Is President Obama Too Late on Trade?

In his 2008 campaign, President Obama was a skeptic about the virtues of trade agreements. This week, in a speech in Cleveland, he was still sounding a skeptical note. “Here in Ohio, you saw firsthand a lot of past trade deals didn’t always live up to the hype,” he said. In between, however, he has made such trade deals a centerpiece of his foreign policy with Europe and the Asia-Pacific. The question is whether the president’s domestic reticence on trade will cause serious harm to U.S. international relations.

When President Obama took office, he inherited three completed trade agreements — with South Korea, Colombia, and Panama — plus the newly launched Trans-Pacific Partnership (TPP). He did not inherit trade-negotiating authority (TPA), which lapsed in 2007 after the Democratic-controlled Congress did not renew it.

The president faced a difficult political choice. Had he pushed for quick passage of the three trade agreements, embraced the TPP, and sought TPA, he would have severely disappointed some of his core supporters who shared the skepticism he had voiced. But if he failed to do these things, he risked alienating allies in critical regions and being hamstrung in his ability to conduct future talks.

The president elected to delay. He suspended TPP talks until late 2009, while the three free trade agreements (FTA) did not pass until the fall of 2011 (under Republican pressure); and he never threw his support behind any specific version of TPA. When the three FTAs were moving through Congress in 2011, offers to bundle TPA along with them were rejected. When a bipartisan compromise on TPA was reached in late 2013, the president withheld his endorsement, and instead issued a curt call for generic authority. He then dispatched the key Democrat behind the deal, Sen. Max Baucus, as ambassador to China.

The absence of trade negotiating authority did not stop the administration from negotiating. U.S. trade representatives just assured partner countries that these were domestic political issues that would be dealt with at the appropriate time. Such assurances were sufficient to allow much of the intricate technical work that goes into crafting a trade agreement. But before countries put their most politically sensitive offers on the table, they want an assurance that the deal will receive a vote in the U.S. Congress, and that it will not be pecked apart through amendments. Those are exactly the assurances offered by TPA. While trading partners have been reluctant to criticize the United States publicly, New Zealand Trade Minister Tim Groser was explicit this week during his visit to Washington: “We … are not going to get into the final end game negotiation without the United States Congress passing TPA.”

But now the president appears caught. The domestic political situation is worsening, and the available timeline is shortening.

Ominous political signals abound. According to Inside U.S. Trade, the AFL-CIO has made the future funding of lawmakers contingent on their opposition to TPA. This puts even moderate Democrats in a very difficult spot. The story quotes Rep. Gerry Connolly (D-VA) as noting that supporting trade will cost labor support, but is unlikely to win any backing from the U.S. Chamber of Commerce.

Meanwhile, House Minority Leader Nancy Pelosi (D-CA) said that the Democratic leadership wants to see TPP before passing TPA, and wants the concerns of Rep. Sander Levin (D-MI) addressed. Those include potentially deal-breaking measures on topics such as currency manipulation.

Things are no better on the Senate side, which has traditionally been more open to trade agreements. There has been open conflict over TPA between Senate Finance Committee Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR), to the point that Hatch urged the president to bring Wyden into line.

More worrisome still, discontent with the TPP has a new face, that of Sen. Elizabeth Warren (D-MA). In a Washington Post op-ed late last month, she concluded: “If a final TPP agreement includes Investor-State Dispute Settlement, the only winners will be multinational corporations.” Given that the investor-state dispute settlement has been an integral part of U.S. trade agreements for years, this seems like the basis for more general opposition.

As the 2016 presidential election season approaches, the window for moving trade agreements narrows. Even before some of the past week’s negative signals, an industry source at TPP talks in Hawaii predicted to Inside US Trade “that Congress would not approve TPA until May, that a TPP deal would be concluded sometime in the summer, and that a completed agreement would not come before Congress until early 2016.”

How is the president responding to this critical threat to pillars of his foreign policy? He addressed the issue in his Cleveland speech. “[T]he trade deal I’m negotiating now, the TransPacific Partnership, would reform NAFTA with higher labor standards, higher environmental standards, new tools to hold countries accountable; would focus on the impacts it’s having on American workers, and would make sure that the rules of the 21st century economy in some of the largest markets in the world aren’t written by China. They need to be written by the United States of America, and that’s what this does.”

It’s not clear that the higher labor standards pitch will do much for the Republicans, on whom the president will need to rely. And this section on trade was paragraph 64 out of 66 in the president’s written text.

It is either high time to make trade a priority, or it is already too late.

Photo credit: Nicholas Kamm / Staff