Yo, Dude, Wassup? Part II

Technically, the dog days of summer are over—and believe me, our dog is happy about that—and activity is quickly returning to the nation’s capital. Nevertheless, having started a discussion last week of what is coming up this fall, I am duty bound to conclude it this week with comments on the legislative branch of our government.

All things considered, and to the surprise of virtually everyone, Congress actually accomplished quite a bit this term, including the first major infrastructure bill in years; gun control legislation, which was very modest but not nothing; the CHIPS and Science Act, which positions us to compete more effectively with China; and the Inflation Reduction Act, a pale imitation of the Build Back Better Act but still far more than nothing, particularly on climate.

Missing from this list is anything on trade (aside from the Uyghur Forced Labor Protection Act). That doesn’t mean there was no effort. Both House and Senate were diligent in producing trade provisions that actually passed their respective bodies but ultimately were all thrown over the side as the CHIPS and Science Act was trimmed down to manageable size. That does not mean, however, that they are lost to history.

One of the axioms of working in a legislative body is to never do something once if you can do it three or four times, and it is certain the failed provisions will be back this fall for another try. This will be fun to watch and will keep the lobbyists fat and happy, but I’m skeptical that any of the provisions will end up in law this year. The main reason is that Congress had seven months to reconcile its differences earlier this year and failed to do so. Those differences were real, and they remain. It is hard to see any epiphany on the horizon that will cause people who have dug in to change their minds.

If anything, the political situation militates against epiphanies. The few weeks before the midterm elections will be dominated by the annual defense bill and appropriations bills (more likely continuing resolutions), which have major challenges of their own. Following the elections there will be, at most, a month to wrap up loose ends before the new Congress takes over on January 3. If the Republicans take over either house of Congress, their strategy will be to prevent any significant action in 2022 on the grounds they will do it better in 2023. If the Democrats retain control, they will still face the same obstacles they were unable to overcome earlier. Neither scenario suggests breakthroughs are likely.

That is unfortunate, because the failed provisions are important. Most urgent is renewal of trade adjustment assistance (TAA), which has largely expired. For more than 50 years, we have provided support to the victims of trade—those who have lost their jobs to imports—and the need now is as great as it has ever been. Our programs are not the best in the world—Denmark is at the top of my list—but we ought to at least be able to continue them. Failure to do so illustrates a chronic dilemma of trade legislation. Republicans have tied TAA renewal to renewal of trade promotion authority (TPA), the authority for the president to negotiate trade agreements. Democrats support TAA but are unenthusiastic about TPA, and the administration has not asked for the latter. The Republicans, in contrast, support TPA and are unenthusiastic about TAA. The obvious compromise, which has worked for decades, is to do both, but in the absence of a major push by the administration for both, it appears neither will make the cut.

Two provisions that both bodies passed in different form were renewal of the generalized system of preference (GSP) and miscellaneous tariff bill (MTB) programs. The differences are over details, but they have been hard fought, with strong feelings on both sides, and there is no reason to think that has anything has changed in the past few months, even as data on what these expired programs are costing U.S. manufacturers in higher input prices roll in.

I have ranted several times about the Casey-Cornyn proposal to provide for review of outbound investments, known informally as “reverse CFIUS.” This proposal now has four strikes, having failed in 2018, in 2021 twice, and this year in the CHIPS and Science Act. If this were baseball, it would have long since been sent to the bench, but in the legislative process resurrection is always possible, and you should expect this one to return, probably as an amendment to the annual defense bill, where hopefully it will receive its fifth strike and get the boot for good.

The Brown-Portman trade law revisions to give the government tools to deal more effectively with circumvention and serial violators of U.S. trade laws are also good provisions, but the longer they dangle out there, the more the business community has time to mobilize to kill them off.

Finally, there was one set of congressional actions that do implicate trade—the domestic procurement and assembly requirements of the solar and electric vehicle tax credits in the Inflation Reduction Act. The latter in particular has already produced vigorous complaints from Korea, Japan, and the European Union, with several threatening litigation at the WTO. I will deal with this issue in greater detail in a future column—doing it here would double the length—but you should expect growing pressure on Congress and the administration to ease the restrictions.

Knowledgeable readers will note there is nothing here about big new trade ideas. That is because the end of a congressional session is about cleaning up loose ends; it is not a time for new ideas. We’ll save those for 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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