Note: This Taking Trade post is a reprint of my article now appearing in a special issue on the Trans-Pacific Partnership, part of the Social Science Japan newsletter produced by the Institute of Social Science at the University of Tokyo.
As the Trans-Pacific Partnership (TPP) negotiations with the 12 international trading partners nears conclusion after five long years of hard bargaining, the battle for the future of the agreement inside the United States is heating up. There are two key elements of the fight: Congressional approval of Trade Promotion Authority (TPA) and passage of the implementing legislation necessary to bring it into force in the United States. In both areas, interest group pressures are likely to be substantial, making ratification of the TPP uncertain.
In the U.S., Congress has the authority to regulate commerce, which includes setting tariffs. But getting 535 members of Congress to negotiate trade agreements is not practical, so historically the executive branch has handled these tasks. In the 1970s, this arrangement was formalized. Congress explicitly gave the role of negotiating trade agreements to the White House subject to a number of specific provisions.
Under what used to be called “fast track” and is now labeled “Trade Promotion Authority” (TPA), Congress is to be notified of the intention to launch negotiations.[1] Congress is given 90 days to respond. The United States Trade Representative (USTR) office is also tasked with gathering information about the future direction and important elements for the talks during this time period from a range of key stakeholders including business groups. After the initial comment period is concluded, USTR is required to keep Congress informed as negotiations continue. Finally, Congress has promised to vote the entire trade agreement up or down without amendment at the end by a simple majority vote in both chambers.[2] The timeline is shown in Table 1.
Ideally prior to the start of new negotiations, USTR would receive TPA from Congress, with the broad parameters and objectives set for any trade agreements to be negotiated during the time covered by the approval. However, this was not done for the TPP as the latest version of TPA expired in 2007.
The outgoing George W. Bush administration announced its intention to join what became the TPP in September 2008. The Obama White House decided not to press Congress for renewal of TPA in 2009, but rather started negotiations in March 2010 by following the provisions of TPA “as if” it were active.
Over all the years of TPP negotiations, the White House never seriously pursued the votes in Congress to support renewal of TPA.[3] But now, as talks enter the closing phase, TPA is necessary to finish the agreement. Without TPA, Congress can amend the agreement from the opening sentence to the closing word. It could also allow the agreement to die in committee or tangle ratification in an endless filibuster. In short, without the provisions of TPA in place prior to the closure of the agreement, the TPP will likely fail to be ratified by Congress.[4]
The first problem for 2015, then, is to secure passage of TPA. The last time the bill was authorized, in 2002, the votes were very close: approval by 215 to 212 in the House of Representatives and by a margin of 64 to 34 in the Senate.[5] All indications are that a TPA vote may be equally close this time.
Even the passage of TPA, however, does not mean smooth sailing for a TPP deal. In authorizing TPA, many members of Congress want to place strict conditions on elements of a final deal that must be present before they will grant approval. Most controversial is an ongoing discussion of including legally binding rules to prevent trade agreement members from manipulating their currencies.[6]
Until now, currency issues like manipulation or currency controls have been kept out of the TPP. There is no appetite within the other TPP member countries to include such rules and certainly there is no interest in adding in an extremely controversial set of provisions at this late date in negotiations. Hence, a decision by Congress to insist on such currency rules in TPA approval in 2015 will be deeply problematic for the TPP.
Ideally, TPA will be granted—as it has always been—for a range of trade agreements and not simply given for the TPP. The United States is simultaneously engaged in multiple negotiations over trade: with the European Union in the Trans-Atlantic Trade and Investment Partnership (TTIP); with nearly two dozen countries on the sidelines of the World Trade Organization (WTO) in the Trade in Services Agreement (TiSA); with 80 countries at the WTO in updating the Information Technology Agreement (ITA); and with more than 160 countries in the WTO in the Doha Development Agenda (DDA). All will need a version of TPA, at least before any agreement can be implemented and enter into force for the United States.
Once TPA has been granted, the fight over trade inside the U.S. will not be over. Instead, different groups are likely to engage in potentially bitter arguments over the provisions of the TPP as Congress grapples with whether or not to approve this specific trade deal.
Even for less controversial agreements, passage of the final legislation for free trade agreements (FTAs) has been far from assured. Congress approved the three most recent FTAs, with Colombia, Panama and South Korea, on October 12, 2011.[7] The votes were largely along partisan lines with many Democrats in Congress voting against President Obama.[8]
The TPP is a much more complicated and challenging agreement. Many provisions will require changes in domestic rules and regulations. Sectors that have not been affected by previous trade agreements may face new issues in the TPP. For example, the agreement drops tariffs to 0 on 90% of goods trade on entry into force, which may impose new competitive challenges on some industries from the very beginning.
Sectors, firms and industries that believe they will be negatively affected, especially by the removal of previous protections of one sort or another, can be expected to lobby furiously to block the implementation of the TPP in the United States. They will likely find a receptive audience, especially from some members of Congress.
Trade agreements have always been problematic for Democrats given their historical ties to the labor and union movements. Additional challenges come from the environmental wing of the party, as opening trade is assumed to undermine environmental protections. Although changing, the party has not been as closely tied to the business community.
An additional complication in securing support from Democrats for the TPP will be the legacy of the North American Free Trade Agreement (NAFTA). The battle over NAFTA was long and bitter. In the end, President Bill Clinton defied his party to push for the conclusion of the deal to tie the United States more closely with Canada and Mexico.[9]
The debate around NAFTA was highly charged with supporters overselling the benefits and opponents making wild claims (Ross Perot, a US Presidential candidate, famously called NAFTA a “giant sucking sound” of American jobs heading to Mexico in one of the debates.[10])
In the 20 years since NAFTA was approved, the evidence on the benefits to the American economy has been largely mixed. In this relatively uncertain environment, opponents have been quick to seize on examples of companies that moved operations into Mexico. Some will likely argue that a similar loss of jobs will take place under TPP.[11]
Against a backdrop of—at best—lukewarm Democratic support, the TPP will require Republicans to line up in support of the agreement. In the past, Republicans largely voted in favor of trade agreements. Now, however, the Republican party is also split. Many members of the party are firmly opposed to any type of foreign entanglements, especially those in the Tea Party wing. Others are simply loath to give President Obama a victory in anything at all. Hence, unified support by Republicans for the TPP cannot be taken as a given.
In this environment, the votes needed to bring the TPP into force in the United States may very well be closer than ever. The President and his team will need to mount an aggressive campaign to ensure that the 12 nation deal does not collapse at the finish line in Washington DC.
[1] For the best review of the history and evolution of fast track, see I.M. Destler, 2005, American Trade Politics, 4th edition, (Washington DC: International Institute for Economics). For a recent discussion of issues, see William Cooper, January 13, 2014, “Trade Promotion Authority and the Role of Congress in Trade Policy,” Congressional Research Service 7-5700. Access at: http://fas.org/sgp/crs/misc/RL33743.pdf.
[2] Technically, TPA is a Congressional-Executive Agreement, which is why it needs approval of both houses of Congress (unlike Executive Actions, which do not need Congressional approval at all or treaties that require 2/3 of the Senate).
[3] President Obama did ask for TPA on January 30, 2013, but did not push very hard to receive it.
[4] Technically, Congress does not ratify trade agreements. But to bring them into force, Congress must pass implementing legislation to bring existing laws into compliance with the newly negotiated international obligations. TPA provisions also streamline the procedures for doing so and prevent the deal from getting stuck while under review.
[5] A 1998 vote went down to failure with a vote of 180-243 in the House.
[6] For example, see “Brown, Levin Working on Currency Legislation Reminiscent of Earlier Bills,” Inside US Trade, January 16, 2015, Vol. 33 No. 2.
[7] House votes for the three were: 262 to 167 for Colombia; 300 to 129; and 278 to 151 respectively while the Senate voted 66 to 33; 77 to 22; and 83 to 15 for the Korean agreement.
[8] For a nice interactive summary of the votes, see Binyamin Applebaum and Jennifer Steinhauer, “Congress Ends a 5 Year Standoff on Trade Deals in Rare Accord,” New York Times, October 12, 2011, accessed at: http://www.nytimes.com/2011/10/13/business/trade-bills-near-final-chapter.html?pagewanted=all.
[9] In the final vote, Democrats split. The House voted 234 to 200 and the Senate was 61 to 38. The Democrats were almost evenly divided in both chambers. (The vote over the next deal, the Central American Free Trade Agreement or CAFTA, was even closer. If even one House member had changed a “yes” vote to “no,” the agreement would have failed in 2005 by 216-216.)
[10] See his remarks in the 1992 Debate at: https://www.youtube.com/watch?v=Rkgx1C_S6ls
[11] See, for example, remarks by Democrat Congresswoman DeLauro, “DeLauro Breaks with Obama, Big CT Firms on Pacific Trade Deal,” Hartford Courant, January 12, 2015; comments by Elizabeth Warren, “Senator Warren’s Remarks at AFL-CIO National Summit on Raising Wages,” January 7, 2015 (accessed at: http://www.warren.senate.gov/?p=press_release&id=696); or Julie Hirschfeld Davis, “Democrats Step Up Efforts to Block Obama’s Trade Agenda,” New York Times, January 8, 2015.