Trade Promotion Authority

Trade Happenings

/ Andrea M. Ewart, Esq. / Leave a comment

Since the start of 2015, there have been several interesting developments on the trade front. Here are some highlights:

Flag of Cuba

US-Cuba Relations:  Previous posts on ILG have discussed the improved tenor of US-Cuba relations, including some limited opportunities to trade with Cuba and lifting of designation of Cuba as a state-sponsor of terrorism. These developments have been followed by news of plans to re-establish direct phone links, increased flights and launch of a ferry service between Florida and Cuba, and the arrival of Airbnb and of Netflix in Cuba. Nevertheless, the laws imposing the U.S. embargo against Cuba remain in place and are being enforced. This includes the repressive Helms-Burton Act which extends the U.S. embargo to non-U.S. actors. As a result, non-U.S. persons may still be penalized for taking actions in Cuba that some U.S. persons are now able to do. And, because of the embargo, while it will be possible to import goods and services from independent entrepreneurs in Cuba, goods will still be subject to higher tariffs than those placed on the goods of most U.S. trade partners. Legislation to normalize trade with Cuba has been introduced in the U.S. House and Senate (HR 403, HR 274, HR 735, S 491). However, Congress is now focused on issues more essential to the Obama Administration trade agenda.

US Trade Agenda:  Legislation to provide Trade Promotion Authority (TPA) to President Obama has been introduced in Congress. TPA gives the U.S. President a mandate from the U.S. Congress to negotiate trade agreements that meet specified criteria. Also known as “fast-track”, TPA has been a key tool of U.S. trade policy since 1974 but lapsed in 2007. As we discussed in an earlier post, the Republican-led Congress provides President Obama with his best hope of getting TPA enacted in time to successfully conclude ongoing trade negotiations that face strong opposition within his own party. With the introduction of TPA legislation, a furious battle has begun to sway U.S. legislators to vote for or against. As always, it will be a close fight.

Courtesy of Wikipedia

Courtesy of Wikipedia

Trade Preferences, in the form of the Generalized System of Preferences (GSP), is another key tool in U.S. trade policy. GSP allows over 5,000 products from about 127 developing countries to enter the U.S. market duty-free. The program helps exports from developing countries to be competitive in the U.S. market. U.S. importers rely on the program to access lower-priced consumer goods and manufacturing inputs. The program has been lapsed since August 1, 2013, disrupting many small traders who rely on its benefits. Some members of Congress have been reluctant to renew GSP legislation without taking steps to exclude countries like Brazil and India which, they believe, are not compliant enough on issues of importance to the U.S. However, legislation to extend GSP for a short period has been introduced into Congress.

So too, has legislation to extend the Trade Adjustment Assistance (TAA) which provides federal funding to retrain workers who have lost their jobs as a result of a foreign trade. TAA is current but scheduled to lapse this year, unless extended. TAA is favored by many Democrats. According to reports, there are efforts to bundle these, and other, trade issues into one piece of legislation that will have something for everyone. Early results show the risk of this strategy, including the possible demise of all these issues.

2014 Mid-Term Election Results & Impact on US Trade Agenda

/ Andrea M. Ewart, Esq. / 1 Comment
Courtesy of Wikipedia

Courtesy of Wikipedia

One bright spot exists for President Obama in the Republican take-over of the U.S. Congress as a result of the 2014 mid-term elections. That is a shared agenda on trade. Republicans tend to be supportive of trade negotiations and tout their potential for economic growth and job creation. The Democrats, on the other hand, typically reflect the concerns of their constituents — trade unions and environmentalists concerned about potential negative impact of such agreements on jobs, labor standards and the environment.

The U.S. Constitution gives shared responsibility to the President and the Congress for the US trade agenda. While it is the President, through his US Trade Representative, who conducts trade negotiations, concluded agreements must be approved by a two-thirds majority of the Senate in order to become law.

The United States is currently negotiating two large trade agreements. The Trans Pacific Partnership (TPP) is being negotiated among twelve countries – Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. The TransAtlantic Trade & Investment Partnership (TTIP) negotiations between the United States and the European Union will create the world’s largest trade bloc.

To facilitate such negotiations, U.S. Presidents over the past thirty (30) years have relied on the Trade Promotion Authority (TPA) legislation passed by the US Congress. TPA defines US trade negotiating objectives to which the President must adhere in concluding trade agreements. In return, the US Congress accepts, or rejects, the negotiated agreement in its entirety. This process provides some assurance to US trade partners that the agreements they sign with the United States will not be subjected to further requirements in order to win Congressional approval.

The last grant of Trade Promotion Authority to the President expired in 2007. President Obama first sought renewal of TPA in 2012. Under the Democratic-led Senate, the response to this request has been a resounding and consistent “no”.

Meanwhile, the Republican Party’s platform on trade includes the demand to “restore Presidential Trade Promotion Authority”. The document goes on to say that international trade is crucial for the US economy because it means more jobs, higher wages and better standard of living.

As a result of the November 4, 2014 elections the Republicans now hold a majority in the Senate, as well as the House. The incoming Senate Majority Leader, Senator Mitch McConnell (R-KY) has already signaled his desire to work with President Obama on trade:

“I’ve got a lot of members who believe that international trade agreements are a winner for America.”

This is why, on this front at least, President Obama may be able to find a silver lining in this changed political environment. The Republicans may keep trying to repeal Obamacare, but are more likely to approve his trade deals.