LegiStorm

Summary:

During the Obama Administration, the United States negotiated two comprehensive and highstandard mega-regional free trade agreements: the Trans-Pacific Partnership (TPP) among the United States and 11 other countries, and the U.S.-European Transatlantic Trade and Investment Partnership (T-TIP). The 12 TPP countries signed the agreement in February 2016, but the agreement required ratification by each country before it could enter into force. In the United States this requires implementing legislation by Congress. Upon taking office, President Trump withdrew the United States from the TPP and halted further negotiations on the T-TIP, but may reengage in the TPP under different terms. The remaining 11 partners to the TPP concluded, without U.S. participation, a revised TPP, now identified as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The Trump Administration is also attempting to revise the two largest existing U.S. FTAs, through the ongoing renegotiation of the North American Free Trade Agreement (NAFTA), and modification talks regarding the U.S.-South Korea (KORUS) FTA. For Members of Congress and others, international trade and trade agreements offer the prospect of improving national economic welfare, while also raising questions about the potential cost to the economy. Congress plays an important role in shaping and considering legislation to implement U.S. trade agreements. Discussions of trade and trade agreements often focus on a number of issues, including the role that trade plays in the U.S. economy, the impact of trade agreements on employment gains and losses, and the size of the U.S. trade deficit. This report focuses on some of the major issues associated with trade and trade agreements and the impact of trade on the U.S. economy. The key findings include the following: From the perspective of the U.S. economy as a whole, trade is one among a number of forces that drive changes in employment, wages, the distribution of income, and ultimately the standard of living. Most economists argue that broad macroeconomic forces, including technological advances, are generally considered to be more important than trade.  Economists generally conclude that trade provides net overall positive benefits to economies. Changes in trading patterns associated with changes in trading partners and composition or with new trade agreements, however, may entail certain adjustment costs, including changes in employment, which can be highly concentrated with some workers, firms, and communities affected disproportionately.  In discussions of trade agreements, both proponents and opponents use the results of a variety of trade models and underlying assumptions to estimate the impact on the U.S. economy. Such models have various strengths and weaknesses, although not always in equal proportion. Most economists argue that such estimates represent a partial accounting of the total economic effects and, therefore, are not representative of the overall impact of trade agreements on the U.S. economy.  Some argue that trade, trade agreements, and globalization more broadly contributed to growing wealth and income equality within countries. Growing income inequality domestically is not unique to the United States, or even to developed countries, but is found in both developed and developing countries. Despite intense focus in the academic literature, there is no consensus on the direct impact that trade or trade agreements have on income inequality Congress faces a number of challenging policy issues relative to trade and the impact of trade agreements on the U.S. economy. These challenges include assessing the quality of data on trade and what, if any, additional resources should be devoted to collecting trade data and analyzing the role of trade in the economy. Congress also has legislative and oversight responsibility over various government programs that assist workers and firms adjust to increased competition from trade.