U.S. Could Use Amendments As Method To Enact Changes To Korea FTA

Inside U.S. Trade
Posted: November 24, 2010

With the U.S. looking to enact substantial changes to the U.S.-South Korea free trade agreement, including changes to tariff phaseout periods, sources said the Office of the U.S. Trade Representative will most likely incorporate any changes to the FTA through amendments that USTR would submit to Congress for a vote alongside the FTA implementing legislation.

Under this approach, the FTA itself would still be protected by fast track procedures, and would still be subject to an up-or-down vote in Congress, because the implementing legislation would still reflect the original agreement that was struck by the Bush administration and notified to Congress while fast track was still in effect, sources said.

USTR officials have informally indicated that such amendments could be defended as allowing the FTA to “operate fully,” according to informed sources.

The amendments themselves, however, would not be protected by fast track. This does not represent a major problem in the House, where the incoming Republican leadership could simply arrange for a rule under which the amendments are also subjected to expedited procedures and an up-or-down vote, sources said.

Passing these amendments could be slightly tougher in the Senate, as members would have to reach unanimous consent to approve the amendments in an expedited fashion because they would not be covered by fast track.

However, one source said opponents of the FTA, who would be the most likely to raise objections, may be hard-pressed to look to hold up passage of the amendments. This is because the amendments are likely to include changes, such as longer U.S. tariff phaseouts or new safeguard provisions, that are favored by critics of the FTA.

This source argued that a potential problem with this approach is that such amendments would clearly outline all the concessions which South Korea made to the Obama administration to improve the FTA as negotiated under the Bush administration in one place. This could pose political problems for South Korea, this source said.

Another potential hurdle is the fact that U.S. and Korean negotiators would likely have to devise a method to ensure that the amendments themselves are enforceable and subject to dispute settlement under the FTA itself. However, sources said it would be fairly easy to include language specifying that this was the case.

Sources said that while these legal deliberations are important, they will ultimately become less significant if there is a political consensus to try to get the agreement passed by Congress. With such a consensus, USTR and Congress will be able to find a way to enact changes to the FTA, they said.

One source noted that while the scope of changes that the U.S. is seeking for the Korea FTA makes it distinct, USTR routinely changes minor aspects of trade agreements that it negotiates in between the time that it notifies Congress of a concluded deal and the time when it sends up implementing legislation for that FTA during a “legal scrub” process.

Sources said this week that the use of amendments to implement any changes to the FTA may make more sense than “reopening” the actual FTA itself. If USTR changed the actual text of the FTA, it would be hard-pressed to argue that it still benefited from fast track protection, as that changed version of the FTA was not “entered into” before the expiry of fast track in 2007.

If the FTA itself were to lose fast track protection, House Republicans could still arrange a closed rule to protect it from amendments and advance it in an expedited fashion. But in the Senate, members would have to reach unanimous consent to advance the FTA in such an expedited fashion (Inside U.S. Trade, July 23).

Sources said it was less likely that the U.S. would look to incorporate changes to the FTA via side letters that “clarified” the contents of the FTA, due to the larger scale of changes that the U.S. is seeking. One advantage of clarifying side letters as traditionally conceived is that they do not alter the fast track status of the FTA, sources said.

In past trade agreements, including the U.S.-Jordan FTA, USTR negotiated side letters with its trade counterparts in the other country. Traditionally, these side letters have served as administrative understandings, meaning that they are not formally part of the FTA and are therefore not considered by the U.S. Congress, sources said.

Another possible option would be to incorporate changes in the FTA implementing legislation, but not change the FTA itself, sources speculated. The administration does not send up the actual FTA to Congress for consideration, but instead sends up the legislation to implement it, and it is on this legislation that Congress votes.

If changes are included in the implementing legislation, those changes would be reflected in U.S. law. However, taking such an approach raises several potential problems and is therefore less likely, sources said.

First, one source questioned how to make such provisions enforceable if they were only included in the implementing legislation, but not included in the actual FTA itself or in a subsequent amendment to the FTA. Another source said this approach would place in doubt whether the FTA would still receive fast track protection.

This is because the implementing legislation would not reflect the agreement that the administration notified to Congress in 2007, this source explained. Another source said it could be politically damaging to try to send up implementing legislation that does not strictly reflect the actual FTA.

The now-lapsed fast track authority states that if changes in existing laws or new statutory authority are required to implement an FTA, provisions that are “necessary or appropriate” to implement the FTA can be included in the implementing legislation. One source said this appears to leave some room for USTR to include FTA changes.

But another source said USTR would be hard-pressed to argue that changes to the FTA, such as changes on tariff phaseouts, are “necessary or appropriate” to actually implement the FTA. They may be “politically necessary,” but that is not the same thing, this source argued.

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