Fast Track and the Declining Consensus About Growth

After much effort, Congress has passed and President Obama has signed Trade Promotion Authority legislation, better, if inaccurately, known as “fast-track.”  In a nutshell, fast-track is a legislative device to allow Congress to consider and vote on trade agreements without amending the deal after the fact.  Over the last few months, American Business Conference executives have been arguing in favor of this legislation and are of course pleased that it ultimately was adopted.  Since at least the days of the Canadian-US Free Trade Agreement during the Reagan years, ABC has strongly advocated fast-track as the means to capture the growth and job-creating possibilities inherent in international trade and investment agreements.

What made this battle different from previous ones is the nature of the opposition.  Of course the usual suspects, organized labor, religious groups, environmentalists, public interest coalitions, and one-world, anti-growth hipsters led the charge against fast-track.

What was new was the presence of conservative Republicans in opposition.

That many of the Republican members of Congress could be against fast-track illustrates, at least in part, the low level of confidence even some Republicans now have in American business.  Put simply, they, along with their unlikely union allies, do not believe that more open international trade and investment will yield growth benefits that will ultimately accrue to the American people.  The notion that the economy and government are scams that reward only C-Suite types is an intellectual drag on the economy that affects all business and workers.

The possibility and even the desirability of economic growth are no longer taken for granted.  For this reason, fast-track just barely squeaked through Congress.    In short, the crisis in trade policy is really the crisis in growth policy.

We are in the midst of history’s slowest recovery from recession, with first-quarter gross domestic product limping along at an annualized rate of 0.2 percent.  To the extent that Washington can do anything about this, it hasn’t.  Tax reform is dead in the water, the entitlement-driven debt overhang, as the CBO recently pointed out, is worsening, infrastructure improvements are languishing, and the regulatory burden of such things as Dodd-Frank continues.  Without the unifying concept of growth and what it can do for society these problems will persist.



Trade Promotion Authority in Danger

The Trans-Pacific Partnership (TPP), a trade negotiation between the United States and eleven other countries, is nearing completion.  However, absent the passage of Trade Promotion Authority (TPA), it is unlikely that the President will be able to conclude the agreement.  TPA allows for expedited Congressional consideration of trade agreements without amendments.  Without it, countries cannot know if the deal they sign will be the one Congress eventually votes on.

Ideally, TPA should have been passed before our trade negotiators had moved so far down the road with the Trans-Pacific Partnership negotiations.  That way, very general trade negotiating objectives would have been established legislatively and the mechanism for Congressional action would have been in place.  Indeed, a bipartisan TPA bill was introduced last year, written by then Finance Committee Chairman Max Baucus and Senator Orrin Hatch.  It never came to a vote.  Now, the President is in the difficult position of asking for trade authority after going ahead with a negotiation.

The result is a political mess.  The TPA legislation appears to some to be an after the fact endorsement of a particular negotiation – the TPP.  Since the TPP talks have been conducted behind closed doors – as such negotiations always are – the Administration has been vulnerable to charges of a lack of “transparency” and bad faith relations with Congress.  Much of this criticism is disingenuous.  Many of those complaining the loudest would not be likely to support Trade Promotion Authority in any case.

At present, there is no TPA bill.  Finance Committee Chairman Orrin Hatch and Ranking Member Ron Wyden have been unable to agree on language that, from Hatch’s point of view, does not dilute TPA’s effectiveness while, simultaneously, from Wyden’s point of view, offers at least the chance that some Democrats will vote for the bill.  This is quite a needle to thread.

It is ABC’s hope that a bill will emerge from Finance by Memorial Day.  Until then, we are in the position, when our members go to the Hill, of selling a concept rather than legislation, and that is awfully difficult to do.  Moreover, if Finance does come up with a bill, no one knows if it can pass.  A rump group of very conservative Republicans in the House are opposed to TPA because they don’t want to give the President any more power, even if it means concluding a pro-business trade negotiation via a mechanism, TPA, that has been used for the last forty years by Presidents of both parties.  These Republicans are few in number but they add weight to the very large number of Congressional Democrats who oppose market opening initiatives under almost any circumstances.  The only thing worse than not getting a TPA bill would be to get one and then see it voted down.  That is not an impossible eventuality.  It is time for proponents of more open trade get out of their defensive crouch and get to work.



The Export-Import Bank and the Lack of a Trade Policy

As expected, Congress passed a continuing resolution (CR) last week that will fund the government through December 11.  This had to be done in the absence of legislation to fund fully the government in FY 2015, which begins on October 1.  The December 11 expiration date means the funding issue will have to be revisited once more during the lame duck session, most likely with another continuing resolution that will keep the government open through early 2015.

The new CR also extends the operating authority of the Export-Import Bank through June 30 of next year. While not a full-fledged reauthorization of the Bank, the extension keeps the institution alive for now in the face of conservative objections that it represents little more than “crony capitalism” that uses taxpayer dollars to support the international sales of big companies through sweetheart financing guarantees.

Keeping the Export-Import Bank on life support underscores first, the inability of Washington to kill off agencies and, second, the terrible preference that Congress has shown in the last twenty years for temporary “fixes” that merely prolong debates rather than settle them.

Indeed the entire collapse of the budget process, which necessitates passage of continuing resolutions, is itself an illustration of the latter problem.  Or think about so-called tax extenders, measures such as the tax credit for research and development, which are renewed on a regular basis rather than permanently placed in the tax code.  There are 55 such provisions and they have been temporarily extended 19 times.  Why?

Government’s preference for the temporary over the permanent of course can be explained in a number of ways.  But surely one explanation is the lack of an economic strategy that allows policymakers to evaluate the worth of proposals or agencies in the context of a larger set of national goals. 

The Export-Import Bank is an example.  Whatever one thinks of it, it appears to be a “one-off” agency without any grounding in an overall trade policy because we do not have an overall trade policy that enjoys bipartisan support.  Lacking a trade policy, we cannot measure the utility of the Export-Import Bank as part of that policy.  And so the Bank is consigned to a kind of twilight existence, not quite dead and not quite alive, hostage to future fights over its temporary extension, battles that will benefit no one but the lobbyists who are paid to wage them.


Trade Negotiating Authority

Under the Constitution (Article 1 Section 8) Congress has the power to regulate commerce with other nations and thus Congress must grant to the President the authority it holds. The last grant of trade promotion authority to the President expired in 2007.

Last month, Senators Max Baucus and Orrin Hatch, respectively the chairman and ranking minority member of Senate Finance, introduced the “Bipartisan Congressional Trade Priorities Act of 2014.” Similar legislation was introduced in the House by Dave Camp, the chairman of Ways and Means.

The Baucus-Hatch-Camp legislation renews the President’s right to enter into trade agreements before July 1, 2018. The bill provides for an extension of that authority to July 1, 2021 if the President requests such an extension and if neither house of Congress adopts a resolution of disapproval. Thus, the next President will be able to enjoy trade promotion authority, potentially through his or her first term.

Passing trade promotion authority is going to be a heavy lift politically, especially since Majority Leader Harry Reid has announced his opposition.

The Baucus-Hatch-Camp initiative may be the only pro-growth legislation of consequence to emerge this year. In this letter to members of Congress, written almost a year ago, ABC’s chairman and president make the case for trade negotiating authority and, more generally, the importance of trade for our economy. The letter seems as relevant today as when it was sent.