July 26, 2002

July 26, 2002 | WebMemo on Trade, Economic Freedom

Moving Ahead with the TPA Conference

As the world is still reeling from U.S. decisions on steel and the passage of the farm bill, the congressional conferees made a giant step toward free trade last night by agreeing on a conference report for trade promotion authority (TPA). TPA gives the President the ability to negotiate trade agreements and then present them to Congress for an up or down vote without amending the agreement. With only 3 out of the 190 trade and investment agreements in the world, the United States lags far behind.

The fact that the United States trails behind the world in free trade agreements is troubling. In this time of economic need, Congress should waste no time to grant the President trade promotion authority (TPA) to negotiate more trade agreements.

Many countries would like to sign a free trade agreement with the United States, but they are hesitant to enter negotiations on agreements that could be subject to countless amendments debated at length in Congress. Trade promotion authority will assure potential trade partners that the agreements they sign with the Administration will be approved or rejected by Congress quickly and without debilitating amendments.

It is possible to negotiate agreements without TPA, but it is far more difficult and thus less likely to occur. Countries are more likely to negotiate with others that possess such authority, which ensures a quick negotiating process, not a tedious one. Meanwhile, as other countries freely trade back and forth, the United States continues to fall behind.

As Pascal Lamy, the European Commissioner for Trade, has observed, "If Trade Promotion Authority is denied by Congress, it would be hard for the U.S. Administration to establish itself as a credible trading partner." Granting the President trade promotion authority at a time when U.S. credibility is at a low point due to the steel tariff and the farm bill will send a message to the rest of the world that the America is serious about free trade and will no longer sit on the sidelines.

The conference report also includes trade adjustment assistance (TAA) for displaced workers. In particular, it extends assistance to workers for health care coverage. The health care provisions in the conference report are a modest step forward for health care policy. Fortunately, Congress resisted earlier attempts to enroll Trade Adjustment Assistance (TAA) eligible workers into Medicaid, the government-run welfare program for health insurance. Instead, Members opted to provide these individuals with federal assistance to help them secure private health care coverage of their own. The adoption of a health care tax credit offers credit recipients favorable tax treatment for the purchase of health insurance, similar to that which they enjoyed through their employer. Furthermore, direct tax credit assistance will reduce the likelihood that these workers and their families will be forced to join the ranks of the uninsured. 

The conference report does not include full, open access to all forms of health insurance. It restricts tax credit recipients' access to policies bought in the individual market and defers to the states which coverage options will be available. It is unfortunate that Congress chooses to deny an individual's right to apply the credit to a policy of their own choice.

While the legislation creates obstacles for tax credit recipients to access affordable, private health care coverage, it does offer states an opportunity to design innovative approaches to cover this population. It encourages states to devise solutions that supplement the effectiveness of the tax credit. Similar to the achievements made by the states with welfare reform, the prospects for success are tangible.

Although it affects only a small population, Congressional passage of a health care tax credit marks a major change in the federal tax treatment for health insurance. While some of the provisions remain problematic, this policy creates a framework to which further work can be done by the states and the federal government to give individuals and families the ability to choose affordable, private health care coverage of their choice.

Moving ahead with the conference report will give states the opportunity to design innovative approaches to covering displaced workers and will give American workers and farmers better opportunities from engaging in free trade.

Sara J. Fitzgerald and Nina Owcharenko are Policy Analysts at The Heritage Foundation.

About the Author

Sara J. Fitzgerald Policy Analyst
Center for Trade and Economics (CTE)

Nina Owcharenko Director, Center for Health Policy Studies and Preston A. Wells, Jr. Fellow
Center for Health Policy Studies