Brazil

Last week, the administration and the government of Brazil announced a trade deal—technically a limited protocol added to the existing Agreement on Trade and Economic Cooperation.  The agreement covered only three areas: customs and trade facilitation, good regulatory practices (borrowed from the United States-Mexico-Canada Agreement), and anti-corruption. It does not contain enforcement provisions, and it does not contain provisions sought by the business community on digital trade and intellectual property, among others. I am not going to go further into the details of what was agreed to—you can read more details about it here.

Instead, I want to comment on two features of the agreement that have aroused controversy—whether we should be negotiating with Brazil and whether the agreement should be submitted to Congress for approval. The latter in particular has implications for the renewal of trade promotion authority, which will be expiring at the end of June 2021.

On the first matter, Democratic members of Congress have raised objections to negotiating with Brazil based on their opposition to the Bolsonaro regime and its policies, particularly with respect to the environment. (It is worth noting that France and members of the European Parliament from a number of member states have raised similar environmental concerns with respect to the EU-Mercosur trade agreement, calling into question whether the parliament will approve it.)

I am not going to express a view on the Brazilian government or its policies. The interesting question to me is the extent to which non-trade issues should intrude into trade negotiations. This is not an entirely new issue, but it has taken on increased importance over the past few years. Last year, Senator Warren (D-MA) in her campaign for president put out a trade policy that opposed negotiations with countries that did not meet a set of criteria, including detailed commitments on labor, environment, and human rights. At the time, critics, including me, pointed out that if her policy were law, the United States would not be able to negotiate with itself, since we did not meet all of her criteria.

I think the idea of prerequisites for negotiations approaches the issue backwards. If we wait for countries to become “acceptable,” we are not likely to be negotiating with anybody, and the practices we object to are likely to continue. It would be more productive to use the negotiating process to obtain the results we are seeking. In the case of Brazil, it is a fair point that the Trump administration is probably not interested in addressing Senator Warren’s priorities, which probably accounts for the Democrats’ opposition, but I think it is a bad policy precedent to demand that we not negotiate with a government simply because we do not approve of all of its policies.

The second issue revives a long-standing debate over the prerogatives of the executive and legislative branches that has been exacerbated by the Trump administration, which has not submitted the Korea, Japan, China, and now Brazil agreements to Congress, not to mention the famous lobster deal with the European Union.

The administration rests its position on trade promotion authority language which mandates submission of agreements that would require changes in U.S. law or would make tariff changes that go beyond the fairly limited authority granted to the president. Arguably, none of the agreements mentioned above would require such changes, so they were not submitted, although it was noted that phase two of the China and Japan agreements might well require submission. In contrast, some members of Congress regard this tactic as a deliberate effort to avoid the oversight they believe the constitution requires in Article I, Section 8.

The administration’s preference for avoiding congressional review has moved this argument from academia to the political sphere, since Congress will likely begin to consider renewal of trade promotion authority next year, and it is already clear that there will be a good deal of sympathy for a change that would require more agreements to be submitted for approval. The Scholl Chair has been conducting a discussion with a working group of experts on what a new trade promotion authority bill might look like, and we have spent several hours discussing this precise issue. That work is not finished, but it is clear that many members of the group favor a requirement that all trade agreements be submitted and that Congress would have to approve them before they could go into effect. 

There is a growing view in Congress that the pendulum has swung too far in the direction of executive branch authority, and it is time for it to swing back towards the legislative branch, not only on the question of submission of agreements but on other matters like the president’s use of the section 232 national security provision. Of course, the last time the pendulum was at the other end of its cycle was during the Hoover administration, and we ended up with Smoot-Hawley. It is safe to say it won’t go back that far, but some significant adjustments are overdue, and we will see them float to the surface next year.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.

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