Congress failed to pass much needed and anticipated trade legislation last session. Issues the new House and Senate must face include: the extension of the Trade Adjustment Assistance, the future of the Trade Promotion Authority, renewed Generalized System of Preferences, and a new Miscellaneous Tariff Bill.
The Future of the Trade Adjustment Assistance and Trade Promotion Authority
The Trade Adjustment Assistance (TAA) was extended by one year in the fiscal year 2023 omnibus following its expiration at the end of June 2022. The TAA is a top Democratic party priority that may be used as a bargaining tool for the potential renewal of the Generalized System of Preferences (GSP) and the new Miscellaneous Tariff Bill (MTB). Senator Ron Wyden (D-OR) hopes this extension could also lead to a long-term package of “other expired trade initiatives.”
Sen. Wyden said, “I fought to ensure the omnibus renewed for funding… I look forward to working with my colleagues to improve the program as part of a long-term package that addresses other expired trade initiatives as well.” He emphasized that this extension is a key first step and went on to say, “You can’t build sustainable economy without putting workers first, and the Trade Adjustment Assistance is an essential part of the safety net to help workers get the skills they need. There should be bipartisan agreement on policies that support high-tech and sustainable American manufacturing of everything from semiconductor chips to solar panels. TAA is a win-win that helps workers succeed, and have the skills to run the manufacturing facilities that will be the backbone of a durable American economy.”
On the other side of the aisle, Republicans have pushed to preserve the historical pairing between TAA and the Trade Promotion Authority (TPA), which permits presidential ability to pursue Free Trade Agreements (FTAs) in accordance with congressional direction. However, the Biden administration has neither requested TPA renewal nor pursued new FTAs, to the chagrin of Republicans.
The newly GOP-led House is anticipated to focus on more traditional trade deals, with heavier scrutiny on trade deals past and present, and placing more emphasis on China. The Republican Ways & Means Committee members will likely utilize their majority to pressure the Biden administration toward pursuing more traditional trade agendas, centered around opening new markets, although FTAs require the renewed TPA. Rep. Kevin Brady (R-TX) told reporters that, “with a Republican majority, I’m hopeful that we can [go] back and show that there’s bipartisan support for market access… opening free trade. It’s really crucial, especially with our economy to sell more American.”
However, both the president and Office of the U.S. Trade Representative Katherine Tai have avoided market access talks in favor of broader economic arrangements, including the Indo-Pacific Economic Framework for Prosperity. Both sides of the aisle remain concerned about the administration’s efforts to provide more robust consultations on agreements such as this one. “A lot of members want to talk about TPA and market access. Other countries over the years… have seen more market access here than they’re willing to give us in their respective countries,” says Rep. Adrian Smith (R-NE).
In early December, Senate Finance Committee Chair Ron Wyden (D-OR) and ranking member Mike Crapo (R-ID) along with 19 other members, sent a letter to President Biden emphasizing the Indo-Pacific Economic Framework of Prosperity’s (IPEF) required congressional approval. House democrats followed suit, sending a similar letter. These letters follow months of accusations from both Republicans and some Democrats that the administration was not being forthcoming regarding TRIPS talks and IPEF, which USTR denies. The agency holds that it has and will continue to consult with lawmakers on trade policy. Sen. Bob Menendez (D-NJ), who serves on the Finance Committee, says that USTR recently committed to address accountability- although the agency hasn’t confirmed what that this commitment entails. Menendez has extensively sought to establish a USTR inspector general to improve accountability and transparency.
The Biden administration’s decision to avoid pursuing TPA renewal has made some Democrats in Congress hesitant to provide support. Democrats have instead prioritized the renewal of TAA, which provides benefits to workers who lost their jobs as a result of global trade. However, many Republicans will only support TAA if it is accompanying TPA, as the two have been historically linked.
Sen. Portman (D-OR) and Sen. Chris Coons (D-DE) attempted to pass a trade package in December that included limited TPA deals with four countries: United Kingdom, Kenya, Taiwan, and Ecuador, as well as the restoration of both the TPA and GSP, and a new MTB. These efforts did not yield success as both Democrats and Republicans have yet to reconcile major differences on key issues.
Renewing Generalized System of Preferences and Miscellaneous Tariff Bill
Lawmakers and various industry groups have urged Congress to reauthorize both the GSP and MTB, following the expiration of both in 2020. However, these efforts have not pushed Congress forward. Last Congress, both the House and the Senate separately passed legislation to restore the programs but their different criteria present challenges. Efforts to push them through the jam-packed session were unsuccessful. GSP and MTB are typically bipartisan priorities that do not generate much controversy, and there is still a possibility that the two are moved through Congress without accompanying other trade measures.
Among industry representatives urging lawmakers to reauthorize GSP is Beth Hughes, American Apparel & Footwear Association’s vice president of trade and customs policy. Hughes told reportersthat GSP and MTB will be among the top priorities in the new Congress. “Unfortunately, for American companies and consumers, we’re just going to wait out the clock until Republicans take control, and then they’re going to get GSP and MTB done,” Hughes said.
The new Republican-controlled House provides a “great opportunity” to pass bipartisan legislation renewing the GSP, including a new MTB, Rep. Adrian Smith (R-NE) said. He is confident that the House and Senate will agree on a bill that reinstates both GSP and MTB, accomplishing a key priority for many business groups.
Both programs have bipartisan support and is a priority for many lawmakers on both sides of the aisle. However, House Democrats have pushed for strengthened GSP eligibility criteria, among other differences. It is unlikely that House Ways & Means Republicans will support House Democrats’ plans for GSP and MTB, as they said they would back the Senate version.
Changes in Leadership: What a GOP-Led House Means for Trade
Amid the change in leadership in Congress, Rep. Jason Smith (R-MO) was picked in early January by the House Republican Steering Committee to chair the Ways & Means panel in the 118th Congress. In a statement, Jason Smith noted Republicans under his leadership would “examine using both trade policy and our tax code to re-shore and strengthen our supply chains, where products and services vital to our national security are made here at home using American labor, as well as craft policies that help America achieve food and medical security rather than dependence on nations like China.” His statement further indicates that, “the interests of American workers and punishing unfair trade practices that benefit China at the expense of American workforce and job creators,” is a top priority.
Smith’s appointment follows ranking member Kevin Brady’s (R-TX) retirement. The Senate Finance Committee will remain under Democrat control and is to be steered by Chair Ron Wyden (D-OR). However, the departures of two outspoken voices on trade issues, Sen. Rob Portman (R-OH) and Pat Toomey (R-PA), will also shake up the makeup of the Finance committee.
Senate Finance Committee’s Pat Toomey (R-PA) and House Ways & Means Committee’s Ron Kind (D-WI) teamed up to leave a roadmap, called “How to save trade,” for the next Congress which calls for increased market access, amplified congressional authority over tariffs, and an urge for World Trade Organization reform. Toomey and Kind note their discontent with the trade policies of the past two administrations, but the pair remain hopeful and state, “Rebuilding a bipartisan pro-trade consensus is possible,” they continue, “but it will require leadership from Congress. We have spent our careers advocating for freer trade because it leads to greater economic prosperity, disproportionately benefits lower-income Americans, enhances our security ties to friendly nations, and is morally right.”
Toomey and Kind provide the following recommendations for the Congress to prioritize:
- Aggressively work to conclude comprehensive free trade agreements- inclusive of market access- with U.S. allies; reject so-called “sole executive agreements”
- Clarify the legal process for withdrawal from free trade agreements
- Renew & strengthen trade promotion authority
- Rein in executive abuse of tariff authorities, including Section 232
- Support efforts to positively reform the world trade organization; reaffirm the United States’ Commitment to the WTO
Brady’s retirement may also alter the relationship between USTR and the Ways & Means Committee. Prior to taking office as trade representative, Tai was the chief trade counsel for Ways & Means Democrats. “She’s famously very close to Mr. Brady. That is something else… to watch in the new Congress is how the committee’s relationship may change with USTR, with Mr. Brady no longer being at the helm,” said Brian Pomper, former chief international trade counsel for the Senate Finance Committee.
Republicans have added new members to the House Ways & Means Committee. The House Republican Steering Committee selected Reps. Mike Carey (OH), Randy Feenstra (IA), Michelle Fischbach (MN), Brian Fitzpatrick (PA), Nicole Malliotakis (NY), Blake Moore (UT), Michelle Steel (CA), Greg Steube (FL), Claudia Tenney (NY) and Beth Van Duyne (TX) to join the panel pending approval by the House Republican Conference, said Chair Smith. However, the final makeup of the committee is not yet set in stone; Democrats will make some compromises regarding their members to make way for the Republicans majority.