Pass Free-Trade Pacts and Renew the TPA

The long winter surrounding U.S. trade policy is starting to thaw. While this Congress and the administration have yet to do anything to actually liberalize trade, it has reappeared on the to-do list of lawmakers.

There is a lot of lost time to make up for, however, as it has been nearly four years since Trade Promotion Authority--something I believe every president deserves--expired and more than three years since Congress last acted on a trade agreement.

As the trade agenda returns to the headlines, it is important to remember that there is both good news and bad news in the world of U.S. trade. And the shorthand for the division between the two is the difference between policy and politics.

The first piece of good news is that we have in place the necessary processes for advancing our near-term trade agenda. First, the TPA, proposed by President George W. Bush and enacted by Congress in 2002, remains in effect for the Colombia, Panama and South Korea trade agreements that were signed before the TPA expired. It was a hard-fought Congressional battle, but the law requires that once the president submits a trade agreement to Congress, expedited procedures ensure that the bill is immediately introduced in the House and Senate, is not subject to amendment and is given Congressional consideration within 90 days.

The second piece of good news is that effective tools for resolving trade disputes are on the books as well. While these established dispute-resolution processes are reaffirmed by our pending agreements, long-standing U.S. statutes exist to address claims of dumping, export subsidies and other barriers to trade.

Without a renewal of the TPA and a yet-unseen commitment by the administration to aggressively pursue open markets, we will only slip further behind other developed nations as a leader in trade liberalization.

Moreover, these two fundamental elements of any good trade agenda--liberalization and dispute resolution--each reinforce the other. Using enforcement tools when necessary and appropriate builds confidence among nations that open markets will not be unfairly exploited by one party. And this confidence in turn can promote expanded trade and more trade liberalization.

While there has been no legislative action on the pending agreements, dispute resolution mechanisms are actively functioning, whether they are at the World Trade Organization or through domestic statutes. Recent rulings by the WTO with respect to the Boeing-Airbus cases are but one example. While the U.S. did not emerge unscathed from the most recent ruling, it is clear from a broader review of that fight that trade subsidies provided to Airbus dwarf those to Boeing and the U.S.

Another important case, just filed under domestic trade remedy laws by Whirlpool, alleges dumping of imported refrigerators in the U.S. market at prices below the manufacturers' production cost. It is a serious allegation for two reasons.

First, dumping products into our market is a serious violation of U.S. trade laws and WTO rules, and those countries party to the WTO must live up to their trade practice obligations. That is true when the U.S. is at fault as well as when the fault lies with our trading partners. We must abide by our commitments, and we should fight to ensure others abide by theirs as well.

Second, the consequence of dumping is visited not only on U.S. shareholders but also on U.S. workers. Whether building airplanes or building refrigerators is in question, there are jobs in the United States at risk. Without the confidence that the cases can be adjudicated fairly and promptly, the political case for more bilateral, regional and multilateral agreements becomes more difficult. But if workers trust that expanded global trade will be beneficial to them as consumers and as producers, politicians can maintain their will.

But there is bad news as well. First, Congress is quite rusty when it comes to action to liberalize trade. One clear and explicit objective of ratifying eight free-trade agreements from 2001 to 2006 was to establish the value of repetitive actions for effective learning. Members of Congress learned by doing. But the lack of progress for more than three years has left the U.S. a laggard, not a leader, on the global stage.

The problem to solve is a political one. The opportunity for opening markets is here, the substantive policy work is complete and the legislative process for getting it done is in place, but the political commitment has yet to materialize.

Second, and more significant, is that peering forward beyond the euphoria surrounding the three pending agreements reveals that the future of our trade agenda is completely bleak. Not only are big deals such as European Union-South Korea near completion, but more than 100 trade agreements are being negotiated worldwide.

Without a renewal of the TPA and a yet-unseen commitment by the administration to aggressively pursue open markets, we will only slip further behind other developed nations as a leader in trade liberalization.

While I'm encouraged by the near-term opportunities for trade deals this year, it simply isn't enough. Buttressed by the knowledge that individual trade disputes can be addressed through existing mechanisms, we need to be vigorous in our pursuit of the broader free-trade agenda. That means first passing the pending trade agreements, then renewing the TPA.

Bill Thomas is a visiting fellow at AEI.

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  • Bill Thomas, a former chairman of the House Ways and Means Committee, served in the U.S. House of Representatives from 1978 to 2007. During his six-year chairmanship, he guided the enactment of $2 trillion in tax relief, including the Economic Growth and Tax Reconciliation Act of 2001, which reduced all ordinary income tax rates; the Jobs and Growth Tax Reconciliation Act of 2003, which reduced the tax rate on dividends and capital gains; and the Job Creation Act of 2004, which provided significant reforms for corporate tax policy.
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