Last week’s congressional election results could have an important impact on how Congress addresses international trade issues. In the House of Representatives, the Republicans captured at least 60 seats, bringing their total to 239 and dropping the Democrats to 189, with some races still too close to call. This gives the Republicans a majority for the first time in four years. In the Senate, the Democrats lost six seats but maintained narrowly their majority, with one race officially undetermined.

With this election come changes not only in congressional representation but in key players both in the House and the Senate, as well as possibly in the Obama Administration. We will likely see the revival of certain free trade agreements and other pro-trade initiatives. The general emphasis of the congressional trade agenda in the new Congress, at least in the House, may likely be directed more at further trade liberalization than at enforcement of past agreements.  

This could depend, however, on the trade positions of new members of the Tea Party movement, who likely will have a major impact on the overall congressional agenda of the Republicans. The position of the Tea Party members on trade issues has not been fleshed out fully, but it appears that a slight majority of those elected are more likely to be against government intrusion and for free trade.

Key Players in Congress and the Obama Administration

The House of Representatives

In the House of Representatives, there will be changes in the leadership of the committee that oversees trade, the Committee on Ways and Means, effective in January 2011. It is likely that Dave Camp (R-MI), currently the Ranking Member of the Committee, will succeed Sandy Levin (D-MI) as the Chairman of the Ways and Means Committee. On the Ways and Means Subcommittee on Trade, Kevin Brady (R-TX) is poised to succeed John Tanner (DTN) as Chairman. It is unclear at this time who will be Ranking Minority Member on the Trade Subcommittee since Chairman Tanner is retiring from the House at the end of this Congress. In addition, there will be general turnover in the membership of the Ways and Means Trade Subcommittee as many Republicans, as well as Democrats, will leave the Committee, and new members will be added.

The Senate

While the shifts in leadership in the Senate will be less dramatic since the Democrats retained control over that body, there will be some notable changes on the Republican side. Senator Chuck Grassley’s (R-IA) term as the Ranking Member of the Senate Finance Committee will expire at the end of 2010. His replacement will be Senator Orrin Hatch (R-UT). According to term limits set by the Senate Republican Caucus, Senator Hatch may serve in that capacity for up to six years. Senator Hatch has traditionally been more attuned to the needs of domestic manufacturers than Senator Grassley, and less concerned about agricultural issues. Senator Max Baucus (D-MT) will continue to chair the Senate Finance Committee.

The Obama Administration

It is also possible that these mid-term elections will be accompanied by additional departures from the Obama Administration’s economic team. In the past, key trade policy-makers or Cabinet-level officials have sometimes left after mid-term elections. There have already been major changes announced in the White House economic team: personnel who have recently left or who will be leaving shortly include White House economic guru Larry Summers, CEA Chair Christina Romer, and OMB Director Peter Orszag. It seems likely that other changes will follow, particularly as the Administration tries to regain its footing on economic issues, which seemed at the center of the big Democratic losses.

Congressional Initiatives on Trade

With a Republican-controlled House, it will be even more important for the Administration and the Congress to work together if anything is to be accomplished on trade, including agreement on which trade legislation should take priority in the 112th Congress. President Obama has signaled his desire to conclude and send to Congress the pending U.S.-Korea Free Trade Agreement and possibly the U.S.-Colombia Free Trade Agreement. The United States is in negotiations currently to become a member in the Trans-Pacific Partnership, a multilateral free trade agreement involving many of the countries bordering the Pacific, such as the United States, Chile, New Zealand, Singapore and Brunei (but not yet including some of the big players such as China, Japan or Canada). Negotiations could be concluded on this agreement during the 112th Congress, but that is by no means certain.

On September 29, 2010, the House of Representatives passed legislation aimed at deterring China from manipulating its currency. China currency legislation may still pass in the Senate during the upcoming lame duck session but if it is not taken up, passed by the Senate and signed by the President, the process would have to begin anew in the next Congress. While incoming Ways and Means Chairman Camp supported the House China currency legislation, incoming Trade Subcommittee Chairman Brady opposed it. How they will deal with this subject from their new positions in the majority remains to be seen.  

Notwithstanding the potential for movement on the free trade agreements, it is not clear that there will be any added impetus from Congress to conclude negotiations on the WTO Doha Round or whether the new leadership and members in Congress will even show any interest in these negotiations. The Doha negotiations have been stalled for a long time.

The General Trade Agenda

As previously noted, Republicans are more likely to be proactive on trade in the Ways and Means Trade Subcommittee and to focus on trade liberalization initiatives, in contrast to the enforcement agenda pursued by the Democrats. The focus may well be less China-centric and more business-oriented. Another change is that the unions will likely have less leverage in the House and diminished leverage in the Senate.

Even with the Republican-controlled House, there will still be a closely-divided Senate and a Democratic White House, which may make it difficult to get agreement on any public policy matters, including trade. The newly-elected members from the Tea Party movement do not necessarily share a collective view on trade. In addition, there will be a change at the top of the Republican side of the Finance Committee, which will introduce a new dynamic. The new Congress will bring many changes, and challenges, to the field of international trade.