The Department of Treasury’s recent guidance on rules for the Inflation Reduction Act’s (IRA) clean vehicle tax credits has raised concerns about the executive branch’s authority to enter into and define free trade agreements. This article aims to provide a comprehensive understanding of free trade agreements, the constitutional powers granted to the executive branch in trade negotiations, and the avenues for Congress to engage in the process for Treasury’s proposed rule.
Deciphering the Definition of Free Trade Agreements
A free trade agreement (FTA) is typically understood as an agreement that eliminates tariff and non-tariff barriers to trade between the United States and a partner country. However, the IRA did not provide a specific definition for FTAs, leaving room for interpretation by the executive branch. The World Trade Organization defines FTAs as regional trade agreements, which are “any reciprocal trade agreement between two or more partners, not necessarily belonging to the same region.”
Constitutional Distribution of Power for Foreign Trade Negotiations
The U.S. Constitution divides powers to interact with foreign countries between the legislative and executive branches. Article I, Section 8 grants Congress the power to regulate commerce with foreign nations, while Article II, Section 2 gives the president the authority to make treaties with the consent of the Senate.
The Role of Trade Promotion Authority in Trade Agreements
Trade Promotion Authority (TPA) is a tool that has historically facilitated the negotiation and approval of FTAs by Congress. TPA expired in July 2021, but the new critical minerals agreement between the United States and Japan is viewed as an extension of the 2019 U.S.-Japan Trade Agreement, negotiated by the Trump Administration utilizing Section 103 of TPA.
Strategies for Congressional Oversight and Influence
As the clean vehicle tax credits are implemented and the proposed rule is evaluated, Congress can engage in the rulemaking process by submitting comments once the proposed rule is published in the Federal Register and by considering holding hearings on the congressional intent behind the law. Additionally, Congress can utilize the Congressional Review Act (CRA) to undo regulations propagated by the executive branch, ensuring its voice is heard in the process.
In conclusion, understanding the intricacies of the executive branch’s authority in negotiating and defining free trade agreements is essential for effective congressional oversight. By actively engaging in the rulemaking process and utilizing tools like the CRA, Congress can ensure that its intent is respected and the best interests of the American people are considered.