97-817: Agriculture and Fast Track Trade Legislation

Geoffrey S. Becker and Charles E. Hanrahan

Specialist and Senior Specialist in Agricultural Policy
Resources, Science, and Industry Division

Updated March 27, 2001

Summary

The 107^th Congress is expected to consider new "fast track" (or, Presidential trade promotion) authority, which could enable the Administration to submit trade agreements negotiated with foreign countries to Congress for consideration under expedited procedures. Efforts to renew such authority failed in the 105th Congress, due to concerns about delegating too much authority to the President and disagreements over the goals of U.S. trade negotiations, and no serious debate occurred during the 106^th Congress. Many agricultural and food industry interests are among the export-oriented enterprises that support fast track authority, arguing that foreign trading partners will not seriously negotiate with an Administration that lacks it. However, some agricultural groups argue that fast track ultimately will lead to new agreements that deliver more benefits to foreign than to U.S. producers, at least in some commodity sectors. This report will be updated if events warrant.

What Is Fast Track (Presidential Trade Promotion) Authority?

Fast track authority, which the Bush Administration is calling "Presidential Trade Promotion Authority," refers to legislation explicitly enabling the President to negotiate trade agreements with foreign countries and then to submit legislation to implement them to Congress for approval under special, expedited procedures. First adopted in the Trade Act of 1974, the authority was used to negotiate and implement several bilateral and multilateral agreements, including agreements in the Tokyo Round of multilateral trade negotiations, the U.S.-Canada Free Trade Agreement (FTA), the North American Free Trade Agreement (NAFTA), and the Uruguay Round (UR) accords, which included establishment of the World Trade Organization (WTO).

Under past fast track procedures, the President could negotiate a trade agreement with one or more foreign countries and then submit to Congress the text of the agreement along with draft implementing legislation to make any "necessary or appropriate" changes in U.S. laws. Senate and House leaders introduced this implementing legislation on the day it was submitted. Congress then generally had a maximum of 60 legislative days to approve or disapprove the complete package, with no amendments permitted. Fast track is intended to strengthen the President's negotiating authority and credibility by reassuring foreign trading partners that agreements will be considered promptly by Congress and not subjected to changes that would force a return to the bargaining table.

Fast track procedures included requirements for advance notification of Congress and consultations with relevant committees, before an agreement could be concluded. Lawmakers, in effect, used these consultative requirements as informal mark-ups to address, in advance, the various policy issues that otherwise might be debated during the votes on the implementing legislation. (For more information, see CRS Report RS20039 (pdf), Fast-Track Implementation of Trade Agreements: The Debate Over Reauthorization.

Importance of Trade for Agriculture

Export markets are critical to U.S. farmers' prosperity. According to the U.S. Department of Agriculture (USDA), agricultural export value is equivalent to about 20% of the value of farm production and 25% of farm income. It is estimated that major crops planted on one out of every three acres are exported. Yet exports have been depressed in recent years due to world economic and agricultural conditions. (For more data, see CRS Report 98-253 (pdf), U.S. Agricultural Trade: Trends, Composition, Direction, and Policy.)

Most agricultural interests contend that U.S. efforts to open international markets must continue in order to sustain export growth--including the negotiation of new or enhanced trade agreements that reduce tariff and nontariff import barriers and curtail the use of trade-distorting domestic and export subsidies. Now underway are negotiations to: further reform multilateral agricultural trade under the aegis of the WTO; join with Chile in a FTA; and create a Free Trade Area of the Americas (FTAA) (see below).

Most also concede that free trade cannot be a one-way street: the United States also is expected to open its own borders to the products of other countries. While increased agricultural imports can bring variety and lower prices to U.S. consumers, they also can compete directly with U.S.-produced goods and force adjustments on U.S. producers.

Previous Fast Track Trade Legislation and Agriculture

Fast track procedures were used to implement three free trade agreements and two multilateral trade agreements. Three of them have significant agricultural provisions:

The U.S.-Canada FTA provided for the phased elimination of tariffs on all goods traded--including agricultural products--between the two countries within 10 years (by January 1, 1998), in three staging categories depending on the "import sensitivity" of products. The FTA did not, however, address quantitative barriers to trade in dairy, poultry, and eggs, on the basis that those products would be dealt with in then-ongoing multilateral negotiations in the Uruguay Round. Implementing legislation, the U.S.-Canada Free Trade Agreements Implementation Act (P.L. 100-449, U.S.C. 2112 note.), was signed into law on September 28, 1988.

NAFTA provides for the phased elimination of all tariffs on trade between the United States, Canada, and Mexico. The agreement incorporates the tariff reductions agreed to in the U.S.-Canada FTA and all of its agricultural provisions. As for U.S.-Mexico bilateral trade, most tariffs will be eliminated by 2004, while tariffs for import-sensitive items, including a number of agricultural products, will not be completely eliminated until 2009. For the first time in any trade agreement, NAFTA contains rules on applying animal and plant health and safety measures (termed sanitary and phytosanitary--SPS--measures) to imports, and spells out procedures for recognizing the "equivalency" of each country's food safety standards for poultry and meat products. The North American Free Trade Agreement Implementation Act (P.L. 103-182, approved December 8, 1993, 19 U.S.C. 3301 note) includes the changes in U.S. law that affect U.S.-Mexican agricultural trade.

The Uruguay Round/WTO Agreements are the most comprehensive agreements in the history of multilateral trade negotiations. The UR Agreement on Agriculture (URAA) strengthens multilateral rules and disciplines for agricultural trade and requires WTO members to reduce import protection, export subsidies, and trade-distorting domestic support. Other UR agreements set new multilateral rules for trade in services, trade-related investment measures, trade-related intellectual property rights, and government procurement, and dispute settlement. The WTO is established as the international organization that administers trade rules under both the General Agreement on Tariffs and Trade (GATT) and the new rules and disciplines developed in the Uruguay Round.

The Uruguay Round Agreements Act (P.L. 103-465, approved December 8, 1994, 19 U.S.C. 3511) has a number of important agricultural provisions. It authorizes the President to convert U.S. quantitative restrictions to tariff quotas for dairy products, sugar, sugar-containing products, peanuts, cotton, and beef; exempts all WTO members from section 22 import quotas; and repeals the Meat Import Act of 1979. The Act provides for the reduction in export subsidies provided by the Export Enhancement Program and Dairy Export Incentive Program as required by the Agreement on Agriculture. The legislation extends the concept of equivalency of meat and poultry inspection standards, developed in NAFTA for Canada and Mexico, to all WTO member countries.

Effects of Trade Agreements on U.S. Agriculture

The support of agricultural groups for fast track legislation depends in large part on their perceptions of how they have been affected by previous agreements. Comparing trade flows before and after NAFTA's entry into force, most analyses report that NAFTA has had a positive overall effect on U.S. agricultural trade. Of course, factors other than trade liberalization--including population and economic growth, national agricultural policies, exchange rates, geographic proximity, and weather--also influence trade flows.

Canada and Mexico are, respectively, the second and third largest U.S. agricultural export markets, together accounting for about one-fourth of the value of our farm exports worldwide. Total agricultural trade between the United States and its two NAFTA partners increased from $17.5 billion in 1993, the year just prior to NAFTA's entry into force, to $27.4 billion in 2000. In 1994, NAFTA's first year, U.S. agricultural exports and the net balance both increased substantially.

U.S. agricultural exports to Mexico declined to $3.7 billion in FY1995, the year of Mexico's peso devaluation, from around $4.2 billion in FY1994, giving Mexico a small agricultural trade surplus with the United States. U.S. agricultural exports to Mexico recovered significantly in 1996, and reached nearly $6.3 billion by FY2000, while Mexico's exports to the United States were nearly $5 billion. U.S. agricultural exports to Canada also increased in 1994 and 1995, but at a significantly slower pace than U.S. agricultural exports to Mexico. In FY1996, the U.S. trade balance with Canada turned from a surplus to a negative one. By FY2000, U.S. agricultural exports to Canada were about $7.5 billion, while Canada's exports to the United States were $8.5 billion.

U.S. commodity exports to Mexico that have shown substantial gains since NAFTA include coarse grains, wheat, cotton, processed fruits and vegetables, and red meats. Mexico has made significant gains in tomatoes, peppers, onions, cucumbers, grapes, and melons. U.S. commodity exports to Canada that have grown include soybeans, corn, poultry meat, dairy and egg products, fresh vegetables, citrus, cotton, and wine and beer. Canada's agricultural export gains include cattle, hogs, red meats, dairy products, rapeseed oil, and potatoes.

Some U.S. farmers contend that they have been disadvantaged by NAFTA or that their concerns are not being addressed by the agreement, often leading to lingering trade tensions and/or formal actions to obtain limit import relief. Commodities that have been the focus of such frictions include imports of Canadian wheat, live animals, potatoes, and stuffed molasses; and of Mexican cattle, tomatoes and other winter vegetables, and (prospectively) sugar. Frequently such complaints revolve around the contention that foreign producers are unfairly subsidized, or are "dumping" their commodities here at less than their costs of production.

On the other hand, some U.S.-exported agricultural products have come under similar scrutiny by Mexico and Canada. For example, complaints have been raised by Mexico about U.S. meat products and high-fructose corn syrup; and by Canada about U.S. corn, among other things.

Fast track and free trade advocates also have been promoting the success of the URAA by citing USDA estimates of its economic benefits for farmers. For example, USDA has stated that the URAA and other WTO agreements will increase U.S. agricultural exports by a projected $4.7 billion to $8.7 billion by 2005, and raise farm income by as much as $2.5 billion by the same year. Others challenge such assertions, contending that at it is difficult to separate the agreement's effects from other factors that influence world trade, and that the numbers are highly speculative and overly optimistic.

Other assessments of the impact of the URAA have focused on implementation of commitments and dispute settlement. The Office of the U.S. Trade Representative (USTR) reports that most countries, including all major trading partners of the United States, generally are in compliance with their market access and export subsidy reduction commitments. A few countries, however, have not met their commitments to open markets to some U.S. agricultural products.

Much attention has been paid by farmers and agribusinesses to the WTO dispute settlement process--and its perceived weaknesses. The United States has won most of the agricultural cases it has brought to the WTO or reached favorable settlements before the cases were adjudicated by WTO panels. But concerns have arisen about the pace of implementation of panel decisions in the U.S.'s favor. Important examples are the European Union's (EU's) reluctance to implement WTO rulings against both its ban on imports of meat produced with hormones, and its banana import regime, which favors bananas from former EU colonies over those from Latin American countries where U.S. companies operate. Despite frequent comments by the USTR that the dispute settlement is in fact working, some in agriculture have questioned its credibility--and the value of trade agreements in general. However, other agricultural interests contend that the economic benefits of free trade agreements outweigh these problems, and they express support for the URAA and the WTO dispute settlement procedures as important steps toward improving prospects for U.S. agricultural trade.

New Fast Track (Trade Promotion) Authority

President Clinton had submitted a fast track proposal to the 105^th Congress, and separate bills were reported by the Senate Finance and House Ways and Means Committees. However, the House bill (H.R. 2621) was defeated in the full House on September 25, 1998, and an omnibus Senate trade bill (S. 2400), incorporating a fast track bill (S. 1269) passed earlier by Finance, was not put to a floor vote.

The President again expressed his support for new "fast track" authority in his State of the Union address in January 1999. Subsequently, neither the Administration nor any major congressional supporters made a serious attempt to move such legislation in the 106^th Congress. However, near the end of 2000, lawmakers did include, with the USDA appropriations act for FY2001 (P.L. 106-78), a sense of the Congress that the President should formally request fast track authority for future U.S. trade negotiations.

The outlook for fast track in the 107^th Congress appears to be more optimistic. President Bush and congressional Republican leaders have indicated that such renewal is a trade policy priority, and anticipate enactment sometime this year. Democrats who support trade reform also have expressed interest in fast track, although they have warned that Congress must address longstanding concerns about trade agreements' impacts on the environment and labor, if the measure is to win widespread support. No consensus has yet emerged, making prospects for passage unknown at this time.

As of late March 2001, four bills had been offered on new negotiating authority. S. 599 by Senator Roberts would make trade promotion authority permanent. S. 136 by Senator Gramm would extend new authority generally through calendar 2004. S. 333 by Senator Lugar and H.R. 627 by Representative Boehner, both broader agricultural measures, include a title that would extend trade negotiating authority either through FY2003 or FY2007 under certain conditions.

Fast track (trade promotion) authority supporters have pointed out that other nations already have negotiated, or are negotiating, free trade agreements with important U.S. trading partners. Unless the United States is engaged, U.S. agricultural and other exporters will face higher tariff and other trade barriers vis-a-vis countries that have signed such arrangements, fast track supporters maintain. Opponents, on the other hand, contend that any potential economic and political advantages of these free trade agreements are outweighed by the prospect of U.S. capital and jobs being exported to countries where wages, labor standards, and environmental requirements are weaker--including those in the agricultural sector. Members who advocated stronger labor and environmental provisions in trade agreements opposed both the Senate and House committee bills in the last Congress, and, joining with those who opposed any fast-track authority, forged the majority that defeated the House bill.

Agricultural Provisions

Fast track bills in the 105^th Congress had contained various agricultural provisions. More recently, the Trade and Development Act of 2000 (P.L. 106-200) now contains a list of explicit U.S. objectives for agriculture in WTO negotiations. These include "expeditious elimination of all export subsidies worldwide" while maintaining U.S. food aid, market development, and export credit programs; further disciplines in trade-distorting domestic farm support; elimination of or more transparency in state trading enterprises; affirmation that the WTO SPS agreement applies to new technologies, including biotechnology; further reduction of tariffs and other barriers to agricultural imports; and stronger WTO dispute settlement procedures. The law also requires extensive consultations with the House and Senate Agriculture and other relevant committees, among other agricultural language.

Similar provisions might be anticipated as part of any new negotiating authority law. For example, S. 333 and H.R. 627 contain similar negotiating objectives and consultation requirements for agriculture.

Potential Uses of the New Authority

Even lacking fast track authority, U.S. authorities have been active in various multilateral and bilateral trade negotiations. However, officials have stated that the mantle of fast track will expedite the negotiations and help to conclude them successfully. The following negotiations are currently among the most prominent.

WTO. In March 2000, WTO members opened sectoral negotiations aimed at further liberalizing agricultural trade; these talks are proceeding. Some are looking toward the next WTO Ministerial Conference, in Qatar in November 2001, for possibly launching a more comprehensive round of multilateral trade negotiations. (See CRS Report 98-254 (pdf) ENR, Agriculture in the Next Round of Multilateral Trade Negotiations.)

Free Trade Area of the Americas (FTAA). A high priority for President Bush, negotiation of an agreement to remove all trade barriers within the Western Hemisphere would go well beyond NAFTA to cover 34 countries. Some of them want more access to U.S. beef, sugar, citrus and vegetable markets; U.S. groups in turn want additional openings for an array of products plus more assurance that these countries will abide by SPS and other trade rules. Negotiators hope to agree shortly on an agenda for negotiations that can lead to an agreement by 2005.

Chile. Meanwhile, the Administration is negotiating a bilateral FTA with Chile, which already has agreements with Canada, Mexico, and the Common Market of the South (MERCOSUR, composed of Argentina, Brazil, Paraguay, and Uruguay). Though Chile accounts for only about 0.5% of overall U.S. agricultural trade, it has been considered a key step toward broader economic integration in the Western Hemisphere.

Other FTAs. FTAs with Jordan and Vietnam already have been negotiated but not yet taken up by Congress. Other FTAs are either in negotiation, e.g., Singapore, or under consideration for negotiation, e.g., Australia.