The fair track to expanded free trade: making TAA benefits more accessible to American workers.

in the market of the importing country, removal of those barriers

enhanced aggregate domestic welfare in that the total gains to

consumers could be shown always to exceed the total losses to

producers/workers. Put in this crude way, the case for trade

liberalization appeared to be totally indifferent to any notion of

a just distribution of benefits and burdens from the removal of

trade restrictions. (32)

The implied domestic political bargain embedded in the liberalism of the GATT trading regime was that the losers of expanded free trade would be compensated by the winners and, hence, the losers would not block trade liberalization due to questions of distributive justice:

How then, was the [GATT] insider network able to turn a blind eye

to these issues of distributive justice? Above all, through the

notion that gains to the winners should allow us to fully

compensate the losers from removal of trade restrictions, while

still netting an aggregate welfare gain. According to this

conception, based on what is known in the economics and related

literatures as Kaldor-Hicks efficiency, in the end no one need be

worse off as a result of trade liberalization. What was presumed,

or taken for granted here, was the existence of a regulatory and

social welfare state to take care of the interests of the losers

(however legitimate) through the use of nontrade policy instruments

(worker retraining, etc.) that are less costly to domestic welfare

than trade restrictions. (33)

So long as the economic benefits of expanded free trade were clear and the losers appeared to be roughly compensated for their losses, the politics of U.S. trade liberalization was fairly straightforward: Congress would grant the Executive branch fast track authority and workers displaced by expanded free trade would be entitled to receive TAA. (34)

But, the political economy of trade in the United States has shifted since the mid-1990s. (35) Following the extension of fast track authority in mid-1993, passage of the NAFTA implementing statute in late 1993, and the re-extension of fast track authority in early 1994, Congress refused to grant President Clinton fast track authority after it expired in late 1994. (36) Since the mid-1990s the economic benefits of further U.S. trade liberalization have gotten murkier, and the opposition to it has become more pronounced. (37) Then, after an eight-year hiatus, fast track negotiating authority was renewed on August 6, 2002, but not without a bruising political battle in the U.S. House of Representatives. (38)

1. The Necessary Grant of Fast Track Authority

It would be difficult, if not impossible, for the United States to expand free trade without the Congressional delegation of fast track authority to the Executive branch, because trading partners would be reluctant to enter into trade agreements with the United States unless they were confident that the agreement reached through negotiations would not be materially changed in Congress; and, unless Congress insulated itself from protectionist self-interests, and restrained itself from encumbering trade-agreement implementing legislation with excessive amendments and debate, trade agreements reached by the Executive branch would rarely, if ever, be voted on by Congress as negotiated. Indeed, they might never be voted on at all. Accordingly, all major U.S. trade legislation since the Trade Act of 1974 has been enacted using the fast track approach. (39)

Although Section 8 of the U.S. Constitution authorizes Congress to "lay and collect Taxes, Duties, Imposts and Excises" and to "regulate Commerce with foreign Nations," (40) in the past, Congress has proven itself incapable of resisting protectionist self-interests when exercising direct control of U.S. trade policy. The disastrous Smoot-Hawley Act of 1930--a legacy of direct control by Congress--"represents the high-water mark of U.S. protectionism in the twentieth century." (41)

Since the Reciprocal Trade Agreements Act of 1934, (42) Congress generally has delegated the power to shape U.S. trade policy to the Executive branch. (43) Under that statute, the United States negotiated parallel, bilateral agreements that substantially reduced tariffs with trading partners before World War II, and, through successive extensions of it, the United States further reduced tariffs in the first five rounds of multilateral trade negotiations following the formation of GATT in 1947. (44)

Before the start of the Kennedy Round of GATT negotiations, Congress passed the Trade Expansion Act of 1962, granting the Executive branch the authority to negotiate the further reduction in and elimination of tariffs, while planting the institutional seeds of the fast track approach to U.S. trade liberalization that remain in place today by:

* establishing the Office of the Special Representative for Trade Negotiations, the predecessor of the current office of the U.S. Trade Representative (U.S.T.R.);

* requiring the transmittal to Congress by the Executive branch of any concluded trade agreement, along with a statement explaining the reasons for entering into it; and

* mandating the involvement of members of the Senate Finance, and House Ways and Means Committees in multilateral trade negotiations. (45)

The U.S.T.R. and members of Congress from those "gatekeeper" committees remain key players in the politics of U.S. trade liberalization. (46) But the Executive branch overreached the authority Congress had delegated to it under the Trade Act of 1962 by negotiating commitments on nontariff barriers, (47) and when that delegation of authority expired in 1967, it took Congress seven years before it again delegated authority to the Executive branch, under the Trade Act of 1974, to negotiate the removal of nontariff barriers and other trade-distorting restrictions in the GATT Tokyo Round. (48) This delegation came to be known as "fast track" authority because of the six express procedural requirements/restrictions it established for expedited legislative consideration of trade agreements negotiated by the Executive branch:

(1) notice to Congress by the Executive branch ninety days before entering into such a trade agreement;

(2) consultations between the Executive branch and, among others, members of the Senate Finance, and House Ways and Means Committees;

(3) transmittal of a copy of the agreement to Congress by the Executive branch, plus a draft implementing bill with a statement of any administrative action proposed to implement the agreement and an explanation of how the implementing bill or statement changes existing law;

(4) time limits of forty-five days for discharge out of committee to the full House or Senate, and fifteen days for a vote on the implementing bill in each chamber;

(5) prohibition of any amendments to the implementing bill; and

(6) limited debate of no more than twenty hours in each chamber, divided equally between members in favor of and opposed to the implementing bill. (49)

The Tokyo Round agreement was implemented by the Trade Agreements Act of 1979, which extended fast track authority for nine more years and was widely viewed as a success for achieving the dual purposes of enabling the Executive branch to successfully conclude an important round of GATT negotiations and facilitating congressional approval of the agreement reached. But nine years later, Congress took back some of the power it had ceded to the Executive branch, through previous fast track legislation, when it passed the Omnibus Trade and Competitiveness Act of 1988. (50) The two most important curtailments on the prior delegation of negotiating authority were: (1) requiring more extensive consultations with the gatekeeper committees in Congress, and (2) creating "a two-house derailment procedure that has since come to be known as the 'reverse fast track.'" (51) By the time the 1988 grant of fast track authority was scheduled to expire on June 1, 1991, Congress had multiple mechanisms at its disposal for derailing fast track authority. (52)