Congress butts in on trade agreements

By Sam Obenhaus

Photo courtesy of the U.S. Mint

There is at least one policy initiative that a bipartisan majority of the House and Senate agrees on: the Trans Pacific Partnership (TPP), a 12-member free trade agreement currently being negotiated by the Administration, should address currency manipulation by member states.  This isn’t all talk.  A cadre of influential members wants it to be a binding goal for negotiations.  Putting aside the merits of clamping down on currency manipulation, Congress’ interference in the negotiating process sets a terrible precedent and undermines a power-sharing agreement that has facilitated the enactment of America’s trade policy for the past 75 years.

At the heart of the problem is that modern trade agreements, despite resembling treaties, are approved as congressional-executive agreements.  This is a delicate, frankensteinian process that exists because the Constitution fails to define the scope of two, sometimes conflicting powers: the President’s Article II power to negotiate treaties with the advice and consent of the Senate, and Congress’s Article I power to “regulate commerce with foreign nations.”

Under this process, Congress effectively limits its own power by ceding its Article I authority to the President.  Congress does so by passing legislation, currently termed Trade Promotion Authority, allowing the Executive Branch to negotiate bilateral or multilateral agreements that have the effect of “regulating” international commerce by reducing or eliminating tariffs, along with other policy changes.

The first such bill, the Reciprocal Trade Agreements Act of 1934, allowed new tariff rates to go into effect automatically so long as they fell within a range pre-defined by Congress. The first revision, passed in 1974, continued to place only minimal restrictions on the President’s negotiating authority but enhanced Congress’s oversight role by requiring the President to submit implementing legislation to both the House and Senate for passage.  Recognizing that no foreign nation would negotiate with the Executive Branch only to have any agreement reformed in the House and Senate, Congress created an alternative TPA process that limits debate and prevents the introduction of amendments.  The trade agreement the President submits gets an up-or-down vote within 90 days, requiring a simple majority for passage.

Despite changes in process, each revision has left the basic division of powers in place: the Executive Branch enjoys broad latitude to negotiate an agreement while Congress retains an oversight role.  This reflects an implicit acknowledgement that the Executive Branch is uniquely suited to negotiating complex international agreements regardless of the legal right established by the Constitution.  And this process has worked incredibly well.  The 11^th Circuit echoed this point when declining to overturn the North American Free Trade Agreement (NAFTA) on the grounds that it was enacted as a congressional-executive agreement and not as a treaty.  Citing the long and successful current practice, the court said the determination was a non-judicable political question.

But the delicate balance of power that underpins the system’s successful operation is under threat from an overzealous Congress. In 2002, the system survived its first significant challenge when some in Congress tried to force the President to negotiate minimum labor standards in any free trade agreement enacted under the 2002 TPA.  The amendment to the TPA containing this language was narrowly defeated on a party-line vote and the resulting negotiating objectives were broad and of no significant constraint.

When Congress renews TPA, either this year or early next year, there may not be enough votes to prevent Congress from upsetting the apple cart.  With a majority of both chambers in favor of including provisions on currency manipulation in the TPP, it is a real possibility that the forthcoming renewal of TPA makes addressing this issue a binding objective of TPP negotiations. Considering this very sensitive subject has not been raised – a deliberate choice by the Administration – adding it at the last moment would certainly extend if not derail completion of the agreement.

Conclusion of the TPP notwithstanding, the greatest damage caused by Congress’s intrusion into the negotiations would be to the TPA process itself.  The nation’s ability to successfully complete future trade agreements would be imperiled. 

Allowing Congress to specify with exacting detail the provisions that must be included in a given trade agreement would destroy the implicit understanding that the Executive Branch is best equipped to negotiate complex trade agreements with foreign nations.  The delicate division of powers that has underpinned the country’s successful pursuit of its trade agenda for the last 75 years would be eviscerated.  Opening the floodgates to Congressional demands – as would surely happen – would be disastrous.  Negotiation, by definition, requires horse-trading, but restrictive preconditions would handcuff our trade negotiators and greatly restrict the creativity needed to complete these complex agreements.

As the Supreme Court has long noted, it is important that the country speak with “one voice” on matters of foreign affairs.  The 535 members of Congress cannot effectively negotiate a trade agreement, either as direct participants or by setting a growing web of preconditions on Executive Branch negotiators.