What’s TPP, TPA, and TAA?

These acronyms have been in the news lately, so we thought we’d break down the details for you.

The Club for Growth strongly supports free trade.  And while we would prefer immediate multilateral elimination of all tariffs (domestic and abroad), or even unilateral elimination (just domestic), we recognize that politics get in the way of that.  So while they aren’t preferable, the Club typically supports free trade agreements.  Deals like NAFTA, CAFTA, and now the recent Trans-Pacific Partnership (TPP), massively reduce tariffs and other barriers to trade.

When trade agreements become law, the government’s intervention in the free market is reduced.  But in order for this to happen, they have to be negotiated with the foreign countries involved.  Unfortunately, it’s impractical for 535 politicians to be on one side of the negotiating table when working out the various details.

That creates a dilemma.  But luckily there’s a solution.  The Constitution grants the President the authority to negotiate with foreign countries.  It also grants Congress the authority to write laws.  So trade promotion authority (TPA) brings these two things together.  Through TPA, Congress allows the President to negotiate trade agreements as long as he follows certain objections.  In return, Congress promises to hold an up or down vote on the agreements without them getting bogged down with dozens of amendments.

So while TPA isn’t a pro-growth idea, it enables the creation and the ultimate passage of pro-growth trade agreements.

Most Republicans in Congress are for free trade, and therefore, are pro-TPA.  Conversely, most Democrats – beholden to their labor union supporters – are hostile to trade and therefore, TPA.  But some Democrats are willing to support TPA if they get some big government policies out of the deal.  This is where Trade Adjustment Assistance (TAA) comes in.  TAA is a welfare program that provides cash benefits and job training for workers who lose their jobs to free trade.  The labor unions love it.  But the program is so poorly designed and administered – not a surprise for a government agency – that a study commissioned by the Labor Department itself said that it was a negative net benefit to society.

Sometimes TPA, TAA, and even free trade agreements themselves are cobbled together in order to grease the wheels towards passage of all three.  But as standalone policies, it’s clear that TPA enables the passage of pro-growth trade agreements, while TAA is nothing but an anti-growth welfare program that should be terminated.