U.S. GDP is expected to grow by $12 billion as a result of new free trade agreements with South Korea, Colombia and Panama. So why stop now? Exporters are asking the government to launch negotiations to open newer markets. The question is, does the Obama administration have enough momentum to move forward?
The idea is popular in Congress. Members of the House have asked the government to seek FTAs with Turkey and Georgia. The next major agreement is likely to be the Trans-Pacific Partnership, a wide-ranging free trade agreement encompassing nine Pacific Rim countries and the United States. The administration hopes to announce progress at the Asia Pacific Economic Cooperation annual meeting in Honolulu on Nov. 12-13.
Rep. Kevin Brady, R-Texas, one of the strongest trade advocates in the House, said the FTAs with Colombia, South Korea and Panama are good for jobs. “Currently, U.S exporters face unfair restrictions in other countries, either in the form of high tariffs or discriminatory regulations that put us at a significant disadvantage. These agreements help address these imbalances and level the playing field.”
A hallmark of the agreements is giving the president authority to negotiate deals that can’t be amended by Congress. The Bush administration had trade promotion, or “fast-track,” authority to pursue the deals with South Korea, Colombia and Panama, but TPA expired in 2007, just after the FTAs were completed.
The Obama administration has not been in a rush to renew trade promotion authority. Republican senators offered a renewal amendment during Senate debate of a precursor bill to the FTAs, but it was voted down. Officials said TPA was too important to bury in another bill.
“We are looking for some thought and consideration that we can find consensus on TPA,” said Charles W. Dittrich, vice president of the National Foreign Trade Council. The trade council published a white paper about the future of TPA in 2008. “It has an impact on what negotiations other countries are willing to enter into with the United States. They know they’re entering an open-ended discussion without trade promotion authority.”
“Trade promotion authority fills two very important spots. It gives confidence to the other country that the agreement will be considered or passed without amendment. It allows Congress to set forth negotiating objectives,” said Doug Goudie, director of trade policy for the National Association of Manufacturers.
TPA has been the president’s negotiating tool since the late 1970s. It was used to negotiate the North American Free Trade Agreement. The first TPA expired in 1994, and was revived by the Bush administration in 2002. Goudie said the current law is showing its age. The old TPA, for example, doesn’t include intellectual property rights protection.
Goudie said free trade agreements are the best alternative for opening markets unless there’s a revival of the World Trade Organization Doha Development Round. Doha negotiations broke down in 2008.
The NAM thinks a free trade agreement between the U.S. and the European Union, or a NAFTA-EU agreement is a prize worth pursuing, Goudie said. Much of the U.S.-EU trade is intra-company transfers of components. Tariff rates are low, but “you have a lot of companies paying low nuisance tariffs on products that they’re shipping back and forth as part of the manufacturing process.” Congress periodically approves a miscellaneous tariffs bill that provides relief for specific items that companies import, but an FTA would cover all goods moving from a European plant to one in the U.S.
Goudie said negotiations with the EU would smooth the rough spots in law and regulation. “There would be a value in working out an overhaul of regulatory and statutory issues that are so different between the U.S. and the EU.” A sticking point could be the EU’s long-standing resistance to market access for foreign agricultural products.
The Trans-Pacific Partnership agreement could include additional countries: Indonesia, Thailand and the Philippines, Goudie said. “These are difficult negotiations. You have some thorny issues — state-owned enterprises, varying levels of economic development and growth.”
Goudie said the president doesn’t need trade promotion authority to start negotiations, and the window of opportunity is closing. Prospective trade partners may be unwilling to enter into negotiations in an election year. “The question is: Will you find countries that are willing to negotiate with you, given the uncertainty about who will be the president to carry on those negotiations?”