Trade Promotion Authority: Addressing Some Criticisms

Some members of Congress are concerned about Trade Promotion Authority (TPA), which would fast track trade negotiating authority, but in fact it would be a positive move toward ensuring the United States remains a competitive economy. Senator Jeff Sessions (R-Ala.) released a statement this week citing concerns with TPA over increased trade deficits, currency manipulation—claiming it would take power away from Congress and give it to the executive branch—and more.

AEI’s Derek Scissors published a rebuttal to Sessions’ misdirected attack on TPA that deals with many of the issues raised by Sessions. Scissors noted correctly that some of Sessions’ concerns have little to do with TPA but are hot-button issues for opponents of trade agreements, for example, immigration.

Several points raised in Sessions’ attack deserve more elaboration. First, contrary to Sessions’ assertion, Trade Promotion Authority does not usurp Congress’ authority in relation to trade agreements. Rather, it is an accommodation between the executive branch and the legislative branch of government to allow trade negotiations to be conducted with credibility with other countries; that is, that agreements reached during negotiations will not be overturned in the voting process. TPA cedes negotiating authority to the president for trade agreements only if certain congressionally determined criteria are met: that very specific objectives outlined in TPA are accomplished in a trade agreement, that Congress is consulted throughout the negotiating process. TPA puts Congress in charge.

Some of the objectives in TPA have gotten very expansive, and that is a cause for concern, as special interests have increasingly pushed for non-trade-related issues to be included in trade agreements. And those issues, especially labor and environmental issues, provide the basis for much of the rancor relating to trade.

Sessions also raises the spectre of job losses because of TPA and trade agreements that increase the trade deficit. The trade deficit argument is raised by those who believe that imports provide less value to the economy than do exports, without recognizing that both are necessary in a thriving economy. Imports provide more choices and a greater range of prices for consumers as well as honing competition for improved products and services. Also, in today’s world, with the globalized supply chain, many goods have value added at many different points and by many different countries during their manufacture. The antiquated concept of “trade deficits” doesn’t recognize these significant changes.

Sessions also raises the currency manipulation issue in relation to China, when China isn’t even a part of any of the trade agreements being considered. My colleague Iain Murray took on the currency manipulation argument in his recent article in The Washington Examiner. As Murray noted:

If a given country decides to drive down the value of its currency to boost exports, it represents a subsidy to Americans paid by the other country’s citizens. That benefits not only American consumers, but also importing producers, because a significant amount of trade consists of intermediate goods — semi-finished products like car engines or commodities like sugar used to make candy. China’s role in the global supply chain, where it often provides such intermediate goods, means its monetary policy doesn’t always affect the price of final consumer products.

Some claim that currency manipulation gives an unfair advantage to foreign producers and discriminates against the U.S. exporters, creating trade deficits and job losses, especially in manufacturing. Though it is true that employment in exporting sectors might decline, this does not mean that U.S. is losing jobs on net.

Higher imports release resources, including labor, that can be used to produce other goods that otherwise would not be locally available. Moreover, the figures show that foreign investment in the U.S. exceeds capital outflows, also creating economic activity and jobs.

TPA is not a perfect vehicle for advancing free trade interests, but it does streamline a complex process and makes it less likely that trade agreements will be hijacked by special interests after they have been negotiated.