- By Phil Levy<p> Phil Levy teaches international economics at Columbia University's School of International and Public Affairs. </p>
This fall has been a roller-coaster ride for followers of trade. Against a background of great trade ambition, there was the October realization that political dysfunction in Washington could easily impede progress on trade. But the government shutdown passed and long-futile global trade talks even managed to eke out some progress. Then there was the sobering realization that, unlike that WTO deal, the big pending trade agreements with Europe (TTIP) and Asia (TPP) would need congressional approval and the administration had not laid the proper groundwork.
More recently, in a note of great hope for the holidays, word leaked out of Capitol Hill that key players had, in fact, struck a deal on Trade Promotion Authority (TPA). What’s more, the administration seemed to be moving beyond the familiar stage of grand pronouncements and endless technical meetings toward an actual strategy for accomplishing its trade goals. If these last developments sound like the steady upward-chug of a roller-coaster, then theme park aficionados will know what comes next — the plunge.
Last night, word leaked that the White House was to nominate retiring Montana Sen. Max Baucus as U.S. ambassador to China. Had the intent been to sabotage trade progress, it would have been hard to think of a more effective approach. Baucus, as chairman of the Senate Finance Committee, is an absolutely critical player on trade. True, he had already announced that he would retire after his term expired this coming year. But there was hope that his time in the Senate would culminate with progress on trade and tax reform. Switching analogies, the ambassadorial appointment is the equivalent of removing a key field commander on the eve of a major fight and installing him in a prestigious Pentagon communications post. It’s nice for him, might help with PR operations, but can prove disastrous for the battle itself.
With the caveat that this entire story is based on leaks and rumors, rather than public statements, here are four questions and tentative answers about Baucus’s impending departure:
1. Wasn’t Baucus’s work done? Hadn’t a TPA deal been reached?
No. The reported TPA agreement was struck between Chairman Baucus, Senate Finance Ranking Member Orin Hatch (R-UT), and House Ways and Means Chairman Dave Camp (R-MI). The first critical point to note is the person who is missing: Ways and Means Ranking Member Sander Levin (D-MI), the last of the trade "big four." Had Levin been on board, there would have been true bipartisan, bicameral agreement. But Levin had been criticizing the traditional approach to TPA all summer, calling instead for a more comprehensive competitiveness agenda. Among other features, he wanted enforceable measures against currency manipulation. In his skepticism, he is backed by roughly 150 House Democrats who have argued that the old approach to TPA (most recently passed in 2002) is undesirable. Curiously, at the same time the Obama administration said it badly needed TPA, it tried to side with these same House critics, agreeing that a 2002-style approach was undesirable. There was clearly some intricate persuasion remaining. Note that Baucus’s departure would mean that only Republican leaders were left supporting TPA.
Further, there is a looming battle over trade adjustment assistance. This long-standing program, intended to help workers displaced by the effects of trade liberalization, had traditionally been a "price" paid to win bipartisan support for new trade-opening measures, despite Republican qualms about its efficacy (does the program really help the workers?) and its premise (why do we favor trade-displaced workers over other displaced workers?). Feelings against the program hardened among Republicans as it was renewed in 2009 and 2011, even in the absence of new negotiating authority. It now seems likely that the Senate may include an adjustment assistance measure along with TPA while the Republican-controlled House does not. That would tee up important House-Senate negotiations — exactly when one needs experienced, powerful legislators to craft a deal.
2. Could Baucus just get this done before he leaves?
I have not seen any announcement of when Chairman Baucus will resign and others with Hill experience can weigh in on the feasibility of different approaches. It seems implausible, however, that Baucus would be strong-arming colleagues into difficult trade votes at the same time that he was asking them to back his confirmation.
3. If this is so disastrous for its trade agenda, why would the White House do this?
The Washington Post offers three reasons, one of which is even plausible.
The first implausible one is that the administration wanted to remove a credible critic of the Affordable Care Act. At this point, critics of PPACA are so thick on the ground (see all red-state Democratic senators, for example) that the marginal benefit of banishing Baucus would barely register.
The second implausible reason is that Baucus is a China expert. In fact, as recent ambassadors to China go, he looks relatively ill-suited. As a senior senator and chair of a key committee, he has certainly dealt with many issues important to China. But he doesn’t speak the language and it has not been a particular focus of his work.
More plausible is the domestic political benefit Democrats will gain. If Baucus served out his term, Montana would be an open Senate seat; Republicans would have a good shot at taking it and thereby coming closer to controlling the Senate. An early departure means that a Democratic governor will get to install someone who will run as an incumbent.
4. Which is more important for U.S. standing in Asia: trade progress or a good ambassador to Beijing?
Even if we stipulate that Baucus’s connections and experience will make him an outstanding ambassador, it is hard to see how this is a net positive. As Ian Bremmer recently argued, there is no region of the world more important for U.S. foreign policy than Asia, and there is no U.S. undertaking more important there than the passage of TPP. Ambassadors put the best face they can on existing U.S. policy. There is only so much a great ambassador can do with a faltering policy. While China is not a participant in TPP, the success of that agreement will matter immensely for the strength of alliances across the region.
TPP was supposed to conclude this year. It won’t. Congressional passage of TPA in the upcoming election-shortened legislative year was meant to reassure impatient trading partners that the United States is serious. Failure or indefinite deferral would convince them of the opposite.
After a prolonged period of seeing trade policy stymied by domestic political considerations, the optimism and progress of the past few weeks felt distinctly
odd. Should Baucus’s departure play out as rumored, it may well mark a plunge back into the fruitless trade approach of the last five years.