tag:theconversation.com,2011:/uk/topics/trade-promotion-authority-17243/articlesTrade promotion authority – The Conversation2015-06-24T21:29:16Ztag:theconversation.com,2011:article/437502015-06-24T21:29:16Z2015-06-24T21:29:16ZFour lessons for US and world as president finally gets what he wants: a free hand on trade<p>After a long, bruising fight, the US Senate finally passed a bill to give the president the <a href="https://ustr.gov/trade-topics/trade-promotion-authority">trade promotion authority</a> (TPA, aka fast track) that he has been seeking for months. The House already <a href="http://www.wsj.com/articles/house-passes-fast-track-trade-bill-1434645208">approved</a> the measure last week, so it seems very likely that President Obama will be signing TPA into law very soon. </p>
<p>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 <a href="http://www.jstor.org/stable/2601306?seq=1#page_scan_tab_contents">tied its hands</a> in this way since 1974 and has used other methods of delegation to the executive for more than 80 years. </p>
<p>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 <a href="https://ustr.gov/tpp">Trans-Pacific Partnership</a> (TPP) with 11 countries, mostly in the Asia-Pacific region, and the <a href="https://ustr.gov/ttip">Trans-Atlantic Trade and Investment Partnership</a> (TTIP) with the European Union.</p>
<p>I have <a href="https://theconversation.com/fast-track-overcomes-key-hurdle-but-obstacles-remain-as-trade-deals-hang-in-balance-42221">written</a> about these agreements and about the <a href="https://theconversation.com/updating-fast-track-is-key-to-getting-a-trade-deal-in-2015-35138">history</a> of fast-track authority in previous articles. </p>
<p>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.</p>
<h2>Partisanship isn’t everything</h2>
<p>Since the George W Bush years, there has been much talk of the <a href="http://www.people-press.org/2012/06/04/partisan-polarization-surges-in-bush-obama-years/">increasing partisanship</a> 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. </p>
<p>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: <a href="http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=6189812&fileId=S0022381600050660">research</a> has consistently shown a free-trading orientation among US presidents of both parties. </p>
<p>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 <a href="http://wps.aw.com/bp_krgmnobstf_interecon_10/">know</a> about free trade says that it benefits countries in the aggregate (although it can have very painful repercussions for numerous individuals). </p>
<p>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 <a href="https://theconversation.com/is-tpp-about-jobs-or-china-42296">China</a>. 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.</p>
<p>Of course, this is not to say that parties don’t matter, even in trade policy. Tuesday’s Senate <a href="http://www.nytimes.com/2015/06/24/us/politics/senate-vote-on-trade-bill.html?_r=0">vote on cloture</a> – which required 60 supporters and was the last big hurdle ahead of today’s final vote – was largely along party lines. </p>
<p>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, <a href="http://www.chron.com/news/politics/article/Ted-Cruz-reverses-support-of-fast-track-6344573.php">have come out against</a> fast track. </p>
<p>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.</p>
<h2>The unique politics of trade in the US</h2>
<p>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. </p>
<p>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 <a href="https://www.law.cornell.edu/wex/commerce_clause">dominant powers</a> in trade. </p>
<p>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. </p>
<p>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.</p>
<p>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. </p>
<h2>Door still open to compromise</h2>
<p>In the past, trade policy was sometimes considered an “elite” rather than a “mass” political concern. As early as 1994, <a href="http://www.amazon.com/Democracy-International-Trade-Daniel-Verdier/dp/0691021031">Daniel Verdier</a> of Ohio State University had already effectively shown that trade politics can be mass politics. </p>
<p>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.</p>
<p>Still, compromise in trade policy is possible. The new TPA <a href="https://theconversation.com/bipartisan-fast-track-bill-offers-best-chance-to-cinch-trade-pacts-40733">introduces</a> 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 <a href="http://visclosky.house.gov/media-center/press-releases/steel-caucus-secures-commitment-on-trade-enforcement-provisions">considering</a> further legislation to strengthen trade enforcement. </p>
<p>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.</p>
<h2>Growing irrelevancy of WTO in trade deals</h2>
<p>I’ve <a href="https://theconversation.com/why-the-wto-still-matters-34624">written</a> 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. </p>
<p>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. </p>
<p>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. </p>
<p><a href="https://law.duke.edu/lib/researchguides/gatt/">The hope</a> 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. </p>
<p>We may now be witnessing the slow unraveling of this international liberal vision. </p>
<h2>Preserving globalization’s liberal base</h2>
<p>All of this leaves me with mixed feelings about the state of trade policy in the United States and in the world. </p>
<p>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. </p>
<p>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.</p>
<p>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. </p>
<p>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.</p><img src="https://counter.theconversation.com/content/43750/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Charles Hankla does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The fight over fast-track that pitted the president against his own party offers reasons for both pessimism and optimism in future trade deals.Charles Hankla, Associate Professor of Political Science, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/433932015-06-18T15:36:29Z2015-06-18T15:36:29ZUS trade fight underscores long road ahead for Pacific pact in foreign capitals<figure><img src="https://images.theconversation.com/files/85585/original/image-20150618-23232-11ac41w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Even if President Obama gets his fast-track trading authority, his Pacific trade legacy faces a long slog.</span> <span class="attribution"><span class="source">Dark road via www.shutterstock.com</span></span></figcaption></figure><p>Republican leaders and President Obama <a href="http://www.wsj.com/articles/house-gives-itself-until-july-30-to-reconsider-trade-legislation-1434478467">appear</a> to have aborted a plan to put off a “final” vote on a fast-track trade bill until the end of July and may bring it before the House as soon as today. </p>
<p>The latest plan would be to separate Trade Promotion Authority (TPA) – which allows the president to put a trade deal before Congress for a straight up-or-down vote – from the workers’ assistance program that tripped up the bill last week. Lawmakers would then pass the two pieces of legislation separately. So it seems the Trans Pacific Partnership (TPP) that TPA is essential for still has a chance of being successfully negotiated and implemented. </p>
<p>Yet the problems experienced by the Obama Administration of getting TPA through Congress only serve to underscore the fact that many of the other 11 member governments involved in the negotiations face similar highly motivated opposition to the TPP.</p>
<p>Indeed, a number of government leaders in TPP capitals will be secretly pleased by the deadlock in Congress. It gives them every excuse to delay negotiations further and put off making the really tough decisions that inevitably come toward the end of lengthy trade negotiations. </p>
<h2>TPP’s troubles</h2>
<p>In places like Australia and New Zealand, the kind of broad coalition that challenged the Obama Administration is likely to band together to oppose the TPP being ratified by their governments. Just as in the US, organized labor, environmentalists, “netizens,” health care workers and consumer groups all have reasons to oppose the TPP.</p>
<p>In Japan, Prime Minister Shinzo Abe, under pressure because of his national security reforms, will not want to make <a href="http://www.ft.com/intl/cms/s/0/67689c7c-131d-11e5-bd3c-00144feabdc0.html#axzz3dQaJTBBf">tough decisions</a> about key agricultural policies were TPP negotiations to start up again in the early fall. </p>
<p>Similarly, Canadian Prime Minister Steven Harper, who must go to the polls in October and is facing a tough three-way fight, <a href="http://www.theglobeandmail.com/report-on-business/economy/defensive-posture-leaves-canada-on-fringes-of-trans-pacific-trade-talks/article24470333/">would not relish</a> having to admit to ceding ground on supply management in the poultry and dairy sectors and the attendant possibility of losing crucial rural seats.</p>
<p>Among the Asian members, the Obama Administration’s <a href="http://www.nytimes.com/2015/06/17/world/asia/obama-trans-pacific-partnership-asia.html?_r=0">talk</a> of the TPP ensuring that US rules, rather than China’s, would govern trade and investment in the Asian region does not sit comfortably. China has become the largest trading partner of nearly all East and Southeast Asian economies, and such explicit talk of working to limit China’s influence puts them in a difficult position.</p>
<p>In addition, the transparency provision in the TPA authored by Senator Ron Wyden means that should the TPA eventually pass, then the full text of the TPP, once signed, would be <a href="http://www.cato.org/blog/whats-really-new-trade-promotion-authority-bill">made public</a>. This could well help to galvanize opposition in the member countries as the TPP agreement goes through the ratification process. </p>
<h2>Transparency, IP and aging</h2>
<p>One issue that will be influenced by the new transparency will be the <a href="https://www.whitehouse.gov/blog/2015/02/26/investor-state-dispute-settlement-isds-questions-and-answers">Investor State Dispute Settlement</a> (ISDS) mechanism, which makes it <a href="https://wikileaks.org/tpp-investment/press.html">easier</a> for an investor to challenge a foreign government. In recent years, sentiment has moved against the ISDS, especially in developing countries. This may be one of the reasons that a recently leaked version of the investment chapter states that the details would be made public only four years after the TPP came into force.</p>
<p>The ISDS, as well as <a href="http://www.washingtonpost.com/blogs/monkey-cage/wp/2015/03/26/people-are-freaking-out-about-the-trans-pacific-partnerships-investor-dispute-settlement-system-why-should-you-care/">concerns</a> about the extent to which the TPP’s intellectual property rights provisions will raise the price of pharmaceuticals, has mobilized health care professionals and consumer groups in a number of countries. </p>
<p>In addition, politicians in countries with aging populations will also no doubt want to analyze the impact the TPP will have on their ability to keep health care costs in check.</p>
<h2>Long, hard slog</h2>
<p>Of course as time goes by, political calculations and governments change. In Malaysia, the government, which got a major scare at the last election, finds <a href="http://www.themalaysianinsider.com/malaysia/article/activists-getting-dr-m-anwar-to-share-stage-to-protest-tppa#sthash.fZmaAuwP.dpbs">significant</a> portions of their political base in the Malay community <a href="http://thediplomat.com/2014/09/the-tpps-biggest-obstacles/">implacably opposed</a> to the TPP. </p>
<p>They fear it may take away their hard-won economic privileges. And, in Chile, the Bachelet government, which came into power just over a year ago, has <a href="http://fpif.org/can-chile-curb-tpp/">never been as convinced</a> as its predecessor of the value of the TPP for the Chilean economy.</p>
<p>With such a diverse set of participants, the road to a ratified TPP was always going to be a long, hard slog. Still, it is important to note that the TPP has considerable support within the participating countries. </p>
<p>But, as we’ve seen over the last month in the US, opposition around the Pacific Rim to the TPP is mobilizing. Even if the current Congressionally induced detour does not eventually force it off the track, the Obama Administration has plenty more obstacles to overcome.</p>
<p>The principle of single undertaking – or “nothing is agreed until everyone and everything is agreed” – means that there is still a great deal of negotiating both among the 12 TPP participants and by each government with its constituents at home before the pact can be successfully ratified and implemented.</p><img src="https://counter.theconversation.com/content/43393/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Stubbs does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The fierce debate in the US Congress that almost derailed the president’s trade agenda is likely to replay itself in many of the 11 other capitals that are party to the deal.Richard Stubbs, Professor of Politics, McMaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/432222015-06-13T02:28:56Z2015-06-13T02:28:56ZWhy Pelosi and House Democrats turned on their president over free trade<p>Over the last several days, President Barack Obama pulled out all the stops to pass Trade Promotion Authority (TPA) – aka fast track – which would restrict Congress to an up-or-down vote without amendments on trade deals for the next three years. </p>
<p>On Thursday night, the president paid an <a href="http://www.nytimes.com/politics/first-draft/2015/06/11/obama-makes-surprise-trip-to-nats-park-to-lobby-pelosi/">unscheduled stop</a> at an annual charity congressional baseball game across town to court Democratic Leader Nancy Pelosi and then made an impassioned 40 minute <a href="http://www.huffingtonpost.com/2015/06/12/obama-hill-trade_n_7569168.html">appeal</a> to House Democrats on Capitol Hill Friday morning to pass fast track. Friday’s vote was essential to complete the <a href="https://ustr.gov/tpp">Trans-Pacific Partnership</a> (TPP), a trade deal encompassing 11 other countries and 40% of global GDP.</p>
<p>All the President’s efforts unexpectedly careened into a ditch. The actual details of this embarrassing pileup are laden with acronyms and more than a bit convoluted. </p>
<p>House members first buried Trade Adjustment Assistance (TAA), which would provide benefits to workers displaced by trade, by a vote of 126-302. Fast track itself actually then <a href="http://www.nytimes.com/2015/06/13/us/politics/obamas-trade-bills-face-tough-battle-against-house-democrats.html">passed</a> by a vote of 219-211, with 28 Democrats joining 191 Republicans. Since the Senate passed both these measures, the failure of aid to displaced workers has now stalled fast track.</p>
<h2>What went wrong</h2>
<p>What happened? Three factors resulted in the debacle. First, a growing feeling among the Democratic Party’s base that the TPP itself was a vehicle to advance the interest of transnational corporations at the expense of workers, communities, consumers and the environment. </p>
<p>In particular, the international arbitration procedure, Investor-State Dispute Settlement (ISDS) process, has <a href="http://www.washingtonpost.com/blogs/monkey-cage/wp/2015/03/26/people-are-freaking-out-about-the-trans-pacific-partnerships-investor-dispute-settlement-system-why-should-you-care/">raised hackles</a>. Since ISDS involves three-lawyer extrajudicial panels drawn from industry friendly-attorneys, it is widely viewed as a fox guarding the hen house. Critics fear the interests of transnationals will trump government regulations and protections.</p>
<p>Second, proponents of the TPP tend to sing the praises of free trade, while critics draw on the <a href="https://theconversation.com/annals-of-free-trade-will-tpp-learn-from-our-nafta-past-or-are-we-condemned-to-repeat-it-42005">real-life failures</a> of earlier trade pacts such as the North American Free Trade Agreement (NAFTA). </p>
<p>When the New York Times <a href="http://www.nytimes.com/2015/06/13/upshot/what-you-should-know-about-the-trans-pacific-partnership.html">sought to explain</a> “the simple case” for TPP, it pointed out “when every country focuses on what it is best at, the overall economic pie becomes bigger.” </p>
<p>This is true enough in theory, but when Pelosi gave her floor speech for slowing down Fast Track just before the vote, she pointed out that “each week, each of us goes home to our districts. And in the case of many of us, we put our hand on a very hot stove.” </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/u--y3nLY6AQ?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Pelosi takes the floor.</span></figcaption>
</figure>
<p>The “hot stove” includes not simply manufacturing workers who lost their jobs by closed plants but the teachers, nurses, cashiers and managers who were displaced throughout distressed communities.</p>
<p>Finally, the secrecy surrounding the agreement made many members of congress and senators wary. When lawmakers were allowed only to read the draft agreement in “<a href="http://www.npr.org/sections/itsallpolitics/2015/05/14/406675625/a-trade-deal-read-in-secret-by-only-few-or-maybe-none">secure</a>” rooms and were told not to take notes transparency is not the first word that comes to mind. In fact, the democratic process requires at least a pad and a pencil. </p>
<p>Ultimately, the debate managed to galvanize large parts of the Democratic Party base from environmentalists to labor against fast track.</p>
<h2>Citizens front and center</h2>
<p>Was the president’s defeat a vote against expanded trade and a retreat from globalization? The Washington Post referred to Democrats who opposed the bill as “<a href="http://www.washingtonpost.com/politics/president-obama-is-all-in-on-trade-sees-it-as-a-cornerstone-of-his-legacy/2015/06/12/32b6dce8-1073-11e5-a0dc-2b6f404ff5cf_story.html">anti-trade Democrats</a>.” The reality is far-different. </p>
<p>“We all understand we live in a global economy,” Pelosi said. “Some of us, as I do, represent cities built on trade.” </p>
<p>House leaders such as Representatives Rosa DeLauro (Democrat of Connecticut) and Sandy Levin (Democrat of Michigan) have a strong international vision and see the benefits of increased trade. They also understand that the gains must be shared to have “inclusive trade,” and TPP is “trickle-down trade,” in which the idea is if transnational corporations prosper we all benefit.</p>
<p>Whether fast track can be saved will depend on how many Democratic votes President Obama may be able to turn around early next week. The failure of fast track would effectively jettison TPP. </p>
<p>If we want inclusive prosperity, it will require a trade agreement that puts all citizens front and center in the US and in the countries with which we trade. </p>
<p>In my view, TPP, as currently presented, is corporate trade masquerading as free trade.</p><img src="https://counter.theconversation.com/content/43222/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Harley Shaiken receives funding from the University of California. He has previously received research grants from a wide variety of foundations, the U.S. government and the University of California. He's also currently on the advisory boards of the Center for American Progress and Jobs With Justice. </span></em></p>President Obama pulled out all the stops in recent days, but it wasn’t enough to convince House Democrats that he would negotiate a fair trade deal in the Pacific.Harley Shaiken, Director of the Center for Latin American Studies and Professor of Letters and Science, University of California, BerkeleyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/422972015-06-13T00:26:21Z2015-06-13T00:26:21ZObama, Shakespeare and the aborted legacy of the Trans-Pacific trade agreement<figure><img src="https://images.theconversation.com/files/84925/original/image-20150613-1461-1l2cagr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The fight over fast-track trade authority increasingly resembles a Shakespearean tragedy. </span> <span class="attribution"><span class="source">Tempest via www.shutterstock.com</span></span></figcaption></figure><p>Events in Washington this week on the proposed historic 12-member <a href="https://ustr.gov/tpp">Trans-Pacific trade agreement</a> have had all the key elements of a Shakespearean tragedy. A resolute, noble and well-intentioned ruler (played ably by President Obama) seeking to dispense largesse in the form of a trade deal for his subjects. And subjects who are deeply suspicious to the point of revolt against their aging leader.</p>
<p>The president’s personal benefit in this tale, as is often the case with rulers in their twilight, would be an enduring legacy. It would be an agreement that would be a key building block in sustaining America as an economic power in Asia.</p>
<p>Obama’s strength has been his ability to consistently rely on his closest allies – in this case the House Democrats. His weakness – and this is what makes it a tragedy – is his inability to foresee their inevitable “<a href="http://www.wsj.com/articles/house-deals-blow-to-obamas-bid-for-trade-deal-rejects-worker-aid-program-1434131589">betrayal</a>.”</p>
<p>At least in public, the president minimized their degree of hostility and that of the domestic constituents that they represent. He thought that, once again, offering common sense and good communication, he could overcome traditional partisanship and the seeds of doubt. It has worked for him with Democrats in the past. So why not again?</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/84919/original/image-20150612-1491-11p3e5s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/84919/original/image-20150612-1491-11p3e5s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/84919/original/image-20150612-1491-11p3e5s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=454&fit=crop&dpr=1 600w, https://images.theconversation.com/files/84919/original/image-20150612-1491-11p3e5s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=454&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/84919/original/image-20150612-1491-11p3e5s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=454&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/84919/original/image-20150612-1491-11p3e5s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=570&fit=crop&dpr=1 754w, https://images.theconversation.com/files/84919/original/image-20150612-1491-11p3e5s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=570&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/84919/original/image-20150612-1491-11p3e5s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=570&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Americans have been told that protectionism (such as the Smoot-Halwey Tariff Act, its namesakes pictured) causes depressions. Is protectionism back in vogue?</span>
<span class="attribution"><span class="source">Library of Congress</span></span>
</figcaption>
</figure>
<h2>The king’s largesse</h2>
<p>Americans have consistently been told that protectionism led to the Great Depression. The <a href="http://future.state.gov/when/timeline/1921_timeline/smoot_tariff.html">Smoot-Hawley Tariff of 1930</a> was to blame. </p>
<p>So they have been told – and generally believed – that free trade is a virtue. Any departure from this mantra in US policy is only tolerated when trading partners start “cheating” by doing things like introducing domestic tariffs or subsidizing their firms. </p>
<p>Americans built two global trade organizations on the principle that free trade is a good thing – first the <a href="https://www.wto.org/english/docs_e/legal_e/gatt47.pdf">General Agreement on Tariffs and Trade</a> (GATT) and then the World Trade Organization (WTO). Free trade, we are told, sustains national prosperity, enlarges the middle class and even promotes democracy. So the core conviction of most Americans was on the president’s side in promoting, effectively, a huge, new free trade zone.</p>
<h2>Unruly subjects revolt</h2>
<p>But American Democrats have become increasingly suspicious of this core belief over the last two decades – especially House Democrats, whose core constituents have suffered the most and, in large numbers, fled the party. In their view, other countries consistently cheat and care little about human rights or the environment. American firms do the same, offshoring work, paying their lower taxes abroad while still accepting all manner of subsidies from the US government. </p>
<p>As a result, the number of manufacturing jobs has shrunk, and unions, a traditional cornerstone of American support, have withered. As I <a href="https://theconversation.com/is-tpp-about-jobs-or-china-42296">described</a> in a recent column, for them NAFTA has become emblematic of all these ills.</p>
<p>But the president is always a person who believes in reason. He thought he could correct the past sins of agreements like NAFTA and convince his colleagues of the veracity of his approach. They simply needed to understand that this trade agreement was an opportunity, not a threat. It is not free trade agreements that are the problem. It is how they have been set up and implemented that is the problem.</p>
<h2>A leader’s legacy</h2>
<p>The president’s signature domestic legislative legacy, the Affordable Care Act, is now <a href="http://www.latimes.com/opinion/editorials/la-ed-health-johnson-bill-20150612-story.html">under attack</a> from the courts. This, if anything, may have deepened his commitment to getting this new trade agreement in case the Affordable Care Act yet stumbles. And no president wants to leave office with the stigma of his most notable foreign policy “achievement” being that he embroiled the US in yet another Iraq war.</p>
<p>This combination – of faith in the goodwill of the House Democrats, of faith that he could repair the ills of NAFTA and of faith that he could still leave behind a great foreign policy legacy – led him to put everything on the line. </p>
<p>As The New York Times <a href="http://www.nytimes.com/2015/06/13/us/politics/obamas-trade-bills-face-tough-battle-against-house-democrats.html?hp&action=click&pgtype=Homepage&module=first-column-region&region=top-news&WT.nav=top-news">reported</a> in the aftermath of the House vote, the president was willing to personally plead with the Democrats to support him. </p>
<p>And the Democrats were willing to perform the equivalent of eating their own by voting, in the Times’ words, “to kill assistance to workers displaced by global trade, a program their party created and has stood by for four decades.”</p>
<blockquote>
<p>By doing so, they brought down legislation granting the president trade promotion authority — the power to negotiate trade deals that cannot be amended or filibustered by Congress — before it could even come to a final vote. </p>
</blockquote>
<h2>A final twist of the knife</h2>
<p>In the ultimate Shakespearean element of irony, many Republicans, those sworn enemies of the president, tried to resurrect the trade adjustment assistance program that the Democrats had just voted down – a program that they have vehemently opposed in the past. </p>
<p>They even passed a measure that they hate in order to support the free trade agreement. But that is all in vain because it differs from the bill passed in the Senate – and the two bills cannot now be reconciled. Both their efforts, and their ultimate failure, must have been the ultimate twist of the knife for the president.</p>
<p>Where Obama goes from here is unclear. He’ll no doubt try to resurrect this agreement. But as he enters the twilight of his presidency, it’ll be hard to envisage any trade agreement being concluded – spanning the Pacific or the Atlantic. A familiar phrase, “lame duck,” will soon be in common usage in op-ed pieces across America. </p>
<p>But when they write about his legacy, let’s hope the historians focus on the fact that Obama defied the naysayers. Let’s hope they stress that he pulled America back from the brink of total economic collapse and got most of America back to work – not that his own colleagues condemned him in the twilight of his presidency despite his best intentions. Still, there is a reason that they call them tragedies.</p><img src="https://counter.theconversation.com/content/42297/count.gif" alt="The Conversation" width="1" height="1" />
Events in Washington this week on the proposed historic 12-member Trans-Pacific trade agreement have had all the key elements of a Shakespearean tragedy. A resolute, noble and well-intentioned ruler (played…Simon Reich, Professor in The Division of Global Affairs and The Department of Political Science, Rutgers University - NewarkLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/420052015-05-28T10:07:30Z2015-05-28T10:07:30ZAnnals of free trade: will TPP learn from our NAFTA past, or are we condemned to repeat it?<p>The Trans-Pacific Partnership (TPP) – a mega deal between the United States and 11 trading partners – has provoked the fiercest trade debate since the North American Free Trade Agreement (NAFTA) more than two decades ago. Like NAFTA, a Democratic president is leading the charge and relying on mostly Republican votes to muscle it through Congress.</p>
<p>Let’s clear something up from the start: the increasingly heated debate over TPP is not about free trade versus protectionism or even about more trade versus less trade. All trade in so-called “free trade agreements” is heavily managed. The real issue concerns the rules of the game. The key question is: who wins and who loses as a result?</p>
<p>Proponents of TPP have tended to sing the praises of free trade in the abstract and point glowingly to theoretical gains trade makes possible – as if the alternative were no trade. </p>
<p>Not true. Of course trade can produce real gains, but rules of the game that give better protection to workers, consumers and the environment are vital to boosting trade by expanding purchasing power. And these gains can minimize the economic devastation in US communities that has sparked such a strong backlash against “free trade.” These protesters aren’t necessarily opposed to trade but are desperate to stop the reality of trade that is coming at their expense.</p>
<p>Here we can learn something from the experience over the last 20 years of NAFTA, a pact that included Mexico, Canada and the US, all of whom will now become part of the proposed TPP. That deal got a boost last week when the Senate <a href="http://www.nytimes.com/2015/05/22/business/senate-obama-trade-pact-export-import-bank-patriot-act.html">passed</a> a measure that would limit lawmakers from amending the final deal. They would only be able to vote it up or down. If the House also passes so-called fast-track trade authority, TPP will more likely – but not automatically – get <a href="https://theconversation.com/fast-track-overcomes-key-hurdle-but-obstacles-remain-as-trade-deals-hang-in-balance-42221">Congress’s nod</a> as well, perhaps as soon as later this year. </p>
<p>My <a href="http://www.scholarsstrategynetwork.org/sites/default/files/ssn_key_findings_shaiken_on_nafta_after_twenty_years.pdf">research</a> into the impact of NAFTA paints a dark picture of what we can expect from TPP unless lawmakers ensure stronger labor protections than are currently included in the deal. </p>
<h2>Lessons from NAFTA</h2>
<p>In 1993, when NAFTA was being debated, Mexico <a href="http://clas.berkeley.edu/research/trade-nafta-paradox">faced</a> a disturbing reality: manufacturing productivity was rising at the same time real wages for Mexican workers were declining. Autos and color televisions were moving along assembly lines in state-of-the-art factories whose productivity and quality rivaled that of the US or Japan, while workers were often living in communities without running water. </p>
<p>Economists tell us low wages reflect low productivity, but here we were seeing high productivity and rock-bottom wages. The result was high-productivity poverty. Why? A key factor was a lack of critical labor rights: the virtual impossibility in the export sector for Mexican workers to form independent unions and bargain collectively for better wages and conditions.</p>
<p>US unions forged the link between rising productivity and wages from 1945 to the mid-1970s. As a result, highly competitive companies and strong unions produced a robust middle class and a growing economy. Today, declining union strength has contributed to a similar wage-productivity disconnect. US productivity <a href="http://clas.berkeley.edu/research/trade-nafta-paradox">has outstripped</a> wages by 40% since the mid-1970s. Robust is hardly the word you’d use to describe today’s middle class.</p>
<p>NAFTA contained strong language to harmonize upwards the standards covering investment and intellectual property rights so that building a plant or opening a business in Nuevo Leon would be as secure as doing it in Ohio. And Mexico instituted extensive reforms on its own to ensure a “business-friendly” climate even before NAFTA was passed.</p>
<p>When it came to labor and the environment, however, the details were <a href="http://www.warren.senate.gov/files/documents/BrokenPromises.pdf">relegated</a> to side-agreements that were nonetheless hailed as the strongest and most progressive to date, <a href="http://www.historycentral.com/documents/Clinton/SigningNaFTA.html">including</a> by then-President Clinton. But the accord excluded the core issue of the right of workers to form independent unions and has had weak to nonexistent enforcement for what it did cover. </p>
<h2>Effusive praise, meager results</h2>
<p>In fact, all free trade agreements the US has signed since NAFTA have followed the same pattern: effusive praise for labor protections followed by meager results. Senator Elizabeth Warren <a href="http://www.warren.senate.gov/files/documents/BrokenPromises.pdf">released</a> a review of this experience in May, titled “Broken Promises,” documenting the anemic enforcement of these protections.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/xzfxv2XQoPg?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Senator Warren on TPP.</span></figcaption>
</figure>
<p>The report points out that the US Department of Labor “has accepted only five claims against countries for violating their labor commitments, and it only agreed to restart the first ever labor enforcement case under any free trade agreement in 2014, six years after the initial claim was filed.”</p>
<p>As my research has shown, by strengthening investment protection and largely ignoring worker protections, real wages in Mexican manufacturing continued to slide in the wake of NAFTA, declining almost 20% from 1994 to 2011 while productivity <a href="http://clas.berkeley.edu/research/trade-nafta-paradox">grew</a> almost 80%. This loss for Mexican workers also contributed to a sharp downward pressure on manufacturing wages in the US. The combination of high productivity and depressed wages not surprisingly can serve as a beacon for investment.</p>
<h2>Tales from the auto industry</h2>
<p>Consider the automobile industry, the most important manufacturing industry in both Mexico and the US. </p>
<p>Manufacturing does not have to be a zero-sum game, and rising wages could create new demand in both countries benefiting workers and their families as well as fueling demand. Just the opposite happens if low wages become the source of competitive advantage.</p>
<p>Mexico has achieved striking success under NAFTA in the auto sector. The country has <a href="http://circanews.com/news/mexican-car-and-steel-industries-ramp-up">become</a> the seventh-largest car maker in the world and the fourth-largest exporter, trailing only Germany, Japan and South Korea. Mexico now exports more light vehicles to the US than Japan. </p>
<p>Despite a slow-growing economy and traumatic drug-related violence, international automakers <a href="http://www.wsj.com/articles/goodyear-to-invest-550-million-in-new-plant-in-central-mexico-1429812017">have committed</a> US$21 billion in new auto investment in Mexico in the last two years, according to the Wall Street Journal, “lured by Mexico’s low wages and more than 40 free-trade deals.” The country is headed toward producing 5 million vehicles annually by 2020, compared with 3.2 million last year. US assembly lines produced 11.6 million in 2014. </p>
<p>The growth of an advanced auto industry could be a great benefit to Mexico and to workers and companies in the US. When the draw is low wages, however, Mexican consumer demand is diminished and US workers share the pain. Mexican auto wages are 10% to 20% of comparable US wages, in part, <a href="http://www.autonews.com/article/20150206/OEM01/302069972/mexico-auto-exports-forecast-to-hit-record-in-2015">depressed</a> by a lack of labor rights. </p>
<p>Seventy percent of light vehicles made in Mexico are exported to the US. Mexico is the production site, but the US is the market. This <a href="http://www.census.gov/foreign-trade/Press-Release/2014pr/12/ft900.pdf">imbalance</a> has seen the bilateral trade relationship tilt from a $4 billion US merchandise trade surplus in 1992 to a $100 billion deficit in 2014, $63 billion of which comes from the auto sector alone. </p>
<p>Auto supplier jobs in Mexico <a href="http://www.wsj.com/articles/goodyear-to-invest-550-million-in-new-plant-in-central-mexico-1429812017">are expected</a> to climb from 700,000 currently to 1 million over the next several years. In many cases, production that used to take place in the US has moved South. A new Mazda plant that will employ 5,000 by early 2016 replaced assembly in Flat Rock, Michigan. Toyota is breaking ground on a new plant to assemble Corollas in central Mexico, formerly built in a Fremont, California, plant employing 4,000. These workers won’t be singing the praises of free trade anytime soon. </p>
<p>Well, you might be thinking, isn’t all this <a href="http://www.wsj.com/articles/why-obamas-free-trade-push-makes-sense-1430324511?KEYWORDS=Obama%27s+Uphill+Push+for+Free+Trade">talk about trade</a> and manufacturing so 20th century? After all, manufacturing in the US now <a href="http://www.epi.org/publication/the-manufacturing-footprint-and-the-importance-of-u-s-manufacturing-jobs/">accounts</a> for only about 10% of employment, and what’s the difference if more of these jobs migrate to low-wage areas? </p>
<p>The difference is critical because this sector plays an outsized role in research and development, and each manufacturing job creates many more in the broader economy. Germany’s economic success has shown the value of a high-wage, globally competitive manufacturing sector to an advanced economy.</p>
<h2>Reform begins long before ink dries</h2>
<p>The countries participating in TPP <a href="https://www.whitehouse.gov/sites/default/files/docs/cea_trade_report_final_non-embargoed_v2.pdf">represent</a> almost 40% of global gross domestic product (GDP). Strong labor and environmental protections are vital to ensure global competitiveness is based on innovation, productivity and quality, not who can press down hardest on wages or have the weakest environmental standards. It is an argument for expanding trade in a way that results in inclusive societies. </p>
<p>The NAFTA experience indicates that for this to happen, serious reform must begin before any agreement is signed – the moment when leverage for change is the greatest – and enforcement needs to be taken seriously. Instead, TPP is in danger of locking in a flawed status quo for labor and the environment. </p>
<p>And there’s a lot more at stake with TPP. The dispute settlement process, at least according to a leaked draft, makes the agreement appear more like a “Trans-Corporate Partnership” with quasi-privatized panels that ignore conflicts of interest. And these bodies would have the power to <a href="https://theconversation.com/sen-warren-is-right-fast-track-could-help-roll-back-dodd-frank-41941">undermine domestic legislation</a> that protects consumers enacted by elected bodies. </p>
<p>As Joseph Stiglitz <a href="http://www.project-syndicate.org/commentary/us-secret-corporate-takeover-by-joseph-e--stiglitz-2015-05">noted</a>, “the real intent of these provisions is to impede health, environmental, safety, and, yes, even financial regulations meant to protect America’s own economy and citizens.”</p>
<p>When it comes to healthcare, TPP provisions could prove catastrophic to millions. We need to take seriously the concerns of Deane Marchbein, president of Doctors Without Borders USA, who <a href="http://healthaffairs.org/blog/2015/05/08/the-trans-pacific-partnership-a-threat-to-global-health/">writes</a>, “TPP, in its current form, will lock-in high, unsustainable drug prices, blocking availability of affordable generic medicines, and price millions of people out of much-needed care.”</p>
<p>Trade promotion authority, also known as fast-track, passed the Senate in late May after a bruising fight and is now on the way to the House where the vote could prove much closer. Approving this bill would ensure one more round of grand promises and nonexistent results for workers and consumers as well as compromising the rights of citizens.</p>
<p>To paraphrase philosopher George Santayana’s famous words: “Those who cannot remember the past are condemned to repeat it, only with TPP on a far larger and more damaging scale.”</p><img src="https://counter.theconversation.com/content/42005/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Harley Shaiken receives funding from the University of California. He has previously received research grants from a wide variety of foundations, the U.S. government and the University of California. He's also currently on the advisory boards of the Center for American Progress and Jobs With Justice. </span></em></p>NAFTA promised strong labor protections but failed to deliver. The Trans-Pacific Partnership is headed in the same direction.Harley Shaiken, Director of the Center for Latin American Studies and Professor of Letters and Science, University of California, BerkeleyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/422212015-05-22T19:54:14Z2015-05-22T19:54:14ZFast-track overcomes key hurdle, but obstacles remain as trade deals hang in balance<p>After the Senate’s refusal to pass <a href="https://ustr.gov/trade-topics/trade-promotion-authority">trade promotion authority</a> (TPA) on May 12, some trade advocates feared that President Obama’s ongoing commercial negotiations with Asia and Europe would die a slow death. </p>
<p>Yesterday’s <a href="http://www.washingtonpost.com/politics/senate-votes-to-give-obama-fast-track-authority-on-pacific-rim-trade-deal/2015/05/21/e54c539a-ffbd-11e4-8b6c-0dcce21e223d_story.html">narrow vote</a> 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.</p>
<p>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. </p>
<p>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 <a href="http://www.dailykos.com/story/2015/05/21/1386694/-Trade-Promotion-Authority-vote-secured-on-Export-Import-Bank-nbsp-promise#">last-minute bargain</a> over the future of the controversial Export-Import Bank. </p>
<p>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 <a href="https://theconversation.com/bipartisan-fast-track-bill-offers-best-chance-to-cinch-trade-pacts-40733">guarantee</a> that international trade agreements negotiated by the president would receive an up-or-down vote by Congress with no amendments. </p>
<p>Without TPA, America’s high-stakes negotiations with 11 other countries including Australia and Japan to create the <a href="https://ustr.gov/tpp">Trans-Pacific Partnership</a> (TPP) and with the European Union to create the <a href="https://ustr.gov/ttip">Transatlantic Trade and Investment Partnership</a> (TTIP) would probably be unachievable. </p>
<p>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. </p>
<h2>More hurdles remain</h2>
<p>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? </p>
<p>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. </p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<h2>What’s next for TPP?</h2>
<p>As for TPP itself, negotiations seem to be <a href="http://www.dailymail.co.uk/wires/reuters/article-3090782/Australia-hopeful-wrapping-TPP-negotiations-June.html">drawing to a close</a>, 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. </p>
<p>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 <a href="http://www.theguardian.com/australia-news/2015/may/22/labor-greens-and-crossbenchers-concerned-at-trans-pacific-partnership">skepticism</a> of Australia’s opposition Labor Party and other members of Parliament, for example, may slow its ratification.</p>
<p>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. </p>
<p>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.</p><img src="https://counter.theconversation.com/content/42221/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Charles Hankla does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Passage of trade promotion authority is still far from certain, but yesterday’s Senate vote may signal good news for the trade deals it’s meant to help.Charles Hankla, Associate Professor of Political Science, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/419412015-05-17T14:25:16Z2015-05-17T14:25:16ZSen Warren is right: fast-track could help roll back Dodd-Frank<p>Earlier this month Senator Elizabeth Warren <a href="http://www.politico.com/story/2015/05/obama-aides-elizabeth-warren-trade-117703.html">suggested</a> that the Trade Promotion Authority (TPA) bill currently before Congress could make it easier, in the future, to roll back Dodd-Frank financial reforms. The reaction from the Obama administration was an immediate rebuttal, <a href="https://www.yahoo.com/politics/why-obama-is-happy-to-fight-elizabeth-warren-on-118537612596.html">including from the president himself</a>.</p>
<p>And <a href="http://www.politifact.com/truth-o-meter/statements/2015/may/14/elizabeth-warren/fact-checking-elizabeth-warren-and-barack-obama-tr/">a number of commentators joined</a> the president’s side of the argument, claiming that Senator Warren’s concerns were hypothetical or far-fetched.</p>
<p>On this issue, however, Senator Warren is entirely correct, and President Obama and his supporters appear to have completely misunderstood the risks of passing TPA, dubbed fast-track, in its current form – which after some snags appears to be <a href="http://www.usatoday.com/story/news/politics/2015/05/14/senate-trade-vote-fast-track/27306255/">close to a vote</a> in the Senate.</p>
<h2>What TPA means in practice</h2>
<p>The Trade Promotion Authority is a procedure for passing trade agreement-implementing legislation through Congress. </p>
<p>Under TPA, Congress agrees in advance to consider implementing legislation – such as the Trans-Pacific Partnership (TPP) – on an up-or-down basis. Members can vote for or against, but they cannot offer amendments.</p>
<p>In the House of Representatives, this amounts to promising to adopt a particular rule for implementing legislation when proposed. In practice, however, those rules are controlled by the House leadership – and they can always decide that a particular piece of legislation will be considered without amendments being allowed. </p>
<p>When the House leadership wants a trade agreement – as the Republicans want the TPP – then fast-track does not have much impact on the House side for free trade agreement-implementing legislation.</p>
<p>The real impact is on the Senate side. Here TPA would commit the Senate to vote on TPP – and any future trade agreements while TPA is in effect – without allowing any potential filibuster. So the support of only 50 senators would be needed (as the vice president can break a tie) rather than 60.</p>
<h2>How Dodd-Frank is at risk</h2>
<p>Dodd-Frank financial reform and regulation issues are not central, as far as we know, to the <a href="https://ustr.gov/tpp">Trans-Pacific Partnership</a>, but they are absolutely on the table in the upcoming free trade agreement with the European Union, known as the <a href="https://ustr.gov/ttip">Transatlantic Trade and Investment Partnership</a> (TTIP).</p>
<p>TTIP is still being negotiated, but the Europeans <a href="http://trade.ec.europa.eu/doclib/press/index.cfm?id=1018">have said</a> publicly and repeatedly – including recently – that they would like to include a great deal about financial regulation in this agreement. And important parts of the US and European financial sector lobby are egging them on.</p>
<p>The current Treasury Department is adamantly opposed to including such issues, precisely because it would impede the working of financial regulation in general and implementation of Dodd-Frank in particular. (For more details, see <a href="http://www.iie.com/publications/pb/pb13-26.pdf">this Policy Brief</a> that I wrote with Jeffrey J. Schott, my colleague at the Peterson Institute for International Economics.)</p>
<p>But the term of the TPA, as currently proposed, is six years. (To be precise, it is for three years, renewable for another three, but the terms of renewal are almost automatic. And as long as the Republicans control the House of Representatives in 2017-18, it will be renewed.)</p>
<p>If the next president agreed to amend Dodd-Frank as part of TTIP, he or she would include those changes in the bill that implements it, with no Congressional amendments allowed to strip out the financial changes.</p>
<p>Any direct Dodd-Frank repeal attempt in 2017 or later would presumably be subject to potential filibuster in the Senate – and as long as Democrats can control at least 41 seats, they can block it. But TPA would allow TTIP to pass the Senate with a simple majority.</p>
<h2>The GOP’s back door to rolling back Dodd-Frank</h2>
<p>If a Republican is elected president in November 2016, it is likely the Republicans will control the House and have a majority in the Senate – but not 60 votes. So a Dodd-Frank rollback through TTIP would be entirely feasible and easier to implement (for a Republican president in that scenario) than any kind of direct attack on the law. </p>
<p>The odds of this scenario are roughly the same as that of a Republican being elected president in 2016. (The <a href="http://www.realclearpolitics.com/elections/2016/">latest polls</a> show the two parties are neck-and-neck to win the White House.) </p>
<p>To be clear, the TPP and TTIP agreements will involve and require changes to US law, assuming specific tariffs are reduced or eliminated (and the same goes for many changes to non-tariff barriers). If a trade agreement didn’t require such changes, we wouldn’t need an implementing bill.</p>
<p>Politicians are often criticized for not looking sufficiently far ahead. Ironically, Senator Warren is being criticized for doing just that, applying the logic of the Obama Treasury (in not wanting financial regulation included in TTIP) and pointing out that the TPA would greatly increase the probability of exactly what the president claims he does not want: a significant or substantial legislative repeal of Dodd-Frank on any number of dimensions. </p>
<p>In addition, TTIP could have a chilling effect on regulation and even the supervision of finance. This is precisely why big banks are so keen to get financial regulation into TTIP.</p>
<h2>Was it a mistake?</h2>
<p>Why doesn’t the White House simply thank Senator Warren for pointing out this potential problem – and move to limit the term of TPA? The Republicans want TPP and soon; they would vote for a TPA that expires at the end of 2016.</p>
<p>President Obama says that he would do nothing to facilitate the rollback of Dodd-Frank. But his administration did exactly that with the <a href="http://blogs.reuters.com/financial-regulatory-forum/2014/12/18/reversal-of-dodd-frank-swaps-rule-ignores-lessons-from-financial-crisis-london-whale/">repeal</a> of Section 716 in December (Section 716 limited the ability of big banks to bet heavily on derivatives). </p>
<p>Senator Warren and others on Capitol Hill fought hard against that repeal, wanting to keep this sensible restriction on big banks. But at the decisive moments the White House pushed strongly in the other direction.</p>
<p>Has the White House made a simple and perhaps embarrassing mistake by seeking TPA that runs for six years? Or does the Obama administration know exactly what it is doing when it opens the backdoor to undermining its own signature Dodd-Frank legislation? The latter, unfortunately, seems more likely.</p><img src="https://counter.theconversation.com/content/41941/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Simon Johnson is a registered Democrat in Washington DC (necessary in order to vote in primary elections); I don’t donate money to any political party or candidate. Click here for more information: <a href="http://mitsloan.mit.edu/faculty/detail.php?in_spseqno=41226">http://mitsloan.mit.edu/faculty/detail.php?in_spseqno=41226</a>.
</span></em></p>While the Obama Administration vociferously disagrees, Trade Promotion Authority opens the door to watering down financial reform.Simon Johnson, Professor of Global Economics and Management , MIT Sloan School of ManagementLicensed as Creative Commons – attribution, no derivatives.