- By Phil LevyPhil Levy is Senior Fellow on the Global Economy, The Chicago Council on Global Affairs, and teaches strategy at Northwestern University’s Kellogg Schoool of Management.
President Obama flew west, met with Asia-Pacific leaders, and trumpeted his intention to strike a high-standards trade deal with other committed trading partners in the region, the Trans-Pacific Partnership (TPP).
That paragraph could describe either this last weekend or Nov. 2009, when the president first revived the TPP (it was initially launched in Sept. 2008 under the Bush administration and set aside by the new Obama team). Perhaps that’s why the story about the weekend’s APEC leaders’ gathering in Hawaii was buried in the inner pages of the Washington Post and failed to make the front page of the New York Times. The papers may have learned, with this president, to duly note the statements of grand intentions, but to save the gaudy headlines for actual accomplishments.
There has been some movement over the last two years, of course. The nine nations currently involved in the TPP negotiations have been meeting and hammering out a "framework" for the agreement. The Obama administration, over that time, moved from a tentative "intent to engage in discussions" to a full-fledged embrace of the TPP. New countries are now clamoring to join in the negotiations.
But enormous obstacles remain:
- Core structural issues of the TPP remain undecided. Will the TPP be a ragged quilt of existing agreements stitched together with new patches? Or will it be a new seamless fabric designed to cover existing and future participants? If the latter, it offers two great virtues: simplicity for businesses trying to trade across the region, and a clear high standard that any newcomers will have to meet (think China). But the United States has held out for the former. It already has FTAs with a number of the TPP participants and the idea of refighting all of those market-access battles is daunting for an administration that took almost three years to pass three already-completed FTAs.
- Will new members make significant commitments? Reports from APEC that Canada and Mexico want to follow in Japan’s footsteps as new applicants to the TPP were described as a coup for President Obama. Perhaps. It certainly would heighten the economic significance of the TPP, if and when it is concluded. But the new entrants will make an already elusive agreement even more difficult to reach. Japan is more than reluctant to liberalize its agricultural sector. New Zealand has previously objected to Canada’s illiberal approach to dairy imports. It is not hard to imagine an extreme in which one has a very large number of participants who engage in endless talks that never conclude (this has recently been known as "Doha" in the WTO context).
- The unauthorized Obama administration. Because the U.S. Constitution gives authority over trade to the Congress, presidents in modern times have not dared to pursue significant trade negotiations without a grant of delegated negotiating authority (sometimes called "fast track" or "trade promotion authority — TPA"). The danger is that an agreement negotiated without TPA protections could be sidelined through legislative maneuvering in Congress, or it could be destroyed through amendments that undid critical parts of the bargain. The Obama administration does not have TPA. It has not sought TPA. When Senate Minority Leader Mitch McConnell (R-KY) moved to offer the president TPA in September, the White House opposed and the measure was voted down.
- Unresolved issues. The reluctance to request TPA, or to table bolder proposals at the TPP talks, likely reflects the fact that there is sharp disagreement in the Congress over how the United States should approach environmental, labor, and intellectual property issues (among others). These were once covered in a May 10, 2007 agreement between the Bush White House and then-Speaker Nancy Pelosi, but that fell apart when Pelosi moved to block the Colombia FTA. Any new stance will be highly contentious.
- Staunch Democratic opposition. While the passage last month of the Korea, Colombia, and Panama deals was most welcome, it did not herald a new era of bipartisan agreement on trade. If anything, it showed an even more partisan split, with almost unified Republican support in the House and heavy Democratic opposition. Thus, trade looks like the kind of issue that would fit very well in a Clintonian triangulation strategy, in which President Obama tried to demonstrate some common cause with Republicans while distancing himself from his own party. But that hardly seems to be the President’s approach to the upcoming election campaign.
For a long time, key members of the TPP negotiations had pushed for the talks to conclude this month. They did not. The fear was that beyond the Hawaii APEC meeting lay political doldrums. While business leaders have urged a mid-2012 conclusion of the TPP talks, it would be very surprising if they were not becalmed until at least mid-2013.
For the Obama administration, constrained by Democratic politics, the ideal positioning may be to have perpetual stories about the President gazing out across the Pacific, describing his ambitious vision of a 21st Century Free Trade Agreement, an agreement that will be better than all that came before in thrilling and unspecified ways. The danger for everyone else is that the Obama team may prefer perpetual reruns of this "visionary" story to any new accounts of a concluded agreement.