Crossing All The "T"s Will Not Dot The "I"s: Some Of The Politics Of Trade
Which comes first, TPP (the "Trans-Pacific Partnership") or TPA ("Trade Promotion Authority")? Alphabetically, and logically, TPA. Strategically, TPP. Politically, neither is likely to come at all. Nor, then, is TTIP the "Trans-Atlantic Trade And Investment Partnership"), which would be the most important of the "T"s for trade, and for economic development, and the only one with an "I" to dot. It is way behind TPA and TPP — on the calendar, in negotiation, and in political prospects.
TPA refers to "Trade Promotion Authority," the nomenclature assigned by the Bush Administration to "fast track" during the period when the Bush Administration seemed to believe it necessary to rename anything associated with the Clinton Administration. Fast Track expired in 1994. Congress declined to restore or renew TPA to Clinton in his second term. Bush, placing a high priority on presidential authority to negotiate international trade agreements, renamed fast track (dissociating the reference from the authority denied to Clinton). He then squeezed TPA through Congress by a three vote margin, only once, with expiration long before he left office.
The United States Constitution confers authority over international commerce on Congress, but Congress collectively cannot reasonably negotiate international agreements. Presidents have suffered, not infrequently, humiliating defeats of agreements they negotiated without full congressional partnership, most famously the League of Nations.
U.S. trade partners have understood that a President's signature on an international agreement is only as good as the congressional assurance to back it, and that confidence has to precede the conclusion of an agreement. When Presidents sign agreements without full, prior congressional engagement, they must submit the agreement to a Congress almost certain to change it. International partners always have understood that the agreement would then be subject to renegotiation, possibly through the President but ultimately and effectively with 100 Senators (for treaties) and 485 representatives (for "agreements").
"Fast track" (now TPA) confers upon the President authority to negotiate and sign international trade agreements that Congress may accept or reject but cannot change. TPA legislation, therefore, contains negotiating guidance: it instructs the President on what may, and what must, be included, what will be acceptable and what will not be acceptable. It informs the President of congressional priorities and instructs on negotiating parameters.
Without TPA, the President is without congressional guidance and priorities, and without congressional commitment. Without it, his priorities and objectives may coincide with Congress, benefitting perhaps from intensive consultations, but he is without any approval of Congress as a whole and his negotiating partners are without any assurance that the President's word is backed by Congress. Although there is no guarantee that Congress will accept a negotiated trade agreement, the President is expected to keep Congress fully informed and not to sign an agreement he is not confident will win congressional approval. TPA provides a template for judging the proposed deal.
For TPA to have any useful meaning, Presidents need to be negotiating with authority already conferred because both international partners and the President need to know that the President is negotiating an agreement Congress in principle has accepted (because it has been negotiated according to the guidelines Congress has provided) and cannot change. The President can expect passage only when he has reason to believe Congress knows thoroughly what he is negotiating.
While the logic dictates that TPA must come first, the Obama Administration has operated for five years on the theory that it can come second. The Administration is not without reason. Obama inherited three bilateral trade agreements signed by President Bush after the expiration of his trade promotion authority. Congress, declining the "up or down" vote required by fast track, made certain objections clear, particularly as to labor and environment provisions. The partners to these agreements were either weak and small (Panama and Colombia) or in particular need (South Korea), enough to renegotiate certain provisions with Obama notwithstanding Bush's signature. Obama then submitted them successfully to Congress, without TPA.
Isolated bilateral deals with weak partners (Colombia represents less than one percent of U.S. trade, Panama much less) or partners with geostrategic needs for American partnership (South Korea) should not be mistaken as useful precedents for multilateral agreements. Renegotiation with a single bilateral partner is not a comparable task, and bilateral partners are far more willing to put their best deals on the table without confidence in Congress than numerous partners in, inevitably, more complicated negotiations.
Even with TPA, multilateral negotiations can be especially difficult, as the Bush Administration ruefully learned over failures in the Doha multilateral round and the highly touted Free Trade Area of the Americas ("FTAA"). Bush devolved onto bilateral agreements (with Australia, Chile, Singapore, Peru, Bahrain and Morocco – and Jordan, signed by Clinton but requiring renegotiation by Bush — plus the three bilateral deals passed on to Obama) only after he failed to make progress multilaterally. These agreements had to substitute for a larger and failed geopolitical strategy to isolate Brazil in the Americas (the FTAA) and to soften wars in Afghanistan and Iraq with trade in the other countries of the Middle East (Bahrain, Morocco, Jordan). Economically, of all the Bush deals, only the Korean FTA meant very much. Moreover, Bush did bilateral deals with four of the eleven TPP partners, in addition to Canada and Mexico already in NAFTA and South Korea. Seven of the twelve possible TPP partners already have free trade agreements with the United States.
Under recent pressure about the lack of transparency and communication, the Obama Administration is scrambling to save TPP (the Trans Pacific Partnership) by acquiescing to the reality that negotiating partners have not been forthcoming in the absence of TPA. After proclaiming the likely completion of negotiations by the end of 2013, and then announcing probable completion by the end of February 2014, the Office of the U.S. Trade Representative finally admitted in a closed door briefing on February 11, according to Inside U.S. Trade, that TPP "negotiators still face a large number of major outstanding issues, such as rules on intellectual property, state-owned enterprises and labor rights."
No decision has yet been made to include Korea in TPP and, according to Washington Trade Daily, "Top U.S. and Japanese trade officials were unable to reach agreement on bilateral market access issues – including automotive trade—that stand in the way of conclusion Saturday [February 22] of the Trans Pacific Partnership." Worse, perhaps, for the Administration, as Inside U.S. Trade has observed, some House Democrats have "conflated" TPA with the debate over TPP, complaining of a secretive process and a failure to consult with Congress. "Lawmakers," Inside U.S. Trade reported on February 14,"are taking positions on the fast-track bill fueled by their opposition to TPP or vice-versa."
Had TPA been granted Obama prior to the TPP negotiations, or even at an earlier stage, Congressmen could not conflate them, the form and extent of consultations would have been mandated, the contours of the negotiations would have been agreed. Hence, most of the criticisms of TPP now would not have been possible. The TPP negotiations likely would have advanced further because trade partners would have had more confidence in Obama and would have been more willing to table "final offers." The politics of trade negotiations in the Obama Administration has been the subject of several previous articles on this blog, including An Obama Trade Policy Courtesy Of The Tea Partyand TPP, TTIP, And Congress: The Elephant In The Room.
Theoretically, passage of TPA still could precede TPP, and the final negotiations of TPP could conform with TPA requirements. However, that sequence appears unlikely. The bipartisan Camp-Baucus bill to confer upon the President Trade Promotion Authority, carrying the imprimatur of the Republican Chairman of the House Ways and Means Committee and the Democratic Chairman of the Senate Finance Committee, was greeted at birth with the outspoken opposition of the Ranking Minority member of the Ways & Means Committee, the House Minority Leader, and the Senate Majority Leader. The Chairman of the Senate Finance Committee promptly abandoned the bill to become the U.S. Ambassador in Beijing, and his successor as Finance Committee Chairman declined to endorse the bill and, again as reported by Inside U.S. Trade, "clearly signaled that dealing with a pending fast-track bill is not among his immediate priorities."
President Obama did not declare a strong interest in TPA until spring 2013, and then left the matter to Congress. The TPA law that expired in 2007 had been created in 2002. Many in Congress said a new law would need to address new things, with Democrats especially exercised about alleged "currency manipulation," labor and environmental issues. Traditionally, none of these subjects has been part of international trade, although labor and environment concerns were articulated in side letters to NAFTA and were central to the Obama renegotiations of the three inherited bilateral agreements from President Bush.
The Camp-Baucus bill mimics the 2002 legislation. Democrats have sought to amend U.S. trade law unsuccessfully for currency manipulation since before the recession, and Congress people Pelosi (Minority Leader) and Levin (Ranking Ways & Means Committee member) both rejected the Camp-Baucus bill because it contains no currency provision.
Beyond the details of the Camp-Baucus bill, there are more fundamental congressional divisions. House Speaker Boehner says he cannot muster the 218 Republican votes needed to pass the bill, and some say that 50-70 Republicans oppose it for various reasons (implacable opposition to Obama; distrust of Obama to implement or negotiate in good faith; inadequacy of the legislation). There may be fewer than 50 Democrats supporting TPA in the House, and Senator Wyden, the new Chair of the Senate Finance Committee, not only accords it no priority: he says he will not bring the bill to the floor of the Senate.
Obama demurred when asked at a meeting of the House Democratic Caucus in early February whether he would make known to Congress the terms of the TPP prior to a congressional vote on TPA. No surprise, then, that concerns related to one conflate with the other. In November, three-quarters of the Democrats in the House advised the President in writing that they would not support a revival of TPA as written in 2002, yet the White House endorsed the Camp-Baucus bill.
Despite a two sentence rallying cry in his hour-long 2014 State of the Union Address, Obama never mentions international trade among his highest priorities. According to Inside U.S. Trade, "An official readout from the White House of Obama's meeting with House Democrats did not mention trade as a topic of discussion."
There is bipartisan consensus on the congressional fate of TPA and TPP. Neither stands any chance of congressional approval without a forceful, sustained White House engagement, not in 2014, probably not in 2015, and certainly not in the last year of the Obama presidency. Nor, even with such presidential commitment, is passage likely without a sustained educational, lobbying effort.
The American Chamber of Commerce has been telling the diplomatic representatives of foreign trade partners not to worry, that passage will come. Hundreds of opposing environmental and labor groups, however, have been campaigning hard in Congress. So far, they may not outpace the expenditures and resources of business and financial interests, but they are expending more energy, and to greater effect. Even the Vice President has uttered publicly his doubts about TPA.
Crossing the TPA "t" cannot come soon enough to save TPP, and neither will dot the TTIP "I" (as in the Transatlantic Trade and Investment Partnership). Mexican spokesmen from the North American Summit of February 20 report that the United States is seeking to accelerate the TPP talks and bring them to a swift completion as a way to force support for TPA, a strategy that seems to misread Congress: opposition there is explained principally by the perceived need to know and participate more in the TPP process, while the President wants to finish the deal before TPA could require keeping Congress more involved and informed. The President promises to stay the course campaigning for a trade agenda he says will help fuel economic recovery, but he leaves no doubt that his heart is not really in the fight and his head is elsewhere altogether.
It's Mostly Political Anyway
President Obama has endorsed TPP and TTIP as additional tools for economic growth. Some economists agree, and some don't.
The only trade agreement the United States has entered with economic meaning since NAFTA and the WTO (twenty years ago) is with South Korea. According to Rep. Marcy Kaptur (D-Ohio), the U.S. trade deficit with South Korea has doubled since KORUS was signed. U.S. exports declined; imports from South Korea increased. It is not a story that sells subsequent agreements on Capitol Hill.
The genesis and negotiating contradictions of TPP are important to appreciate. The argument that 40 percent of world trade would be represented in the Trans Pacific Partnership depends upon the inclusion of South Korea and Japan, neither of which is yet certain. U.S.–Japan negotiations appear to be at an impasse over agriculture (as well as the automotive trade), and Australia and New Zealand are indicating that they will not make important concessions on other matters without opening more U.S. and Japanese agricultural markets. South Korea's primary trade partner is China, excluded from TPP, and South Korea already has unique advantages in trade relations as the only Asian country (other than Singapore) with a free trade agreement with the United States. It is not obvious why South Korea might antagonize China, and would make important concessions or even encourage the TPP, which can only dilute its relative advantage with the United States.
The potential impact of the TPP also depends upon the inclusion of Canada and Mexico, neither of which was involved during several years of negotiations. The United States now rationalizes that Canada and Mexico should be part of the TPP because NAFTA needs an upgrade best accomplished in this larger Trans-Pacific entity. Like South Korea, Canada and Mexico enjoy NAFTA advantages that could be diluted in a broader agreement. At the North American summit convened in Toluca, Mexico on February 20, neither Mexican President Pena Nieto nor Canadian Prime Minister Harper expressed great enthusiasm for the TPP, and in a 1600-word joint closing statement of the three leaders, the Washington Post reported that only one sentence was devoted to the TPP.
The idea for the TPP did not originate with the United States. Negotiations for a Pacific partnership grew out of concern from smaller Asian countries enlisting the United States to help them offset the growing authority and influence of China. The United States has protested that the TPP was not designed to exclude or contain China, but instead was to be an agreement of such high economic and free market standard that the state-controlled economy of China probably was not ready; eventually, the United States said, China would be welcome. Yet, one of the more significant economies in the original group of countries is Vietnam, certainly no less a non-market economy than China, and much further behind in economic development. It is difficult to demonstrate that Vietnam is more able to take on a "high standard" agreement than China.
As discussed on this blog in Healing More Important Than Dealing in The Pacific, collateral geostrategic issues, such as the confrontation between China and Japan in the East China Sea, have led the United States to be more transparent about motives. The United States has taken Japan's side in that conflict and, in the process, has articulated publicly concerns about China's growing power, notwithstanding simultaneous assurances to China denying any intent to limit or contain China. One consequence of these public contradictions has been to emphasize that the TPP is at least as much about balance of power in Asia as it is about international trade and jobs.
TPP was the catalyst for TTIP, as the European Union worried that the Obama pivot would consign the EU to a backseat in world affairs. TTIP negotiations have served to remind the United States that, notwithstanding Asian (and especially Chinese) advances, the world's economy remains concentrated more over the Atlantic than over the Pacific Ocean, and that common values and perspectives are far more apparent there. TTIP has even less of a chance of succeeding than TPP, but the very existence of negotiations has played a major part in political balance.
Trade agreements are always more political than economic. TPP and TTIP are not exceptions. Their politics, and political purposes, are complicated by domestic political imperatives in the United States that focus on TPA. The battle over TPA is more about partisan control of Congress than about foreign relations or trade, but in this instance the President's greatest problems are with his own party.
Substance Doesn't Matter
Whether TPP is, in the terms Obama presented to Harper and Pena Nieto, "a good agreement," is not important. Obama told his North American counterparts that, provided TPP is a "good agreement," Congress would approve it. Unfortunately, that conclusion is without any foundation. Four hundred eighty-five congressmen will vote according to their best estimate of how their votes will be judged by voters, and whether by voting they will enhance or diminish their chances to hold their congressional seats in the 2014 mid-term elections.
Because there is political risk in voting for international trade agreements, Congressmen would prefer not to vote. Most likely, in an election year, they will not vote. The Camp –Baucus bill, already rejected by Levin and Pelosi and probably by Wyden, will be replaced by a bill that surely will not be considered before November elections, and then likely will not be taken up in a lame duck session. TPA now is hostage to the election cycle, and TPP is hostage to TPA. TTIP will not jump the queue. Congressional politics, therefore, will dispose of all of them.
What Good (And Not So Good) Could Come Of It
The good that may be inherent in the trade agreements is not likely to come about during the Obama Administration, if ever. Although Obama always has been a free trade Democrat, he seems never to have appreciated that pursuit of free trade requires substantial commitment in American politics, and he always has had higher priorities. George Bush cared about trade, not health care; Obama, in his first term, was committed to health care, not trade. He found it better to refine trade agreements already signed than to seek authority to negotiate new ones.
Now, in his second term, Obama is appreciating more the link between market access and American production. He understands that trade requires reciprocity: opening foreign markets almost always requires dealing away something protected or cherished at home. Giving up anything at home means making political deals which, for trade, he has been unwilling to make. It has been a lot easier to negotiate trade without authority, than to assign lower priority to immigration, budgets, tax reform, debt ceilings, displacing them on his agenda in order to seek trade negotiating authority. And, there is no indication that Obama will displace any of them, even as there is more bipartisan support for trade than for anything else on his agenda.
Obama has brought a new realism to American foreign policy, pulling out of wars that could not be won, declining colonial reflexes of nation-building, avoiding interventions in which getting in would be far easier than getting out. Critics have accused him of shrinking the American footprint, giving up American influence in the world prematurely, shirking international responsibility. Yet, the trade negotiations themselves convey a different message.
Some forty countries are deeply engaged in trade negotiations with the United States, and only because the United States is involved are they at the negotiating table at all. Most of them are relying on Obama's word that he can bring these negotiations to successful conclusions. The negotiations reflect a faith and confidence in the United States, probably unwarranted, but acknowledging the need for, and the reality of, global American leadership.
There is both hope and risk in these conclusions. Fully aware of the new realism Obama has brought to American global ambitions, partners in every corner of the globe still look to the United States for leadership and still want to share in the American market if not the American dream. But the implied promise – negotiate with the United States because the word of the President is good – imperils American credibility. It is good that there is faith and confidence in the United States, and it is not so good.
The political catalysts for the negotiations are also not so good. Reinforcing a military alliance with Japan, at the very moment when Japan is exacerbating antagonisms with China, may do permanent damage to American interests in the region of the world where the President has declared priorities. The combination of pressing forward with TPP and aligning with Japan in the East China Sea seems particularly unstable, especially because there is no apparent value in pressing forward with a trade agreement unlikely to be concluded.
There is more innocence and greater economic interest in TTIP, but it is inherently a more difficult negotiation notwithstanding the inclusion of non-market Vietnam in TPP. The TTIP parties acknowledge that, despite numerous meetings already, there has been very little progress, which may be to the good, because with less agreed upon, there will be less cause for disappointment.
For at least three years there has been little else to talk about in the international trade community besides TPA, TPP, and TTIP. The trade press has reported endlessly and breathlessly about each pronouncement, each meeting, each private communiqué. Expectations have been high. But, as in the conflation of TPA and TPP, the trade situation has been a muddle, political battles masquerading as technical and technocratic disputes.
It is past time for reality to set in: the Camp-Baucus bill will never get to the floor of either house of Congress. A replacement bill may be introduced, but it will not be debated nor voted upon before the November mid-term elections. The lame duck Congress will not take it up. By the end of 2015, TPP negotiations might have concluded, but without TPA final offers in TPP probably will not have been tabled. TPP then will not be ready, and a new Congress will not likely give President Obama a signature foreign policy achievement during his last eighteen months in office.
Those relationships—between TPP and TPA — require only crossing "T"s. They must be crossed before the "I" in TTIP can be dotted. For the Obama trade agenda, the "T"s will not be crossed, the "I" will not be dotted. Nor is the "I" likely to be dotted in Europe, which requires the concurrence of twenty-eight members. The mark left in question will be a "C," for American credibility.
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