Debunking the Myriad TPA/TPP Myths

A trade policy nerd can only be subjected to blatant protectionist nonsense for so long.  So, after months of hearing/reading/seeing myths about Trade Promotion Authority, the Trans-Pacific Partnership and free trade more broadly, I finally cracked.  The result is a 3500+-word debunking of the nine most common myths (just like old blog times!).  The intro and direct links are below.

Enjoy!

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Top Nine Myths About Trade Promotion Authority And The Trans-Pacific Partnership

The current debate over Trade Promotion Authority proves, once again, that the classic description of the anti-globalization movement—as “largely the well-intentioned but ill-informed being led around by the ill-intentioned and well informed”—still holds true. Despite the tireless efforts of trade policy experts to explain why TPA and the U.S. trade agreements it’s intended to facilitate are, while imperfect, not a secret corporatist plot to usurp the U.S. Constitution and install global government, myths and half-truths continue to infect traditional and social media outlets.

Because these myths—originating with the same old anti-trade bedfellows that have been with us for decades—have duped a lot of good folks who are otherwise predisposed to support liberty and free markets (including some in Congress), and because the House of Representatives is poised to vote on TPA in the coming days, here is one last debunking of the top nine myths about TPA, the Trans-Pacific Partnership (TPP), and U.S. free-trade agreements (FTAs) more broadly.

To save some time, you can skip to your favorite myth by clicking on the links below.

Myth 1: TPA and U.S. FTAs are unconstitutional and undemocratic!

Myth 2: TPA grants the president new and unlimited powers!

Myth 3: TPA sets legally binding congressional rules for U.S. trade negotiations!

Myth 4: Once TPA is approved, Congress will be powerless to stop TPP or other FTAs!

Myth 5: TPP is being negotiated via a dangerous and unprecedented level of secrecy!

Myth 6: FTAs, completed via TPA, undermine U.S. sovereignty!

Myth 7: TPP is a secret backdoor for a parade of horribles (and TPA lets that happen)!

Myth 8: FTAs (and free trade generally) benefit large corporations at the expense of working people!

Myth 9: TPA doesn’t matter!

And Now for a Brief, but Important, Lesson on Trade Promotion Authority

Claude Barfield's latest piece emploring the GOP to advocate free trade has a great rejoinder to the persistent-yet-silly arguments from some on the right that Trade Promotion Authority is unconstitutional or unconservative:

Two arguments explain the incipient dissent: one, though not stated openly, is a reaction against giving any kind of victory to the Obama administration; and two, on more substantive grounds, broader constitutional arguments have been raised against TPA as ceding congressional power to the executive and eroding national sovereignty. As for the personal and political distaste for giving Obama a victory, opposition to TPA - and thus, by extension ratifying TPP and TTIP - for Republicans is akin to the proverbial "cutting off your nose to spite your face." Ultimately, a defeat for TPP and TTIP, if and when they come before Congress, would represent a defeat for longstanding Republican policies and principles and a victory for those elements of the Democratic party that are deeply suspicious of globalization and global free enterprise (The Elizabeth Warren wing of the party would be ecstatic).

On the constitutional questions, despite claims from anti-global activists on the left (and right: viz., Pat Buchanan and Clyde Prestowitz), conservative judicial experts have consistently defended the limited grant of authority on trade from Congress to the Executive as within the bounds of the division of powers envisioned by the Founding Fathers.

They make two points: first, through the TPA process, Congress exercises the power to dictate specific negotiating goals, and it mandates constant consultations with congressional leaders during the course of extended bargaining sessions. Second, and of paramount importance, Congress through TPA reaffirms that the provisions of trade agreement cannot force changes in US domestic law. Legislation implementing trade agreements all contain the following language:

"No provision of the Agreement...which is inconsistent with any law of the United States shall have effect." "Nothing in this Act shall be construed...to amend or modify any law of the United States...unless specifically provided for in this Act."

A decade ago when similar questions were raised about the constitutionality of similar trade legislation, two legal experts with impeccable conservative credentials - former Attorney General Edwin Meese and Judge Robert Bork - both endorsed the Executive-Legislative partnership on trade agreements. As Bork wrote at the time: "No treaty or international agreement can bind the United States if it does not wish to be bound. Congress may at any time override such an agreement or any provisions of it by statute."

As Meese and Bork affirm, US sovereignty and congressional prerogatives are not threatened by TPA or the proposed new trade agreements. Thus, Republicans should get on with the job of reaffirming their traditional commitment to open markets and vigorous international competition.

The whole Barfield piece is worth reading, so be sure to check it out.  My only quibble: Republicans should support all forms of free trade, not just free trade agreements which require TPA.  Indeed, as I argued recently, unilateral liberalization of US trade barriers is not only an economic no-brainer, but also a manifestly constitutional, conservative and moral policy that any fan of free markets and limited government (I think that still means Republicans) should strongly support.  And, of course, my preffered free trade policy doesn't require messy reciprocal trade agreements, politically difficult TPA or the costly, Big Government things (*cough*TAA*cough*) that are so often attached to such measures.

Yet here we are, debating TPA and hoping against hope that somehow the President can complete new FTAs.  That seems... misguided.

(p.s. Bill Watson's recent review of Republicans and TPA is also worth your time.)

2012 GOP Platform on Trade: the Good, the Bad, and the Really Ugly

The Republican Party has released its 2012 Platform, and it's pretty much what you'd expect given the past few months of campaign and congressional rhetoric: it mostly supports free trade, yet does so in a mercantilist way and contains some pretty harsh - and indeed protectionist - words for today's trade bogeyman, China.  In fact, the platform seems like it was almost entirely lifted from Gov. Mitt Romney's 2011 economic plan, for the better and the worse.  Although there are various trade-related elements throughout the platform, the main "international trade" section can be found on pages 6-7 and I'll focus on it tonight:

International Trade:
More American Jobs, Higher Wages, and A Better Standard of Living

International trade is crucial for our economy. It means more American jobs, higher wages, and a better standard of living. Every $1 billion in additional U.S. exports means another 5,000 jobs here at home. The Free Trade Agreements negotiated with friendly democracies since President Reagan’s trailblazing pact with Israel in 1985 facilitated the creation of nearly ten million jobs supported by our exports. That record makes all the more deplorable the current Administration’s slowness in completing agreements begun by its predecessor and its failure to pursue any new trade agreements with friendly nations.

This worldwide explosion of trade has had a downside, however, as some governments have used a variety of unfair means to limit American access to their markets while stealing our designs, patents, brands, know-how, and technology—the “intellectual property” that drives innovation. The chief offender is China, which has built up its economy in part by piggybacking onto Western technological advances, manipulates its currency to the disadvantage of American exporters, excludes American products from government purchases, subsidizes Chinese companies to give them a commercial advantage, and invents regulations and standards designed to keep out foreign competition. The current Administration’s way of dealing with all these violations of world trade standards has been a virtual surrender.

Republicans understand that you can succeed in a negotiation only if you are willing to walk away from it. Thus, a Republican President will insist on full parity in trade with China and stand ready to impose countervailing duties if China fails to amend its currency policies. Commercial discrimination will be met in kind. Counterfeit goods will be aggressively kept out of the country. Victimized private firms will be encouraged to raise claims in both U.S. courts and at the World Trade Organization. Punitive measures will be imposed on foreign firms that misappropriate American technology and intellectual property. Until China abides by the WTO’s Government Procurement Agreement, the United States government will end procurement of Chinese goods and services.

Because American workers have shown that, on a truly level playing field, they can surpass the competition in international trade, we call for the restoration of presidential Trade Promotion Authority. It will ensure up or down votes in Congress on any new trade agreements, without meddling by special interests. A Republican President will complete negotiations for a Trans-Pacific Partnership to open rapidly developing Asian markets to U.S. products. Beyond that, we envision a worldwide multilateral agreement among nations committed to the principles of open markets, what has been called a “Reagan Economic Zone,” in which free trade will truly be fair trade for all concerned.

I've been over most of these ideas before, so there's no need to get long-winded tonight.  Instead, here's a quick summary of the good, the bad and the ugly in the GOP platform's international trade section:

The Good. The platform expresses unequivocal support for international trade and free trade agreements.  Especially noteworthy is (i) formal party support for the Trans-Pacific Partnership - something we've suspected but not really heard from the GOP's top dogs; and (ii) a loud call for restoration of Trade Promotion Authority - an absolutely critical legal tool for the President's ability to effectively negotiate new trade deals.  Although I'll start complaining in just a second, the GOP's embrace of international trade is definitely a good thing, especially given the economic anxiety out there right now and the strong anti-outsourcing and anti-trade stuff we've been hearing from most Democrats.  Maybe the Dem Platform will surprise us and not contain similar protectionist positions this time around, but until then, the GOP remains the better party when it comes to public support for good trade policy.

The Bad.  The platform continues the failed approach of selling free trade through a single-minded focus on exports and reciprocal trade (i.e., only opening our market if others open theirs).  As I've repeatedly discussed, this strategy is not only economically ignorant, but it also undermines public support for free trade by reinforcing the erroneous notion that imports - and by extension the US trade deficit - are somehow bad for the US economy.  The platform also errs in its support for Romney's "Reagan Economic Zone" - a silly idea from a practical perspective (I've yet to read serious, apolitical trade policy expert express even lukewarm support) and one that implicitly abandons the existing multilateral negotiating framework at the WTO.  That, in my opinion, is a serious mistake - the WTO is and will remain the only real mechanism for broadbased, multilateral trade liberalization, and any alternatives are dangerous non-starters.  The GOP certainly isn't abandoning the WTO altogether - the text above promotes the use of WTO dispute settlement, and the platform on page 49 supports Permanent Normal Trade Relations with Russia in order to reap the benefits of Russia's WTO accession - but the Reagan Zone strongly implies that the GOP no longer sees multilateral negotiations through the WTO as viable.  And that, in my opinion, is a mistake, regardless of the big mess that is the Doha Round.

The Ugly.  I guess it shouldn't be a surprise, but it's really a shame that America's "free market" party has warmly embraced Romney's zealous contempt for all things China trade-related.  This includes support for (i) countervailing duties on Chinese imports due to currency manipulation; (ii) mysterious "punitive measures" on foreign firms found engaging in IPR theft; and (iii) support for a "Buy AmericanAnything-But-Chinese" procurement policy.  Leaving aside for the moment the fact that each of these proposals raises serious legal and practical concerns (see, e.g., here on currency; there's not really a vehicle under US law for the second; and the third could violate WTO rules if it singled out China), there are much bigger problems with such talk: 

• First, the scary chest-thumping overshadows far more legitimate gripes about bad Chinese trade policies (like subsidies and IPR enforcement).  When you're screaming about attacking imports and investment, people tend not to notice your more subtle gripes about real problems in the Chinese market. 

• Second, and more importantly, these proposals expressly condone self-destructive retaliatory protectionism that defies economic sense and free market principles.  As I've repeatedly warned, there is absolutely no reason why such "logic" couldn't be applied to other "offending" countries, and the protectionist slope is very, very slippery.  Saying "we only meant it for China" is likely not going to serve as an adequate defense when the well-funded protectionists come knocking on the White House door.  And, by empowering these anti-trade forces, such proposals also won't help improve tepid American support for free trade.  In short, Pandora's Box has been opened, and it remains to be seen whether Republicans can control the nastiness inside.  The Democrats - who once supported things like NAFTA, China trade and the WTO (see, e.g., Bill Clinton) - sure couldn't.

Granted, each of the GOP's China trade proposals allows for ample wiggle-room, and it's very likely that a President Romney would pursue a much less aggressive approach (indeed, the platform later on page 49 states that the GOP "welcome[s] the increase in trade and education alliances with the U.S. and the opening of Chinese markets to American companies").  Regardless, "Commercial discrimination will be met in kind" is a recipe for heightened protectionism and possibly a trade war, not a responsible, economically and legally sound policy from the supposed "adult in the room" on US international trade policy and politics.  And the sign that such rhetoric - in GOP's defining policy document, no less - sends to the rest of the world is nothing short of embarrassing.  The only bright side for Republicans, I guess, is that the Democrats' platform promises to be even worse.

Hooray, lesser of two evils!

More to come, I'm sure.

White House Does the TPA Two-Step; Hypocrisy Ensues

Today comes news from National Journal [$] that the White House supports a strict reading of Trade Promotion Authority, except, you know, when it doesn't (emphasis mine):

The White House pushed back a last-minute attempt on Monday to prevent it from attaching Trade Adjustment Assistance to the pending free-trade agreement with South Korea after closed-door efforts to find an alternative for its renewal failed.

Sen. Orrin Hatch, R-Utah, the top Republican on the Senate Finance Committee, sent congressional leaders a letter requesting an unprecedented “mock conference” to reconcile two different versions of the Korea pact that were approved in committee last week. But, Hatch’s last-ditch effort quickly fell flat as the White House continued on what could be the only sure course to renew the program’s funds.

In his letter, Hatch escalated GOP skepticism of the legality of the White House decision to include TAA in the Korea bill and questioned whether the administration has the constitutional authority to choose between the House and Senate versions of the pact.

“Reconciling the two bills is the exclusive prerogative of Congress, a prerogative which cannot rightfully be devolved to the executive branch,” Hatch said. He urged legislative leaders to call a mock conference to reconcile the bills and present the White House with a template for drafting the final legislation.

Trade agreements, however, are not handled like normal legislation and the White House quickly dismissed Hatch’s claim. Bills on pending trade deals with Colombia, Panama, and South Korea are all slated to move through Congress under the protective rules of Trade Promotion Authority.

“Under Trade Promotion Authority, the results of informal ‘mock’ markups are recommendations to the president as he prepares to submit implementing legislation to Congress,” said an Obama administration official. “Both the House Ways and Means Committee and the Senate Finance Committee have now made their recommendations.”...

Trade agreements moving under Trade Promotion Authority are not subject to filibuster or amendment and only require a simple majority for passage in both chambers.

“We’ve made clear that a robust renewal of TAA has to be part of the legislative agenda, and including it on an implementing bill for a trade agreement is the only viable pathway that has emerged,” the administration official said. “So far, no other credible alternatives have been offered to get the trade agreements and TAA done in a timely fashion.”

So, to summarize the White House's arguments:

• A strict reading of TPA, like, totally precludes unique procedural proposals like Senator Hatch's "mock conference," so his idea is stupid and illegal.  Thus, we're going to ignore it.

• A liberal reading of TPA, like, totally allows unique procedural proposals like our plan to attach expanded Trade Adjustment Assistance to the US-Korea FTA implementing legislation, so our plan is perfectly appropriate and legal.  Thus, we're going to pursue that plan and ram the TAA-FTA bill down the throats of objecting congressional Republicans.

Behold, unabashed political hackery!  Sigh.

I've already laid out - in excruciating detail - why the Administration's liberal interpretation of TPA is complete and utter nonsense (and dangerous nonsense, at that), and it appears that Senator Hatch's office is raising similar legal objections.  Good for them.  I hope they continue to do so.

But if you disagree (expressly or tacitly) with our legal analysis and thus are totally fine with the Obama administration's liberal interpretation of TPA, then surely you oppose the White House's immediate rejection of Sen. Hatch's "mock conference" scheme, right?  And surely you're incensed - and a little embarrassed - by the administration's clear hypocrisy, right?

Or do you, like the White House, have absolutely no regard for the rule of law?

The silence here - by the media and the Obama administration's supporters (redundant, I know!) - is rather deafening.

The TAA-FTA "Deal," Part 3: It's the Politics, Stupid

[Ed note: This is the third of a three-part series in which I'll review the joint FTA-TAA legislation proposed by the Obama administration and Senate Democrats last week. Familiarity with the White House's brilliant plan and recent events is presumed.  Parts 1 (on the spending) and 2 (on the law) of the series are available here and here, respectively.]

Now that Republican and White House positions seemed to solidify over the weekend and ultimate passage of pending US FTAs with Korea, Panama and Colombia is in question, it's a good time to analyze what everyone in DC really cares about - who's to blame for any ultimate collapse.  I had planned to do an extensive history of how we got here, replete with damning quotes from certain parties, but there's no need for that now, as Doug Palmer's latest Reuters' piece on the TAA-FTA stalemate does most of the heavy lifting for me (emphasis mine):

President Barack Obama appears headed toward a fight with Republicans over a long-delayed trade deal with U.S. ally South Korea, even though both sides say they want it to pass Congress.

Obama administration officials say no deal has emerged to ease passage of an agreement that supporters contend would create tens of thousands of jobs and help the White House aim of doubling U.S. exports in five years....

The Korean deal, and two other pending pacts with Colombia and Panama, were negotiated and signed under former President George W. Bush. He could not win their approval after Democrats took control of Congress in November 2006.

A year ago, Obama moved to resolve Democratic concerns with the deals. That accelerated after Republicans won the House of Representatives in November and demanded action on all three deals by July 1.

Obama could send the agreements to Congress as early as this week after committee-level action in the House and Senate last week.

The administration has signaled to business groups it intends to submit the Korea agreement with the controversial Trade Adjustment Assistance (TAA) retraining program included, one business source said.

McConnell strongly opposes that but the administration official said they see no other way to win approval of TAA, a key White House priority along with the pacts.

The administration does not want to further upset organized labor, which is wary of trade deals over their potential impact on U.S. jobs and is an key Democratic Party constituent....

Congress created TAA in the 1960s. An expanded version expired in February after newly elected Republicans, who now lead the House, balked at the $1 billion annual price tag.


Although the underlying TAA program remained in place, the White House warned Republicans in May that it would not send the three free trade agreements to Congress until there was a deal to renew many of the expanded benefits approved in 2009....

Democrats believe the administration needs to include it in the Korea bill to prevent Senate Republicans from killing it. Republicans believe they should be kept separate and have called plans to put TAA in the Korea bill "a poison pill."

Obama appears poised to defy Republicans, apparently counting on their traditional support for free trade deals which many of his fellow Democrats traditionally oppose.

That strategy might backfire. "We can't speak for every Republican, but (McConnell) has said he'd be compelled to vote against the Korean trade bill if it includes TAA," a McConnell spokesman said, adding the Republican leader would first do "everything in his power" to block action on the bill....

A Republican aide said McConnell believes TAA would pass in the Senate on its own and would not work against it if he got a vote on renewal of the [Trade Promotion Authority] fast-track powers.

House Speaker John Boehner also wants separate votes on the TAA program and the trade bill.

So to recap:

• Because the White House, a significant minority of House and Senate Democrats and almost all congressional Republicans support the pending FTAs, the deals could, if submitted under TPA, pass both chambers of Congress relatively easily.  Like tomorrow. 

• However, the TPA "fast track" protections needed to ensure congressional passage only apply if the President submits the FTAs' implementing legislation to Congress.  Thus, the agreements' fate rests solely in the President's hands.

• Republican opposition to TAA expansion has been known since February, when the House overwhelmingly rejected extending the expanded TAA program because of substantive concerns about the program's purpose, scope and cost.

• Knowing the Republicans' substantive opposition to TAA, the White House in May demanded that TAA renewal be part of congressional consideration of the FTAs.  Republicans, quite unsurprisingly, objected.

• It is well-known that the White House's TAA demands are politically motivated in order to garner labor union support for the 2012 elections.

• Because TAA cannot pass the House or Senate on its own merits, the President has refused to submit the FTA implementing legislation to Congress without TAA being attached.  Such extortion is the only way that the President can score the political victory he wants.

• The President has issued his demands knowing full well that (a) Republican opposition to TAA is longstanding and substantive; (b) the FTAs would almost certainly be approved by Congress under TPA; and (c) the FTAs very likely cannot pass both chambers without TPA's procedural protections.  Thus, Obama's strategy is extremely risky and depends entirely on congressional Republicans reversing a substantive position on a controversial, billion-dollar spending program (of dubious value) that they cemented only a few months ago.

To summarize: the FTAs are the only thing that the White House and a majority of both chambers of Congress support, while TAA simply cannot survive the normal congressional process.  The President is thus risking the FTAs' sure passage by attaching a politically untenable program, and he's taking that risk in order score a cheap political victory.  And, of course, if the agreements' die, the President also benefits politically because US labor unions - a core Democratic constituency - steadfastly oppose them.

So, knowing this, can really there be any doubt as to who's to blame if the FTAs remain unimplemented into the Fall (and maybe even longer)?  Can there be any doubt as to who bears responsibility for the harms caused to US consumers and exporters as these trade agreements remain shelved?

Of course not, regardless of what the White House and its media supporters claim.

Still don't believe me?  Ok, then let's close with a simple hypothetical:

My wife hates anchovies, and I kinda like them.  I've known that she hates the little buggers - can't even stand to have 'em on the same plate as her food - since we first started dating.  So say one night we go to a local pizza joint and she, as she sometimes does, leaves her purse at home, thus leaving me the only Lincicome in the place with the ability to pay for dinner that night.  I only have enough cash on me for one large pie, so we're going to have to share (so much for "recovery summer," I guess).  Fortunately, we'd both be fine with a plain cheese pizza, so if I order that, we both will eat well and go home happy.  But if I were to demand that we order a large pizza with extra anchovies, she's almost sure to refuse to eat it even though, technically, she could force down a few slices and be fine (it's not like she's allergic or anything).  So say, after warning me against ordering anchovies and just begging for a plain cheese pie, I order the anchovy pizza anyway because that's what I want and, frankly, I have the cash.  When the pizza arrives at our table, she flatly refuses to eat it and, furious, demands to be taken home immediately.  So we just end up walking out of the restaurant without eating anything.  And everyone loses.

Now, is there really any way on earth that we could blame my wife for that ridiculous result?

Of course not.

So could somebody - anybody - please tell the President to just hold the damn anchovies?

The TAA-FTA "Deal": The Law, Ctd.

On Tuesday, I blogged about whether the Obama administration's brilliant plan to jam through Congress joint legislation containing Trade Adjustment Assistance and the US-Korea FTA would, based on a reasonable reading of the law, qualify for the procedural protections afforded FTA implementing bills under Trade Promotion Authority.  My conclusions were that the White House's legislation shouldn't qualify for TPA, but that the Senate could - and probably would - just ignore the law.

Phil Levy picks up where I left off and opines on the broader implications of a decision by the White House and Senate Majority Leader Harry Reid (D-NV) to ignore the law and go through with their plans to move the TAA-FTA bill using TPA.  His conclusions are as depressing as they are correct (emphasis mine):

This [fast track] process worked until April of 2008, when then-Speaker Nancy Pelosi demonstrated, to widespread surprise, that Congress had not really committed itself at all: When President Bush tried to submit the Colombia FTA under Trade Promotion Authority, she just changed House rules and blocked it. This dealt the first serious blow to the underpinnings of U.S. trade policy.

Last week, the administration dealt the second such blow. By stuffing TAA into the Korea FTA implementing bill - i.e., by protecting it with Trade Promotion Authority that was supposed to be reserved exclusively for these trade agreements -- it may have sounded the death knell for this critical trade procedure.

The maneuver may well work.... But there is a significant future trade agenda now at serious risk. The administration has ambitious negotiations underway for a Trans-Pacific Partnership that could set the rules for trade with Asia. Global leaders have repeatedly called for a conclusion to beleaguered talks under the auspices of the World Trade Organization. For any of these, the White House will need new trade promotion authority. Such authority was hard to come by even in the best of circumstances. What chance would it have now, if it is interpreted as giving any White House the right to attach controversial and unrelated spending measures in a protected way?

The passage of the pending FTAs is long overdue. The compromise on TAA is acceptable, if it paves the way for a necessary reworking of the program. But, as with mishandled fireworks, the administration's narrow and divisive approach to solving the present impasse may prove crippling for U.S. trade policy in years to come.

In short, the Obama administration's attempt to use the KORUS FTA and a dangerously expansive interpretation of TPA as a sketchy vehicle for achieving a narrow political victory on TAA might win the legislative battles over the Korea, Colombia and Panama FTAs, but the plan seriously risks losing the bigger war over the future of American trade policy and potential trade agreements worth far more than the three currently being debated.  So free traders really need to ask themselves the following question:

If the President refuses to yield and a joint TAA-FTA package passed under fast track really ends up being the only way forward, is it worth it?

I think we all know which direction I'm leaning these days.  And that's pretty sad.

Finally, let's also not forget that, considering that all of the troubling TPA chicanery noted above has come from Democratic politicians doing the bidding of anti-trade American labor unions, the big winner from the passage of these FTAs might just be the very folks most opposed to them - the unions.  (No, seriously.)  In the process of "losing" the current FTA battles, their elected minions might just ensure the demise of future trade deals and America's long history of leading global trade liberalization initiatives.  Such a result would be one helluva "win" for them.

And one helluva loss for the American people.

[UPDATE: I somehow forgot to mention that the Obama administration's erosion of TPA's value actually began last December with its steadfast assertions that the Agreement's renegotiated automobile provisions would somehow not remove the deal from TPA's procedural protections.  So, really, the joint TAA-FTA package is the third blow to the longstanding congressional-executive agreement on TPA (and fast track before it).  The third, however, definitely remains the most egregious and problematic for the reasons Phil states.]

The TAA-FTA "Deal," Part 2: It's the Law, Stupid

[Ed note: This is the second of a three-part series in which I'll review the joint FTA-TAA legislation proposed by the Obama administration and Senate Democrats last week. Familiarity with the White House's brilliant plan and recent events is presumed.  Part 1 of the series is available here.]

Now that the Republican-led House Ways & Means Committee has released its own FTA implementing legislation without expanded Trade Adjustment Assistance, it's clear that the House will hold separate votes on the FTAs and TAA expansion - just as Speaker Boehner and pretty much every Republican in the House and Senate have said they'd do all along.  Of course, House consideration of the FTAs in this manner will have to occur without the procedural protections afforded FTA implementing legislation under Trade Promotion Authority (TPA), which holds that only FTA bills submitted by the President may be considered by the House and Senate without amendment and pursuant to strict timelines.  So, with the House going the "clean FTA" route and the Senate pursuing the President's TAA-FTA scheme (confirmed again today by USTR Kirk), the obvious question arises:

What will happen when the House-passed FTA legislation meets the Democrat-controlled (and thus more trade-averse) Senate, which (we assume) will only agree to consider the President's TAA-FTA package?

Well, the increasingly-conventional answer to this question is that Senate could consider the House-passed FTAs under TPA if (i) the House also passes the TAA expansion and then combines the FTA and TAA legislation before sending it to the Senate; and (ii) the House TAA-FTA legislation exactly matches the TAA-FTA implementing legislation ultimately submitted by the President to the Senate.  According to Inside US Trade [$], "industry lobbyists" and even the Senate Parliamentarian (informally) have stated that the joint package would receive TPA protections.

But, assuming that the House does actually pass the separate TAA expansion (a somewhat big assumption considering that the same House rejected TAA only a few months ago), does the TAA-FTA legislation really qualify under TPA's "Fast Track" rules?

In short, no, but it probably doesn't matter because the Senate can - and likely will - just ignore the law.

TPA's rules for congressional consideration of an FTA implementing bill are set forth under US law in 19 USC Sec. 2191.  The law defines "implementing bill" as follows:

(1) The term “implementing bill” means only a bill of either House of Congress which is introduced as provided in subsection (c) of this section with respect to one or more trade agreements, or with respect to an extension described in section 3572 (c)(3) of this title, submitted to the House of Representatives and the Senate under section 2112 of this title, section 3572 of this title, or section 3805 (a)(1) of this title and which contains—

(A) a provision approving such trade agreement or agreements or such extension,

(B) a provision approving the statement of administrative action (if any) proposed to implement such trade agreement or agreements, and

(C) if changes in existing laws or new statutory authority is required to implement such trade agreement or agreements or such extension, provisions, necessary or appropriate to implement such trade agreement or agreements or such extension, either repealing or amending existing laws or providing new statutory authority.

Clearly, TAA doesn't fall within (A) or (B) above, and the word on the street is that Senate Democrats and the White House will claim that the TAA expansion falls under sub-paragraph (C), i.e., that it is a "provision" (a) "repealing or amending existing law or providing new statutory authority" that is (b) "necessary or appropriate to implement" the FTA at issue.

It's absolutely laughable, however, that the TAA expansion attached to the US-Korea FTA would qualify as such a "provision."  First, TAA expansion isn't "necessary or appropriate to implement" the KORUS FTA.  Indeed, one of the key features of the TAA expansion package is that it de-links benefits from US FTAs.  So, other than the fact that both the FTA and TAA have "trade" in their names, their actual substance is unrelated.  Of course, one could argue that inclusion of TAA is politically "necessary" to ensure Senate passage of the KORUS FTA.  However, by this silly political metric, anything - no matter how irrelevant and unconnected to the FTAs - could be deemed "necessary" to implement the FTA and thus entitled to special consideration (e.g., no filibusters) under House and Senate rules.  So if, for example, a majority of US Senators said that they'd only vote for the KORUS FTA if the implementing legislation included a provision giving each of their spouses $1 billion in cold, hard cash, that "provision" would, under the White House's interpretation, be "necessary" to implement the FTA and thus qualify for TPA protections.  This, of course, is absurd.

Second, the White House's expansive view of sub-paragraph (C) totally ignores its introductory clause: "if changes in existing laws or new statutory authority is required to implement such trade agreement or agreements or such extension."  This clause makes it absolutely clear that the "provision... repealing or amending existing laws or providing new statutory authority" must be related to the "changes in existing laws or new statutory authority" that are required to implement the FTA at issue.  So, if an FTA's implementing legislation amends US law, and it's determined that those amendments necessitate conforming edits to other US laws, the provisions containing those consequential conforming edits may be included in the implementing bill and granted TPA's protections.  And this is precisely the type of "necessary provision" that has been included in past FTA implementing bills (such as that for the NAFTA).

So to claim that TAA expansion qualifies under sub-paragraph (C) and thus deserves TPA protection is a serious stretch.  (And that's being kind.)

Yet despite the legal jujitsu (and pokerface practice) that the White House and Senate Dems will have to undertake to make this highly questionable argument, the fact remains that, when it comes to TPA, the actual rule of law doesn't really matter much.  As I've noted previously, TPA's disciplines pretty much mean whatever the House or Senate leadership and a majority of House/Senate members want them to say.  The House/Senate leadership can either overrule the parliamentarian's interpretation of the law, or the House/Senate can just change the darn rules.  The law itself makes this clear:

This section and sections 2192 and 2193 of this title are enacted by the Congress—

(1) as an exercise of the rulemaking power of the House of Representatives and the Senate, respectively, and as such they are deemed a part of the rules of each House, respectively, but applicable only with respect to the procedure to be followed in that House in the case of implementing bills described in subsection (b)(1) of this section, implementing revenue bills described in subsection (b) (2) of this section, approval resolutions described in subsection (b)(3) of this section, and resolutions described in sections 2192 (a) and 2193 (a) of this title; and they supersede other rules only to the extent that they are inconsistent therewith; and

(2) with full recognition of the constitutional right of either House to change the rules (so far as relating to the procedure of that House) at any time, in the same manner and to the same extent as in the case of any other rule of that House

If you'll recall, then-Speaker Pelosi exercised this very authority when she suspended TPA protections for the US-Colombia implementing legislation that was submitted by the Bush Administration back in 2008.  So for the TAA-FTA package currently being debated, the Senate can pretty much do with TPA whatever it pleases.

And apparently, that's exactly what Harry Reid and the White House plan to do, regardless of the text of the actual law.  And unless folks stop buying the White House's questionable arguments about TPA, they'll probably get away with it too.  But please, spare me the idea that some combined TAA-FTA legislation submitted by the President to the Senate would definitely qualify for TPA's protections under existing US law.

Because that's just not true.

KORUS and TPA, ctd.

A few more thoughts on last night's open questions re: the US-Korea FTA and its 2011 congressional consideration under Trade Promotion Authority (TPA):

• An informed reader helpfully points out another scenario that I didn't mention last night: the original 2007 agreement proceeding through congress under TPA, while the 2010 "supplemental agreement" is considered separately and subsequently as a new modifying agreement that would not be subject to TPA's important disciplines.  Under such a scenario, the supplemental agreement would have been "entered into" after July 1, 2007 (the original TPA deadline), so it would have to be considered under the still-in-force 1974 Trade Act (19 U.S.C. 2112), which has none of TPA's protections.  Thus, ill-willed members of Congress could certainly try to meddle with it in all sorts of nasty ways.  (And, of course, if - as we discussed last night - the 2007 agreement was found to be "entered into" in 2010 because of the new deal's significant substantive changes, it too would have to be considered under Section 2112.)   Now, such consideration is not a total death sentence for either of the agreements - implementing legislation for the US-Jordan FTA was considered in 2001 without TPA under the 1974 Act, and it passed both chambers pretty easily.  Of course, that agreement was far less controversial and congressional Democrats hadn't wholly abandoned free trade yet, so easy passage for the KORUS under the 1974 Act is far from certain.  So in sum, unless the entire package is somehow considered to fall under TPA, the administration appears to have a little procedural mess on its hands - either the original FTA was amended, and it's thus no longer under TPA; or they've created a "supplemental agreement" outside the original agreement, and it's not subject to TPA.  Dilemma.

• It turns out that I am certainly not the first person to consider this potential problem.  Several people are asking questions about it, and, as I suspected last night, the administration was worried about all of these TPA problems back in July of this year when it was trying to figure out how it could possibly appease Ford, Chrysler and the UAW, while still keeping TPA's important procedural disciplines in place by not "re-opening" the KORUS through big, substantive changes.  (So much, as they say, for that.)  The article linked above is a great guide to all of the procedural arcania involved, so be sure to read the whole thing if you're interested in all the different ways that this could play out next year.  The most important nugget, I think, is what happens if the White House submits the FTA legislation under TPA and a congressman or senator objects: "If the FTA were submitted under TPA and a member of the House objected due to a belief that TPA protections no longer applied, that member could raise a point of order.  The ultimate decision on whether TPA applied would then fall to the House speaker, who would rule with the guidance of the House parliamentarian.... That ruling can also be challenged, in which case the entire House would vote on whether the FTA could proceed under TPA.  The majority party typically would support the ruling of the speaker in that instance. Similarly, an objection in the Senate would be ruled on by the chair of that chamber, with a vote possible in the case of further objection."  Very interesting.  The article also makes it pretty clear that, even if TPA becomes an issue for the KORUS, it's very likely that any problem can be overcome with cooperation between the White House and both chambers of Congress.  (Yet another reason to celebrate the GOP's new majority in the House, eh?)

• It appears that both the administration and House Republicans are sticking with the line that both the 2007 KORUS agreement and the 2010 supplemental agreement will be covered by TPA.  Incoming chair of the House Trade Subcommittee (and strong free trader) Kevin Brady (R-TX) said today that he wants all FTAs - not just KORUS - considered in the 112th Congress' first six months.  And when asked whether TPA would apply to the KORUS "since the new 'supplemental agreement' reached last week changes the terms of the original 2007 deal," Brady said that he was "confident the side agreement did not invalidate the original deal's fast track [TPA] protection."  

• The White House is apparently also "confident," telling sources (like the Nelson Report's Chris Nelson) that the KORUS is, like, totally covered by TPA, dude.  Nelson states: "On the possible 'Fast Track' problem that the auto tariff sections of the KORUS deal are vulnerable to a Point of Order which could deny it protection from amendments: we are told that the Administration will likely argue that the bottom line on tariffs is not changed, only the timing... so since the tariffs will end up at their "original" planned numbers, timing on when or how quickly is a technical detail, not a disqualifying change in substance."  On this argument, Nelson sounds skeptical ("Whether that will 'fly', along with the planned use of 'side letters' to make legislative changes? Stay tuned."), and he has every right to be. If you take a quick look at the tariff schedules in the 2007 agreement for both the United States and Korea, you'll see that they include the specific "codes" for the tariff elimination schedules (they key for these codes is also in the 2007 agreement here).  The 2010 supplemental agreement amends these codes based on the new, agreed (and longer) timeframes for tariff elimination.  So this remains a substantive, textual change to the 2007 agreement, and the White House's claims seem (to me at least) to be pretty flimsy.  Just think of it this way: if the President could sign a trade agreement, then modify it at will, and still have it covered by TPA, then why did President Bush and his USTR rush to complete and sign the original KORUS by June 30, 2007?  They could have just signed a tariff schedule with all lines ending up at zero, and then hammered out the tariff elimination schedules in the following months (or years).  Hmmmm?

Now, again, with strong House and Senate support for the agreement (and its consideration under TPA) and/or with all of those different ways for congressional leadership to control the fate of the KORUS (with or without TPA), all of this might just be pointless geekspeak speculation.  Then again, it might not be pointless if things start getting out of hand next year and the KORUS ends up getting held hostage (heh) by a rogue Senator or two because of the substantive changes demanded by Ford, Chrysler and the UAW.  And either way, all of this trouble is certainly further proof of why it's always, always a really bad idea for the world's most powerful man to cave to insular special interest groups just to score some cheap political points on a huge free trade agreement when he could have just stood tall and argued the facts, principle and law instead.

Oh well.

KORUS Afterthoughts

With a KORUS deal in the bag and both Presidents signaling strong support, here are a few more things - some big, some little - to consider since last Friday's original post on the new agreement.

• It turns out that the agreement included more new protectionism than I originally noted.  In particular, Korea now gets to maintain its tariffs on US pork until 2016, instead of 2014 as originally agreed in 2007.  (The Korea Times has a nice rundown here.)  Market access for American pork was one of the big achievements of the original 2007 agreement, so this is a little more serious than it sounds.  That said, this bad change, like those on autos, won't override the agreement's overwhelming economic benefits, but it still stinks that our administration is bragging about "improving" a free trade agreement by increasing trade barriers, not lowering them. 

• Thinking more broadly about last week's deal, it becomes pretty clear to me that the Koreans really caved.  Not only does the laundry-list of achievements/concessions appear to favor US negotiators (Nice work, team! Way to keep the US market closed! Grumble grumble), but the re-opening of the agreement necessary to complete last week's deal is also a dramatic shift from Korea's consistently firm stance on the FTA that, for economic, strategic and political reasons, they would not agree to substantive, textual changes.  So why the complete reversal, especially when, armed with the Korea-EU FTA and similar trade agreements with other US competitors, the Koreans had the upper hand?  I can only think of one thing, and it actually has very little to do with the FTA: North Korea.  It seems to me that the only thing that changed between last month's embarrassing meeting and non-agreement between Presidents Obama and Lee and last Friday's deal was the unprovoked attack on South Korea (and murder of several of its citizens) by a certain psychopathic dictator and his babyfaced dictator-in-training to the North.  After those Nork missiles were fired, I think completion of these distracting trade negotiations got a lot more urgent, and the South Koreans decided that the long-term bilateral relationship was a lot more important than a few million dollars in automobiles nonsense (and the UAW had no counterbalancing concerns, of course).  So in the end, it could be that the most effective KORUS negotiator wasn't an American or a South Korean but instead a stumpy, murderous jerk who likes to look at things.

• Not everything about the KORUS deal surprised me.  For example, we got to watch our Mercantilist-in-Chief go through some typical contortions to avoid mentioning the economic benefits that Korean imports would provide American consumers (including many businesses).  In his remarks heralding last week's agreement, Obama stated that KORUS will benefit American exporters ("For our farmers and ranchers, it will increase exports of American agricultural products. From aerospace to electronics, it will increase our manufacturing exports to Korea, which already support some 200,000 American jobs and many small businesses."); he stated that it will benefit Korean exporters and consumers ("They will gain greater access to our markets and make American products more affordable for Korean households and businesses -- resulting in more choices for Korean consumers and more jobs for Americans."); but he didn't say anything about American consumers and the (very significant) benefits they'd derive from the FTA.  I guess American imports into Korea benefit Korean households and businesses, but Korean imports to the US?  Not so much.  And once again, when faced with a very public opportunity to educate the public on all of trade's benefits, President Obama whiffed.  Shocking, I know. 

• Finally, and on a serious note, has anyone given any thought to how this new deal will affect congressional consideration and approval of FTA?  Sure, people are already vote counting, but that's not actually my concern (I think the agreement will pass pretty easily).  Instead, I'm very curious as to whether this "new" agreement will be covered by the now-expired Trade Promotion Authority (aka "fast track"), which subjects trade agreements completed and signed before July 1, 2007 to strict procedural requirements and thus prevents congressional meddling.  A few observers are assuming that TPA will apply because the original agreement was signed on June 30, 2007, but the law on TPA (19 U.S.C. 2191-2194 and 3803-3805) states, inter alia, that it will cover trade agreements "entered into" by the President before July 1, 2007.  Thus, it appears that whether TPA applies to the KORUS will rest entirely on whether the 2010 changes on autos, beef, etc. mean that the agreement wasn't "entered into" until now.  The changes announced to the FTA - especially those affecting the countries' previously-agreed tariff schedules - almost certainly constitute substantive changes to the agreement, so I'm having a very hard time figuring out how someone can seriously argue that TPA will apply - i.e., that the agreement wasn't substantively modified such that it must be re-signed and "entered into" again.  [Note: USTR is calling this a "supplemental agreement," so maybe they're going to spin this as outside the original agreement, but that seems like a pretty hard sell considering that specific tariff lines, present in the original agreement, have been changed by the 2010 pact.] 

• And trust me, this is no small matter - if TPA doesn't apply, then all of its important procedural limitations - short timelines, limited committee consideration, no amendments, etc. - don't apply.  And, as I discussed a few weeks ago, TPA effectively prevents a few powerful congressmen or senators from singlehandedly derailing the deal (through procedural maneuvers, "poison pill" amendments and other nasty things).  Senate Finance Committee chair Max Baucus is apparently spitting mad that last week's deal didn't address Korean restrictions on US beef exports, and while he's powerful enough to scuttle the deal, I doubt he'll do it (although he might use his new power to get Korea to move on beef outside the confines of the FTA).  On the other hand, folks like anti-trade stalwart Sen. Sherrod Brown (D-OH) would probably have no such reservations, particularly if Brown's favorite constituents - the United Steelworkers Union - decide to oppose the deal (as of now, they're still decidingdetermining what goodies they can squeeze out of the White House).  So am I missing something here, or is TPA a bigger issue than most people are considering?  I'd assume that the White House and USTR have already considered this important procedural issue, so maybe I'm worrying about nothing; then again, considering that this is the same team that amateurishly allowed the President to set - and then miss - a very public November 2010 deadline for KORUS' completion, I'm not so sure about that anymore.  I guess we'll find out soon enough.

A little more food for thought.  Your thoughts on the last point would be particularly welcome.

[UPDATE: According to Reuters' Doug Palmer (via Twitter), USTR and the White House say that TPA will apply.  I'd prefer to hear that from the congressional experts - i.e., the House and Senate parliamentarians, and maybe the Ways & Means and Senate Finance trade counsels - not the agreement's salesmen.]