The October 5 2015 announcement of the successful conclusion by Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam of the negotiation of the Trans-Pacific Partnership (TPP) Agreement is a major accomplishment, but details of the agreement are still unknown. Moreover, even after the text is revealed, it may take time for each TPP nation to obtain approval of the deal and implement the commitments that the negotiators have undertaken. Actual entry into force of the TPP is not expected before 2017; it will likely occur later and in piecemeal fashion.
Pending availability of the TPP text, and in light of the considerable controversy and demands for renegotiation that this wide-ranging '21st-century agreement' has engendered, this update reviews the approval process that will apply in the United States and the challenges that some prior US free trade agreements (FTAs) experienced when they came up for consideration during election campaign periods.
US process for approval of TPP
The Bipartisan Congressional Trade Priorities and Accountability Act of 2015,(1) which was enacted in June, will govern the TPP, but it largely reflects laws under which Congress has – for specific periods of time and subject to conditions set by Congress – authorised the president to negotiate trade agreements. Better known as 'trade promotion authority' or 'fast track', the law establishes the respective responsibilities of the administration and Congress and a timeline for each to follow.
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Notification of intent to sign
Trade promotion authority requires the president, at least 90 days before signing an agreement, to notify Congress of his intent to do so (see Figure 1(A)). When this should be done is a complex decision because it triggers more immediate deadlines. No later than 30 days after notification of the intent to sign:
- the administration must post online the full text of the agreement, making it publicly available (see Figure 1(B)); and
- federal advisory committees must provide written reports to the administration and Congress (See Figure 1(B)).
US Trade Representative Michael Froman has stated that his goal is to make the TPP text publicly available within 30 days of the October 5 2015 conclusion of the negotiations, but this is not guaranteed. Besides finalising agreement terms for the issues that were resolved in the final hours of negotiations at the ministerial level, all participating nations are undertaking a legal review of the text. The TPP nations have also agreed that the text should be issued simultaneously in English, French and Spanish – requiring completion of the translation process before the administration can post the text.
Preparation of federal advisory committee reports
On October 14 2015 US negotiators held an all-day meeting with the members of the international trade-related advisory committees to brief them on the TPP's contents – presumably to enable those committees to prepare the required reports. These reports are typically relatively short, but are negotiated among the members of each committee to reflect the range of views – a process that is not generally accomplished in one day.
As a practical matter, given Congress members' complaints about not yet having access to the TPP text, the administration may conclude that it may be unwise to notify the House of Representatives and Senate of its intention to sign the TPP before making the text available to them. Hence, the administration could decide to provide formal notice of such an intent concurrent with or shortly after releasing the text.
Preparation of International Trade Commission report
No later than 90 days before entering into the agreement, the administration must provide to the US International Trade Commission (ITC) the details of the agreement "as it exists at that time" and request that the ITC prepare an assessment of "the likely impact of the agreement on the United States economy as [a] whole and on specific industry sectors...and the interests of United States consumers" (see Figure 1(A)). The ITC report must be completed and submitted to the president and Congress no later than 105 days after the president signs the agreement (see Figure 2(D)). The administration has already been providing the ITC with information with which to begin its work on the required report for the TPP, presumably with the hope that the ITC's report will be completed well ahead of the statutory deadline.
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Administration to advise of law changes
Once the agreement is signed, which may occur later than 90 days after notice of intent to sign (see Figure 2(C)) the administration has 60 days to provide Congress with a description of the changes to existing US laws that are necessary to bring the United States into compliance. Moreover, at least 30 days before providing that description, the administration must submit to Congress a draft statement of administrative action that is proposed to implement the agreement and formally present Congress with a copy of the final agreement.
Preparation of implementing bill
In addition to satisfying these prerequisites, the administration will have to work informally with the relevant Senate and House of Representatives committees to reach agreement on the legislative text of the TPP implementing bill, which also serves as the congressional approval bill. Those committees include the Senate Finance and House of Representatives Ways and Means Committees, and may also include other committees to the extent that laws under their jurisdiction must be amended to comply with the US commitments under the TPP.
Typically, the administration drafts the implementing bill text, which is then finalised through informal mock mark-up sessions with the relevant committees. This informal process for vetting proposed amendments by members of Congress and reaching consensus on the terms of the bill that will be introduced is necessary because trade promotion authority provides that once the implementing bill has been formally introduced, no amendments are permitted – either in committee or during floor action; only straight up or down votes are permitted.
Submission of implementing bill
Following the mock mark-up process, an agreed bill and a finalised statement of administrative action should be ready for submission to Congress. The administration may make this submission only on a date when both houses of Congress are in session (see Figure 3(E)). Once submitted to Congress, procedures under Section 151 of the Trade Act of 1974 apply, starting with the introduction of the implementing bill "by request" of the majority leader of each house. That starts the clock for congressional action (see Figure 3(F)).
Significantly, while the clock for the administration's action is based on calendar days, the clock for congressional action is based on legislative days. In the House of Representatives, a legislative day is each day that it is in session. Often the House of Representatives meets only three or four days a week. In the Senate, a legislative day starts when the Senate meets after an adjournment and ends when the Senate next adjourns. That means that in the Senate, a legislative day may extend over several calendar days.
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Congress to vote on implementing bill
For trade promotion authority purposes, once the implementing bill is introduced, the House of Representatives committees of jurisdiction have 45 legislative days to report the bill. The full House of Representatives must vote within 15 legislative days of the measure being reported or discharged from the committees. The Senate committees then have 15 additional legislative days for their action; Senate floor action must be completed within another 15 legislative days. Thus, congressional consideration of the implementing bill could take up to 90 legislative days – and many more calendar days. To put this in context, in 2014 the House of Representatives was in session for 135 days. In 2015 it took until the second week of May before the House of Representatives had been in session for 60 days.
Theoretically, the Obama administration could:
- notify Congress in early November 2015 of its intention to sign the TPP;
- use the period before signing to hold mock mark-ups with the House of Representatives and Senate committees;
- sign the TPP in late January 2016, on the 90th day after notification of its intent; and
- promptly send the implementing bill to both houses to be introduced.
However, the congressional process could still easily last until summer 2016 – when the US presidential election (along with congressional elections) will be in full swing.
There could also be other delays, as has occurred in the recent past. Trade promotion authority expressly reiterates "the constitutional right of either House to change the rules...at any time". The House of Representatives did just that in 2008.
The George W Bush administration signed the US-Colombia FTA on November 22 2006, but delayed formally submitting it to Congress in response to congressional demands for modifications. With Democrats having won the majority in both houses of Congress in the November 2006 elections, the administration in 2007 agreed to modify the Colombia FTA to make it consistent with the 'May 10th agreement', a bipartisan consensus on labour, environmental and IP issues. However, when the Bush administration presented a draft implementing bill to Congress in April 2008, without the consent of congressional leadership – which was demanding action on a trade adjustment assistance bill before consideration of the Colombia FTA – the House of Representatives responded by approving a rule change eliminating fast-track procedures for the bill. As a consequence, the Bush administration did not seek congressional action on the FTAs that it had concluded and signed in 2007, with Panama and Korea.
It was not until October 2011 that Congress voted on these three FTAs, after the Obama administration put its own imprimatur on them:
- reaching an agreement with Colombia on a labour action plan to improve Colombian labour laws and protect labour union leaders;
- securing a tax information exchange agreement with Panama; and
- signing a supplemental agreement with Korea modifying the FTA's automobile market access commitments and issuing bilaterally agreed minutes addressing automotive fuel economy and greenhouse gas emissions regulations and intra-company employee transfer visas.
The Senate then considered all three bills under trade promotion authority procedures, while the House of Representatives considered the Colombia FTA under a closed rule and the Panama and Korea FTAs pursuant to trade promotion authority requirements.
Given the similar situation today – with one party holding the White House and the other both houses of Congress – it is easy to imagine a scenario in which the Obama administration does not move quickly to sign the TPP or to present implementing legislation to Congress for a vote. That would increase the likelihood that congressional action will waver until a lame-duck session of Congress, after the November 2016 elections. At that point, the outcome of the elections may determine whether Congress votes or defers the matter to the next Congress and administration.
Process for entry into force
Even if the US Congress approves the TPP in 2016 or 2017, its entry into force may be further off. Froman has confirmed that the TPP will enter into force only when at least six signatories have completed their applicable procedures, provided that those six countries together account for at least 85% of the combined gross domestic product of the signatories.
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Under trade promotion authority rules, no later than 30 days before the agreement is set to enter into force with respect to a particular partner, the president must submit to Congress written notice that the party has taken necessary measures to comply with the agreement. Previously, there have been considerable gaps between US congressional action and entry into force of approved FTAs. With respect to the last three US FTAs – the Colombia, Panama and Korea FTAs, which were approved by Congress in October 2011 – the Korea FTA entered into force on March 15 2012, the Colombia FTA entered into force on May 15 2012 and the Panama FTA entered into force on October 31 2012. The experience with the last regional FTA that the United States entered into – the Dominican Republic-Central America FTA (DR-CAFTA), which was approved by Congress in July 2005 – may be even more relevant. DR-CAFTA entered into force with El Salvador in March 2006, with Honduras and Nicaragua in April 2006, and with Guatemala in July 2006. However, it was not until March 2007 that DR-CAFTA entered into force with the Dominican Republic, and not until January 2009 that it entered into force with Costa Rica.
Given the complexities of the TPP – including the large number of parties involved, the pre-existing FTAs between and among the participating countries (the United States has FTAs with Australia, Canada, Chile, Mexico, Peru and Singapore) and the issues being addressed for the first time in an FTA – the parties reportedly anticipate that the entry into force process may take two or more years to complete.
For further information on this topic please contact Andrew W Shoyer, Brenda A Jacobs or Michael E Borden at Sidley Austin LLP by telephone (+1 202 736 8000) or email ([email protected], [email protected] or [email protected]). The Sidley Austin LLP website can be accessed at www.sidley.com.
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