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Time for Congress to Shape Commerce

Congress should not buck trade treaties but take initiative in molding future ones.
January 25, 2021
Time for Congress to Shape Commerce
Speaker of the House Nancy Pelosi and House Ways and Means Committee Chairman Richard Neal, Democrat of Massachusetts, speaks about the US - Mexico - Canada Agreement, known as the USMCA, on Capitol Hill in Washington, DC, December 10, 2019. (Photo by SAUL LOEB / AFP) (Photo by SAUL LOEB/AFP via Getty Images)

After several years of noisy trade war, a casual observer would be forgiven if they thought that under the U.S. constitution questions of trade belonged exclusively to the president. Democrats should use their moment of unified control to strike a more balanced approach over the next two years. In defining policy priorities for the incoming Biden administration, Congress can take the initiative in influencing not only the future of trade but how its—and by extension, America’s—voice is heard on a range of intertwined issues that are likely to be top priorities, including climate policy.

Admittedly, treaty-based trade has long been a constitutional challenge for Washington, as treaties are signed by the president but foreign commerce is the domain of Congress. Fast-track authority, now referred to as Trade Promotion Authority (TPA), has been the solution for managing the growing interplay between treaties and trade and the presidency and Congress. The current TPA is set to expire on July 1, 2021, with the potential to severely limit the U.S. government’s ability to act with a unified message on the world stage.

This is the moment to build on the enactment of the US-Mexico-Canada Agreement (USMCA), extending free trade well beyond America’s borders.

In the Americas, Washington should seek to build on the patchwork of free trade agreements and further integrate the hemisphere by lowering tariffs and non-tariff barriers alike. With Europe, Washington should seek to present a united front against China and its predatory economic and humanitarian practices, while working out a joint approach to digital services and other tech policy challenges. In the Indo-Pacific, Washington should find a politically palatable way to return to a revised Trans-Pacific Partnership (TPP), from which President Trump withdrew in his first days in office. (After the United States withdrew, the agreement is now referred to as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).) And in Africa, the United States should finish the free-trade agreement with Kenya, using it as a stepping stone to engagement with the recently opened African Continental Free Trade Area.

An aggressive, multi-pronged approach is particularly important given the ground the United States has lost as it recklessly abandoned the TPP and obsessed over levels of soybean exports. At the same time, China, its greatest geopolitical rival, continued to grow its economic and geopolitical power by strengthening commercial ties with U.S. allies in Asia, Europe, and Latin America.

Most recently, this has taken the form of two major new trade agreements. In November, China signed the Regional Comprehensive Economic Partnership (RCEP) with all ten members of the Association of Southeast Asian Nations, as well as Japan, South Korea, Australia, and New Zealand. And just last month, China reached an agreement in principlewith the European Union on a so-called Comprehensive Agreement on Investment (CAI). While it is very unlikely that major U.S. allies will align with China on key national security issues, agreements like this, if left without a Washington-led alternative, may keep them from fully aligning with the United States.

Brussels’s agreement with Beijing demonstrates a lack of appreciation for the broader strategic and geopolitical implications of trade policy. In the past, for Washington, trade deals had been almost exclusively about the economy, too. However, recent trade deals have been about so much more—today’s trade treaties shape the balance of power in tomorrow’s world.

This is an especially somber lesson for today’s Washington and, specifically, Congress. Recent events have made liberal democracy an even harder sell than it was before; however, the dynamism of the American economy, its innovative private sector, and its unparalleled research universities remain a beacon for much of the world.

Washington has no time to lose. Congress should start by listing its top priorities. These should include the removal of tariffs that injure allies for little reason and inviting the same allies to agree on shared regulatory standards. Washington could integrate climate goals, labor standards, and the humanitarian concerns on which the new Congress and the Biden administration agree into its set of negotiation objectives. Congress should also consider laying the seeds for supply chain diversification and reduce reliance on China for critical goods.

An ambitious agenda of trade liberalization along these lines would strengthen America’s economic recovery. It would also help bring the United States back to full employment, while giving Congress the opportunity to shape what the Biden administration’s “building back better” program should look like.

Ryan C. Berg, Lauri Tähtinen, and Stan Veuger

Ryan C. Berg is a research fellow in Latin America Studies at the American Enterprise Institute. Lauri Tähtinen is the founder of Americas Outlook, a geopolitical analysis and advisor firm in Washington, and a non-resident fellow of the Finnish Institute of International Affairs. Stan Veuger is a senior fellow in Economic Policy Studies at the American Enterprise Institute.