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U.S. Political Dysfunction and the Trans-Pacific Partnership Trade Agreement

As the bell rings, signaling the end of the current round of Washington scuffling over the debt ceiling, and as the participants return to their respective corners, we can take a moment to assess the damage. There is plenty, but we can focus on the question of what the last few weeks meant for the ...

Photo: STR/AFP/Getty Images
Photo: STR/AFP/Getty Images
Photo: STR/AFP/Getty Images

As the bell rings, signaling the end of the current round of Washington scuffling over the debt ceiling, and as the participants return to their respective corners, we can take a moment to assess the damage. There is plenty, but we can focus on the question of what the last few weeks meant for the Obama administration's effort to conclude a Trans-Pacific Partnership (TPP) trade agreement.

The current incarnation of TPP talks dates back to late 2008; these have been going on a while. The 12 countries now participating have set themselves a notional goal of wrapping things up this year.

The Financial Times concludes that the recent budget standoff took a toll, when President Barack Obama decided to skip the APEC leaders' gathering. It quotes the director of research at the Asian Development Bank Institute as saying, "Obama not coming here means that the TPP probably didn't get the big push it was to get." Instead, the Financial Times story describes how China used the occasion to advance its alternative trade vision -- the Regional Comprehensive Economic Partnership -- which just so happens to exclude the United States (as the TPP excludes China).

As the bell rings, signaling the end of the current round of Washington scuffling over the debt ceiling, and as the participants return to their respective corners, we can take a moment to assess the damage. There is plenty, but we can focus on the question of what the last few weeks meant for the Obama administration’s effort to conclude a Trans-Pacific Partnership (TPP) trade agreement.

The current incarnation of TPP talks dates back to late 2008; these have been going on a while. The 12 countries now participating have set themselves a notional goal of wrapping things up this year.

The Financial Times concludes that the recent budget standoff took a toll, when President Barack Obama decided to skip the APEC leaders’ gathering. It quotes the director of research at the Asian Development Bank Institute as saying, "Obama not coming here means that the TPP probably didn’t get the big push it was to get." Instead, the Financial Times story describes how China used the occasion to advance its alternative trade vision — the Regional Comprehensive Economic Partnership — which just so happens to exclude the United States (as the TPP excludes China).

There are plenty of reasons to worry about the TPP’s prospects, and the budget debacle in Washington likely made things worse. But the main problem was not Obama’s absence from the Asian gatherings, nor China’s chance to peddle its wares. Had the president used the government downtime to find common ground with Republicans and repair a broken relationship, the TPP’s prospects would likely have improved. Had there been a grand bargain on budget matters, as some participants sought, Congress could have moved on to other matters, such as granting the president negotiating authority for the TPP and the agreement with Europe (the TTIP – another casualty of government-shutdown theater).

Instead, the president seemed determined to vanquish his off-balance Republican opponents. The putative deal that emerged from the Senate only provides a few months’ respite, guaranteeing that Congress will return to fight over the issue another day.

This matters for the TPP (and TTIP) because it will be virtually impossible for the president to conclude these deals successfully without cooperation from congressional Republicans. As I noted in the wake of our early-fall foreign-policy crisis (over Syria), Congress has the ultimate say over trade policy. With Republicans in the majority in the House, the TPP would need their support to pass.

An optimist might counter that this is hardly a serious concern. Are Republicans really going to vote down a concluded agreement just to spite Obama? The threat hardly seems credible. And that would be right — if the president already had trade negotiating authority. It is that authority which would give him his negotiating instructions and let him put a completed agreement before Congress for an up-down vote. But he doesn’t have any such authority. The last version of trade promotion authority (TPA) expired in 2007. There have been attempts since to revive it, notably in 2011, but the White House didn’t back the effort and Senate Democrats blocked it.

The road to successful trade agreements runs through TPA. To get TPA, there has to be agreement on what subjects trade pacts ought to cover. This is not just haggling about tariffs; it involves trickier domestic policy issues such as labor standards, environmental measures, intellectual property rights protection, and regulatory practices. There is substantial opposition to the current approach to trade among House Democrats, represented by the House Trade Working Group. The veteran trade skeptics on the left have recently been joined by a smaller group of novice trade skeptics on the right, who voice concerns about the delegation of congressional power to the executive.

One can still imagine a successful coalition in the House that could back TPA, but it would likely involve Obama working hand in hand with Republican leaders to craft a bill that would embrace Republican principles, enjoy majority Republican support, and win over a minority of internationalist Democrats. At this point, such cooperation seems fanciful. Even if the president could fracture the House Republican caucus and get a group to endorse the principles of the Democratic skeptics, the outcome would likely be unpalatable to the country’s TPP trading partners.

The TPP is yet another illustration of the analytical value of political scientist Robert Putnam’s idea of two-level games. Those lamenting Obama’s absence from recent Asian summitry implicitly give greater weight to the international negotiations as an obstacle. At this point, domestic obstacles may loom larger.

Astute TPP partners will be less worried about the president’s decision not to mill about in a colorful shirt and more worried about the implications of the recent fight for comity up and down Pennsylvania Avenue. The president showed not that he could work hand in hand with congressional leaders, but that he could deliver a sharp uppercut. Progress on trade will likely have to await the conclusion of the budget fight, Round 2.

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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