WASHINGTON — Lawmakers will begin a new session of Congress this week amid heightened rancor, but a new dynamic on Capitol Hill could work to pass presidential Trade Promotion Authority and, eventually, push through an Asia-Pacific trade pact.
While Republican control of the House and Senate for the next two years is expected to result in partisan battles with the White House on contentious issues such as immigration, trade is one area where a divided government could find some common ground.
Two free-trade advocates, Sen. Orrin Hatch (R., Utah) and Rep. Paul Ryan (R., Wis.), will chair the Senate Finance Committee and the House Ways & Means Committee, respectively, and they could play a big role in advancing TPA and laying the groundwork for Congressional consideration of the Trans-Pacific Partnership trade deal being negotiated by the U.S. and 11 other countries.
TPA, which expired in 2007 under President George W. Bush, is seen as vital to completing several trade deals, including the TPP and the Transatlantic Trade and Investment Partnership between the U.S. and the European Union. Under TPA, Congress can’t amend trade pacts negotiated by the executive branch but only vote up or down on them.
Industry officials also are hoping a plethora of smaller trade measures will gain momentum in this Congress, including a preferential trade program for apparel with Nicaragua, which expired on Wednesday; the African Growth & Opportunity Act, which expires on Sept. 30, and the Generalized System of Preferences, which expired in July 2013.
Internet sales tax, a key, non-related trade issue important to retailers, could have a more difficult time moving forward in the new year, particularly because the clock essentially started over on legislation that stalled in the last session of Congress. In addition, efforts to raise the federal minimum wage, a priority of President Obama that has little GOP support, will face challenges this year.
“I’m positive on the outlook for progress on the trade agenda over the next two years, but it will take some time — into at least the middle of 2015, if not the end of the year,” said Phillip Swagel, a professor of international economic policy at the University of Maryland. “There first has to be a chance for President Obama and the new Congress to work together, to build confidence. After two years in which the President emphasized unilateral action, it will be difficult to convince Republicans to go forward with a grant of power through TPA and then doubly difficult because Republicans will want to see a sizable number of Democratic votes for the measure, including in the House.”
Swagel said the TPA vote will be tough for Democrats, who “see the base of their party moving away from the sort of global engagement and market orientation embodied by trade agreements.”
Despite the hurdles, Obama last month predicted the odds of closing a deal on TPP are now “significantly higher” than 50-50 and much better than they were last year.
Industry officials are somewhat optimistic.
“Orrin Hatch is as free trade as they come. Paul Ryan is as free trade as they come. Both of them have indicated this will be one of their highest priorities,” said Juanita Duggan, president and chief executive officer of the American Apparel & Footwear Association. “But there is so much distrust between the branches, and there is so much feeling of a lack of transparency” that it will be difficult.
“I think they need to pass TPA,” Duggan continued. “I don’t know how they can close TPP without it. That is our collective opinion, and we are going to push as hard as possible to help get that done. At the same time, they need to do the low-hanging fruit [AGOA and the Nicaragua tariff preference program] because that’s a confidence-building measure. These are not controversial, bipartisan, and they don’t cost anything. If they come together and the Democrats and Republicans are able to do the noncontroversial stuff, it gives them some kind of basis for moving forward.”
Julia Hughes, president of the U.S. Fashion Industry Association, said she is hopeful Congress can pass TPA in the first four months of the year, though she noted it won’t be “smooth sailing.
“It seems as though everyone is focused on TPA as an area where Congress can act and the administration can work with them to get a good outcome,” Hughes said. “That will really open the door to pressing for the conclusion of TPP this summer. Some people have talked about a faster timeline for TPP, but I am a little skeptical because there are really tough and sensitive issues, including textiles and apparel, that will be hard to resolve before [the summer].
“I think there will be an effort later this year, after TPA is approved, to try to move quickly on T-TIP,” Hughes added. “In many of our issues, in terms of duty elimination and even regulatory harmonization, there is a lot of unanimity on the U.S. and EU side. We’ll cross our fingers that they can conclude it in 2015, but we first need to get other trade deals completed, especially TPA.”