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Four lessons for US and world as president finally gets what he wants: a free hand on trade

The president offers a toast to Congress. Reuters

Four lessons for US and world as president finally gets what he wants: a free hand on trade

After a long, bruising fight, the US Senate finally passed a bill to give the president the trade promotion authority (TPA, aka fast track) that he has been seeking for months. The House already approved the measure last week, so it seems very likely that President Obama will be signing TPA into law very soon.

Trade promotion authority would bind Congress to take an up-or-down vote, without amendments, on trade agreements placed before it by the president. Congress has periodically tied its hands in this way since 1974 and has used other methods of delegation to the executive for more than 80 years.

The significance of TPA today is that it would give President Obama the authority he needs to complete the negotiations for two very significant trade agreements – the Trans-Pacific Partnership (TPP) with 11 countries, mostly in the Asia-Pacific region, and the Trans-Atlantic Trade and Investment Partnership (TTIP) with the European Union.

I have written about these agreements and about the history of fast-track authority in previous articles.

Now that it appears very likely that the president will succeed in winning fast track, I think it is a good opportunity to review some of the lessons that we can take from the TPA roller coaster ride of the past months.

There was a time when trade deals rarely inspired the passions they do today. Reuters

Partisanship isn’t everything

Since the George W Bush years, there has been much talk of the increasing partisanship of American politics – and of Congress in particular. While this trend is undoubtedly real, trade policy shows that parties are not the only things that count in Washington.

The pro-trade coalition is seemingly a strange one, pitting most congressional Democrats against a coalition of the president and congressional Republicans. This coalition may not be as strange as it first appears, however: research has consistently shown a free-trading orientation among US presidents of both parties.

That’s because presidents must represent the national interest rather than the interests of a more narrow set of constituents, and most of what we know about free trade says that it benefits countries in the aggregate (although it can have very painful repercussions for numerous individuals).

In addition, trade often has strategic implications, something that is very clear in TPP’s efforts to build an open trade zone in Asia that excludes China. Presidents are typically more sensitive to these sorts of issues than Congress, so we shouldn’t be too surprised that they tend to favor trade.

Of course, this is not to say that parties don’t matter, even in trade policy. Tuesday’s Senate vote on cloture – which required 60 supporters and was the last big hurdle ahead of today’s final vote – was largely along party lines.

Still it’s worth noting that, even in Congress, there are many more party “defectors” on trade than on other hot-button issues. Thirteen Democratic senators voted for cloture, and 30 Democrats backed TPA last week in the House. Not only that, but a number of prominent Republicans, most recently Senator Ted Cruz, have come out against fast track.

Presidential politics aside, these intraparty divisions are most likely the result of the differential impact that trade can have on different parts of the country.

Well, not all of them do, at least when there’s a Democratic president. Reuters

The unique politics of trade in the US

While trade tends to divide skilled and unskilled workers, exporting and importing businesses in similar ways across the rich world, America’s institutions make these divisions play out quite differently than they do elsewhere.

The US Constitution was written long before trade policy was the subject of regular international negotiations, back when tariffs were a major source of government funding. Not surprisingly, then, the founders gave Congress dominant powers in trade.

Since the 1930s, however, Congress has decided to delegate many of these powers to the executive, not least because a legislature is not in a position to negotiate the reciprocal pacts that are the bread and butter of trade policy today.

For that reason, disputes over trade, and globalization more generally, typically come to a head in the US not when agreements are up for a vote, but when Congress is deciding whether to delegate its constitutional trade authority to the president. America’s negotiating partners must wait on the sidelines to see whether the president will be given the powers he needs to be a credible negotiating partner, or whether Congress will retain its rights to amend any agreement as it sees fit, throwing it back for potentially endless renegotiation.

In one sense, this stronger role for the legislature, so rare internationally, makes the trade policy process in America more democratic. In another sense, it opens the door for all sorts of local political concerns to structure, and perhaps distort, US foreign economic policy.

Door still open to compromise

In the past, trade policy was sometimes considered an “elite” rather than a “mass” political concern. As early as 1994, Daniel Verdier of Ohio State University had already effectively shown that trade politics can be mass politics.

But today we can see the politicization of trade much more clearly. With the introduction of environmental, health, regulatory and labor issues into trade negotiations, future agreements are bound to ignite popular sentiment much more than in the past. The era of trade policy as the realm of the “elite” is decidedly over.

Still, compromise in trade policy is possible. The new TPA introduces much more congressional oversight then previous incarnations, and it seems likely that an expansion of Trade Adjustment Assistance (TAA), to help workers displaced by trade, will accompany it. In addition, members of Congress are currently considering further legislation to strengthen trade enforcement.

Overall, then, while the fast-track debate in the United States has been far from perfect, it does provide some reasons for optimism. It shows that, at least in one important policy area, our institutions are flexible enough to adapt to the changing needs of the country.

The WTO is losing its central role representing the ‘evils of capitalism’ as bilateral and regional agreements become much more common. Reuters

Growing irrelevancy of WTO in trade deals

I’ve written before about the continuing importance of the World Trade Organization (WTO). And I still believe that the WTO, as an enforcer of critical past agreements, will remain important to world trade.

But it is striking that the recent TPA debates have hardly mentioned the WTO, which was the lightning rod for opposition to trade in the past, most famously during the violent protests at the 1999 Seattle ministerial. Instead, current controversies have mostly concerned TPP and TTIP, two regional agreements that are being negotiated mostly outside the WTO.

What are the implications of this marginalization of the multilateral trading system? It is hard to know for sure, but it could risk the re-creation of trading blocs centered on great powers. Creating a truly global trading order was one of the key goals of the founders of the WTO’s predecessor, the General Agreement on Tariffs and Trade (GATT), after World War II.

The hope behind that agreement was to unite all countries in mutual interdependence and to move the world beyond the colonial (and, in the 1930s, German) trading blocs that characterized prewar globalization.

We may now be witnessing the slow unraveling of this international liberal vision.

Preserving globalization’s liberal base

All of this leaves me with mixed feelings about the state of trade policy in the United States and in the world.

On the one hand, I believe that the democratic process has mostly worked. America needs to be a guiding member of any new trade zones in Europe and Asia, and it would have been very damaging if Congress had forced the US to sit on the sidelines.

At the same time, in the interests of democracy, Congress was right to provide more direction to the president in negotiating these agreements. In many ways, I am quite happy with this outcome.

But I worry about the long-term implications of this seemingly inexorable shift of trade policy out of the more transparent multilateral arena and toward a complex web of regional and bilateral agreements.

It is in America’s interest, and indeed in the world’s interest, to preserve the liberal and transnational foundations of globalization. Next time around, I hope that we think more about how to protect this liberal inheritance when we discuss the future of trade.