How U.S. states use a unique institution to speak out on trade

Trade policy took center stage during the 2016 U.S. presidential election and President Donald Trump has since made trade a cornerstone of his administration’s “America First” efforts. In this way, global trade is usually discussed in terms of the national economy and geopolitical considerations. Yet, behind the scenes, some U.S. states are vying to be heard on the nittygritty provisions that affect them, from procurement to chemicals regulation. The peculiar system that state governments have to voice their positions has been in place for decades – but even supporters say there is need for reform. At stake are two fundamental American values.

Next up on the microphone is a farmer from rural Maine, contending that free trade agreements such as the Trans-Pacific Partnership (TPP) take power from supposedly sovereign people and put it in the hands of unelected but financially powerful interests.

“How’s that working for everybody?”, he asks incredulously, drawing some chuckles from the crowd of about two dozen that has gathered in a spacious and modern conference room in Portland, Maine. At this point, about two and half hours into the public hearing on the TPP convened by the Citizen Trade Policy Commission, it has become clear that not a single testimony will come out in favor of the TPP. The Citizen Trade Policy Commission is an official governmental body in Maine made up of state legislators and members representing small businesses, environmental organizations, unions or farmers. It has analyzed the impact of trade agreements on Maine since 2003 and relayed its positions to Congress and the federal government on numerous occasions.

On the very same night of the public hearing, Ohio governor John Kasich calls on lawmakers to pass the TPP in an effort to promote global trade, which “is good for my state of Ohio and good for America.”1Kasich, John. (2016, September 15). A Vote Against Trade Is a Vote Against Growth. The Wall Street Journal. Retrieved September 15, 2016, from http://www.wsj.com/articles/a-vote-against-trade-is-a-vote-against-growth-1473981566. He used an op-ed in The Wall Street Journal and an appearance on national television that night to make his position known, all in preparation for a meeting on TPP with President Barack Obama in the White House the next day. Governor Kasich agreed to lobby Congress to vote on the TPP in the lame-duck session, despite his differences with the president on many other economic issues and despite potential backlash from his fellow Republicans about supporting the president.

Even further West from Maine and Ohio, Robert Hamilton has already done his legally mandated reporting job on the TPP: As chairman of the Intergovernmental Policy Advisory Committee (IGPAC), he was in charge of writing up the committee’s assessment of the T.P.P. in relation to the U.S. local and state level. Mr. Hamilton serves as trade policy adviser to Governor Jay Inslee and has is office in downtown Seattle, Washington. In December 2015, he submitted the IGPAC report to the Office of the United States Trade Representative (USTR), which is responsible for negotiating trade agreements on behalf of the administration. The report overall favored passage of the TPP, but also warned of potential threats to state regulatory authority.

Trade policy making is strongly centralized at the federal level

The three examples from Maine, Ohio and Washington reveal a lot about how trade policy is made in the U.S. and what role the federal states play – or don’t play. Constitutionally, states are not responsible for U.S. trade policy: This task lies solely with the federal government, namely Congress. Since 1974, Congress has delegated part of its authority to the administration. By granting the president fast-track authority for trade deals, Congress is able to set specific parameters for the president on what he can and should negotiate for. However, in turn, Congress abdicates its power to table amendments to the finalized trade deals, meaning either the legislators vote for the trade deal in its entirety or they reject it in its entirety.

The trade policy process puts the power to broker trade deals squarely in the hands of the national government, which explains why the Maine Citizen Trade Policy Commission has written so many letters to the USTR and to the Maine Congressional delegation, and why Governor Kasich has teamed up with President Obama to convince Congress to pass the TPP. State officials often rely on letters, resolutions, media appearances or informal contacts to Congress and the administration to make their positions known.

States try to influence try deals such as the TPP or the Transatlantic Trade and Investment Partnership (TTIP) because these agreements have profound effects on the states, both positive and negative. For instance, in a letter to the president and Congressional leadership, 15 (mostly Republican) governors pointed out the crucial importance of international trade for their states’ economies and jobs, and spoke out in favor of the TPP. Governor Kasich echoed this sentiment in his op-ed and added the geopolitical leadership role the U.S. could play as a crucial benefit.

State legislators: Concerns over losing state authority

However, state officials also have concerns about international trade agreements. Various state legislators, for example progressive elected officials in Maine, Vermont or Washington, have criticized the system of investor-state dispute settlement in state resolutions or in letters. They believe this system makes state regulation done in the public interest vulnerable to challenges by foreign companies which might claim unnecessary burdens to their business. These worries lead to the critical stance towards corporate influence expressed by the Maine farmer and many other citizens, members of Congress and advocacy groups. State officials take a particular interest in protecting those policies over which states’ have wide-ranging regulatory authority. One example is toxic chemicals regulations, in which some states’ provisions could theoretically clash with international trade obligations.

Government procurement is another big issue on which state officials have spoken out in letters and official reports, because states have full discretion over how they spent their own revenues on procurement (find more on procurement in this post). The administration has no legal authority to override states’ procurement rights, which in many cases favor local suppliers and producers. However, the administration has in the past asked states to sign on to procurement rules, for example within the World Trade Organization or in the context of bilateral free trade agreements. There was always a number of states deciding to open up their procurement markets in exchange for access to foreign countries’ procurement markets. But the fact that no trade agreement ever saw all or even just 40 states agreeing to the procurement rules shows the caution states exercise in this field, aiming to preserve their own regulatory discretion. This caution is reflected in the IGPAC report, which calls on the USTR to uphold the approach of seeking explicit state consent before binding states to procurement rules.

A "quirky" institution for states to voice their trade policy opinions

The IGPAC, as the only institutionalized avenue for states to represent their interests, is a peculiar body. One of the people I talked to called it the most unique and quirky body at the USTR. Out of the roughly 30 advisory committees at the USTR, it is the only one that represents state and local officials and one of just three that is not composed of private-sector industry representatives. Its members are drawn from state executives, state legislatures, state associations such as the National Conference of State Legislatures, in addition to a few local representatives such as county commissioners or the National League of Cities. These members are appointed by the USTR and do not receive compensation. In talking to a number of former and current members of the IGPAC, it becomes clear that the IGPAC works in theory but has serious limitations in practice.

The benefit of the IGPAC is clear: If working properly, it is the primary mechanism for state-federal consultation on U.S. trade policy. The federal government can brief states on the current status of trade negotiations and the state governments can provide comments from their specific view as sub-federal officials. But the system is not working properly at the moment and there are a variety of reasons for that:
  • The IGPAC membership is very heterogeneous. Not only is there a mix of state and local officials, but also of representatives from different branches of government, from different regions of the U.S. and with contrasting political and ideological backgrounds. This heterogeneity could be seen as a strength, bringing in many different perspectives, but in the USTR’s advisory committee system, it is a weakness: All the private sector committees are made up of a dedicated group of experts with much narrower economic interests such as the automotive or pharmaceutical industry.
  • Not all IGPAC members are engaged in the committee’s work. Only a handful of the 14 members is actively participating in the conference calls the USTR holds. International trade policy is not a top priority in many states and state officials, including IGPAC members, have a myriad of domestic issues to deal with in which they actually have legislative responsibilities. Overall, only very few state-level experts are working on international trade policy in the entire country.
  • USTR outreach to the IGPAC is lacking. The system of information exchange at the USTR has been up and running for decades now, with IGPAC members getting periodic briefings from USTR and having access to negotiation texts, once they have received their security clearance. To a certain extent, the success of IGPAC depends on state officials’ commitment to become involved. However, a lot of current or former IGPAC members see flaws in how the USTR informs the committee. Even a generally supportive member of the IGPAC pointed out shortcomings: How are state officials supposed to read, evaluate and then report on draft trade agreements, if they only have a couple of weeks to do this? The lack of access to texts and trade data coupled with irregular and trivial briefings were frequent criticism leveled against the USTR.

The IGPAC has continuously raised these issues with the USTR and at times in the past, there have been serious conflicts between state-level officials, supported by specialized law professors and non-profit organizations, and the administration. Some issues remain to this day, but many of the IGPAC members I spoke with acknowledge that the USTR has a challenging job of balancing industry interests, public concerns and negotiating partners’ demands in trade policy.

Balancing between federalism and open markets

On a broader level, the IGPAC is attempting to strike a balance between the two fundamental American values of federalism and open markets. A federal democratic system is what the U.S. is founded on and global market liberalization has been a pillar of U.S. trade policy since at least the Second World War.

Having a formalized means of communication is a compromise between these two values: The constitution sees no role for states in international treaty making and elected federal officials in Congress have decided to pursue global open markets, but disregarding state preferences would seriously undermine the federal U.S. system.
So how could this compromise system be improved? The IGPAC could include governors to give it a higher profile. But some governors were actually members of the IGPAC until the early 2000s and it turned out that they did not have the time to read through pages and pages of technical negotiation texts.

Got questions or feedback?

If you have comments or questions, please feel free to get in touch via e-mail at research@transatlanticties.com (PGP-Key).

Another option is having a representative from every single state executive and legislature on the committee, so that their collective interests would size up to the hundreds of business representatives. Yet, an IGPAC of 100 members would simply be too big to function effectively.

A delegation of duties to the state associations, for example the National Governors Association (NGA) or the National Conference of State Legislatures (NCSL), seems possible. Or the states as a group could be represented directly in the private sector advisory committees, so that industry representatives would have to at least listen to sub-federal issues in international trade policy.

Each of these options, however, relies fundamentally on good communication between state and federal officials. States need to invest more to have knowledgeable and available experts on the IGPAC and the USTR needs to improve its briefings to be more timely and substantive.