Obama needs TPA

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Obama needs TPA

As the Obama administration prepares the second term of its “pivot” to Asia, there is no more important metric of the strategy’s success than the Trans-Pacific Partnership. A wide-ranging free-trade negotiation among the United States, Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, the TPP represents the next major step by the United States, after the passage of the Korea-U.S. FTA (Korus), to build a framework for a free trade area of the Asia-Pacific.

The last round of negotiations for TPP took place from Dec. 3 to 12 in Auckland and focused on complex issues such as intellectual property, state-owned enterprises, the environment and investments as well as fine-tuning market access negotiations for goods, services and agriculture and resolving technical issues like technical barriers to trade, telecommunications, customs and sanitary and phytosanitary (plant quarantine) standards. The next round is to take place in Singapore from March 4 to 13 and will focus on moving forward on the remaining areas of market access issues with the objective of concluding an agreement by year’s end to match the goal announced by the leaders last year in Honolulu.

The United States has made no secret of its desire to see major economies like Korea and Japan become members of the TPP, which would give substantial momentum to the negotiations. Japanese Prime Minister Shinzo Abe’s visit to Washington in February may be the first step to Japan’s eventual inclusion. Yet, one of the key metrics of U.S. credibility in forging a credible path to a TPP is the renewal of Trade Promotion Authority.

Trade Promotion Authority, or TPA, is the product of an idiosyncrasy in the U.S. system of government. Under Article I, Section 9 of the U.S. Constitution, Congress is given the power to “regulate commerce with foreign nations” and to “lay and collect taxes, duties, imposts, and excises.” Under the Constitution, however, the President is not awarded any trade powers, yet possesses the authority to negotiate international treaties in the conduct of foreign affairs.

With the Trade Act of 1974, Congress gave the President for the first time the authority to negotiate trade agreements. Known colloquially as “fast track authority,” the act was aimed at giving the executive branch of the U.S. government the power to negotiate on non-tariff barriers and other unfair trade practices of U.S. economic partners. Congress awarded fast track authority (called TPA from 2002) jealously and with the stipulation that it would have the authority to reauthorize the act periodically, that the president would be under strict reporting requirements to Congress and that it could consult regularly with the White House on trade negotiation objectives. In return, the President could negotiate trade agreements and submit them to Congress for an up or down vote within 90 days and without amendments.

TPA makes any U.S. administration’s position on a trade negotiation infinitely more credible to those on the other side of the table. It gives the White House leverage because trading partners have the assurance that its word is the final one (presumably after some consultation with Congress), and that a deal will not be subjected to endless tinkering and earmarks. Thus, it is no surprise that past U.S. presidents have negotiated numerous agreements under fast track/TPA including the 1979 Tokyo Round Agreements, the 1985 Israel FTA, the 1988 Canada FTA, NAFTA in 1993, the 1994 Uruguay Round Agreements, and, under the George W. Bush administration, free trade agreements with Chile (2003), Singapore (2003), Australia (2004), Bahrain (2004), Morocco (2004), the Dominican Republic-Central America Free Trade Agreement (2005), Oman (2006), Peru (2006), Colombia (2006), Panama (2007) and, of course, South Korea (2007).

So why hasn’t the Obama administration requested TPA from the Congress? In the past, TPA renewal was a fairly bipartisan issue. From the Clinton administration, however, it became an object of partisan wrangling. Clinton failed to achieve renewal of TPA during the Uruguay Round Agreements Act of 1994 because of disagreements over the inclusion of labor standards and environmental issues in trade agreement negotiations. Democrats wanted the President to have the authority to negotiate labor and environmental regulations as part of trade negotiations, while the Republicans did not. This resulted in an eight-year period in which the White House lacked TPA. Fast-track authority was renewed under the Bush Administration in 2002.

Armed with TPA, Bush embarked on an aggressive free trade agenda, negotiating agreements with seventeen countries in five years. However, as bitter partisan wrangling between Congress and the White House mounted over the war in Iraq, among other issues, the Congress failed to renew TPA, allowing it to expire at midnight on July 1, 2007.

The Obama administration would seem to be well-positioned to press for TPA renewal. Fresh off an electoral victory and still promoting the National Export Initiative - announced in the 2010 State of the Union address to double exports by the end of 2014 and to support millions of jobs at home - Obama needs TPA in order to implement the trade agenda that would allow him to meet his export objectives and grow the U.S. economy. Yet, neither Congress nor the White House seems ready to move. Outgoing U.S. Trade Representative Ron Kirk told the House Ways and Means Committee in February 2012 that the Obama administration planned to request TPA so it can finish the TPP talks, but this never happened. Senate Minority Leader Mitch McConnell (R?Ky.) also said he wanted a vote on TPA by the Memorial Day recess in 2012, but that never happened either. The House Ways and Means Committee Chairman Dave Camp (R-Mich.) and the Senate Finance Committee Chairman Max Baucus (D-Mont.) have both identified the renewal of TPA as one of the top priorities this year.

Part of the delay may have to do with how the Democrats, Republicans and the White House want to set trade negotiation priorities. Republicans would like to see TPA set out some priorities (and restrictions) on the President’s authority to negotiate agricultural issues. Democrats probably would like to see more provisions on labor and environmental standards in TPA, given their efforts to supplement these provisions of the Trade Act that gave Bush fast-track authority. As Koreans know well, this internal U.S. disagreement over labor and environment standards caused great headaches in the negotiation and re-negotiation of Korus.

Given that the next Trade Act will most likely authorize this president to negotiate a TPP that might potentially whet Chinese interest (particularly if Korea and Japan join), then new provisions for treatment of state-owned-enterprises, small- and medium-size businesses and global supply chains would need to be considered. The fact that Korus was submitted to the Congress for approval three to four years after its signing also raises the issue of a time limit between signing and submission of an agreement.

In the end, the most significant legacy the Obama presidency will leave in Asia is the real free trade architecture that it builds with Korus and TPP. The U.S. cannot possibly do this without TPA.

*The author is professor at Georgetown University and Korea Chair at CSIS in Washington, DC. His book, The Impossible State, was selected by Foreign Affairs as a Best Book of 2012 on Asia and the Pacific.

by Victor Cha
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