Why Barack Obama and Elizabeth Warren are fighting: The strange world of trade, the TPP and TPA

The two most significant icons in American progressive politics are fighting. Over the past few months, President Obama has lobbied Congress and the public to support the Trans-Pacific Partnership (TPP) in increasingly strident terms, while Senator Elizabeth Warren has taken to making alarming speeches on the Senate floor about how the TPP will destroy America. Along the way, each has amassed some strange allies: President Obama’s strongest ally in the House of Representatives is Ways and Means Chair Paul Ryan, and Senator Warren is in agreement with the Koch-funded Cato Institute.

How did such a strange arrangement come to be in a city where left-right polarization seems destined to stop any productive action? To find an answer and develop a well-considered opinion on the trade deal which promises to dominate the non-electoral political news for months to come, a quick review is in order.

What is the Trans-Pacific Partnership (TPP)?

In brief, the TPP is the largest free-trade agreement in history, currently in the final stages of negotiation among twelve countries in the Pacific Rim region.

Such a description, while omnipresent in news coverage, is not terribly useful, as is gives no indications of the impact of the deal and, by extension, why the public should care.

A more thorough investigation reveals that the TPP was conceived at the 2002 Asia-Pacific Economic Cooperation meeting as the Pacific Three Closer Economic Partnership among New Zealand, Singapore, and Chile. Brunei joined during negotiations, leading to a new name: the Trans-Pacific Strategic Economic Partnership (TPSEP), which took effect in 2005–2006. The TPSEP includes an “accession clause” which encourages other countries to join the agreement, even after its initial implementation. Accordingly, in 2008 the Bush Administration announced an intention to enter negotiations to join the pact, renamed as the more familiar Trans-Pacific Partnership. Negotiations have stretched on ever since.

The primary reason negotiations have lasted so long is because more countries have since joined. Three are particularly notable. Canada and Mexico, with whom the US is party to the ever-contentious North American Free Trade Agreement (NAFTA) joined, leading to questions of the impact of the TPP relative to the NAFTA. The Obama Administration has since come to present the TPP as a higher-standard successor to the NAFTA. As North American trade relations are already quite liberalized, the TPP is unlikely to result in the less-desirable impacts of the NAFTA that have already occurred, such as the loss of American manufacturing jobs to Mexican maquiladoras.

Japan was the latest country to join the TPP. As the third-largest economy in the world, Japan accounts for roughly $300 billion of trade in goods and services each year and is America’s fourth largest trading partner after Canada, China and Mexico. It is also notoriously protectionist, particularly of Japanese auto and agricultural markets, maintaining a prohibitive 778% tariff on imported rice beyond a small quota. Thus, a high-standard trade agreement between the US and Japan has potential to significantly reshape both economies. Potential beneficiaries include American farmers, American auto manufacturers and consumers in both countries; Japanese farmers would stand to be the biggest losers. As both countries are highly developed, the results are more likely to resemble post-NAFTA trade between the US and Canada more than that between the US and Mexico.

Map of TPP countries

Countries currently negotiating the TPP
CartoDB attribution © OpenStreetMap contributors © CartoDB. Interactive version available here.

Other current members of the TPP include Australia, Malaysia, New Zealand, Peru and Vietnam. More importantly, though, the TPP retains the TPSEP’s openness to future members, which may in time come to include China. Negotiations are thus very forward-looking; the US in particular is using the TPP as an opportunity to set a very high standard from which to negotiate such a future agreement, commonly referred to as a Free Trade Area of the Asia-Pacific (FTAAP). Standards for the environment, labor, currency manipulation and government interference in industry set now will thus have a much larger impact in the future. China is pursuing a similar strategy in negotiations for the Regional Comprehensive Economic Partnership (RCEP), another free trade agreement organized by ASEAN in earlier stages of negotiations.

The TPP is big. As of 2013, the countries currently negotiating make up 37% of global output—$28 trillion. Should China join, those numbers would be 49% of  global output and $37 trillion. It encompasses 41% of US trade in goods, (55% with China), and 24% of the rapidly growing trade in services.*

The TPP is far-reaching, containing chapters on everything from customs and technical barriers to trade to environmental and labor protections. While some information has been made public by the US Trade Representative (USTR), who is responsible for negotiations, the TPP is negotiated in secret so that negotiators can take positions and make compromises that could otherwise be undermined by domestic public pressure. Nonetheless, negotiating drafts of the environment and intellectual property chapters have been leaked by WikiLeaks, leading to outcry from the Sierra Club and Electronic Frontier Foundation that the language was problematic.

The final language will not be revealed until the trade agreement is sent to Congress for approval, when it will be publicly available for 60 days before a vote. Prior to the waiting period, only members of Congress and approved industry and nonprofit stakeholders may view the text – and even then, they are not allowed to take notes. Thus, most critiques are highly speculative.

What is Congress talking about?

News coverage of the TPP has increased lately due to activity in Congress. Congress is not, however, voting on the TPP. At least not yet. Instead, a proxy battle is taking place over Trade Promotion Authority (TPA), also called “fast-track”, which is a procedural law that temporarily gives the president authority to present trade agreements to Congress for an up-or-down vote. The primary direct impact of the law is that an agreement sent to Congress under TPA cannot be amended.

Anti-TPP yard sign, via

Anti-TPP yard sign, via GlobalTradeWatch / Flickr

TPA is essential to passing any trade agreement, as without it, the countries the administration is negotiating with have no assurances that Congress will not remove parts of the agreement unpleasant to the US. In such a situation, the administration would have very little ability to negotiate any agreement, as other countries would have to reach every compromise not just with the president, but with every voting member of Congress.

TPA expired in 2007, but the TPP has been negotiated as if it were in effect. For the US to ratify the TPP, TPA must be renewed; otherwise, the agreement will likely languish through election cycles until a Congress more friendly to TPA is elected. Depending how many years that takes, the TPP may need to be renegotiated, and the China-centric RCEP may take its place.

Is the TPP/TPA stuck in Congress?

After a temporary failure to bring the bill to the floor and strong opposition from Senator Elizabeth Warren, TPA has passed the Senate 62-37, with 14 Democrats supporting, and 5 Republicans opposed.

The bill faces a tougher challenge in the House of Representatives. Again, the White House does not have support from Democratic leadership, with Minority Leader Nancy Pelosi fighting with Speaker Boehner to kill the bill before it reaches a vote. While its future is far from certain, Republican leadership is determined to find a way to get the bill to the floor, preferably without changes necessitating re-approval by the Senate.

Last week, the House officially passed TPA, but the bill was unable to move forward due to it being linked to a sister bill, Trade Adjustment Assistance (TAA), that failed. Both bills needed to pass in order to advance. The TAA will be back up for a vote this week in what has essentially become a proxy TPA vote. House Minority Leader Nancy Pelosi has signaled that she will deliver enough Democratic votes to ensure passage of “fast track” in exchange for a highway bill. POLITICO has an in-depth rundown of the tangled political maneuverings taking place on Capitol Hill here.

For his part, President Obama has held meetings with the New Democrat Coalition, a caucus of moderate Democrats whose members will likely form the core group of Democratic supporters for the bill. Exactly how many House Democrats will support TPA is uncertain.

House Republicans face a challenge to hold their caucus together. Only four Republicans opposed the bill in the Senate — most notably Senator Rand Paul — but the House GOP caucus contains a stronger Tea Party contingency, which opposes TPA on the basis that it transfers power from Congress to the President.

Speaker Boehner and Ways and Means Chair Paul Ryan are whipping the Republican conference hard to keep enough GOP votes such that Obama’s efforts to win over Democrats are sufficient to bring the total back to 217. Debate and lobbying are already fierce, with Obama’s OFA 4.0 and business lobbies pushing for and the Sierra Club and the AFL-CIO against. Should TPA fail in the House, US engagement in the TPP is not necessarily over, but it will be further delayed until TPA can be passed, whether that takes weeks or years.

Why are Democrats fighting each other?

The fight is usually framed as between the progressive wing and moderate, business-friendly Democrats, but the full picture is considerably more complicated.

President Obama supports the TPP because he is negotiating it, and thus can control the priorities therein. In his public lobbying, he has presented the TPP as the most progressive trade deal in history, with strong, enforceable labor and environmental protections in an effort to differentiate it from the NAFTA and that agreement’s deleterious effects. Lately, the administration has also begun to push the TPP as a foreign-policy tool to keep American industry competitive with China and maintain American influence in the Pacific region.

President Obama and Elizabeth Warren, via DonkeyHotey / Flickr

President Obama and Elizabeth Warren, via DonkeyHotey / Flickr

Senator Elizabeth Warren, the most vocal opponent of the TPP, opposes it because corporations will profit, potentially at the expense of workers if the TPP plays out in ways similar to the NAFTA. She has also called attention to the Investor-State Dispute Settlement (ISDS) mechanism, which allows foreign investors who lose their investment due to government intervention to sue for damages in an international tribunal, claiming that the process would allow corporations to sue the US government in order to defang environmental law. The White House, which insists on an ISDS mechanism in all trade agreements USTR negotiates, dismisses Warren’s claims, as the US has yet to lose an ISDS case because USTR has always negotiated favorable terms. Even should the US lose, the tribunal could not change American law.

Various coalitions of Democrats support the TPP for a variety of reasons. The Congressional Black Caucus has been the focus of lobbying due to their strong support of the president. Democrats with large ports who stand to benefit in their states proved much more supportive in the Senate. The agricultural lobby is pushing strongly for the TPP, offering political cover to rural Democrats. The entertainment industry is supportive due to intellectual property provisions which promise to crack down on piracy. And so on; the reasons for supporting the TPP are as diverse as Congress.

On the other hand, Democratic opposition of the TPP is clearly focused on the labor and environmental movements. Unions and environmental groups are opposing the trade agreement in the fear that, like the NAFTA, it will cost jobs to outsourcing and allow corporations to dodge American environmental and labor laws due to weak enforcement mechanisms. Support for TPA will cost pro-trade Democrats campaign donations from labor and leave them vulnerable to a primary challenge from the left.

Should progressives support TPA and the TPP?

The calculation is decidedly more complicated for Members of Congress worried about fundraising, but for the public not concerned about such things, the calculations are simple. Aside from those currently shielded from trade by remaining protectionist measures, e.g. the remaining American unskilled labor or Japanese farmers, there are few reasons to oppose TPA, which will allow the public to see the full text of the TPP and judge its merits accordingly. Arguments against TPA on the basis that Congress should get a say in trade agreements are unrealistic, as the TPP will never reach Congress unless TPA is passed.

Coming to a reasonable position on the TPP as a whole (or making remotely accurate impact projections) requires seeing the currently secret and not-yet-finalized text. If TPA is passed and the finalized text is revealed, expect a hearty debate of its merits and weaknesses. Any judgment prior to the revelation of the text is blindly agreeing with either Obama’s claims that the TPP is a different, more progressive trade agreement, or the assumptions of the American blue-green alliance that the TPP will be no different from the NAFTA.

 

* GDPs in current USD from the World Bank WDI dataset. US trade data from the United States International Trade Commission and a publicized Congressional Research Service report from 20 March 2015 hosted by the Federation of American Scientists.


Edward is interested in economics, foreign affairs, and American and Democratic identity. He lives on Capitol Hill and is a graduate of Pomona College.

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