Written by Chair, North America and Global Trade Lead Everett Eissentat.
The Missing Tool in President Biden’s Trade Agenda
President Biden is missing a key tool to advance America’s trade agenda: Trade Promotion Authority (TPA). Under TPA, Congress delegates limited authority to the president to negotiate trade deals on behalf of the United States, helping ensure that negotiations lead to strong trade agreements which can gain the approval of Congress. While TPA may be imperfect, it is a proven instrument to effectively coordinate Congress’ Constitutional authority over tariffs and the Executive branch's Constitutional authority over foreign policy, enabling the US to align and act strategically on foreign trade. It also enables the US to lead on global trade.
The Biden administration, however, let TPA expire in June 2021, limiting its ability to get trade deals done. Given the increase in global economic uncertainty and geopolitical risk, it is now more important than ever that the White House seek congressionally approved authority to negotiate new trade agreements that help shape and provide predictability to the global economy.
Economic and geopolitical uncertainty defines today’s global reality. After decades of growth driven by open market policies, trade integration, and just-in-time delivery, the post-WWII geopolitical consensus that favored globalization is rapidly ebbing. It leaves in its wake growing pockets of economic populism, heightened nationalism, and economic fragmentation. As a result, today’s world is increasingly chaotic, unpredictable, and dangerous.
Complex geopolitics are driving this change at an accelerating rate. Russia’s invasion of Ukraine led to a global scramble for food security and placed Europe in the grips of an unprecedented energy crisis. Supply chains disrupted by the impact of the Covid pandemic remain tangled, resulting in shortages and price hikes. Governments, looking to enhance their national security, are increasingly looking inward and weaponizing trade and investment.
For companies with supply chains and manufacturing footprints built for the past era of globalization, these changes bring increased risk. Russia’s curb on fertilizer exports negatively impacted agribusinesses in Brazil which has led to global soybean shortages and increased costs for food manufacturers worldwide. US legislation has driven billions of dollars in incentives to shift semiconductor production from Asia to the United States, potentially sparking a global subsidies race. Meanwhile, a new carbon border adjustment mechanism in Brussels imposes new costs on certain carbon-intensive imports into the EU and on industries seeking to access the EU market.
Decades old institutions and trade rules are insufficient to keep pace with this rapidly changing geopolitical and regulatory environment. While the Biden administration deserves credit for undertaking a trade and economic dialogue with countries such as Kenya, and for pursuing multilateral initiatives like the Indo-Pacific Economic Framework (IPEF) and the Americas Partnership for Economic Prosperity (APEP), these efforts are not enough. The Biden administration must aggressively pursue new trade agreements and work with Congress to update US trade laws designed to address today’s increasing risk and economic insecurity.
Renewing TPA would enable the Biden administration – and the US writ large – to address these dynamic challenges. Today’s TPA can and should reflect the geopolitical and economic priorities of the administration and Congress under which it is renewed. Past iterations of TPA have included new procedures on Congressional-Executive consultations and required agreements to meet new trade and economic priorities on issues such as labor, the environment, digital trade, and market access as well as data, energy, and food security. And, if past is prologue, negotiations over TPA will unlock a stalled Congressional trade agenda, enabling much needed renewal and reform of other US trade laws, including: renewal of unilateral preference programs such as the Africa Growth and Opportunity Act (AGOA) and the Generalized System of Preferences (GSP); reauthorization of worker adjustment and training programs such as Trade Adjustment Assistance (TAA); and updating US trade remedy laws, including long-overdue reform of statutes such as Section 301 under which tariffs were unilaterally imposed on roughly $350 billion dollars of Chinese imports with little to no Congressional consultation or oversight.
With TPA and renewed trade laws in place, the United States can lead and advance a trade agenda to create a more transparent, predictable, and fair multilateral trading environment. Doing so will enhance US economic security and strengthen US national security alliances. It will also help unleash the forces of private sector growth, providing businesses, governments, and other stakeholders with more predictable and transparent rules to guide international trade. Until then, businesses and economies around the world will continue to be whipsawed by the forces of economic insecurity and unpredictable geopolitics. TPA renewal by the Biden administration is a critical missing step to advance America’s trade agenda and to lead globally.
