Postelection Trade Blues
Today is the first in a two-part series on trade policy after the election. One might ask why this is being written before the election rather than after it, and the answer is it’s all speculation anyway, so before or after the voting doesn’t make much difference. It does require one assumption, however, which is that the Republicans take over one or both houses of Congress. Otherwise, if the Democrats remain entirely in charge, our trade policy will essentially be more of the same. This week I will look at the lame duck session and next week at 2023.
To set the stage, I recommend you read Doug Palmer’s thoughtful piece in Politico, which features two members of Congress, Kevin Brady (R-TX) and Ron Kind (D-WI) discussing the possibility of a more traditional pro-trade agenda in the next Congress, including some free trade agreement negotiations. They even raised the possibility of the United States returning to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), although that was viewed as a very large hill to climb. Kind’s theory was that when control is divided between the parties, presidents turn to foreign policy because it might be easier to accomplish something there. Brady’s view, which he has frequently expressed, was that failing to pursue trade agreements that include market access constitutes lost opportunities for economic growth and jobs.
Readers of this column know I have a good bit of sympathy for Brady’s position, but I don’t think that a change of party control by itself is sufficient to get there. Most of the members of Congress talking about this are either committed pro-traders or are retiring, or both, as Brady and Kind are. They won’t be around to set the agenda in 2023, but they will be here for the rest of this year and are in a position to influence the agenda.
There has already been discussion about an end-of-year trade bill, largely because there is so much unfinished business. Both the House and Senate versions of the CHIPS and Science Act had trade provisions which were dropped in conference. Some of the provisions, like renewal of the Generalized System of Preferences (GSP) and the miscellaneous tariff bill process, were in both versions in different forms. Others, like trade adjustment assistance (TAA) renewal, trade law amendments, and a change in the de minimis rules aimed at China, were only in the House bill. Missing from both bills was renewal of trade promotion authority (TPA), which expired June 30, 2021.
When I commented on this two months ago, I was skeptical that anything would happen. The two sides had more than seven months to work out their differences and failed to do so, and I was not convinced that three more weeks would make any difference.
I still think that, but the situation has gotten more complicated over the past month as a partisan difference of opinion has erupted. The Democrats want to renew TAA, which provides badly needed support for workers who have lost their jobs due to trade and which expired with TPA in 2021. The Republicans, or at least some of them, say the price for TAA renewal is TPA renewal as well, noting that the two have been linked in the past (although they didn’t start out that way). TPA renewal is a fraught exercise—it is essentially writing a new comprehensive trade bill—that takes a long time, more than Congress has left this year. Moreover, the administration has shown no interest in obtaining new negotiating authority—a decision they will come to regret, but it remains their position.
While there is an obvious deal here—renew both—the practical obstacles, primarily lack of time, will likely prove insurmountable, unless all parties, including the administration, can be persuaded simply to renew both without changes. That would require three things that right now appear to be a stretch. First, there would have to be a change in administration thinking to welcome the authority even if they have no immediate plans to use it. Second, the Republicans would need to resist the temptation to play games with the content of the bill and avoid trying to insert provisions that would require awkward votes from the Democrats. Third, the Democrats would have to shut down their own left wing, which has long resisted TPA legislation.
Of the three, the administration’s decision should be the easiest because the bill simply provides authority; it does not require using it. No doubt, the authority’s existence would increase pressure to do something with it, but they will face that anyway as pressure for a more active trade policy mounts. The other two are harder. Asking Republicans not to offer “gotcha” amendments is like asking them to cut off their hand. Asking Democrats to reopen a bitter intraparty feud is equally unrealistic.
Finally, there is context. Brady has suggested there will be interest in doing something this year because Democrats want to clean up unfinished business, and Republicans will be willing to clear some things off the table so they won’t have to deal with them next year. My experience, however, suggests the opposite. When control is changing, the incoming majority usually insists on only minimal work in December on the theory that they will do it better once they take over.
During CSIS’s former U.S. Trade Representative (USTR) event on October 17, Senator Rob Portman (R-OH), also retiring, proposed a “grand bargain” on trade to close out the year. He did not go into detail, but you can assume the core of it was exactly what I’ve been writing about here. I hope he and the others fading off into the sunset can pull that off, but, sadly, I’m not holding my breath.
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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