The FTAs' Price Tag, ctd.

By the time most of you read this, the House and Senate will have passed implementing legislation for the Korea, Colombia and Panama FTAs, thus ending a long and tortuous path for these trade agreements.  But before we put the FTA saga to bed for good, I've been looking at a few of the more, ahem, interesting details surrounding these deals.  Last night I went through the CBO scoring of the implementing legislation, and noted that it increased merchandise processing fees on imports from countries other than the three FTA partners to the tune of about $4.3 billion.  I forgot, however, to examine the CBO scoring of the expanded Trade Adjustment Assistance and Generalized System of Preferences legislation accompanying the FTAs.  As you'll recall, this legislation is only being considered now because President Obama refused to formally submit the FTAs to Congress unless he had assurances that expanded TAA would get reauthorized.  The CBO report (conveniently released only late last week) on TAA/GSP is available here, and the key table laying out the new TAA-related spending and revenues (i.e., taxes) is below:

As you can see, the President's demands that TAA expansion be included with the FTAs will cost US taxpayers over $1.1 billion over the next five years.  Meanwhile, an increase in the merchandise processing fees from 0.21% to 0.3464% ad valorem on US imports will offset the cost of TAA expansion by raising over $2.4 billion in new customs fees paid by US importers (and, thus, American consumers).  The TAA bill then lowers those fees to only 0.174% in 2016, allegedly providing some $600 million in "savings" for US import consumers between 2016 and 2019.

And there's where things get a little more interesting.

As I noted last night, the CBO score for the KORUS also raises revenues (again, $4.3 billion) by increasing merchandise processing fees.  The schedule for those new fees is here:

Now, please notice how the KORUS-related fee increase (also from 0.21% to 0.3464%) doesn't begin until 2016 - just as the TAA-related fee increase is supposedly lowered to 0.174% (a little lower than the current 0.21%).  In short, there are conflicting merchandise fees - and thus budgetary effects - in 2016-2019. (And, in case you're wondering, I also checked the text of the legislation, and each bill amends the exact same provision of US law - 19 USC 58c(a)(9)).

So what the heck is going on here?  I'm certainly no budget guru, but I only see two options:

(1) Assuming that the KORUS law supersedes the TAA law, then those $600 million in consumer savings don't actually exist.

(2) Assuming that the TAA law supersedes the KORUS law, then those $4.3 billion in consumer taxes don't actually exist.

I don't know about you, but I'm guessing it's the former scenario, and if so, we can add another $600 million to CBO's scoring of (and thus the price tag of) the expanded TAA bill.

Sweet.

The Circle of (Government) Life

This is... just perfect:

Ex-employees of the failed solar panel company Solyndra have applied for aid under the federal government’s Trade Adjustment Assistance program, the Labor Department has confirmed.

If approved, the employees of what was once touted as a leading exemplar of the White House’s green jobs program will be eligible for more federal funds to enable them to be retrained for other jobs.

It would be an ironic coda to the saga of Solyndra, which manufactured solar panels and received $527 million in loan guarantees from the Energy Department and praise from President Obama during visits to the firm’s California headquarters.

Now those green workers will be seeking the government’s help to find work again and not necessarily in the conservation jobs sector.A source at the department confirmed the request for assistance was received on Sept. 2, just two days after the company filed bankruptcy, placing all 1,100 employees out of work....

The company’s failure was based in part on competition from China, which has been able to produce the panels at a far lower cost than U.S. manufacturers.The request was made by a representative of the 1,100 ex-employees and covers all of them. The department estimates the aid will cost $13,000 per worker for the coming year.

The TAA program offers help to domestic workers who have lost their jobs due to the trade practices of foreign countries. The assistance includes job retraining, allowances for job searching, health benefits and up to 130 weeks of income support.

So to recap: massive government subsidies created 1,100 "green jobs" that never would've existed but for those massive government subsidies.  And when those fake jobs disappeared because the subsidized employer-company inevitably couldn't compete in the market, the dislocated workers blamed China (instead of what's easily one of the worst business plans ever drafted) in order to receive... wait for it... more government subsidies.

Behold, the Circle of Government Life.

(h/t Mark Perry)

Obama's Jobs Speech Reveals His True Trade Priority

Last night, President Obama once again mentioned how pending FTAs with Korea, Panama and Colombia can help kickstart the ailing US economy, but his speech contained a subtle, yet significant, rhetorical shift that laid bare his real priority: passing a $1 billion worker subsidy in the form of the dubious and controversial (and greatly expanded) Trade Adjustment Assistance.  As you may recall, over the last two months Obama has repeatedly called on Congress to pass the FTAs "right now," despite the fact that Congress can't actually implement the deals because the White House has refused to send them to Capitol Hill until the GOP relents on TAA expansion.

Several of us called the President on his misleading rhetoric, yet it continued (again and again and...).  But last night, President Obama didn't actually call on Congress to pass the FTAs:

So, some things we can do on our own. Other steps will require congressional action.... Now it’s time to clear the way for a series of trade agreements that would make it easier for American companies to sell their products in Panama and Colombia and South Korea – while also helping the workers whose jobs have been affected by global competition. If Americans can buy Kias and Hyundais, I want to see folks in South Korea driving Fords and Chevys and Chryslers. I want to see more products sold around the world stamped with the three proud words: “Made in America.” That’s what we need to get done.

Notice here that the President did not say "pass a series of trade agreements"; he said "clear the way" for the deals.  Of course, the only thing standing in "the way" of the FTAs is the President, and he won't get out of "the way" until TAA expansion is secure.

And just how secure, you ask?  Well, according to Harry Reid - who's certainly working in concert with the President - nothing but TAA's passage into law will free the three FTAs.  As Cato's Sallie James discovered yesterday:

After much back-and-forth on sequencing and strategy [subscription required], and many fine words from both sides about how the long-pending trade agreements with Panama, Colombia and South Korea are a bipartisan priority (President Obama’s failure to send the agreements for a vote notwithstanding), Senate Majority Leader Harry Reid (D-Nev.) finally laid all his cards cleanly on the table yesterday.

A deal reached in August seemed to imply that the House would merely have to put Trade Adjustment Assistance to a vote before passage of the trade agreements, but yesterday Senator Reid said that the Senate would not vote on the trade agreements unless and until the House PASSES (not merely “considers”, as the Republican House leadership was always careful to specify) an extenstion of Trade Adjustment Assistance. (By the way, just to clarify, the stimulus-enhanced version of TAA is the main issue here. The basic TAA program has been running without authorization since the start of the year, when OMB ruled that it could continue unauthorized, so long as it was funded. So while the entire program “needs” reauthorization, the 2009 version is the most urgent priority for TAA advocates and their political supporters.)

So there you have it, folks, with all the niceties stripped away: If TAA doesn’t pass, then Harry Reid will ensure the trade agreements won’t even see the Senate floor. Pay the bribe, or pay the price.

Reid's statements establish, unequivocally, that when President Obama last night called on Congress to "clear the way" for the pending FTAs, what he actually meant was: "Hey Republicans, pass TAA expansion into law or the FTAs will never, ever see the light of day."

And that, my friends, is The Chicago Way.

Big News: Senate Dems/GOP Announce Meaningless TAA Deal

The trade world was a'twitter today with the exciting news that Senate Democrats and Republicans have agreed on a path forward for consideration of the Trade Adjustment Assistance expansion that expired in February of this year and, due to White House demands, has prevented congressional consideration of pending US FTAs with South Korea, Colombia and Panama.  Reuters reports the basics:

Congressional leaders said on Wednesday they have agreed upon a path to approve three long-delayed free trade agreements and a program to help U.S. workers who lose their jobs because of foreign competition.

"My staff and (Senate Republican Leader Mitch) McConnell's staff have been in discussions for weeks over the Trade Adjustment Assistance (TAA) program and the three outstanding FTAs," Senate Majority Leader Harry Reid said in a statement.

"We believe those discussions have provided a path forward in the Senate after we return for passage of the bipartisan compromise on the Trade Adjustment Assistance program, followed by passage of the three FTAs," Reid said.

U.S. Trade Representative Ron Kirk also said he was "very pleased Senators Reid and McConnell have agreed on a path forward" for the trade deals with South Korea, Colombia and Panama and the TAA.

In a separate statement, House of Representatives Speaker John Boehner welcomed the deal reached by Reid and McConnell.

"I look forward to the House passing the FTAs, in tandem with separate consideration of TAA legislation, as soon as possible," Boehner said in a statement.

"The Administration looks forward to working with leaders of the Senate and House after Congress returns in September to secure approval of these important initiatives for America's working families," Kirk added.

A Republican aide said the White House had insisted on passage of the TAA in exchange for sending the free trade agreements to Congress for votes.

The deal between Reid and McConnell shows there are votes to pass the pacts and the retraining program, the aide said. Senate Republicans will be able to offer amendments to TAA, but the expectation is they will be defeated, the aide added....

The deal reached by McConnell and Reid calls for separate consideration of TAA, but Reid made clear he did not support movement of the trade deals until TAA is approved.

As an initial matter, I must say that I'm quite pleased that it appears, for now at least, that the White House's hair-brained scheme to attach TAA expansion to the US-Korea FTA is dead.  But beyond that, am I the only one baffled by the treatment of this "big" announcement as some sort of major breakthrough to the current TAA-FTA impasse?   Leaving aside the basic fact that, because Congress is on summer break (woo hoo!) recess until September, a whole month of domestic and world events (such as, you know, the collapse of the global economy) could once again stall the FTAs, I see two major obstacles:

First, contrary to what some of my fellow trade nerds think, House passage of the TAA expansion is not a slam dunk.  As Boehner's announcement above makes abundantly clear, there is no guarantee by House leadership that their chamber will actually pass a standalone TAA bill.  This is because (i) the House GOP rejected a similar (albeit more expensive) expansion of TAA back in February and, after getting double-crossed by House Dems on the "May 10 deal" back in 2007 (which was supposed to ensure passage of all pending FTAs, not just the US-Peru agreement), remains extremely suspicious of any Democratic promises on FTAs; and (ii) House Democrats appear ready to oppose the FTAs until the House actually passes the TAA expansion (or provides an "ironclad" guarantee, whatever that means).  The White House has made similar statements in recent days, and its response to today's Senate announcement clearly showed that the Reid-McConnell deal hasn't solved anything and that the President won't submit the FTAs until TAA expansion is a done deal.

So you have a TAA-averse House GOP who appears ready to consider (but not approve) TAA only if the White House submits FTA implementing legislation simultaneously, and you have congressional Democrats and the White House who won't move the FTAs until TAA is passed.  And some of the procedural "solutions" offered to this standoff are downright laughable, for example:

A business source told BNA in an e-mail that—under one possible scenario discussed—the legislative pathway would begin with House approval of a bill to renew the lapsed Generalized System of Preferences (GSP) program. It would be followed by the Senate approving GSP and adding the TAA compromise to the bill as an amendment, the source said.


According to the source, that bill would then return to the House, which would await submission of the FTA implementing bills from the Obama administration before TAA consideration. Under this scenario, the House would then hold four separate votes, one of which would be a bill including TAA, GSP, and perhaps Andean Trade Preference Act extensions—which alternatively could be included in the Colombia implementing bill. The four bills would go to the Senate for final approval.

Oh, yeah, this should, like, totally end well.  Cripes.

Second, the Senate TAA deal itself faces a serious problem: amendments.  The Reuters article above indicates that the Republican amendments (on things like Trade Promotion Authority or the scaling back of the TAA expansion) are likely to be defeated, but it says nothing about Democratic amendments.  And as this BNA article [$] makes clear, those amendments could create serious problems:

The absence of specific language in the leaders' statements on how the amendment process will be handled led one trade analyst who spoke with BNA to conclude that these important details have not been worked out yet.

McConnell has said previously that he would like to attach renewal of Trade Promotion Authority as an amendment to the GSP-TAA bill, but the amendment would run the risk of not being approved.

In a statement, Sen. Sherrod Brown (D-Ohio) applauded Reid's insistence on passing TAA first and called for swift passage of the Currency Reform for Fair Trade Act (S. 328)—legislation introduced in February by Brown and Sen. Olympia Snowe (R-Maine) that would crack down on Chinese currency manipulation.

Brown and Sen. Charles Schumer (D-N.Y.) are or will be co-sponsors of each other's legislation on Chinese currency manipulation, either of which could be proposed as an amendment to the GSP-TAA bill.

“Extending Trade Adjustment Assistance is an important step to respond to job loss caused by foreign competition,” Brown said. “But addressing unfair trade practices like Chinese currency manipulation can prevent job loss by ensuring a level playing field for American manufacturers facing a flood of cheap Chinese imports.”

The Brown and Snowe measure is a companion bill to House legislation, and they are expected be co-sponsors on the yet-to-be introduced Schumer legislation.

So, if Senator Brown offers his currency amendment, are you telling me that, in this crappy economy and with 2012 rapidly approaching, he definitely won't be able to get sufficient support?  Or are you saying that Sen. Reid will definitely be able to control the notoriously rambunctious Senator Brown who, by the way, is facing a tough re-election fight in 2012?

Wanna bet?

So, to recap, we have (i) a month delay in rough economic times; (ii) an uncertain House process, replete with suspicious GOP leadership and a majority that just 6 months ago rejected TAA expansion; and (iii) an uncertain Senate amendment process that could attach a poison pill to the TAA bill.  And yet, the bi-partisan Senate announcement was somehow deserving of BREAKING NEWS alerts and congressional/business backslapping?

Umm, no.

As I've said for months now, I'll believe in congressional passage of these pending FTAs when I see it, and so should you.

The TAA-FTA "Deal": The Law, One More Time

Last week, I explained why, based on the plain language of Trade Promotion Authority (as codified in U.S. law), the US-Korea FTA implementing bill could not contain provisions reauthorizing expanded Trade Adjustment Assistance and still qualify for TPA's "fast track" protections as it makes its way through Congress.  In particular, I explained how, despite White House assertions to the contrary, it was ridiculous to assert that TAA was "necessary and appropriate" to implement the KORUS FTA, as required under TPA, and thus any attempt to fast-track a joint TAA-FTA implementing bill relied on a blatant disregard of, or contempt for, the rule of law.  On Tuesday, however, Howard Rosen of the TAA Coalition has come to the White House's defense by arguing that the TAA-FTA legislation indeed does qualify for TPA's procedural protections because it's, like, totally "necessary and appropriate."  But is his defense valid?

In short, no.  Not at all.

On whether the TAA expansion could rightly qualify under TPA's  "necessary and appropriate" provisions, I stated last week:

It's absolutely laughable, however, that the TAA expansion attached to the US-Korea FTA would qualify as such a "provision." First, TAA expansion isn't "necessary or appropriate to implement" the KORUS FTA. Indeed, one of the key features of the TAA expansion package is that it de-links benefits from US FTAs. So, other than the fact that both the FTA and TAA have "trade" in their names, their actual substance is unrelated. Of course, one could argue that inclusion of TAA is politically "necessary" to ensure Senate passage of the KORUS FTA. However, by this silly political metric, anything - no matter how irrelevant and unconnected to the FTAs - could be deemed "necessary" to implement the FTA and thus entitled to special consideration (e.g., no filibusters) under House and Senate rules. So if, for example, a majority of US Senators said that they'd only vote for the KORUS FTA if the implementing legislation included a provision giving each of their spouses $1 billion in cold, hard cash, that "provision" would, under the White House's interpretation, be "necessary" to implement the FTA and thus qualify for TPA protections. This, of course, is absurd.

Second, the White House's expansive view of sub-paragraph (C) totally ignores its introductory clause: "if changes in existing laws or new statutory authority is required to implement such trade agreement or agreements or such extension." This clause makes it absolutely clear that the "provision... repealing or amending existing laws or providing new statutory authority" must be related to the "changes in existing laws or new statutory authority" that are required to implement the FTA at issue. So, if an FTA's implementing legislation amends US law, and it's determined that those amendments necessitate conforming edits to other US laws, the provisions containing those consequential conforming edits may be included in the implementing bill and granted TPA's protections. And this is precisely the type of "necessary provision" that has been included in past FTA implementing bills (such as that for the NAFTA).

So to claim that TAA expansion qualifies under sub-paragraph (C) and thus deserves TPA protection is a serious stretch. (And that's being kind.)

In short, because the TAA expansion at issue has no real, substantive connection to the US-Korea FTA, and because expanding TAA in the fashion contemplated here (e.g., renewing expired programs that covered services workers and, most importantly, expanded eligibility to workers allegedly displaced by competition from non-FTA countries) is not needed to conform existing US law to the laws changed by the KORUS agreement, then it simply cannot be "necessary and appropriate" under any reasonable reading of TPA's "necessary and appropriate" requirements.

Rosen disagrees.... well, sorta (emphasis mine):

Finally, including TAA reauthorization and reform in the US-Korea FTA implementing legislation meets the “necessary and appropriate” criteria set by historic precedent. Except for two cases, in 1981 and 2009, all Congressional action on TAA since the program was established almost 50 years ago, has been linked to trade legislation. TAA provisions were included in the Trade Expansion Act of 1962, the Trade Act of 1974, the Omnibus Trade and Competitiveness Act of 1988 and the Trade Act of 2002.

TAA has only been directly linked to FTA implementing legislation once, the NAFTA Implementing Act in 1993, since there was no need to reauthorize or make changes in the program at the time Congress was considering other FTAs. For example, the Trade Act of 2002, which included significant reforms, reauthorized the program through 2007. The only reason there is an immediate need to act on TAA is that the program’s authorization and the reforms implemented in 2009 expired on February 12.

Ok, so that sounds pretty reasonable, right?  Yeah, except for the small fact that it's not reasonable.  At all.

First, it's really important to note here what Rosen isn't saying.  He's actually not arguing with my (correct) interpretation of US law.  Instead he's saying that it's totally ok to disregard a proper reading of US law because it's been disregarded in the past (i.e., "by historic precedent").  Thus, Rosen's primary defense of the joint TAA-FTA legislation is the classic "everybody's doing it" defense that I unsuccessfully tried to deploy against my parents throughout the 1970s and 1980s.  But as my mom (and all other moms) would tell us: just because other people disregarded the law doesn't mean that what they did was legal.  It just means that they didn't get caught.

But there's an even bigger problem with Rosen's defense, and here's where the wheels really fall off: the "historic precedent" he cites is completely inapplicable to the current situation.  Rosen tries to pull a clumsy slight-of-hand in the first paragraph pasted above by switching "FTA implementing bill" with "trade legislation" and then citing all of this "trade legislation" to which TAA has been historically attached (i.e., the Trade Expansion Act of 1962, the Trade Act of 1974, the Omnibus Trade and Competitiveness Act of 1988 and the Trade Act of 2002).  Yet no one is arguing that provisions amending, expanding or reauthorizing TAA can't be attached to "trade legislation," and the TPA legal rules that I cited in my original blog post (and which matter for the purposes of the current TAA-FTA debate) deal only with FTA "implementing bills."  So the fact that TAA has been attached to other trade bills is a red herring.

Second, the "direct linkage" of TAA provisions to the NAFTA implementing legislation actually supports my reading of the law because the TAA provisions included in the NAFTA Implementation Act of 1993 were actually linked to, and necessitated by, NAFTA's implementation.  Indeed, here's how the House Ways & Means Committee Report described the TAA provisions included in the NAFTA implementing bill (emphasis mine):

New Trade Adjustment Assistance Benefits.

The bill would add a new sub- chapter to the TAA program to allow workers who lose their job because their firm shifts production to Mexico or Canada to qualify for TAA. In addition, workers would be required to enter a job training program by their sixteenth week of unemployment or their sixth week of TAA certification, whichever is later, to be eligible for benefits. Unlike the current TAA program, beneficiaries under this sub-part could not receive a waiver from training and still collect cash assistance. TAA cash and training benefits under this amendment would be available to those who are displaced from their jobs between January 1, 1994, and September 30, 1998. CBO estimates that fewer than 1,000 workers annually would qualify for TAA payments under this provision. The average training benefit would be $4,000 per person, and the average cash benefit would be approximately $6,000 per person. CBO estimates that total TAA payments under this new sub-part would be less than $500,000 in fiscal year 1994, $7 million in fiscal year 1995, $8 million in fiscal year 1996, and $9 million each of the fiscal years 1997 and 1998.

Now, leaving aside the distressing fact that expanded TAA benefits under the NAFTA were only in the low millions (compared to the billions of today's TAA program), it's abundantly clear from the description above that the TAA provisions in the NAFTA implementing bill (a) amended existing, not new, TAA programs and (b) were clearly based on the projected effects on the TAA program caused by expanded trade with Canada and Mexico (i.e., NAFTA).

The TAA expansion attached to the KORUS, on the other hand, meets neither of these criteria.  Indeed, as I noted above, it actually de-links benefits from US free trade agreements!  It thus simply cannot be considered "necessary and appropriate" to implement the KORUS under even a liberal reading ot TPA.

As I said in my original blog post on this subject, all of this legal analysis, while correct, is probably moot because Congress can just "creatively interpret" or re-write TPA's rules and thus can basically do whatever it wants on the subject.

But let's please stop kidding ourselves that the joint TAA-FTA package currently being pushed by the White House and Congressional Democrats meets TPA's legal requirements.  Both the law - and precedent - clearly show that it does no such thing.

White House Does the TPA Two-Step; Hypocrisy Ensues

Today comes news from National Journal [$] that the White House supports a strict reading of Trade Promotion Authority, except, you know, when it doesn't (emphasis mine):

The White House pushed back a last-minute attempt on Monday to prevent it from attaching Trade Adjustment Assistance to the pending free-trade agreement with South Korea after closed-door efforts to find an alternative for its renewal failed.

Sen. Orrin Hatch, R-Utah, the top Republican on the Senate Finance Committee, sent congressional leaders a letter requesting an unprecedented “mock conference” to reconcile two different versions of the Korea pact that were approved in committee last week. But, Hatch’s last-ditch effort quickly fell flat as the White House continued on what could be the only sure course to renew the program’s funds.

In his letter, Hatch escalated GOP skepticism of the legality of the White House decision to include TAA in the Korea bill and questioned whether the administration has the constitutional authority to choose between the House and Senate versions of the pact.

“Reconciling the two bills is the exclusive prerogative of Congress, a prerogative which cannot rightfully be devolved to the executive branch,” Hatch said. He urged legislative leaders to call a mock conference to reconcile the bills and present the White House with a template for drafting the final legislation.

Trade agreements, however, are not handled like normal legislation and the White House quickly dismissed Hatch’s claim. Bills on pending trade deals with Colombia, Panama, and South Korea are all slated to move through Congress under the protective rules of Trade Promotion Authority.

“Under Trade Promotion Authority, the results of informal ‘mock’ markups are recommendations to the president as he prepares to submit implementing legislation to Congress,” said an Obama administration official. “Both the House Ways and Means Committee and the Senate Finance Committee have now made their recommendations.”...

Trade agreements moving under Trade Promotion Authority are not subject to filibuster or amendment and only require a simple majority for passage in both chambers.

“We’ve made clear that a robust renewal of TAA has to be part of the legislative agenda, and including it on an implementing bill for a trade agreement is the only viable pathway that has emerged,” the administration official said. “So far, no other credible alternatives have been offered to get the trade agreements and TAA done in a timely fashion.”

So, to summarize the White House's arguments:

• A strict reading of TPA, like, totally precludes unique procedural proposals like Senator Hatch's "mock conference," so his idea is stupid and illegal.  Thus, we're going to ignore it.

• A liberal reading of TPA, like, totally allows unique procedural proposals like our plan to attach expanded Trade Adjustment Assistance to the US-Korea FTA implementing legislation, so our plan is perfectly appropriate and legal.  Thus, we're going to pursue that plan and ram the TAA-FTA bill down the throats of objecting congressional Republicans.

Behold, unabashed political hackery!  Sigh.

I've already laid out - in excruciating detail - why the Administration's liberal interpretation of TPA is complete and utter nonsense (and dangerous nonsense, at that), and it appears that Senator Hatch's office is raising similar legal objections.  Good for them.  I hope they continue to do so.

But if you disagree (expressly or tacitly) with our legal analysis and thus are totally fine with the Obama administration's liberal interpretation of TPA, then surely you oppose the White House's immediate rejection of Sen. Hatch's "mock conference" scheme, right?  And surely you're incensed - and a little embarrassed - by the administration's clear hypocrisy, right?

Or do you, like the White House, have absolutely no regard for the rule of law?

The silence here - by the media and the Obama administration's supporters (redundant, I know!) - is rather deafening.

The TAA-FTA "Deal," Part 3: It's the Politics, Stupid

[Ed note: This is the third of a three-part series in which I'll review the joint FTA-TAA legislation proposed by the Obama administration and Senate Democrats last week. Familiarity with the White House's brilliant plan and recent events is presumed.  Parts 1 (on the spending) and 2 (on the law) of the series are available here and here, respectively.]

Now that Republican and White House positions seemed to solidify over the weekend and ultimate passage of pending US FTAs with Korea, Panama and Colombia is in question, it's a good time to analyze what everyone in DC really cares about - who's to blame for any ultimate collapse.  I had planned to do an extensive history of how we got here, replete with damning quotes from certain parties, but there's no need for that now, as Doug Palmer's latest Reuters' piece on the TAA-FTA stalemate does most of the heavy lifting for me (emphasis mine):

President Barack Obama appears headed toward a fight with Republicans over a long-delayed trade deal with U.S. ally South Korea, even though both sides say they want it to pass Congress.

Obama administration officials say no deal has emerged to ease passage of an agreement that supporters contend would create tens of thousands of jobs and help the White House aim of doubling U.S. exports in five years....

The Korean deal, and two other pending pacts with Colombia and Panama, were negotiated and signed under former President George W. Bush. He could not win their approval after Democrats took control of Congress in November 2006.

A year ago, Obama moved to resolve Democratic concerns with the deals. That accelerated after Republicans won the House of Representatives in November and demanded action on all three deals by July 1.

Obama could send the agreements to Congress as early as this week after committee-level action in the House and Senate last week.

The administration has signaled to business groups it intends to submit the Korea agreement with the controversial Trade Adjustment Assistance (TAA) retraining program included, one business source said.

McConnell strongly opposes that but the administration official said they see no other way to win approval of TAA, a key White House priority along with the pacts.

The administration does not want to further upset organized labor, which is wary of trade deals over their potential impact on U.S. jobs and is an key Democratic Party constituent....

Congress created TAA in the 1960s. An expanded version expired in February after newly elected Republicans, who now lead the House, balked at the $1 billion annual price tag.


Although the underlying TAA program remained in place, the White House warned Republicans in May that it would not send the three free trade agreements to Congress until there was a deal to renew many of the expanded benefits approved in 2009....

Democrats believe the administration needs to include it in the Korea bill to prevent Senate Republicans from killing it. Republicans believe they should be kept separate and have called plans to put TAA in the Korea bill "a poison pill."

Obama appears poised to defy Republicans, apparently counting on their traditional support for free trade deals which many of his fellow Democrats traditionally oppose.

That strategy might backfire. "We can't speak for every Republican, but (McConnell) has said he'd be compelled to vote against the Korean trade bill if it includes TAA," a McConnell spokesman said, adding the Republican leader would first do "everything in his power" to block action on the bill....

A Republican aide said McConnell believes TAA would pass in the Senate on its own and would not work against it if he got a vote on renewal of the [Trade Promotion Authority] fast-track powers.

House Speaker John Boehner also wants separate votes on the TAA program and the trade bill.

So to recap:

• Because the White House, a significant minority of House and Senate Democrats and almost all congressional Republicans support the pending FTAs, the deals could, if submitted under TPA, pass both chambers of Congress relatively easily.  Like tomorrow. 

• However, the TPA "fast track" protections needed to ensure congressional passage only apply if the President submits the FTAs' implementing legislation to Congress.  Thus, the agreements' fate rests solely in the President's hands.

• Republican opposition to TAA expansion has been known since February, when the House overwhelmingly rejected extending the expanded TAA program because of substantive concerns about the program's purpose, scope and cost.

• Knowing the Republicans' substantive opposition to TAA, the White House in May demanded that TAA renewal be part of congressional consideration of the FTAs.  Republicans, quite unsurprisingly, objected.

• It is well-known that the White House's TAA demands are politically motivated in order to garner labor union support for the 2012 elections.

• Because TAA cannot pass the House or Senate on its own merits, the President has refused to submit the FTA implementing legislation to Congress without TAA being attached.  Such extortion is the only way that the President can score the political victory he wants.

• The President has issued his demands knowing full well that (a) Republican opposition to TAA is longstanding and substantive; (b) the FTAs would almost certainly be approved by Congress under TPA; and (c) the FTAs very likely cannot pass both chambers without TPA's procedural protections.  Thus, Obama's strategy is extremely risky and depends entirely on congressional Republicans reversing a substantive position on a controversial, billion-dollar spending program (of dubious value) that they cemented only a few months ago.

To summarize: the FTAs are the only thing that the White House and a majority of both chambers of Congress support, while TAA simply cannot survive the normal congressional process.  The President is thus risking the FTAs' sure passage by attaching a politically untenable program, and he's taking that risk in order score a cheap political victory.  And, of course, if the agreements' die, the President also benefits politically because US labor unions - a core Democratic constituency - steadfastly oppose them.

So, knowing this, can really there be any doubt as to who's to blame if the FTAs remain unimplemented into the Fall (and maybe even longer)?  Can there be any doubt as to who bears responsibility for the harms caused to US consumers and exporters as these trade agreements remain shelved?

Of course not, regardless of what the White House and its media supporters claim.

Still don't believe me?  Ok, then let's close with a simple hypothetical:

My wife hates anchovies, and I kinda like them.  I've known that she hates the little buggers - can't even stand to have 'em on the same plate as her food - since we first started dating.  So say one night we go to a local pizza joint and she, as she sometimes does, leaves her purse at home, thus leaving me the only Lincicome in the place with the ability to pay for dinner that night.  I only have enough cash on me for one large pie, so we're going to have to share (so much for "recovery summer," I guess).  Fortunately, we'd both be fine with a plain cheese pizza, so if I order that, we both will eat well and go home happy.  But if I were to demand that we order a large pizza with extra anchovies, she's almost sure to refuse to eat it even though, technically, she could force down a few slices and be fine (it's not like she's allergic or anything).  So say, after warning me against ordering anchovies and just begging for a plain cheese pie, I order the anchovy pizza anyway because that's what I want and, frankly, I have the cash.  When the pizza arrives at our table, she flatly refuses to eat it and, furious, demands to be taken home immediately.  So we just end up walking out of the restaurant without eating anything.  And everyone loses.

Now, is there really any way on earth that we could blame my wife for that ridiculous result?

Of course not.

So could somebody - anybody - please tell the President to just hold the damn anchovies?

Right Now

There's an old joke that the definition of "chutzpah" is when a man kills his parents and then pleads for mercy on the grounds that he's an orphan. (Ba-dum-cha!)  Well, after President Obama's speech this morning on the dismal June jobs numbers, I think we have a new definition: when a President and his political party do everything in their power to stall four-year old US trade agreements and then publicly grouse about the deals' still-pending status.

In trying to deflect blame for the United States' continued inability to escape the doldrums of the 2009 recession (the worst "recovery" ever, by the way), the President stated today:

There are a few things that we can and should do, right now, to redouble our efforts on behalf of the American people.... Let me give you some examples.... Today, Congress can advance trade agreements that will help businesses sell more American-made goods and services to Asia and South America, supporting thousands of jobs here at home. That could be done right now.

Actually, Mr. President, that could have been done in 2008, had then-Speaker Pelosi (D-CA) not rewritten the longstanding congressional-executive agreement on Trade Promotion Authority (and "fast track" before that) when President Bush tried to implement the US-Colombia FTA.

And that could have been done in 2009, had you not shelved the FTAs in order to placate your party's protectionist wing.

And that could have been done in 2010, had you not demanded that each one be renegotiated in order to further stall the agreements and to pay off powerful domestic constituencies.

And that could have been done earlier this year, had you simply submitted the renegotiated FTAs' implementing legislation to a Republican-controlled House of Representatives that was literally begging for you to do so.

And that even could have been done last week, had you not attached a "poison pill" to the US-Korea FTA in the form of an expensive and highly controversial Trade Adjustment Assistance (TAA) expansion that congressional Republicans had already voted down in February and had repeatedly warned would be deal-killer.

And, despite all of this, Mr. President, you and Congress could still implement these FTAs right now if you would just submit clean FTA implementing legislation to the House and Senate pursuant to TPA.

So, what do you say, Mr. President?  How about we get on this?

Right now.

The TAA-FTA "Deal": The Law, Ctd.

On Tuesday, I blogged about whether the Obama administration's brilliant plan to jam through Congress joint legislation containing Trade Adjustment Assistance and the US-Korea FTA would, based on a reasonable reading of the law, qualify for the procedural protections afforded FTA implementing bills under Trade Promotion Authority.  My conclusions were that the White House's legislation shouldn't qualify for TPA, but that the Senate could - and probably would - just ignore the law.

Phil Levy picks up where I left off and opines on the broader implications of a decision by the White House and Senate Majority Leader Harry Reid (D-NV) to ignore the law and go through with their plans to move the TAA-FTA bill using TPA.  His conclusions are as depressing as they are correct (emphasis mine):

This [fast track] process worked until April of 2008, when then-Speaker Nancy Pelosi demonstrated, to widespread surprise, that Congress had not really committed itself at all: When President Bush tried to submit the Colombia FTA under Trade Promotion Authority, she just changed House rules and blocked it. This dealt the first serious blow to the underpinnings of U.S. trade policy.

Last week, the administration dealt the second such blow. By stuffing TAA into the Korea FTA implementing bill - i.e., by protecting it with Trade Promotion Authority that was supposed to be reserved exclusively for these trade agreements -- it may have sounded the death knell for this critical trade procedure.

The maneuver may well work.... But there is a significant future trade agenda now at serious risk. The administration has ambitious negotiations underway for a Trans-Pacific Partnership that could set the rules for trade with Asia. Global leaders have repeatedly called for a conclusion to beleaguered talks under the auspices of the World Trade Organization. For any of these, the White House will need new trade promotion authority. Such authority was hard to come by even in the best of circumstances. What chance would it have now, if it is interpreted as giving any White House the right to attach controversial and unrelated spending measures in a protected way?

The passage of the pending FTAs is long overdue. The compromise on TAA is acceptable, if it paves the way for a necessary reworking of the program. But, as with mishandled fireworks, the administration's narrow and divisive approach to solving the present impasse may prove crippling for U.S. trade policy in years to come.

In short, the Obama administration's attempt to use the KORUS FTA and a dangerously expansive interpretation of TPA as a sketchy vehicle for achieving a narrow political victory on TAA might win the legislative battles over the Korea, Colombia and Panama FTAs, but the plan seriously risks losing the bigger war over the future of American trade policy and potential trade agreements worth far more than the three currently being debated.  So free traders really need to ask themselves the following question:

If the President refuses to yield and a joint TAA-FTA package passed under fast track really ends up being the only way forward, is it worth it?

I think we all know which direction I'm leaning these days.  And that's pretty sad.

Finally, let's also not forget that, considering that all of the troubling TPA chicanery noted above has come from Democratic politicians doing the bidding of anti-trade American labor unions, the big winner from the passage of these FTAs might just be the very folks most opposed to them - the unions.  (No, seriously.)  In the process of "losing" the current FTA battles, their elected minions might just ensure the demise of future trade deals and America's long history of leading global trade liberalization initiatives.  Such a result would be one helluva "win" for them.

And one helluva loss for the American people.

[UPDATE: I somehow forgot to mention that the Obama administration's erosion of TPA's value actually began last December with its steadfast assertions that the Agreement's renegotiated automobile provisions would somehow not remove the deal from TPA's procedural protections.  So, really, the joint TAA-FTA package is the third blow to the longstanding congressional-executive agreement on TPA (and fast track before it).  The third, however, definitely remains the most egregious and problematic for the reasons Phil states.]

The TAA-FTA "Deal": Spending, Ctd.

[UPDATE: The revised merchandise processing fees for the TAA and KORUS legislation are laid out here.]

Since I blogged on Monday about the dubious spending provisions in the White House's proposed joint TAA-FTA legislation, there have been a few noteworthy developments:

First, on the question as to whether the legislation's increase in Customs Users Fees is consistent with WTO rules (first raised by your humble correspondent, btw), it appears that the White House and its supporters are utilizing the vaunted "because I said so" defense that my parents successfully employed throughout the 1970s and 80s.  Reports Inside US Trade [$]:

Supporters of renewing the lapsed Trade Adjustment Assistance (TAA) program are defending the increase of customs user fees to offset its costs as complying with World Trade Organization rules, which stipulate that customs user fees cannot be higher than the cost of the services rendered at the border.

The TAA deal as unveiled this week would increase the merchandise processing fee from 0.21 percent ad valorem to 0.329 ad valorem as one of a variety of funding offsets. 

Congress has not altered merchandise processing fees since 1995. Several sources noted that the cost of processing goods has gone up since that time, and one source said there is currently a "shortfall" between the costs of border services provided and the money collected through customs user fees.

One source also noted that since the terrorist attacks in 2001, the United States has placed a greater emphasis on security, and suggested that this could be one factor why processing costs have gone up.

In its draft Statement of Administrative Action (SAA) accompanying the draft implementing bill for the U.S.-Korea free trade agreement, the White House provides little explanation for how the fee increase would comply with WTO rules. The TAA compromise is included in the Korea FTA implementing bill.

"The change in rate addresses the increased costs Customs and Border Protection has incurred as a result of the increased volume of trade and additional operational initiatives since the last legislative change to the merchandise processing fee in 1995," the SAA states. 

The current merchandise processing fee of 0.21 percent ad valorem is generally assessed on "formal" entries, or those imports that have a commercial value of $2,000 or more. U.S. importers are required to pay this fee to Customs and Border Protection at the time of presenting the entry summary.

According to Article VIII of the General Agreement on Tariffs and Trade (GATT), all fees and charges imposed by WTO members on or in connection with importation "shall be limited in amount to the approximate cost of services rendered and shall not represent an indirect protection to domestic products or a taxation of imports or exports for fiscal purposes."

That means Congress can determine the level of the merchandise processing fees so long as they are commensurate with the costs of the services rendered.

So to summarize the White House's argument: Legislation that expressly raises revenues by increasing Customs users fees in order to fund TAA expansion doesn't actually raise revenues (and thus violate WTO rules), but instead simply pays for a longstanding "shortfall" in current fee collections (and thus is, like, totally WTO-consistent).   And this "shortfall" has persisted for more than a decade without anyone in the White House or Congress ever proposing to end it in standalone legislation because the US government is apparently so flush with cash that it was simply willing to keep subsidizing US importers to the tune of billions of dollars.  And it was just a coincidence that the big shortfall will be terminated in the joint TAA/KORUS legislation.  Oh, and something about 9/11 and terrorists.

Even shorter: The customs users fees provisions are WTO-consistent because the SAA says they are.  Now what WTO panel could argue with that?  (Rrrriiiiiight.)

Second, and speaking of those billions of dollars, the CBO has released its preliminary estimates of the revenue impact of the joint TAA/KORUS legislation.  You can check out the full score here, but the highlights are as follows:

• Projected amount of import tariffs eliminated (thus saving American consumers) between 2011 and 2016: $2.085 billion.

• Projected cost of TAA expansion over the same period: $1.17 billion.

• Projected increases in customs users fees over the same period (thus costing American consumers): $2.167 billion.

So according to CBO's (admittedly preliminary) projections, in this deal's first five years, American consumers will pay more in new Customs fees than they'll save in reduced or eliminated tariffs on Korean imports, and we'll pay another billion dollars for TAA expansion.

What a bargain!

But, hey, maybe TAA is some super-awesome program that's totally worth this fiscal and political expense.  Wouldn't it be great if some federal government agency released a long-overdue report on that very issue that would settle the TAA debate once and for all?  Umm, well:

As a divided Congress moves closer to a decision on three big international trade pacts, the Labor Department is four years late in delivering a study that is supposed to measure the efficacy of a program to provide extra benefits to workers who lose their jobs through globalization.

The deals with Colombia, South Korea and Panama, which could add billions in exports, are on a knife-edge over disagreements between Republicans and Democrats over Trade Adjustment Assistance, taxpayer funds paid to workers who lose their jobs as a direct result of trade.

The lack of up-to-date government data on how effective the $1 billion-a-year program is at helping the unemployed find well-paying work has hobbled efforts to identify and make improvements....

Labor Department officials say their research on TAA, originally due in 2007, won't be ready until the end of the year. That's likely to be after the fate of the proposed U.S. trade deals has been decided, at least until after the 2012 election. Thus far, the TAA study has cost $8.9 million, the Labor Department estimated.

"The data used for the study is long-term data on individual participants, which was collected over several years; therefore completion of the study is a long process," said Department of Labor spokeswoman Gloria Della.

Howard Rosen, resident visiting fellow at the Peterson Institute for International Economics, helped write 2002 reforms to TAA while he was a congressional aide that also called for a comprehensive evaluation of the program, and he has complained about the Labor Department's failure to deliver it.

"We need to make reforms based on what will work, not what will fly" politically, Mr. Rosen said.

Reports from Labor and the Government Accountability Office have led to changes, for example, in improving worker access to the program. Last year, 235,000 workers—or less than 2% of the nation's 14 million unemployed—were receiving benefits under the TAA program at a cost of $975 million.

In 2009, the program was expanded to include service, not just manufacturing workers, who now make up less than one-fifth of TAA recipients....

According to a Labor-sponsored study of TAA applicants in 2008-09, about one-third of eligible workers belong to a trade union; about half of those in the program are union members.

Gee, I wonder what possibly could be delaying the Labor Department study?  What a shame that it won't be ready in time for the current congressional debate.  Fortunately, IBD today points us to other studies on the TAA program, and let's just say that American taxpayers are definitely not getting their money's worth:

For starters, TAA is wasteful. Sen. Tom Coburn, R-Okla., released a report earlier this year showing that the $18 billion the government already spends on job training programs are full of waste, fraud and abuse.

A 2008 American University study by Kara Reynolds and John Palatucci concluded the same, declaring TAA "of dubious value in terms of helping displaced workers find new, well-paying employment opportunities."

Meanwhile, a 2003 study from the Office of Management and Budget called TAA downright "ineffective."

Also, it duplicates other programs. Trade-blogger David Almasi cites a GAO report earlier this year that shows, as of 2009, there were already 47 different federal jobs programs administered by nine different federal agencies. And 44 of those duplicated other efforts.

Finally, it cheats workers. The GAO study found that workers in the TAA program made less money in their new jobs than workers who hadn't benefited from the 156-week program.

A Heritage Foundation study of academic papers also found that TAA training tends not to boost wages.

On Monday I said of the White House's TAA-FTA proposal, "it's the spending, stupid."  Yet after reading all of these updates, I think I need to issue a slight correction:

It's the stupid spending.

The TAA-FTA "Deal," Part 2: It's the Law, Stupid

[Ed note: This is the second of a three-part series in which I'll review the joint FTA-TAA legislation proposed by the Obama administration and Senate Democrats last week. Familiarity with the White House's brilliant plan and recent events is presumed.  Part 1 of the series is available here.]

Now that the Republican-led House Ways & Means Committee has released its own FTA implementing legislation without expanded Trade Adjustment Assistance, it's clear that the House will hold separate votes on the FTAs and TAA expansion - just as Speaker Boehner and pretty much every Republican in the House and Senate have said they'd do all along.  Of course, House consideration of the FTAs in this manner will have to occur without the procedural protections afforded FTA implementing legislation under Trade Promotion Authority (TPA), which holds that only FTA bills submitted by the President may be considered by the House and Senate without amendment and pursuant to strict timelines.  So, with the House going the "clean FTA" route and the Senate pursuing the President's TAA-FTA scheme (confirmed again today by USTR Kirk), the obvious question arises:

What will happen when the House-passed FTA legislation meets the Democrat-controlled (and thus more trade-averse) Senate, which (we assume) will only agree to consider the President's TAA-FTA package?

Well, the increasingly-conventional answer to this question is that Senate could consider the House-passed FTAs under TPA if (i) the House also passes the TAA expansion and then combines the FTA and TAA legislation before sending it to the Senate; and (ii) the House TAA-FTA legislation exactly matches the TAA-FTA implementing legislation ultimately submitted by the President to the Senate.  According to Inside US Trade [$], "industry lobbyists" and even the Senate Parliamentarian (informally) have stated that the joint package would receive TPA protections.

But, assuming that the House does actually pass the separate TAA expansion (a somewhat big assumption considering that the same House rejected TAA only a few months ago), does the TAA-FTA legislation really qualify under TPA's "Fast Track" rules?

In short, no, but it probably doesn't matter because the Senate can - and likely will - just ignore the law.

TPA's rules for congressional consideration of an FTA implementing bill are set forth under US law in 19 USC Sec. 2191.  The law defines "implementing bill" as follows:

(1) The term “implementing bill” means only a bill of either House of Congress which is introduced as provided in subsection (c) of this section with respect to one or more trade agreements, or with respect to an extension described in section 3572 (c)(3) of this title, submitted to the House of Representatives and the Senate under section 2112 of this title, section 3572 of this title, or section 3805 (a)(1) of this title and which contains—

(A) a provision approving such trade agreement or agreements or such extension,

(B) a provision approving the statement of administrative action (if any) proposed to implement such trade agreement or agreements, and

(C) if changes in existing laws or new statutory authority is required to implement such trade agreement or agreements or such extension, provisions, necessary or appropriate to implement such trade agreement or agreements or such extension, either repealing or amending existing laws or providing new statutory authority.

Clearly, TAA doesn't fall within (A) or (B) above, and the word on the street is that Senate Democrats and the White House will claim that the TAA expansion falls under sub-paragraph (C), i.e., that it is a "provision" (a) "repealing or amending existing law or providing new statutory authority" that is (b) "necessary or appropriate to implement" the FTA at issue.

It's absolutely laughable, however, that the TAA expansion attached to the US-Korea FTA would qualify as such a "provision."  First, TAA expansion isn't "necessary or appropriate to implement" the KORUS FTA.  Indeed, one of the key features of the TAA expansion package is that it de-links benefits from US FTAs.  So, other than the fact that both the FTA and TAA have "trade" in their names, their actual substance is unrelated.  Of course, one could argue that inclusion of TAA is politically "necessary" to ensure Senate passage of the KORUS FTA.  However, by this silly political metric, anything - no matter how irrelevant and unconnected to the FTAs - could be deemed "necessary" to implement the FTA and thus entitled to special consideration (e.g., no filibusters) under House and Senate rules.  So if, for example, a majority of US Senators said that they'd only vote for the KORUS FTA if the implementing legislation included a provision giving each of their spouses $1 billion in cold, hard cash, that "provision" would, under the White House's interpretation, be "necessary" to implement the FTA and thus qualify for TPA protections.  This, of course, is absurd.

Second, the White House's expansive view of sub-paragraph (C) totally ignores its introductory clause: "if changes in existing laws or new statutory authority is required to implement such trade agreement or agreements or such extension."  This clause makes it absolutely clear that the "provision... repealing or amending existing laws or providing new statutory authority" must be related to the "changes in existing laws or new statutory authority" that are required to implement the FTA at issue.  So, if an FTA's implementing legislation amends US law, and it's determined that those amendments necessitate conforming edits to other US laws, the provisions containing those consequential conforming edits may be included in the implementing bill and granted TPA's protections.  And this is precisely the type of "necessary provision" that has been included in past FTA implementing bills (such as that for the NAFTA).

So to claim that TAA expansion qualifies under sub-paragraph (C) and thus deserves TPA protection is a serious stretch.  (And that's being kind.)

Yet despite the legal jujitsu (and pokerface practice) that the White House and Senate Dems will have to undertake to make this highly questionable argument, the fact remains that, when it comes to TPA, the actual rule of law doesn't really matter much.  As I've noted previously, TPA's disciplines pretty much mean whatever the House or Senate leadership and a majority of House/Senate members want them to say.  The House/Senate leadership can either overrule the parliamentarian's interpretation of the law, or the House/Senate can just change the darn rules.  The law itself makes this clear:

This section and sections 2192 and 2193 of this title are enacted by the Congress—

(1) as an exercise of the rulemaking power of the House of Representatives and the Senate, respectively, and as such they are deemed a part of the rules of each House, respectively, but applicable only with respect to the procedure to be followed in that House in the case of implementing bills described in subsection (b)(1) of this section, implementing revenue bills described in subsection (b) (2) of this section, approval resolutions described in subsection (b)(3) of this section, and resolutions described in sections 2192 (a) and 2193 (a) of this title; and they supersede other rules only to the extent that they are inconsistent therewith; and

(2) with full recognition of the constitutional right of either House to change the rules (so far as relating to the procedure of that House) at any time, in the same manner and to the same extent as in the case of any other rule of that House

If you'll recall, then-Speaker Pelosi exercised this very authority when she suspended TPA protections for the US-Colombia implementing legislation that was submitted by the Bush Administration back in 2008.  So for the TAA-FTA package currently being debated, the Senate can pretty much do with TPA whatever it pleases.

And apparently, that's exactly what Harry Reid and the White House plan to do, regardless of the text of the actual law.  And unless folks stop buying the White House's questionable arguments about TPA, they'll probably get away with it too.  But please, spare me the idea that some combined TAA-FTA legislation submitted by the President to the Senate would definitely qualify for TPA's protections under existing US law.

Because that's just not true.

The TAA-FTA "Deal," Part 1: It's the Spending, Stupid

[Ed note: This is the first of a three-part series in which I'll review the joint FTA-TAA legislation proposed by the Obama administration and Senate Democrats last week.  Familiarity with the White House's brilliant plan and recent events is presumed.]

One of the reasons that things went haywire last week was the simple fact that the White House's joint FTA/TAA legislation didn't actually represent a "compromise" on the scope of the Trade Adjustment Assistance expansion that was attached to the US-Korea FTA.  As AEI's Claude Barfield notes:

The attempt to slip TAA through in the FTA process took both the House majority leadership and Senate Republicans, who apparently not been privy to any of the negotiations, by surprise. And it infuriated Finance Committee Republicans, who felt particularly dissed by the substance and the process. The usually mild-mannered [Orrin] Hatch gave a blistering critique of the administration and the president personally in his speech here at AEI. In addition, House Speaker John Boehner immediately disassociated the House Republican leadership from the president’s decision to combine the FTA and TAA legislation in one bill.

Under all of this, there is another complication—the belief by some Republicans Representative Camp had conceded too much on TAA to the administration, allowing too many provisions of the expanded 2009 TAA bill to remain in place. At the panel session we held here at AEI after Hatch’s speech on Thursday, the two speakers, Howard Rosen (long-time advocate for TAA) and Sallie James (a leading critic), who agreed on little else, both agreed that the “compromise” did not split the difference but went far in the direction of the administration’s position.

According to Inside US Trade [$], administration officials have actually been bragging to their supporters about the broad scope of the TAA program attached to the US-Korea FTA implementing legislation:

Administration officials described the TAA deal they negotiated with Republicans and Senate Democrats as a “strong and strengthened program” that retains the most important features of a 2009 expansion. For example, officials noted that the deal retains the eligibility of service workers and workers who lose their jobs due to offshoring and trade with countries with which the U.S. does not have FTAs.

In short, the joint TAA/KORUS legislation saves almost all of the features of the "mega-TAA" program that was created as part of the 2009 Stimulus* bill.  So, given the serious budget constraints facing the federal government these days, this fact of course raises a very simple question:

How much does this darn thing cost?

Well, if the White House is to be believed, they have absolutely no idea:

It now costs about $1 billion annually and administration officials said they did not have a final estimate of what the revised program would cost.

So much for the President's "adult-in-the-room" fiscal responsibility streak, eh?  Of course, such claims of ignorance do run straight into the fact that the "offsets" section of each piece of proposed legislation - required under congressional PAYGO rules - are extremely precise.  For example, Section 601 of the the KORUS legislation raises certain Customs merchandise processing fees on imports from 0.21% to 0.329%.  Meanwhile, Section 602 extends the duration of one Customs users fee program from January 7, 2020 to December 31, 2020 and another Customs users fees program from January 14, 2020 to November 10, 2020.

Those are pretty odd and exact numbers for a program of allegedly indefinite cost, eh?  And don't the White House and Congress have, like, their own personal budget analysts on call?  Hmmmmmm.

The disconnect between the precision of such offsets and the administration's claims of ignorance raises only two possibilities, neither of which are flattering for the White House.  Either they truly have no clue as to how much the TAA program costs and are just spitballing the offsets (insipring total confidence in the process, no doubt); OR they know exactly how much the expanded TAA program costs, but don't want to say in order to avoid putting a very-public pricetag on the cost of their little pet program.  Either way, it's very sketchy.

Furthermore, what kind of fiscally responsible "offset" is the extension of Customs users fees programs from January 2020 to November/December 2020 anyway?  (Such goofy extensions are also included in the legislation for the Panama and Colombia FTAs too.)  There are good arguments against the strict use of PAYGO rules, particularly for legislation that lowers tariffs and taxes, but they're the rules that are now in place.  So please someone explain to me how "paying" for TAA and the FTAs by extending a revenue program that doesn't expire for 9 years passes the "fiscal responsibility" laugh test.

Quick answer: it doesn't.  (So much for the "First Adult.")

The aforementioned KORUS/TAA offsets in Section 601 of the legislation also raise other serious questions.  As I noted before (also discussed by Cato's Sallie James):

• Raising customs fees on imports by about 50% is a rather ridiculous way to "offset" the revenue impact of legislation that eliminates tariffs on those very same imports (and others); and

• Using customs fees to expressly supplement federal budget revenues instead of paying for the cost of services actually rendered could very well violate the United States' international trade obligations under GATT Article VIII.

Moreover, Section 601 of the KORUS legislation also raises questions under the very US law that it amends.    In particular, 19 USC Sec. 58c(a)(9)(B)(i) expressly indicates that such Customs fees should reflect the costs of Customs services rendered not be used to pay for things like TAA (strikethrough represents the KORUS amendment):

The Secretary of the Treasury may adjust the ad valorem rate specified in subparagraph (A) to an ad valorem rate (but not to a rate of more than 0.210.329 percent nor less than 0.15 percent) and the amounts specified in subsection (b)(8)(A)(i) (but not to more than $485 nor less than $21) to rates and amounts which would, if charged, offset the salaries and expenses that will likely be incurred by the Customs Service in the processing of such entries and releases during the fiscal year in which such costs are incurred.

In short, the KORUS legislation is partially paid for by increases in Customs users fees that, according to very same law being amended, are only supposed to "offset the salaries and expenses that will likely be incurred by the Customs Service in the processing of such entries and releases during the fiscal year in which such costs are incurred."  Nice.

So to recap: the Obama administration's TAA legislation (i) is of unknown (but significant) cost; (ii) raises revenue by, in part, extending customs programs that don't actually expire for almost 9 years; and (iii) contains offsets that raise taxes on imports and potentially violate WTO rules and US law.

Behold, the new era of American fiscal responsibility!  Bring on the debt ceiling!

Ugh.

Tomorrow (hopefully), I'll examine whether the KORUS/TAA legislation can proceed in the Senate under Trade Promotion Authority (aka "fast track"), as some Senate Democrats claim.

(And Happy 4th, everyone.)

Rube Goldberg Meets American Trade Policy (and Totally-Expected Problems Arise)

I've been travelling over the last couple days, and thus haven't been able to comment yet on the Obama administration's new plan to pass the expanded Trade Adjustment Assistance program that expired in the House earlier this year.  I plan to do a lengthy review of the legal substance of the Administration's actual plans, but for now, let's just get caught up on where things stand.  President Obama's super-awesome scheme can be summarized as follows:

(1) Enter into bi-partisan talks with a willing dupe member of the GOP leadership in an attempt to iron out a compromise between passing the three pending US FTAs with Korea, Colombia and Panama (which Republicans, many Democrats and supposedly the White House really want) and passing TAA (which Democrats, almost no Republicans, and the White House really want);

(2) Get the dupe member of the GOP leadership to speak publicly about how he supports a scaled-back version of TAA in order to get the FTAs passed.

(3) When the "bi-partisan" talks break down because the dupe member of the GOP leadership can't get the support of the House Speaker or his Senate GOP colleagues, walk away and publicly claim that you'll keep working on a "bi-partisan way forward."

(4) Go golfing underground for the weekend.  Secretly craft legislation which (among other naughty things) attaches mega-TAA to the implementing legislation of the most economically significant agreement, the US-Korea FTA.

(5) Have Senate Finance Chairman Max Baucus (D-MT) boldly and unexpectedly announce the following Tuesday that a "grand bi-partisan bargain" has been reached, and then sit back and praise the deal as a major "breakthrough," even though there hasn't actually been any, you know, actual GOP support for the "bi-partisan" legislation (even from the lone GOP member who was trying to make a deal).

(6) Schedule a hearing on the combined TAA/FTA legislation at 3p on the Thursday before the July 4th Senate recess, knowing that many GOP Senators on the committee will already have left Washington, and that there won't actually be enough time to consider the dozens of amendments that the few attending GOP Senators (and their Democratic colleagues) have submitted.

(7) Expect Senate and House Republicans, including Speaker Boehner (the guy who, you know, controls the House floor schedule), to instantly cave to the administration's demands and agree to move the legislation exactly as the administration has prepared it, despite the fact that they have uniformly and repeatedly stated that they would do no such thing.

(8) Demagogue any Republican who continues to oppose this "grand bi-partisan breakthrough" as an evil jerk who hates working American families and wants to harm the US economy.

(9) ...

(10) Profit!

It's amazing that this foolproof plan didn't work, but, well, it's already run into major problems:

Senate Republicans today said discussions with Democrats over three pending free trade agreements have become so "noxious" that they've decided to block them.

A Senate panel planned to have a hearing today to discuss free trade agreements with Panama, Colombia and South Korea -- agreements that have been in the works for years. Republicans support the deals, as does President Obama, but the GOP today blasted Democrats for trying to attach extra spending to the agreements to help workers displaced by free trade.

Republicans are so opposed to the extra spending, they decided to skip today's hearing in order to stall the agreements. Sen. Orrin Hatch of Utah, calling negotiations with the other party "noxious," said that Democrats purposefully scheduled the hearing for this afternoon, when they knew several senators would already be out of town for July 4th.

He called it a "rush job" to jam the agreements through along with the extra spending, so the administration could "appease its political allies."

Republican Sen. John Thune of South Dakota said the free trade agreements should be "slam dunks."

"To leave something like this sitting around for four years that would create jobs... and help us expand and grow the economy, it is inexcusable," he said. The "free trade agreements are being hijacked in order to get spending the administration wants."

President Obama agrees the agreements will help create jobs, but Democrats also want to extend extra spending, first passed in the 2009 stimulus package, for the Trade Adjustment Assistance (TAA) program. Just two days ago, Democrats and Republicans appeared ready to move forward on the agreements.

Meanwhile, Speaker Boehner's not on board at all:

We’re pleased the President may finally send us the three job-creating trade agreements we’ve requested. But we have long said that TAA – even this scaled-back version – should be dealt with separately from the trade agreements, and that is how we expect to proceed.

Sweet.  So we now have a stalemate - an utterly predictable, and totally unnecessary stalemate.  As they've said all along, the House and Senate GOP leaders won't budge on a joint TAA/FTA package, and the President apparently values TAA so freakin' much that he's willing to hatch the rube-goldbergian scheme outlined above to ensure its passage.  Of course, three economically beneficial US trade agreements - the only things that Republicans and Democrats both actually want - have been put gravely at risk.  But what else did the administration expect with such a convoluted plan?  There was bound to be a hiccup or three.

Now, politically, this is a win-win situation for the President.  If TAA/FTA passes (and it still might), Obama gets a big, fat win over the GOP, the FTAs and mega-TAA.  (Budget deficit, schmudget deficit!).  If the whole thing collapses, he gets plaudits from anti-trade American labor unions and a likely boost to his sagging re-election campaign.  (Sure, American consumers and exporters, and the US economy more broadly, will be screwed, but whatever, man, the campaign coffers will be chock full!)

In this purely cynical sense, the administration's scheme is quite smart.  But from any other vantage point, particularly one that most values the FTAs' actual implementation, this is absolute madness.

You know, for someone who really, really wants these trade agreements to pass, and who singularly controls their fate, President Obama sure has a weird way of showing it.

UPDATE: Highly entertaining video of angry GOP Senator here.

Sunday Quick Hits

Here's a whole lot of links to get your week started off right:

• The Economist asks whether we're seeing the end of China's dominance as the world's low-cost manufacturer of first resort.

• J.E. Dyer absolutely dismantles labor lawyer Thomas Goeghegan's lame defense of NLRB's indefensible attempt to stop Boeing from opening a new manufacturing facility in South Carolina.

• GMU's Russ Roberts beautifully explains why President Obama's silly comments about ATMs taking American jobs are so darn silly.  (And Cato's Andrew Coulson piles on.)

• The AFL-CIO's use of a 13-year old photo in its latest anti-Colombia FTA smear campaign is the perfect metaphor for its trade policy more broadly - stuck in the past.  Meanwhile, Colombia hits yet another labor benchmark that was supposed to ensure passage of its FTA with the United States.  Key words: supposed to.

• AEI's Phil Levy provides a great roadmap showing how we got into the current mess re: Trade Adjustment Assistance and how we can get out of it.

• And while TAA gums up passage of pending US FTAs, our potential FTA partners in South Korea and Colombia are lining up another, rather conspicuous suitor - China.  Awesome.

• And the TAA/FTA impasse also has infected [$] ongoing US trade negotiations under the Trans-Pacific Partnership.  Double-awesome.

• AEI's Mark Perry highlights the amazing gains in US worker productivity in our allegedly struggling manufacturing sector.

• Cato's Dan Griswold shows how IBM's remarkable evolution is a perfect metaphor for the US economy.

• Is America's stupid ethanol policy on the way out the door?  If this recent Senate vote is any indication (and it might not be), yes.

• Cafe Hayek's Don Boudreuax provides some great commentary on the House's vote to cut off those embarrassing US bribes to Brazilian cotton farmers.  John Stossel has more.  (And Brazil unsurprisingly grumbles about it all.)

• Can we please, PLEASE stop labeling free traders who support practical limits on US foreign policy adventurism "isolationists"?

• Mark Perry and Dan Griswold team up to explain how people's blinkered obsession with the US trade deficit misses the other, inevitable side of the coin, our massive foreign investment surplus:

If these don't leave you sufficiently depressed about US trade policy, then nothing will. 

Behold, the Insane (and Possibly Illegal) Bi-partisan FTA Deal!

As you may have heard, the White House and congressional Republicans are currently battling behind closed doors over a way forward for the pending US free trade agreements with Colombia, Panama and South Korea.  National Journal [$] reports on the latest developments (emphasis mine):

House Republicans retreated from their plan to begin preliminary markup on the pending trade agreements with Colombia, Panama, and South Korea, but the public stalling may signal that negotiators are making better progress behind closed doors.

Several people involved in the talks said on Monday that weekend negotiations over Trade Adjustment Assistance moved the parties closer to a deal. The White House has made clear that it wants Congress to reach a deal on TAA before beginning the markup process on the bills.

A House Republican aide said that preliminary hearings, expected to get under way this week, have not been scheduled. The move could pave the way for a deal to be announced before markups begin.

An aide to Rep. Kevin Brady, R-Texas, said in an e-mail: “While no date has been set for the mock-markups, we remain optimistic that a bipartisan solution will soon be reached.”

Some stakeholders said that the biggest sticking point has been finding enough revenue to offset the cost of the program extension. The White House originally pushed for extending a version of the worker retraining funds that was expanded in 2009 to include service employees and health care. But it appears that the deal will be significantly scaled back....

Lawmakers from both chambers have floated a wide range of frameworks in recent weeks. The chief concern has been raising enough revenue to counteract the cost of TAA and tariffs that will expire when the deals come into force.

Several of the parties involved said that a large portion of the pay-fors could come from additional customs fees, although that money would be insufficient to cover the full cost of the package. But the revenue gap may not be insurmountable....

The negotiated agreement on the trade deals may be sufficient to gain the bipartisan support needed to advance a comprehensive package before August, but it may not be enough to win the backing of skeptical Democrats in the House. Once the deals are introduced, they will need only a simple majority to pass in both chambers.

For a moment, let's ignore the fact that these agreements have been completed and signed for about four years, and that the President alone has the power to submit the FTAs for congressional consideration and approval (a simple majority vote in both chambers without amendment and pursuant to strict timelines), and that the three agreements would undoubtedly pass the House and Senate all by themselves.

And let's ignore the fact that the TAA program, in whatever form, has proven itself to be costly, ineffectual (politically and practically) and economically unjustifiable, and that, because he also really wants these FTAs to be implemented, the President is in effect holding a hostage that he's not willing to shoot.

And let's ignore the fact that, even with an eventual deal on the TAA bribe subsidy, most House Democrats (and many Senate Dems too) will never, ever, EVER support these FTAs (as the article makes clear and the Senators themselves have admitted).

Instead, for a moment, let's just focus on the big bi-partisan agreement outlined above.  Why on earth is this "breakthrough deal" even being considered?

First, it's absolutely irrational.  As noted, the parties have reportedly agreed to impose new (or higher) "Customs fees" in order to offset the cost of the TAA subsidy and the lost tariff revenue resulting from the FTAs implementation.  But "customs fees" are simply hidden taxes on import consumers.  A quick review of the US Customs website on "customs users fees" makes this clear.  They're paid (mainly) by commercial transporters bringing goods (imports) into the United States, thus raising the costs of importation.  And those higher costs, of course, are eventually passed on to American consumers through higher import prices.

Thus, pursuant to the bi-partisan deal outlined above, the FTAs' great import liberalization benefits will be immediately and tangibly undermined by new taxes on those very same imports (and others)!  Amazing.  Heaven forbid that Congress fill the tariff gap created by the FTAs and pay for TAA by actually eliminating federal spending on, oh I don't know, one of its absolutely-critical research programs into cow farts or cocaine-using monkeys.  Nope, the Obama administration's (and some congressional Republicans') big plan is to offset the elimination of taxes on import consumers by... wait for it... raising taxes on import consumers.  (It's truly a mercantilist's dream come true!)  Even worse, those new taxes will be necessarily be much larger than the amount of the FTA tax cut because they also have to fund a politically and economically dubious subsidy program that isn't even guaranteed to buy the approval of the FTAs' current congressional opposition!

Only in Washington, folks.  Only in Washington.

Unfortunately, it gets even worse: the big plan might also be illegal under global trade rules.  Granted, the description above is way too ambiguous to make any definitive conclusions about the deal's legality, but assuming that the agreement would raise US customs users fees (or implement new ones) in order to generate revenue for the federal government, it would probably violate GATT Article VIII, which governs WTO Members' imposition of "Fees and Formalities connected with Importation and Exportation" (in other words, customs fees).  The key provision of Article VIII reads:

1.(a) All fees and charges of whatever character (other than import and export duties and other than taxes within the purview of Article III) imposed by contracting parties on or in connection with importation or exportation shall be limited in amount to the approximate cost of services rendered and shall not represent an indirect protection to domestic products or a taxation of imports or exports for fiscal purposes.

WTO panels have interpreted this provision narrowly, and an old GATT panel has actually looked into the US system of customs users fees.  In these cases, the panels have ruled that Article VIII's requirement that a customs fee be "limited in amount to the approximate cost of services rendered" is actually a "dual requirement," because the charge in question must first involve a "service" rendered, and then the level of the charge must not exceed the approximate cost of that "service."  They've also found that the term "services rendered" means "services rendered to the individual importer in question," and that the fees cannot be imposed to raise revenue (i.e., for "fiscal purposes").

Interestingly, a relatively recent Customs Department notice about an increase in the amount of applicable customs users fees makes clear that the US government's customs fees are intended to approximate the costs of customs services (e.g., inspection) actually rendered (emphasis mine):

On October 22, 2004 the President signed the American Jobs Creation Act of 2004 (Pub. L. 108-357). Section 892 of the Act amended Title 19 United States Code 58c to renew the fees provided under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), which would have otherwise expired March 1, 2005, and to allow the Secretary of the Treasury to increase such fees by an amount not to exceed 10 percent in the period beginning fiscal year 2006 through the period for which the fees are authorized by law....

CBP is increasing the fees by the amounts authorized so that they more accurately reflect the actual costs of providing the services for which they are charged. On April 24, 2006, CBP published a Notice of Proposed Rulemaking in the Federal Register (71 FR 20922) proposing to amend the regulations in accordance with the current statutory provisions by increasing the fees for: (1) customs services provided in connection with the arrival of certain commercial vessels, commercial trucks, railroad cars, private aircraft and private vessels, passengers aboard commercial aircraft and commercial vessels, and barges or other bulk carrier arrivals, (2) each item of dutiable mail for which a customs officer prepares documentation, and (3) annual customs brokers permits.

But now, the US government specifically and expressly intends to raise these fees (and/or others) in order to fund TAA and offset lost tariff revenue on imports from Korea, Colombia and Panama - absolutely nothing to do with the "actual costs of providing the services for which they are charged" or, in WTO parlance, the "the approximate cost of services rendered."  So, even assuming that this plan doesn't run afoul of more general WTO non-discrimination provisions by singling out certain countries, how is the deal even remotely WTO-consistent under the most conservative reading of GATT Article VIII?

I honestly have no idea.

But, hey, even assuming the plan isn't illegal, that doesn't change the fact that it's clearly insane.  So it's got that going for it, which is nice.

Could someone again please remind me how we got into this mess?