U.S. Congress: Trade Update

Democrats and Bush administration reach compromise on trade

On May 10, leaders from the Senate and House of Representatives announced a bipartisan compromise to move forward the U.S. trade agenda and pending bilateral free-trade agreements (FTAs) with Colombia, Peru and Panama.  The announcement—a preliminary framework incorporating labor, environment and other revisions in the bilateral agreements—came after months of discussions with administration officials.  Congress is still revising the final text, which has yet to be released.  Additional changes are still anticipated.

In the meantime, the U.S. Trade Representative is working with the governments of Colombia, Peru and Panama to prepare them for the possible changes to the agreements and to help prepare a path forward once the text is agreed upon.  Each country would have to coordinate amendments with their respective legislative bodies.  

The compromise calls for the inclusion of the 1998-adopted International Labor Organization core labor standards:  freedom of association and the right to collective bargaining; elimination of forced and compulsory labor; abolition of child labor; and the elimination of discrimination in the workplace.  Unlike previous agreements, labor revisions will be included in the actual text of each agreement.  Direct insertion, rather than a side letter, emphasizes the significance of the new provisions and helps to ensure full enforcement.  Countries that do not adopt, maintain and enforce labor laws risk action against their FTA status.

Potential intellectual property rights revisions, especially those affecting patented medicines, remain unclear until the release of the revised text.  A revision linking drug approval to patent status, if inserted, would allow drug regulatory agencies to approve the local distribution of generic medicine before certification that the generic would not violate existing patents.  In addition, the agreement may change the foreign drug approval process and the length of time an innovative drug can be patent protected.  Overall, the revisions would allow a more favorable climate for generic drugs than granted in previous agreements.

Under the compromise, trade partners must adopt, implement and enforce obligations required in environmental agreements where the respective country is already a participant.  For example, the Convention on International Trade in Endangered Species of Wild Fauna and Flora ensures that international trade in specimens of wild animals and plants does not threaten their survival, while the Montreal Protocol phases out the production of ozone-depleting substances.  Adherence to the trade agreement cannot supersede obligations written into the environmental agreements.  In an unprecedented change, the agreement calls for U.S. agencies to carry out in-country enforcement of the environmental provisions.

The bipartisan compromise provides an opportunity for passage of the pending bilateral agreements this year. As a practical matter, agreements with Colombia and South Korea may require additional steps before they are brought before Congress.

More broadly, the compromise is intended to serve as a template for additional talks on Trade Promotion Authority (TPA).  Set to expire at the end of June, TPA, otherwise known as Fast Track, allows for the President to negotiate international trade agreements that are then subject to an up-or-down vote, but not amendment, in Congress.  Currently, all four pending bilateral trade agreements fall under the existing TPA authorization and are not affected by the June expiration.