Deceptively good trade news
A couple months ago, the New Yorker posted a story and wonderful online video about a master pickpocket. This person was willing to demonstrate his art on camera. Even so, he moved so quickly that it can take multiple viewings to see just how he relived his target of his possessions. The key to it, ...
A couple months ago, the New Yorker posted a story and wonderful online video about a master pickpocket. This person was willing to demonstrate his art on camera. Even so, he moved so quickly that it can take multiple viewings to see just how he relived his target of his possessions. The key to it, of course, is misdirection. The pickpocket makes sure your attention is directed somewhere other than where the action is taking place.
This came to mind when reading Dan Drezner’s rejoicing about recent polls showing improved U.S. public sentiment about trade. I welcome a new public receptiveness to trade as much as anyone, but Dan, in his euphoria, concludes:
"The spike in public enthusiasm from last year is politically significant. At a minimum, it suggests that President Obama won’t face gale-force headwinds in trying to negotiate trade deals. Which means I could win my bet with Shadow Government’s Phil Levy. Which is the only thing that matters."
Nor was Dan the only one to wax optimistic about trade prospects this past week. Mike Green thought things had gone rather well with Japanese Prime Minister Shinzo Abe’s summit meetings with President Obama in Washington.
"Even on the trans-Pacific Partnership (TPP), where expectations were low, there was much more substance than met the eye…. The Japanese delegation had a quiet spring in their step after the summit and were keen to move on TPP in a matter of weeks…"
This, too, is promising. Peter Feaver had it exactly right when he noted that engagement with Japan could be an essential part of delivering on Obama administration promises of attention to Asia.
So, as far as public wisdom and the Asian pivot are concerned, these are both healthy developments. Yet, when it comes to prospects for trade policy accomplishments over the remainder of President Obama’s term, anyone laying odds or taking wagers should pay close attention to where the action is. To that end, here are four questions to help maintain focus:
1. What will Japan’s entry do for TPP prospects?
Japanese entry into the TPP, if it happens, will be a good thing. It will dramatically increase the economic significance of the TPP, and it will establish the agreement as the premier accord governing trade liberalization and economic rules in the Asia-Pacific region.
If Japan does not join, we have problems. The administration had previously suggested that Japan could enter in the next round, after this version of TPP concludes. That, however, would pose serious difficulties. Japan is no small economy able to sign on to an agreement with a few innocuous accession talks. If the TPP reaches a successful conclusion soon, after four or more years of negotiation, will there really be an eagerness to reopen the deal in the near future? But the size and complication of Japan’s economic relations also mean that the task of concluding the TPP just got much harder. One former USTR recently opined at a conference that if Japan joins the talks the TPP will not be concluded in President Obama’s term.
2. What do key interest groups think?
While it does not hurt to have the public embracing trade, U.S. agreements are not decided by referendum. I will leave it to all the political scientists buzzing around this site to provide details, but a more sophisticated approach would focus on the dynamics of the Congress. A more sophisticated approach would still think about the relations with key constituencies, such as organized labor. From the time President Obama first took office, it appeared clear that he had the votes in Congress to pass the pending FTAs with Colombia, Panama, and South Korea. Yet he did not put them forward until late in 2011, despite loud complaints from the business community. This at least suggests that there was something more than vote counting going on.
Along these lines, there was an alarming bit of news in the Hill recently. One promising feature of a trade deal with Europe was that it would seem immune from divisive questions about labor standards that had plagued FTAs with developing countries such as Colombia. The Hill, however, reported that "unions want to use negotiations on a U.S.-European Union (EU) trade deal as leverage to win stronger labor laws here in the United States."
If so, this does not bode well. Those are among the worst trade fears of Republicans on the Hill — the prospect that labor legislation that could not pass a straight vote could instead be slipped in through the back door of a trade deal.
3. How are Congressional relations these days?
Per the constitution, trade is Congress’ domain. Congress can try to delegate some of the negotiating power to the executive branch but ultimately must approve of any deal that is struck. If this is to work through periods of detailed negotiations, there must be good, open communication between the Hill and the White House. In particular, the committees that deal with trade — House Ways and Means and Senate Finance — must be on board. As it happens, these are the same committees that deal with the sort of taxation issues that have been a recent struggle. I’ll leave it to the reader to grade the degree of comity between branches.
One less subjective measure, however, is whether Congress grants the executive trade negotiating authority (known as TPA — trade promotion authority). The administration has also been saying for years that the idea of TPA is a reasonable one, but the time is not ripe. In the 2013 trade agenda, released today, the administration said it would work with Congress on obtaining such authority. That will be a contentious fight, since it will raise issues such as the permissible scope of labor provisions in an accord. The document does not set a date.
4. Who’s your USTR?
It is also helpful, when negotiating complex trade agreements, to have a representative who will go forth and conduct the negotiations. The incumbent USTR, Ambassador Ron Kirk, reportedly just held his going-away party. Though there have been rumors, the administration has not yet named a new USTR, much less confirmed one. That could prove an obstacle to racing ahead with complex agreements.
So I see the trade policy landscape a little differently than Dan Drezner does. He may want to keep in mind that, if you don’t keep your eye on where the action really is, someone may take your lunch money.
Phil Levy is the chief economist at Flexport and a former senior economist for trade on the Council of Economic Advisers in the George W. Bush administration. Twitter: @philipilevy
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