Senate Finance Chairman Max Baucus, D-Mt., indicated Feb. 15 that the administration will have to address a number of issues before Congress will consider TPA renewal, including more congressional say over the countries with which the U.S. pursues trade agreements. Baucus has long argued that the U.S. should focus its efforts on commercially meaningful agreements that benefit U.S. exporters. In addition, Baucus stated, enforcement of current trade laws, particularly with respect to China, will have to be dealt with before lawmakers give any serious consideration to extending TPA.

Legislation to extend TPA will have to include other changes as well, Baucus indicated. Labor and environmental provisions will have to be strengthened and the trade adjustment assistance program is likely to undergo some significant revisions. Baucus and Sen. Norm Coleman, R-Minn., have introduced legislation that would extend TAA to workers in the services sector. Another idea now under discussion is the concept of “globalization adjustment assistance,” which would offer benefits to workers displaced by not only trade but all aspects of globalization.

In recent remarks, U.S. Trade Representative Susan Schwab has advocated a broad, long-term extension of TPA. She has argued that allowing TPA to expire would send a message to other WTO members that the U.S. is walking away from the Doha Round, and that it would leave the U.S. behind while other countries continue to negotiate bilateral and regional agreements.

Regardless of what a TPA bill may look like, passage of any type of extension is sure to be an uphill battle, and willingness on the part of the administration to make certain concessions to Democratic demands will be key.

Peru, Colombia and Panama FTAs

Democrats have made it clear that the labor provisions in the trade agreements the U.S. has negotiated with Peru, Colombia and Panama will have to be strengthened before implementing legislation comes up for congressional consideration. During a Feb. 14 Ways and Means Committee hearing, Trade Subcommittee Chairman Sander Levin, D-Mich., told Schwab that Democrats continue to believe that the text of these FTAs must include the five core International Labor Organization standards and that the labor provisions must be enforceable like other provisions in the agreement.

Congressional and USTR staff had been working on a compromise regarding the FTA labor terms; however, a recent report from Inside US Trade stated that these discussions have broken down and that Ways and Means Chairman Charles Rangel, D-N.Y., has asked Schwab for a meeting to discuss the issue. One development that is viewed positively has been Rangel’s insistence that committee ranking member Jim McCrery, R-La., be part of the discussions with USTR. In the 109th Congress, Rangel repeatedly criticized then-chairman Bill Thomas, R-Calif., for leaving Democrats out of consultations with USTR.

Some members of the committee told Schwab at the hearing that in addition to changes on labor they expect more to be done regarding the environmental provisions of the FTAs. Eleven committee Democrats wrote to Schwab in January asserting that the environmental provisions in the Colombia and Peru FTAs need to be renegotiated. The specific changes called for in the letter were (1) a requirement that these countries must fully implement and enforce the obligations made through ratified multilateral environmental agreements, (2) parity between the dispute settlement provisions of the FTA chapter related to the environment and those related to trade in goods and services, (3) a clear set of across-the-board exclusions for environmental and public health protections, and (4) a requirement that investors’ rights provisions clearly and unambiguously provide foreign investors “no greater substantive rights” than U.S. citizens receive under U.S. laws.

China

The Department of Commerce’s announcement that the U.S. trade deficit with China hit a record for the fifth straight year in 2006 is certain to prompt additional legislation to tackle the China issue. As in years past, a number of congressional proposals are already on the table.

CV Duties

Rep. Levin has indicated that he would like to see action in the coming weeks on a bill allowing countervailing duties to be imposed on non-market economies. Reps. Artur Davis, D-Ala., and Phil English, R-Pa., have proposed such legislation in the past and are planning to do so again; however, Levin did indicate that the Fair Currency Act (H.R. 782), which would define foreign currency manipulation as an illegal export subsidy that could be countered by imposing CV duties and has already been introduced by Reps. Tim Ryan, D-Ohio, and Duncan Hunter, R-Calif., is being studied to determine if it is WTO-compliant. If so, the bill could be taken up by Congress this spring.

PNTR Withdrawal

Last week, Sens. Byron Dorgan, D-N.D., Lindsey Graham, R-S.C., and Sherrod Brown, D-Ohio, introduced legislation to rescind the permanent normal trade relations status the U.S. granted to China in 2000. Dorgan and Graham introduced the same bill in the 109th Congress. Newly-elected Sen. Bernie Sanders, I-Vt., introduced the House companion bill in the last Congress, which garnered 71 cosponsors.

Currency Manipulation

Sens. Charles Schumer, D-N.Y., and Lindsey Graham are not expected to reintroduce legislation to impose a 27.5 percent duty on all Chinese imports unless Beijing takes steps to revalue its currency. Instead, they stated in late 2006, they plan to work with Sens. Baucus and Grassley on China currency legislation that is consistent with U.S. obligations under the WTO. According to informed sources, this bill, which has not yet been drafted, will not be country-specific but rather will attempt to address currency manipulation more broadly. It will likely keep some of the provisions from a bill introduced last year by Baucus and Grassley that would provide a new mechanism to address “fundamentally misaligned” currencies that adversely affect the U.S. economy.

Preference Programs

At the end of 2006, President Bush signed a bill extending the Andean Trade Promotion and Drug Eradication Act for all four beneficiary countries – Bolivia, Colombia, Ecuador and Peru – through June 30. The program may be extended for an additional six months for a country if the U.S. and that country both complete their legislative process to approve a bilateral trade promotion agreement; however, as neither Ecuador nor Bolivia is currently negotiating such an agreement with the U.S., ATPDEA benefits for both countries will expire this summer under current law. Ecuador had been in FTA discussions with the U.S. but these talks stalled last year and are not likely to be revived following the government’s decision to revoke U.S.-based Occidental Petroleum Company’s oil production contract last May.

Some Democratic members have indicated that they would like to see an extension of ATPDEA benefits for Bolivia and Ecuador passed, noting that negotiating an FTA has not been a condition for preference program benefits in the past. This could be difficult, however, as a number of lawmakers have expressed reluctance to maintain preferences to assist these two counties. Grassley has stated that Congress should not be “in the business of rewarding bad behavior” by continuing to grant Bolivia and Ecuador preferences under the ATPDEA.

As Democrats have typically been supportive of programs that help poorer countries, a renewed push for trade legislation to help least-developed countries is also a possibility. Sen. Gordon Smith, R-Ore., recently introduced the Tariff Relief Assistance for Developing Economies Act of 2007, which would extend preferential trade benefits equivalent to those under the African Growth and Opportunity Act to 14 LDCs – Afghanistan, Bangladesh, Bhutan, Cambodia, Kiribati, Laos, Maldives, Nepal, Samoa, Solomon Islands, East Timor, Tuvalu, Vanuatu and Yemen – not already covered by U.S. trade preference programs, plus Sri Lanka. These 15 countries are already eligible for Generalized System of Preferences benefits but the TRADE Act would enable them to receive duty-free treatment for exports of goods excluded from GSP coverage, including textiles and apparel, watches, electronic articles, steel articles, footwear, handbags, luggage and glass products.

Korea and Malaysia FTAs

In order for FTAs with Korea and/or Malaysia to be considered under TPA, negotiations need to be completed by the end of March. The U.S. and Korea held a round of talks during the week of Feb. 12 and have agreed to an eighth round in early March. Members of Congress are insisting that an FTA with Korea include meaningful market access for U.S. industrial goods, including automotives, and have threatened to sink any agreement that does not include significant access to the Korean market for U.S. beef.

Regarding negotiations with Malaysia, both sides have indicated that it is increasingly unlikely they will meet the March 31 deadline. The talks are stuck in part over U.S. insistence that Malaysia modify certain government procurement programs that favor ethnic Malaysian businesses. Another hurdle has been the call by House Foreign Affairs Committee Chairman Tom Lantos, D-Calif., for the U.S. to break off FTA negotiations if Malaysia refuses to nullify a $16 billion deal between a privately-owned Malaysian business and an Iranian government-owned company to produce liquefied natural gas in Iran.

Doha Round

Progress in the Doha Round in the coming months could provide an incentive for lawmakers to consider at least a short-term extension of TPA. Others argue that a signal from Congress that it is willing to extend TPA is necessary to move forward in the WTO talks. Schwab said she is cautiously optimistic that progress can be made over the coming months but continued to assert that the U.S. will walk away from any deal that does not include substantial new market access for U.S. exporters.

Farm Bill

While there had been some indication that Congress could pass a simple extension of the Farm Bill of 2002 until the Doha Round is concluded, this option appears increasingly unlikely. The most likely scenario now appears to be a five- or six-year farm bill that could be revisited if agreement is reached in the WTO negotiations.