There is still an outside chance that President Obama may be granted the Trade Promotion (fast-track) Authority he needs to bring the critical Trans-Pacific Partnership negotiations to a successful conclusion, but the odds have now lengthened considerably as labor unions have proven determined to cut off their noses to spite their faces. The way this happened is that two pieces of legislation, fast-track negotiating authority and Trade Adjustment Assistance (TAA), after they had passed the Senate as a package, were considered separately by the House so that members of each party could avoid voting for the half they opposed.
TAA provides generous income transfers and retraining to workers whose jobs are said to be “displaced” by trade. In the event, House Democrats rose in a mutiny against Pres. Obama, who had made a rare visit to Capitol Hill to plead for their support. They defeated TAA and with it the larger trade measure. The argument of the labor unions that proved to be instrumental behind this defeat, including organizations in no way affected by foreign competition (such as those for public employees and services workers), is that the emerging Trans-Pacific Partnership (TPP) pact would accelerate the loss of blue-collar jobs that pay well. The argument was also made that fast track would give the President the right to negotiate trade agreements that Congress could not change, only vote for or against.
This line of reasoning is nonsense on both counts. Trade Promotion Authority explicitly allows Congress to outline principles that must be heeded during negotiations and to exercise its constitutional duties by voting on negotiated agreements. Our solons on the Hill have used this authority for decades to shape the direction of trade pacts, which without it would not have been possible, since none of our negotiating partners would sign agreements with the United States that, after the fact, would be subject to line-by-line amendments during Congressional ratification.
As for the loss of jobs labor leaders and their rank-&-file say they worry about (“the pay levels people would have to compete with are obscene,” complained one of them), this, too, is a myth. Of course the US must be internationally competitive, with or without trade agreements. But for the US the TPP is not about giving away trade protection. The US is already a fairly wide-open economy and has free-trade deals with six of the 11 other countries that would be part of the accord. The TPP is not so much about manufacturing, where globalization has become an accomplished fact, it is primarily about agriculture and services, where the US competitive edge is the strongest.
The Trans-Pacific Partnership would establish rules in sectors where non-tariff barriers are currently particularly obstructive, in services and with regard to intellectual property. This is the more significant for this Country as services are a growing part of US exports. The TPP would make it difficult for the 12 participating nations, which together account for about 40% of the global economy, to maintain many of the non-tariff barriers that are in existence now and would erect a bulwark against new forms of hidden protectionism, such as subsidies provided via state-owned enterprises. The adjustments the US would have to make would be relatively minor, while partner nations would have to meet US standards for intellectual property, subsidies and foreign investment.
Without Trade Promotion Authority for Mr. Obama, the US would be without a global economic strategy in a fast-changing world. There would be no prospect of clinching the Pacific trade deal on which the President has been working for three years. The US would also be robbed of some key effects of the “pivot to Asia” and lose its ability to force China, which is not included in the TPP, to abode by global rules on trade and investment. Instead, a collapse of the TPP talks would pump vigor into China’s rival initiative, to which the US does not belong. The notion that others would not take PRC-led trade talks seriously was put to rest last month, when US allies such as Australia and South Korea rejected a US-promoted boycott of the China-headed Asian Infrastructure Investment Bank.
Finally, the US trade team, which had assured prospective TPP partners that Mr. Obama’s getting fast-track authority was a foregone conclusion, would lose all credibility on the world stage. As stated at the outset, there is still a long-shot possibility that Trade Adjustment Assistance will pass on a second vote this week, but much leverage has been frittered away while apparently ill-informed union members have held a reported 650 events opposing the legislation, made about 160,000 telephone calls to members of Congress and wrote more than 20,000 letters. The risk of TPP falling by the wayside is now high, and US business would be the worse for it.