With the exception of the House of Representatives' passage of a bill targeting China for undervaluing its currency in September 2010, the past two years have seen a great deal of talk but little action on trade policy issues. Free trade agreements remain stalled and, while introduced, proposed legislation to place more restrictions on trade did not progress beyond Committee votes.
While it is not possible to predict specific legislative outcomes on trade policy, the new Congress brings both risks and opportunities in the areas of international trade and commerce:
- A Republican-controlled House of Representatives usually indicates a larger "free trade" agenda. However, in this election, many Republican candidates were not the traditional "pro-business free traders" but rather populists who tend to be more protectionist. There is a strong vein of discontent amongst voters as a result of current economic challenges, and this type of economic frustration can often manifest itself in protectionist policies and increased scrutiny of companies involved in international commerce.
- On the other hand, there is a view both in the White House and by some leaders in Congress that U.S. participation in the global economy is essential to maintain U.S. standing in the world and to help the country's economic recovery. Also, U.S. trade policy officials are concerned that other countries and the European Union are signing trade agreements which could put U.S. companies at a disadvantage without similar agreements.
With these factors in mind, look for the following issues to be considered by the Congress in 2011:
- After more than three years, look for the Obama Administration to push for passage of a Korea Free Trade Agreement (FTA) in 2011. Attempts are being made by the Administration to negotiate some labor and auto-related parts of the agreement and the President hopes to push for passage in the next Congress.
- Long-stalled FTAs with Panama and Colombia could also pass, but likely only if the Korea FTA is approved.
- Congress will likely continue its focus on alleged unfair trade practices by China. There is intense lobbying currently underway by supporters of the Currency Reform for Fair Trade Act, a bill that could lead to tariffs against China for currency manipulation. The bill passed the House in September 2010 and supporters want the Senate to consider the bill during the lame duck session of Congress. While Senate leaders are reluctant to move forward with the legislation, particularly with ongoing multilateral negotiations, supporters are confident that there is enough bipartisan support for the Senate to pass a bill during the lame duck.
- Congress will likely target Chinese companies, imports, and investment in the U.S. through legislation and investigation and agencies such as the Committee on Foreign Investment in the United States (CFIUS). In the past, Congressional activism on these issues has triggered trade disputes, chilled foreign investment, and induced retaliatory tariffs from China, and companies with a stake in U.S.-China relations and trade have reasons to be very concerned in the aftermath of the midterm elections.
- An example of Congress targeting Chinese and other foreign companies is the Foreign Manufacturers Legal Accountability Act, a bill that would require foreign manufacturers of consumer products to maintain an agent in the United States as a way to ensure these companies fall under the US tort system for liability law suits. The bill was introduced in both the House and Senate in 2010 and will likely be reintroduced in 2011.
- One issue where bipartisan agreement is likely to occur is enforcement of anti-bribery and international sanctions laws. While Congress has recently expanded the scope of sanctions against Iran, it would not be surprising to see this issue revisited during the next Congress to further toughen sanctions, as this is one of the only tools available to Congress to make policy related to Iran.
- Furthermore, as the Obama Administration ramps up their reelection efforts, companies involved in international commerce should not be at all surprised to find themselves subject to more frequent and probing enforcement inquiries related to the Foreign Corrupt Practices Act (FCPA) and economic sanctions laws.
- Finally, Congress needs to act during the lame duck session on renewal of the Generalized System of Preferences (GSP) program and the Andean Trade Preference Act (ATPA), both of which expire at the end of 2010. In recent years, renewals of the GSP program and other trade preferences programs have become more controversial in Congress.
In summary, after two years of much debate but little trade-related legislation, both pro-trade and anti-trade forces see an opportunity to push their respective agendas in the new Congress.