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Asean Affairs   June 9, 2014

Has America’s Trade Agenda Run out of Gas?

By Robert A. Pollard

The Obama administration has launched the most ambitious foreign trade agenda in decades, and the White House will have to expend considerable political capital to make it happen. Yet a historic free trade deal may not require as heavy a lift as some may think.

The twin super-regional pacts that the United States is pursuing — the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), with countries in the Asia-Pacific and Europe, respectively — would create the largest free trade areas in the world, together constituting about two-thirds of world trade and gross domestic product. These agreements would eliminate most tariffs and create stronger rules on state-owned enterprises, intellectual property rights, and competition policy while encouraging greater cooperation on costly regulations and standards. They would boost jobs and growth in America and partner countries and firm up our strategic engagement with Europe and Asia.

The demonstration effect of these agreements should not be underestimated. Already, the fear of being left out has enticed Japan to join the TPP talks, and even China has shown interest in possibly joining the TPP someday. Both trade pacts would set high standards for future deals with emerging economies.

Yet progress on the U.S. trade agenda has been slow. Hopes of finishing the TPP early this year were dashed. New “fast-track” (Trade Promotion Authority, or TPA) legislation has run into roadblocks in the Congress, most of them coming from the President’s own party. Disagreements over tariffs and traditional agricultural issues, as well as normally “safe” areas like investment, have led many observers to question whether the TTIP can be concluded this year.

Meanwhile, the president has raised trade in this year’s State of the Union address and promoted the TTIP talks when he met with EU leaders in Brussels in March. Yet the crisis in Ukraine, rather than trade, naturally dominated the U.S.-EU Summit. While there were suggestions of a trade breakthrough with Japan after President Obama’s April meeting with Prime Minister Shinzo Abe, so far there have been few details.

Why does movement on the trade agenda seem to have slowed? First, the negotiations are highly complex, as dozens of countries must agree on how to cover thousands of goods and services. Concessions on market opening often hurt important constituencies such as farmers, textile workers, auto companies, and so on, and political trade-offs are difficult to reach before the negotiating endgame. There is no magic bullet that can resolve complicated regulatory issues, either.

The entry of Japan vastly expanded the potential benefits of TPP, but also muddied the path to the endpoint. TTIP may be just as problematic since the two trading blocs come to the table with strong legal and regulatory systems that are tough to reconcile.

Furthermore, our trading partners have sometimes posed obstacles in the negotiations. Prime Minister Abe surely must have known that joining TPP would require opening up sensitive areas like rice, beef, and autos, but Japan – as is normally the case for countries in such negotiations – is not about to make outright concessions until the talks near closure. On spurious health grounds, the Europeans have vowed to “protect” their consumers from American beef, pork, and chicken, in spite of loud and repeated statements from the U.S. side that agriculture must be part of the deal.

In the United States, political calculations not surprisingly have come into play. Certain trade advocates contend that the administration should immediately seek fast-track because other countries will not show their cards at the table until they know the White House has full negotiating authority. TPA, they argue, would also signal congressional buy-in, enhancing the chances of success. Yet after Democrats and Republicans alike failed to rally behind TPA earlier this year, others are now claiming that it should be possible to complete the Asia-Pacific trade deal without it.

In fact, some trade analysts are making the case for waiting until after the mid-term elections in November because it would presumably be easier to push through TPA under either a lame duck or a new Congress. This is surely wrong. Lame duck congresses are notoriously difficult to predict; just as many if not more Democrats and Republicans may turn against fast-track as may suddenly support free trade.

Indeed, the closer one gets to 2016, some experts on trade politics believe, the harder it may be to get anything done. The advocates for pushing TPA sooner rather later would note, for example, that labor unions are not likely to soften their opposition to fast-track no matter what the text says about workers’ rights. In short, there is no advantage to waiting.

Free trade has always been a tough sell because it is easier to count the immediate losers (e.g., factory jobs) than long-term winners (consumers and services jobs). Free traders in the United States have been taking it on the chin ever since previous administrations oversold the benefits of the North American Free Trade Agreement and other trade pacts.

But is free trade really such a heavy lift? The answer is no.

Mike Froman is one of the strongest U.S. trade representatives in many years, commanding respect from both Republicans and Democrats. But he cannot do it alone. Trade advocates from the Congress, business and consumer groups need to join the White House in explaining to the American people why our country needs these trade pacts and then launch an all-out campaign to push fast-track through Congress.

The White House could likely build a coalition consisting of a majority of Republicans and a smaller number of Democrats. With states and localities ever more dependent on exports and foreign investment for jobs, protectionism in Congress has diminished in recent years. Congress approved free trade agreements with Colombia, Panama, and South Korea in 2011 even though few of its members were ready to stand up and be counted as free traders.

In the end, President Obama should be able to win approval for his trade agenda. Presidents sometimes have to swallow hard, reach across the aisle, and take risks to get great things done. Just as Bill Clinton is remembered for balancing the budget and fixing welfare, Barack Obama could be remembered as the president who gave the United States national health care and the biggest trade opening in world history. That’s a legacy worth fighting for.

Mr. Robert Pollard is a State Department Visiting Fellow with the Europe Program at the Center for Strategic and International Studies in Washington, D.C. He is writing in his personal capacity and the views expressed in this article are entirely his own.

Courtesy: This post originally appeared on the Center for Strategic and International Studies, Washington D.C. cogitASIA blog

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