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Fables & Facts: Trade Promotion Authority

by Clark Packard / /

Opponents of Trade Promotion Authority (TPA), and trade in general, are using spurious or misinformed arguments in their attempt to dismiss a much-needed tool for expanding market access and economic freedom. The following is a refutation of the more frequent criticisms (Read the extended Fables & Facts HERE):

Fable #1: TPA would lead to a rash of illegal immigration.

Fact: This is patently false. Few people have fought harder against President Obama’s changes to immigration policies via unilateral executive authority than House Judiciary Committee Chairman Bob Goodlatte of Virginia. After reviewing TPA and TPP, Chairman Goodlatte circulated a Dear Colleague letter on immigration concerns in the proposals, in which he stated, “There is nothing in the current draft of the TPP that will in any way advance or facilitate [the Obama Administration’s immigration policies] or any other unconstitutional action by the Administration.”

Some have based their illegal immigration concerns on a misunderstanding stemming from a free trade agreement with South Korea. As part of a separate letter after the agreement with South Korea was reached, the L-1 visa period for Korean nationals was extended from three years to five years. L-1 visas are temporary visas that foreign companies use to send executives or managers to the United States to help launch U.S.-based operations. In other words, L-1 visas were extended, but the individuals arriving in the United States as a result are neither illegal immigrants, nor permanent residents.

Fable #2: TPA needs strict currency manipulation restrictions because foreign countries devalue their currencies to tilt the playing field in favor of their own companies.

Fact: There are three very good reasons why Congress should avoid inserting strict currency manipulation language into TPA. First, of the 12 Pacific Rim countries currently negotiating the TPP, only Japan could conceivably classified as a currency manipulator. While it is true Japan’s Central Bank has set a loose money policy in recent years, such actions are similar to actions the Federal Reserve has taken since the financial crisis of 2007-2008.

Second, currency manipulation is not a panacea in global commerce. If a country devalues its currency to encourage exports, it raises the price of items it imports from foreign countries. At the same time, forcing countries to raise the value of their currency could raise the prices of imported goods that families and businesses in the United States rely on.

Finally, President Obama has indicated that he would veto a TPA bill containing currency manipulation restrictions. In addition, our trading partners are unlikely to agree to such strictures. The reason is simple: a country’s monetary policy affects its exchange rates and the value of its currency. Inclusion of currency manipulation restrictions in TPA would possibly subject the United States and our trading partners to foreign challenges to their own domestic monetary policy.

Fable #3: TPA cedes Congressional power to President Obama who has not earned the trust of the American people.

Fact: Simply put, TPA maintains an appropriate balance between Congress and the President. Unlike some actions taken by the Obama administration, TPA would be a Congressionally approved mechanism the President could use only to pursue defined objectives.

Under TPA, once the United States and its foreign counterparts reach the best deal they can, the President notifies Congress of his or her intent to enter into the agreement 90 days in advance. Sixty days before the prospective agreement is voted on by Congress, the text is made public. This would provide the public and members of Congress plenty of time to carefully consider the specific details of the agreement before voting to approve or reject the agreement.

In addition, TPA contains a provision that allows Congress to withdraw the “fast track” process for trade agreements if Congress believes the president did not sufficiently notify or consult them on the agreement or if the agreement fails to live up to the defined objectives. Even if skeptics do not trust President Obama, TPA would be law for six years and would give the next president a valuable tool to complete foreign trade agreements. 

Fable #4: TPA and trade agreements threaten U.S. sovereignty by allowing trade agreements to trump U.S. law.

Fact: This is false. The text of TPA plainly states, “No provision of any trade agreement entered into … nor the application of such provision to any person or circumstance, that is inconsistent with any law of the United States, any State of the United States, or any locality of the United States shall have effect.” Likewise, as the Congressional Research Service noted, “[TPA] essentially provides that, for domestic purposes, any trade agreement adopted under the TPA authority is not self-executing. Therefore, any potential agreement adopted through the TPA procedures would not displace any federal, state, or local law without further action taken by the appropriate legislature.”

Fable #5: TPA and trade agreements amount to giveaways to politically connected corporations.

Fact: Trade agreements should make this more difficult by lowering government imposed distortions and barriers in the market. When commerce flows more freely between countries, a government cannot as easily pick winners and losers in the marketplace. If anyone benefits from a status quo of high tariffs and other trade barriers, it is major corporations who are sometimes unfairly shielded from competition by government. Conversely, reducing government’s role in international markets through freer trade will force corporations to compete with one another, which will increase quality and lower costs to consumers.

Fable #6: Foreign trade has been a disaster for the United States’ economy and has led to massive job losses.

Fact: Quite the opposite has happened. Increased trade with foreign nations has been an enormous boon to the United States’ economy. It is estimated that 1 in 5 American jobs depends on foreign trade. As the Business Roundtable notes, 95 percent of the world’s population and 80 percent of the world’s purchasing power are located outside of the United States. As a result, future American prosperity will depend on engaging the rest of the world and improving the free flow of goods and services.