Fast-track overcomes key hurdle, but obstacles remain as trade deals hang in balance

Fast-track proponents say passing trade promotion authority is key to supporting US exports. Reuters

After the Senate’s refusal to pass trade promotion authority (TPA) on May 12, some trade advocates feared that President Obama’s ongoing commercial negotiations with Asia and Europe would die a slow death.

Yesterday’s narrow vote in the Senate to close debate on TPA – a key hurdle to final passage – promises to lift their spirits considerably, as it likely guarantees passage of the bill within the next few days, ahead of the Memorial Day recess.

The vote was interesting because it didn’t follow the expected pattern of hyper-partisanship in Congress. Rather, it pitted a Democratic president and most Republican lawmakers against the bulk of the president’s own party.

Supporters of TPA needed a relatively small number of pro-trade Democrats to tip the scales toward Obama’s trade agenda, and they achieved that through a last-minute bargain over the future of the controversial Export-Import Bank.

While the vote signaled an important victory for TPA’s proponents, more challenges remain before the president can pop open the champagne, both in the Senate and next month in the House. If ultimately passed, TPA would guarantee that international trade agreements negotiated by the president would receive an up-or-down vote by Congress with no amendments.

Without TPA, America’s high-stakes negotiations with 11 other countries including Australia and Japan to create the Trans-Pacific Partnership (TPP) and with the European Union to create the Transatlantic Trade and Investment Partnership (TTIP) would probably be unachievable.

That’s because foreign trade ministers are skittish about Congressional amendments that could upset the delicate balance of international bargains that they consider already settled.

More hurdles remain

Of course, there is still a long way to go before the final passage of TPA, including from lawmakers in other TPP participant countries such as Australia. So what hurdles still confront the president and trade supporters in Congress?

First, the Senate must vote on several controversial amendments to TPA. One of these, which is adamantly opposed by President Obama and pro-trade lawmakers, would seek to curb protectionist currency manipulation by America’s trading partners.

Supporters of TPP fear that a Congressional requirement to negotiate penalties for currency manipulation could cause the other 11 countries to balk at a final agreement. Whether or not such dire predictions are true, there is no question that adding currency manipulation to the TPP agenda could slow down the talks considerably.

In any case, once TPA passes the Senate, it must still be approved by the House. This could prove tricky, because Democratic opposition in that body is firmly entrenched. Interestingly, Democratic skeptics are also joined by some Tea Party Republicans who say that TPA would give the president too much power.

At the same time, as Georgia State University’s Jeffrey Lazarus points out, the more centralized procedures in the House make the ultimate outcome there more dependent on the Republican leadership than it is in the Senate. With a firm commitment of support from Speaker John Boehner, the bill has a reasonable chance of approval.

What’s next for TPP?

As for TPP itself, negotiations seem to be drawing to a close, and President Obama, if armed with TPA, could set the agreement before Congress quite soon. It seems likely that, if TPA garners enough votes from Congress to pass, the Trans-Pacific Partnership also stands a good chance of getting its stamp of approval later this year.

While US agreement is of course critical for the ultimate implementation of TPP, the other 11 signatories have their own processes for domestic ratification. In some countries, centralized institutions or one-party dominance make rapid approval likely, while in others, political hurdles remain. The skepticism of Australia’s opposition Labor Party and other members of Parliament, for example, may slow its ratification.

In the final analysis, today’s vote on TPA is significant only insofar as it increases the chances that Congress will eventually back TPP and TTIP. Together, these agreements would build much deeper economic links between the United States and economies in Europe and Asia that represent a considerable proportion of global output and trade.

If implemented, they could have a profound effect on all of the economies involved. For that reason, citizens of all signatory countries should keep a close eye on how this issue evolves.