Congress Flexes Its Muscles Over Trade Authority
Earlier this month, leaders of the House Ways & Means and Senate Finance Committees unveiled a bipartisan bill that approves the first phase of recently agreed upon trade talks with Taiwan and lays out a process and expectations for congressional approval of subsequent agreements under the initiative. The bill cleared the House floor last week in a unanimous vote.
On the surface, the bill signals a show of support for the Office of the U.S. Trade Representative’s (USTR) discussions with Taiwan under the U.S.-Taiwan Initiative on 21st Century Trade. Between the lines, however, Congress is flexing its trade authority muscles at the administration, signaling discontent with USTR’s approach to formulating U.S. trade policy.
In May, Congress used its authority under the Congressional Review Act to pass a resolution rescinding the Biden administration’s tariff moratorium on solar imports suspected of being transhipped from China through Southeast Asian countries. While Congress ultimately failed to override President Biden’s veto, this served as a strong signal and likely impetus for additional congressional tools, like the Taiwan bill, to stand up to the administration on its trade policy approach.
How did we get here?
Article 1, Section 8 of the Constitution grants Congress the power to regulate trade with foreign nations and to lay and collect duties. These oft-cited clauses firmly established Congress’ jurisdiction over trade policy. Since the 1930s, Congress has delegated some of its constitutional authority over trade to the Executive to negotiate tariff and nontariff trade barriers, so long as the Executive adheres to certain statutorily prescribed conditions in exchange. The intent was, in part, to reduce infighting in Congress over constituent priorities (never forget Smoot-Hawley), speeding up the policymaking process and acting on behalf of U.S. interests as a whole. One such statute, Trade Promotion Authority (though recently expired), sets the rules and procedures for the administration to negotiate free trade agreements, and is often referred to as “fast-track authority” for just that reason.
Congress is rarely fully satisfied with the level of consultation it receives, but frustrations have been steadily on the rise since the Trump administration put international trade in the spotlight during the campaign for the 2016 Presidential election. President Trump made frequent use of long dormant statutes to take trade action absent approval from Congress. He unilaterally imposed sweeping tariffs on steel and aluminum in the interest of U.S. national security and tariffs on a wide range of Chinese imports covering an approximate annual trade value of $550 billion. These measures triggered a series of retaliatory actions by U.S. trading partners, impacting U.S. businesses, farmers and consumers who brought their concerns to Congress. Further discontent arose over the Trump administration’s conclusion of trade pacts with Japan and China via executive action. Despite some support for the substance, frustration grew over the lack of formal consultation with and approval by Congress.
In response to the Trump administration’s actions, various members of the House and Senate introduced bills intended to rein in the Executive’s authority over trade. None of these proposals moved forward, but they were the beginning of a growing debate about the appropriate balance of power over trade policy in the United States.
Where do we stand now?
Unlike his predecessor, President Biden made clear early in his term that it would not be in the U.S. interest to take unilateral trade actions and instead opted to work closely with allies like the European Union to address mutual challenges together. However, President Biden crushed the hopes of trade advocates around the world when he made clear that the U.S. would not seek to rejoin the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which had been a hallmark of the Obama administration that he championed as Vice President. The Biden administration has decided not to pursue traditional free trade agreements like the CPTPP and to engage instead in trade “initiatives”, “arrangements”, and “frameworks” that, when completed, will not be submitted to Congress for approval. For many in Congress, that decision compounds frustrations over authority and consultation, transparency with the American public, and the durability of trade agreements.
The solar import moratorium is another recent example of the Executive using a scarcely-used trade statute to achieve another goal, this time, related to climate and national security. In June 2022, President Biden declared a national emergency with respect to threats to U.S solar energy generation capacity to suspend anti-circumvention tariffs on solar panel imports for two years. He exercised his authority under 19 U.S.C. 1318(a), which has only been used a few times since enacted in the Tariff Act of 1930. Congress had a mixed reaction on the policy implications; some members were disgruntled with the administration's move to meddle in a lawful trade remedy investigation to achieve climate goals, and most were loath to allow any action by the President that could be considered a pass for China.
The solar CRA and Taiwan bill are just the latest messages in a string of warnings Congress has relayed to the administration. The CRA’s initial passage and the Taiwan legislation’s bicameral, bipartisan backing demonstrate just how serious Congress is about efforts to skirt its constitutional authority over trade.
In March, the U.S. concluded a Critical Minerals Agreement with Japan without seeking congressional approval, ensuring that Japanese automakers could sell electric vehicles in the U.S. that would qualify for the clean vehicle tax credit under the Inflation Reduction Act (IRA). All four trade committee leaders came out against it for sidestepping Congress, making statements such as “the Administration has confirmed its only commitment is to bypass the American people, rather than make its case to them” and “working with Congress is the only way to develop enforceable and long-lasting trade agreements.”
In December 2022, Senate Finance Chairman Ron Wyden (D-OR), Ranking Member Mike Crapo (R-ID), and a bipartisan group of committee members sent a strongly-worded letter to Ambassador Tai and Secretary of Commerce Gina Raimondo over the Biden administration’s Indo-Pacific Economic Framework (IPEF). The senators asserted that only Congress can approve a trade agreement with a foreign nation, providing durability and certainty to all parties involved.
Where do we go from here?
The Senate hopes to quickly pass the Taiwan legislation in July, but the Biden administration has been mum on whether it will seek to veto the bill. Given its unanimous passage in the House, a veto override would likely be the end result. Time will tell if Congress takes a similar approach on IPEF, which the administration seeks to conclude in November.
Meanwhile, the U.S. is negotiating critical minerals agreements with the European Union and the United Kingdom, which could produce results in the coming months and raise more ire in Congress if concluded without congressional consultation and approval. Other countries, such as Argentina, Indonesia, Malaysia, and the Philippines are also raising their hands for a piece of the pie, but the U.S. has not signaled whether it will seek agreements with those partners.
Other efforts, such as the administration’s Global Arrangement on Sustainable Steel and Aluminium with the EU, are now receiving increased scrutiny from lawmakers. Chairman Wyden’s recent comments sum up the sentiment well: “I want to make sure that the Congress' constitutional obligation with respect to international trade is protected, and I've been concerned about some of these one-offs.”
The congressional vs. executive authority fight is a perennial issue, but there is no question that it is making waves in trade policy right now. How far Congress will take its escalation is another question, and answers appear to be in the making.
