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IMGXYZ546IMGZYXThe Carnegie Endowment hosted a panel discussion on the expiration and potential renewal of fast track, or Trade Promotion Authority (TPA), with three former Members of the House Ways and Means and Senate Finance Committees, and present and former staffers of those committees. The objective of the meeting was to determine whether the process by which the 1991 and 1993 TPA extensions were achieved holds lessons for a possible renewal of TPA in the spring of 2007. The former member panel consisted of Congressmen Bill Frenzel (R-MN) and Tom Downey (D-NY), both former members of the House Ways and Means Trade Subcommittee; and Senator Bob Packwood (R-OR), former Chair and Ranking Member of the Senate Finance Committee. The staff panel consisted of Tim Reif, Minority Trade Counsel on the Ways and Means Trade Subcommittee, Mike Castellano, Counsel and Senior Policy Adviser in the Office of Minority Leader Harry Reid and former Trade Counsel on the Trade Subcommittee, and Grant Aldonas and Marcia Miller, both former Chief Trade Counsels of the Senate Finance Committee.
Sherman Katz, of the Carnegie Endowment, opened the first panel by inviting the former Members to reflect on the 1991 and 1993 extensions by discussing the political climate of the early 1990s, the roles played by the NAFTA and Uruguay Round of WTO negotiations, the role of labor and environmental concerns and finally, the role of the change of Administration in January 1993.
Senator Bob Packwood focused on describing the general trajectory of trade politics in the United States over the last few decades. Beginning with the inception of fast track in 1974 and moving through its extensions and the negotiations of free trade agreements (FTAs) with Israel, Canada and Mexico, Senator Packwood described the impact of trade as growing in scope. As competition from abroad has increased, pressure on Members of Congress to protect industries key to their constituencies has sharpened. Consequently, Members have increasingly sought assurances that adjustment assistance programs and other forms of compensation will be available for constituents and regions negatively affected by trade liberalization. He argued that the growing impact of trade on the U.S. economy has heightened the need for collaboration and communication in order to assuage the concerns of Members being asked to vote against the short-term interests of their constituencies. Senator Packwood noted that the level and quality of Executive-Congressional consultations has diminished in recent years.
Congressman Downey followed Senator Packwood’s remarks by reminding the audience of the original rationale for TPA. Despite the fact that the Constitution grants the legislative branch the power to regulate foreign commerce, Congress has chosen to constrain itself precisely because of the reason mentioned by Senator Packwood – constituent pressure. Since increased trade typically entails diffuse benefits and concentrated costs, the incentives to oppose trade liberalization can be quite strong, even when it is in the best interest of the country as a whole. The United States should do more to keep these risks from falling squarely on the shoulders of individuals, according to Congressman Downey. He argued that health care and pension reforms need to be addressed.
He also urged more extensive consultations between the Administration and Congress, which he believed would make it easier for Congress to embrace trade liberalization, particularly if the consultations resulted in concrete measures to minimize adverse impacts on constituents. Given the likelihood of a Democratic takeover of at least one house of Congress in the midterm elections, Congressman Downey was pessimistic about the likelihood of TPA renewal, largely because of poor relations between Democrats and the current Administration.
Congressman Frenzel presented a somewhat more optimistic assessment of the prospects for TPA extension in the near future. He conceded that the Office of the United States Trade Representative (USTR) is probably understaffed and under-funded, which presents an obstacle to greater outreach, communication and cooperation with Congress. Other obstacles, such as decreased involvement from the business community and the crowded schedules of the Ways and Means and Finance Committees have also made trade liberalizing initiatives more difficult to pursue. However, avenues for progress exist. Strengthening the social safety net by improving programs such as Trade Adjustment Assistance (TAA) could make trade liberalization more politically palatable. Congressman Frenzel also suggested that new committees be created in the House and Senate to focus exclusively on trade.
Mr. Katz asked the panel if the business community is less involved in promoting freer trade than it once was because the multilateral trade negotiation talks have been a victim of their own success, in the sense that prior talks have captured substantial benefits such as the inclusion of services and intellectual property rights in trade agreements, as well as zero for zero tariff cuts. Congressman Frenzel responded that the fragmentation of production processes possible under today’s trading rules has created sufficient sourcing options to satisfy business interests.
He also suggested that businesses today take a narrower view of the importance of trade liberalization, and as a result, support freer trade less forcefully. He noted that business is now more focused on maximizing short-term profits, rather than raising global living standards. Senator Packwood added that trade is one issue among many that affect the profits and other interests of business. He pointed out that in addition to trade policy, debates on tax law, investment policies and accounting standards all vie for the attention and resources of businesses.
In response to an audience question on the possibility of enacting a new, permanent TPA, or otherwise reformulating the structure of congressional overview of trade policy, panelists agreed that the problem lies not with the current structure, but with the current Administration’s unwillingness to consult with Congress on trade policy. They argued that Congress would never grant permanent TPA but that a shift in structure that, for example, made extension automatic unless an objection was raised, might be possible.
Another audience member challenged the assertion made by several panelists that Americans would be more receptive to freer trade if they were better educated about its benefits. She suggested that policy makers should pay greater attention to public skepticism of free trade. Senator Packwood responded that the process of shifting workers towards more productive, higher value-added jobs would undoubtedly incur short-term adjustment costs, but that this process would secure greater long-term growth and prosperity.
Congressman Downey agreed that policy makers should listen to American workers and protect their interests. But he argued that a more protectionist trade policy would not address the roots of workers’ discontents. Rather, he proposed that reforming education and health care would more directly improve American quality of life, while at the same time making American workers more competitive internationally.
Viji Rangaswami, also of the Carnegie Endowment, moderated the second panel, which brought together current and former Finance and Ways and Means Committee staffers to comment on the first panel’s remarks and on the likelihood of TPA extension.
Ms. Miller provided a general overview of the 1991 and 1993 extensions, focusing on the peculiarities of each. She argued that the 1991 extension offered little guidance for today, because of the unusual circumstances surrounding it. The 1991 extension was not a free-standing debate about new legislation, but rather a midterm review of fast track mandated by a clause in the 1988 Trade Act. The review was included in the 1988 Act because Congress was concerned that the White House would negotiate a sweeping Uruguay Round agreement without consulting with Congress. Ironically, the 1991 extension debate focused almost exclusively on the highly controversial NAFTA. The Bush I Administration had just started negotiations with Mexico – a development most Members had not envisioned when fast track was enacted in 1988.
Ms. Miller also argued that the 1993 renewal may not offer much by way of precedent. She did note that it was marked by the kinds of extensive consultations between the White House and Congress previous speakers had referred to as necessary, and that as a result, the extension, which only granted the authority to negotiate a Uruguay Round agreement, passed easily. Ms. Miller suggested that the process and debate that led to the 1988 TPA legislation might hold more lessons for policy makers today. The Trade Act of 1988 was an extensive piece of legislation that reflected legislators’ understanding that controversial trade liberalizing initiatives must be coupled with other trade provisions, including worker programs and measures strengthening U.S. trade law, to create broad-based support. She concluded that fast track finds support when presented as part of a comprehensive U.S. economic competitiveness policy package.
Mr. Aldonas also emphasized the need for an inclusive, participatory approach to trade policymaking. Because of the vast number of competing and conflicting interests affected by trade policy, not only is candid communication vital, but a decision-making structure that balances those interests to reach an equilibrium point is also necessary. Mr. Aldonas questioned if TPA was necessarily the best structure to achieve that goal and encouraged a broad rethinking of how U.S. trade policy can best promote engagement with the global economy. On the issue of TPA extension in the near term, Mr. Aldonas was pessimistic. He pointed out that to achieve the last extension in 2002, promises and commitments were made to groups that are natural opponents of trade openness; those promises now constrain legislators. Furthermore, the Doha Round is not close enough to completion to urgently demand a TPA extension.
Finally, Mr. Aldonas argued that if the Democrats do take control of one or both houses of Congress, the Administration will not spend its scarce remaining political capital in a fight with Democrats over a controversial issue such as trade. Closing on a note of optimism, Mr. Aldonas suggested that the enormous potential for growth in the developing world will push the United States towards increasing global trade, both because we will naturally pursue new markets and because global stability will hinge on achieving greater prosperity in the developing world.
Current Congressional staffers concluded the panel discussion. At their request, a general summary of all their comments, without speaker identification, is provided below. The summary as a whole does not reflect the views of any one of the individual staffers, nor were the views in the summary necessarily expressed by all of the staffers.
Staff noted several features of the current climate: record trade imbalances, waning enthusiasm for FTAs, exclusion of least developed countries from the global trading system, floundering Doha Round negotiations, and bitter partisanship. Staff emphasized that despite moderate overall economic growth, many Americans are dissatisfied with the economy. Real wages are not rising for the vast majority of Americans, income inequality is widening and more jobs are perceived as being less secure.
Staff noted that while no single bill could address all these problems, there were three conditions good trade legislation would have to satisfy: (1) expanding opportunities for trade; (2) spreading benefits evenly; and (3) coping with the fallout from trade by investing more resources in education, on-the-job training and a safety net for displaced workers.
All of the staffers emphasized the importance of cooperation between Congress and the White House, and the need for much more robust consultation mechanisms. Staff characterized TPA as a “trust vote” and insisted that trust was a minimum predicate for any future extension of TPA. Staff noted that at this time, trust may not exist, particularly because recent Democratic efforts at cooperation have been rebuffed, both by the White House and the majority party in Congress. Staff described the Administration’s consultations with Congress as little more than updates on decisions that have already been made.
Staff also agreed that the time had come for a comprehensive review and reform of U.S. trade policy. Staff agreed that the 1988 Act provides a better example for how TPA might successfully be renewed, as opposed to the 1991 and 1993 extensions. Staff dismissed the probability of a simple, straight-forward extension as being virtually zero.
A discussion session followed, during which panelists responded to questions about the role that the Doha Round or FTAs could play in improving the likelihood of TPA extension. The majority of panelists argued that the Doha Round was not yet near enough to completion of itself to motivate a TPA extension and that the various FTAs currently being negotiated or considered would not compel an extension if negotiators fail to reach agreements before TPA expires next June.
