Congress in Trade
What is the role of Congress in making trade policy?
The U.S. Constitution designates Congress as the primary authority over trade policy. Article 1, Section 8, of the U.S. Constitution expressly grants Congress the power “To lay and collect Taxes, Duties, Imposts and Excises” and “To regulate Commerce with foreign Nations, and among the several States,” as well as the general provision “To make all Laws which shall be necessary and proper” to carry out these specific authorities. Congress exercises this power in many ways, such as through the enactment and oversight of tariff schedules and trade remedy laws, and the approval and implementation of reciprocal trade agreements.
How does Congress make trade policy?
Congress exercises trade policy authority through the enactment of laws authorizing trade programs and measures to address unfair and other trade practices. Additionally, it conducts oversight of the implementation of trade policies, programs, and agreements in areas such as tariffs, nontariff barriers, trade remedies, import and export policies, and economic sanctions, as well as trade policy functions of the federal government. Congress also sets trade negotiating objectives in law, through trade promotion authority (TPA, see “What is Trade Promotion Authority (TPA)?”); requires formal notification and consultation from the executive branch and opportunity to provide advice on trade negotiations; and conducts oversight hearings on trade programs and agreements to assess their conformity to U.S. law and congressional intent. Congress has delegated certain powers to the President to negotiate reciprocal trade agreements and take certain executive action regarding trade policy. In 1934, Congress enacted the Reciprocal Trade Agreements Act, which authorized the President to enter into reciprocal agreements to reduce tariffs within congressionally preapproved levels, and to implement the new tariffs by proclamation without additional legislation. Congress renewed this authority periodically until the 1960s. Subsequently, Congress enacted the Trade Act of 1974, combining tariff proclamation authority with a broader mandate for the executive branch to open markets and to negotiate nondiscriminatory international trade norms for nontariff barriers as well.
Over the years, Congress has authorized a number of trade laws that delegate a range of authorities to the President to investigate and take actions on imported goods for national security purposes (Section 232, Trade Expansion Act of 1962); trade remedies to counter dumping and subsidy practices by other countries; unfair trade practices (Section 301, Trade Act of 1974); or safeguard measures (Section 201, Trade Act of 1974). The Trump Administration used these provisions to impose steel and aluminum tariffs on major trading partners and on a range of Chinese products for what the Administration deems as unfair trading practices, including intellectual property theft and other activities (see “Tariffs and Trade Remedies”).
Additionally, Congress has an important role in international investment and finance policy. Under its treaty powers, the U.S. Senate considers bilateral investment treaties (BITs), and Congress sets the level of U.S. financial commitments to the multilateral development banks (MDBs), including the World Bank and the International Monetary Fund. It also funds the Office of the U.S. Trade Representative (USTR) and other trade agencies, and authorizes the activities of various agencies, such as the Export-Import Bank (Ex-Im Bank) and the newly operational U.S. International Development Finance Corporation (DFC). Congress also has oversight responsibilities over these institutions, as well as the Federal Reserve and the U.S. Department of the Treasury, whose activities can affect international capital flows and short-term movements in the international exchange value of the U.S. dollar. Congress also closely monitors developments in international financial markets that could affect the U.S. economy.
What committees lead in exercising congressional authority over trade?
Because of the revenue implications inherent in most trade agreements and trade policy changes, the House Ways and Means Committee and Senate Finance Committee have primary responsibility for trade matters. Each committee has a subcommittee dedicated exclusively to trade issues. Other committees may also have a role should trade agreements, policies, and other trade issues include matters under their jurisdiction. For example, the House Foreign Affairs and Senate Banking Committees have jurisdiction over export controls. The foreign affairs committees in both chambers also examine trade relationships as part of their broader oversight of foreign relations.
TPA established Congressional Advisory Groups on Negotiations (CAGs) to consult and provide advice to USTR before and during trade agreement negotiations. Separate CAGs are established for both houses: a House Advisory Group on Negotiations (HAG), chaired by the chair of the Ways and Means Committee, and a Senate Advisory Group on Negotiations (SAG), chaired by the chair of the Finance Committee. CAGs can receive briefings and can access trade negotiating documents.
How can individual Members of Congress affect trade policy decisions?
Individual Members affect trade policy first as voting representatives who collectively determine the statutes governing trade matters. They may also exercise influence as sitting members on relevant committees, in testimony before committees whether or not they are members, in written letters to USTR weighing in on trade policy decisions, and in exercising informal influence over other Members through the exercise of the political authority and power invested in them by the electorate.
What is Trade Promotion Authority (TPA)?
In 2021, President Biden may seek and Congress may debate whether to grant Trade Promotion Authority (TPA) to his Administration. TPA is a primary means by which Congress asserts its constitutional authority over trade policy, particularly U.S. trade agreements. TPA—the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (P.L. 114-26)—which was signed by President Obama on June 29, 2015, is in place until July 1, 2021.
Under TPA, an agreement the President concludes (signs) by that date is eligible for consideration under TPA. TPA authorizes qualifying implementing legislation for trade agreements to be considered under expedited legislative procedures—limited debate, no amendments, and an up or down vote—provided the President observes certain statutory obligations in negotiating trade agreements. These obligations include achieving progress in meeting congressionally defined U.S. trade policy negotiating objectives, as well as congressional notification and consultation requirements before, during, and after the completion of the negotiation process.
TPA: Key Facts
First enacted in 1974
Renewed 4 times
Was used to consider 15 FTAs and two multilateral GATT/WTO rounds
TPA 2015 expires on July 1, 2021
The primary purpose of TPA is to preserve the constitutional role of Congress with respect to the consideration of implementing legislation for trade agreements that require changes in domestic law. Another rationale for TPA has been to bolster the negotiating credibility of the executive branch by ensuring that trade agreements will not be changed once concluded. However, more recent FTAs, including the USMCA, have undergone additional negotiation after conclusion, perhaps eroding some of this rationale for TPA. In addition, the Trump Administration concluded agreements with Japan and Brazil, negotiating outcomes on nontariff barriers not requiring changes to U.S. law or a reduction of tariffs through proclamation authority that bypassed congressional consideration.
Since the authority was first enacted in the Trade Act of 1974 (P.L. 93-618), Congress has renewed TPA four times (1979, 1988, 2002, and 2015) and amended it in 1984 to allow for the negotiation of bilateral agreements. In addition, TPA legislative procedures are considered rules of the House and Senate, and, as such, can be changed at any time. Precedent exists for implementing legislation to have its eligibility for expedited treatment under TPA removed by Congress. The 117th Congress may debate granting TPA to the Biden Administration.