job its doing.
If the administration can’t close a NAFTA 2.0 deal soon, will it be the end of the road? Not necessarily. There’s some flexibility to compress the prescribed deadlines under TPA. After all, Congress wrote and gets to interpret the rules. But accomplishing this will require good communication, goodwill, and nonpartisanship.
Fast track enables the legislative and executive branches to share the road to arrive at a good outcome for the American public. More notifications, consultations, and reports, are written into each successive TPA bill. But that’s like patching a pothole in the road rather than pouring a good foundation of asphalt. The foundation is built on how the relationship is managed in practice by the negotiators and legislators responsible for American trade policy.
For the definitive guides on TPA, read these reports, all by the Congressional Research Service:
- Trade Promotion Authority (TPA) and the Role of Congress in Trade Policy, June 15, 2015
- Implementing Bills for Trade Agreements: Statutory Procedures under Trade Promotion Authority, August 12, 2016
- Trade Promotion Authority (TPA): Frequently Asked Questions, April 10, 2018
For expert views on the past, present, and future of TPA, watch this video of an April 18, 2018 event held by the Washington International Trade Association.