Does TTIP (and TPP) require TPA?

I suspect that many readers will find the acronyms in the title of this post puzzling, so let me explain. This is a post about trade policy, and especially about the dependability of the US as a negotiating partner in its negotiations with the EU on the free trade agreement known as TTIP – the Transatlantic Trade and Investment Partnership – billed on the DG Trade website as ‘the biggest trade deal in the world’ and due to be completed by December this year.

The TTIP talks also encompass food and agricultural products. The goal is to eliminate all tariffs on both agricultural and non-agricultural trade between the two counties. Europe is looking for greater market access for its high-end food exports such as wines, cheese, olive oil, high quality beef and pork-meat. Some European food products, such as apples and various cheeses, are currently banned from the US market; others are subject to high US tariffs – meat 30%, drinks 22-23%, and dairy products up to 139%.

Farm organisations emphasise the downside that EU gains in market access will be at their expense. Moreover, the negotiations are much broader than just market access. There is much greater emphasis on nontariff barriers and rules and on achieving regulatory convergence and compatibility across a wide range of sectors including food safety. As a result, civil society and citizen groups are following these trade negotiations much more closely than trade agreements in the past.

The US is simultaneously negotiating a free trade agreement with 11 other Asian countries known as TPP, the Trans-Pacific Partnership. These negotiations have been going on for longer than the TTIP talks with the EU and have reached a more advanced stage, but missed last December’s deadline for their conclusion. The US, of course, is also negotiating multilateral trade liberalisation in the context of the WTO Doha Round as well as the plurilateral Trade in Services Agreement.

Overshadowing all these negotiations is the question whether the US administration, even if the negotiations are successfully concluded, can get a trade deal through the Congress. The last trade agreements approved by Congress were in 2011 with South Korea, Columbia and Panama. Since then, the debate over trade policy in the US Congress has become even more partisan, with many in the President’s own Democratic Party sceptical of the benefits of these agreements.

Many view the passing of Trade Promotion Authority (TPA, the last acronym in the title of the post, also known as ‘fast track’) as a necessary requirement for the US to be taken seriously as a negotiating partner, and for the successful passage of any negotiated agreement through Congress. A bipartisan, bicameral TPA bill was introduced in Congress last month, but the prospects for an early passage appeared to be put on hold last week when the Democratic Majority Leader in the Senate, Senator Harry Reid, announced that he was against the grant of TPA authority and that he would not put the bill to a vote in the Senate.

Meanwhile, the TTIP negotiations continue at an official level, with the next meeting between the two sides scheduled for March. But, given that TPA appears to be side-lined for the immediate future, does this mean that the TTIP negotiations are going nowhere fast?

What ‘fast track’ means

‘Fast track’ arises from the unique Constitutional system of the United States, under which Congress is responsible for “foreign commerce” but the President has authority to negotiate with other governments. This resulted in a system where Congress delegated its powers to reduce tariffs to the President, in return for the obligation to keep the Congress informed. Such delegated authority was renewed on numerous occasions in the post-war period.

However, it ran into difficulties when Congress came to approve the results of the GATT Kennedy Round in the 1960s which would have required the US to change its laws in two nontariff areas (customs valuation and anti-dumping practices) as well as reducing tariffs. Congress argued that the President had overstepped his powers and refused to ratify these nontariff agreements, much to the annoyance of the EU and other negotiating partners at that time (see this useful primer on the TPA from the US Congressional Research Service).

The result was the “fast track” process granting trade agreements authority which was embodied in trade legislation in 1974. The 1974 Act stipulated that nontariff barrier agreements entered could only enter into force if Congress passed implementing legislation. However, recognising that US trading partners would be reluctant to negotiate agreements that would be subject to unlimited congressional debate and amendment, Congress agreed to an expedited legislative process for trade agreements provided that it had authorised the talks in advance and Administration trade officials consulted closely with key legislators throughout the process.

The key features of this expedited process are:
• mandatory introduction of the bill to both houses of Congress
• automatic discharge after a specified period of time
• limited floor debate
• and, crucially, no amendments, meaning that each House can only vote the bill up or down.

As part of this process, Congress defines the trade negotiation objectives and the Administration is expected to honour these objectives if it wants the implementing legislation to be approved under the expedited process.

Trade agreements authority was subsequently extended on a number of occasions but lapsed after the successful approval of the Uruguay Round agreements in 1994. With each extension Congress included more extensive directions on negotiating objectives, including for example labour and environmental issues, and also demanded more extensive congressional consultation. However, the expedited legislative procedures have not changed since first enacted in 1974.

President George W. Bush successfully sought trade agreement authority (now renamed Trade Promotion Authority) in 2002 as the US began a more activist policy of bilateral trade deals and following the launch of the Doha Round negotiations the previous year. The legislation passed by one vote in the House with Republicans largely voting in favour and Democrats largely voting against. The free trade agreements with Korea, Columbia and Panama were approved under this legislation in 2011 (but only after earlier attempts to approve these agreements had not been put to a vote). However, this TPA authority expired in 2007 and it has not been renewed since. President Obama has sought TPA on a number of occasions, including in his State of the Union address last month, and the new bill responds to this request. As noted, however, the prospects for its early passage do not seem bright.

Is fast track necessary?

Not everyone is convinced that TPA is required to enable the US to complete negotiations on trade deals despite the view that it is necessary if the US is to be seen as a credible negotiating partner. The TPP negotiations are far advanced even without TPA in place. The argument is that, where there is a successful outcome to a negotiation that the Congress would approve, then it could extend the TPA expedited legislative procedure just for that purpose. It seems the Obama Administration is negotiating the proposed TPP, and presumably the TTIP, as if the TPA were in effect. But the question remains if the other TPP countries, and the EU when the time come, will be prepared to make the politically difficult final concessions if they are not sure the US Congress is on board.

Another more cynical view of the political process in the US argues that it would be counter-productive now to seek a renewal of TPA because the key part of that debate, defining the negotiating objectives to be incorporated into future trade agreements, would be likely to reduce the flexibility of the US negotiators to no great advantage, given that House Democrats will not vote for the TPP in any case. However, it is unclear whether the same antagonism extends to the TTIP negotiations. In any case, the strong advice of four former US Trade Representatives is that TPA is an essential ingredient to a successful negotiation.

Much will depend on how much political energy President Obama is willing to spend in an election year on persuading his fellow Democrats to support the TPA bill. TPA is not essential to the conclusion of a TTIP agreement, but without it, even if the negotiations were successfully concluded (which remains to be seen), a draft agreement is potentially hostage to all kinds of special interest lobbying in the US Congress.

Picture credit: AVG Blogs

This post was written by Alan Matthews

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2 Responses to “Does TTIP (and TPP) require TPA?”

  1. Klaus Mittenzwei
    February 7, 2014 at 14:48 #

    Thanks for clarifying this aspect of the negotiations. I wonder whether you could expand on the topic by suggesting the possible impact a successful conclusion of TTIP and TPP (with or without TPA) would have on the Doha Round. One might argue that TTIP and TPP (and other regional FTA concluded in the recent past) make it easier the way to finalize Doha, as the (economic) impacts will be reduced for each regional FTA that comes into being. Thus a conclusion of the Doha Round would merely be a victory from a political point of view. On the other hand, one might argue that each new regional FTA reduces the need of a conclusion of the Doha Round precisely because it would not have an important economic impact. It would just consolidate many regional FTAs.

  2. Alan Matthews
    February 8, 2014 at 00:25 #

    @Klaus

    Your comment raises two interesting questions about the impact of these mega-regional FTAs (i) on incentives to conclude the Doha Round and (ii) on the size of the economic impacts of concluding the Doha Round.

    My view is that if the mega-regionals (TPP, TTIP) are successfully concluded they will probably reduce the incentives to complete Doha. Consider that the political economy of Doha requires that there are sufficient gains to exporting interests in each country to offset the losses to import-competing sectors. It is not only that the mega-regionals reduce the overall size of the gains that Doha might bring, but they affect the winners and losers asymmetrically. FTAs tend to leave out or minimise the impacts on sensitive sectors, the hard cases (such as agriculture). Thus they cherry pick the sectors with the easiest gains. I think this may make concluding the mutliateral talks more dificult because the exporting sectors have less to gain and thus have less interest in mobilising political support domestically to approve them while the import-competing sectors still would have quite a lot to lose. .

    This is only one of the ways that the mega-regionals might impact on the multilateral trading system. Various authors have highlighted that mega-regionals might play a positive role in developing rules on NTBs and other issues which might subsequently be mutliateralised.