Omnibus Package Likely Route to Trade Legislation Passage, May Include GSP, MTB

Lawmakers have recently failed to pass, or even introduce, pieces of trade legislation significant to U.S. importer interest, such as the Miscellaneous Tariff Bill (MTB) and renewal of the Generalized System of Preferences (GSP) (see 13080110). Pressure from advocacy groups to do so continues to build, some trade lawyers and analysts say. The targeted conclusion of Trans-Pacific Partnership (TPP) negotiations by the end of 2013 adds a critical dynamic. The Obama administration has pressed passage of Trade Promotion Authority (TPA) prior to congressional adoption of the legislation that would be necessary to implement TPP (see 13030410). The Senate Finance and House Ways and Means Committees didn't comment.

A number of industry players say TPA is poised to be the flagship element of an omnibus package. The other pieces of legislation central to an omnibus package would likely be the MTB, GSP renewal, Trade Adjustment Assistance (TAA), possibly the Africa Growth and Opportunity Act (AGOA) early renewal and potentially a substantial number of other, small trade bills. “My expectation is that there will be a big legislative package that gets passed by the end of the year,” said David Olave, Director of International Trade and Government Relations at Sandler Travis & Rosenberg. “Lawmakers won’t waste political capital on one bill. They’ll try to put all the bills into one and wrap a ribbon around it.”

The potential for passage of an omnibus trade package bodes positively for U.S. importers. Through congressional inaction on GSP renewal and the MTB, importers now face higher tariff rates on some previously duty-free eligible products. The National Association of Manufacturers (NAM) concludes U.S. manufacturers will suffer a $748 million tax hike (here) over a three year period as a result of the Dec. 31, 2012 MTB expiration. As the fight to renew GSP ramped up in the days prior to that program’s expiration on July 31, 2013, the Coalition for GSP estimated American companies will lose $2 million daily (here) on tax benefits reaped through GSP. A retroactive renewal of either program remains uncertain.

The omnibus route makes the legislation more palatable to detractors by marginalizing concerns, trade lawyers and industry analysts say. “It’s what they do when everything else fails. If you can’t get the bills done the regular way, you put everything together… You look at other vehicles that might be moving forward,” said President of the National Foreign Trade Council Bill Reinsch. “GSP renewal, TAA, the Miscellaneous Tariff Bill…all have advocates. They’ll look at the TPA package as an opportunity to add their particular provisions.”

Reinsch said TPA, also known as fast-track authority, currently has the most political momentum of the pieces of trade legislation in question, noting that the authority is an “800 pound gorilla” that involves essentially “rewriting the Trade Act”. The sheer size and significance of TPA delivers opportunity for lawmakers to tack on other bills that prospectively will not make or break a deal. Moreover, lawmakers and administration officials have urged introduction of TPA legislation before TPP hits the Senate and House floors (see 13071818). As U.S. Trade Representative (USTR) Michael Froman prepares to meet other potential TPP member ministers in Asia this month, the USTR continues to press negotiation conclusion for TPP, a pact that would administer a huge portion of the global economy, by the end of 2013 (here).

“There are some that are saying we can’t take TPP to Congress unless you have the procedural protections in place, acquired through TPA,” said Brian Pomper, Partner at Akin Gump Strauss Hauer & Feld and former chief international trade counsel to Senate Finance Chairman Max Baucus, D-Mont. “Finalizing TPP provides an incentive to pass a TPA agreement.” Pomper also noted TPA allows Congress to more directly and formally shape trade policy prior to legislation coming to the floor.

It is uncertain the amount of time that would elapse between the end of negotiations and congressional adoption of legislation. But the authority delivers the administration the ability to present legislation that will receive an up-or-down vote without amendment and with limited debate. Therefore, the potential for expeditious passage is significantly enhanced. According to USTR chief Froman, all U.S. free trade agreements, with the exception the pact with Jordan, have moved through Congress under fast track authority (here).

Some advocates for the other pieces of trade legislation in question are not concerned with the route of passage. “Obviously when you have additional costs in an already sluggish economy, there is a headwind impact on manufacturing and the U.S. economy…what is critical is that congress acts quickly on the MTB bill. How the tactics of that work out is an issue for congress to decide,” said Chris Moore, Senior Director at the National Association of Manufacturers.

Aside from the political momentum that favors TPA, the logistical impediments to individual passage of pieces of trade legislation may prove to be too burdensome, as well. The Senate would likely simply not take the time to debate each piece of legislation on the floor, a number of industry players and congressional experts said. The Senate leadership has more issues it wants to take up on the Senate floor than available time will permit, Pomper said, and the majority staff is actively seeking to resolve issues off the floor. “This is fundamental to the operation of the senate,” said Pomper. “That’s why the filibuster is such a powerful…because floor time in the Senate is such a commodity.”

The high level of division in the 113th Congress puts passage of any legislation into jeopardy, however. A GOP imposed earmark moratorium has presented a roadblock for a 2013 MTB bill, with Senate Republicans calling the exemptions earmarks (see 10111714) . “There is the question of whether this is the most polarized Congress we’ve ever seen. I think the MTB unfortunately is suffering because of that,” said Olave. “It’s just one of those perfect political storms. The MTB bill used to be so transparent and non-controversial. It always passed with [unanimous consent] and suspension of rules.” Proponents of the MTB, such as the National Association of Manufacturers, dismiss that label of the duty suspensions as earmarks, identifying the traditional duty-free eligibility in the bill as a tax cut. According to industry players, the Senate has not chartered a path forward to resolve that dispute. The House on July 17 reintroduced an MTB but the Senate has failed to follow suit (see 13071816).

Still, an omnibus bill seems likely to emerge toward the end of 2013, said Ron Sorini of Sorini, Samet & Associates. “There is increasing recognition in Congress that there are many things outstanding for so long, and they need take a deep breath and deal with those things,” said Sorini. -- Brian Dabbs