Shadow Government

Who Will Win the U.S. Trade Game?

For U.S. trade policy, the game is now afoot. The question is whether trade enthusiasts or skeptics will be ahead when the buzzer sounds. One might have thought the game started some time back. After all, the United States signed up for the Trans-Pacific Partnership (TPP) very late in the George W. Bush administration and ...


For U.S. trade policy, the game is now afoot. The question is whether trade enthusiasts or skeptics will be ahead when the buzzer sounds.

One might have thought the game started some time back. After all, the United States signed up for the Trans-Pacific Partnership (TPP) very late in the George W. Bush administration and the Obama administration has overseen multiple negotiating sessions with an ever-expanding membership. But ever since 2007, the principal barrier to trade agreements involving the United States has been domestic political opposition. Three free trade agreements (FTAs) that were signed before mid-2007 all had to wait until the fall of 2011 for passage.

For the vast majority of the Obama presidency, the United States Trade Representative (USTR) assured trade partners that everything domestically was under control and would be taken care of in due course. But the requisite domestic bouts were not fought — until now.

Postponing the domestic trade discussion this way now poses a special challenge for the administration. It must extract from Congress negotiating instructions that match the nearly-completed negotiations for the TPP. Thus, the challenge is not to get a Trade Promotion Authority (TPA) bill, but to get the TPA bill. There is some wiggle room — the administration can promise to make sincere efforts on any number of topics without pinning itself down too precisely. The danger comes with killer amendments, such as the one attached to the TPA bill as it came out of the Senate Finance committee. The amendment seeks to block agreement with countries that fall afoul of international standards on human trafficking, a requirement that might rule out Malaysia.

Such an amendment at this stage is not necessarily fatal. No such amendment was attached to the version of TPA that emerged from House Ways and Means. If there are differences between the bills that come out of the House and the Senate, there will presumably be a conference to reconcile them. That allows for all sorts of future revisions (and removal of amendments).

This is part of what makes the current trade game so hard to follow. It is being played out in the halls of Congress, where much of the important action occurs out of sight. The visible parts can be grouped into two categories: substantive and procedural.

In the substantive battle, opponents of the president’s trade agenda publicly lodge objections to potential effects of either TPP or TPA. Sen. Elizabeth Warren (D-Mass.) entered early with an op-ed attacking “Investor State Dispute Settlement” (ISDS) provisions in the TPP on the grounds that they “would allow foreign companies to challenge U.S. laws — and potentially to pick up huge payouts from taxpayers — without ever stepping foot in a U.S. court.” Sen. Jeff Sessions (R-Ala.) alleged that TPA would provide a vehicle for President Obama to relax U.S. immigration policy. There are counters to these arguments (see here on ISDS and here on immigration), but they play an important role in this game. Someone who opposes TPA because they dislike trade is branded a protectionist; someone who opposes it because they have concerns over ISDS language is seen as a sophisticate.

On the procedural front, TPA begins with three strikes against it. Strike one: trade proponents have to push for action, as opposed to inaction. In the Senate, this gives a distinct advantage to opponents. Minority Leader Harry Reid (D-Nev.) has not been shy about his opposition to the trade deals. If he keeps most of his caucus of 44 Democrats together, he can block a bill. That task gets easier if Republicans join in opposition.

Strike two: the bill has to be “clean” enough to permit the TPP agreement that has been the subject of years of negotiation already. Beyond the human trafficking amendment, one addressing currency manipulation stands out as the biggest concern. Majorities of each house of Congress have already expressed support. In a letter to Congress, though, U.S. Treasury Secretary Jack Lew wrote, “Seeking enforceable currency provisions would likely derail the conclusion of the TPP given the deep reservations held by our trading partners.” There is also the potential for a fight over Trade Adjustment Assistance. Keeping TPA clean means either blocking popular amendments or redirecting them to another legislative vehicle. TPA opponents only need one killer amendment; proponents need to block them all.

Strike three: the clock favors TPA opponents. This is a tricky one, since there is no formal clock. In theory, Congress could vote on a TPP agreement next summer, sandwiched in between primary elections, party conventions, and the national vote. But no one thinks this is a good idea. To minimize overlap with the presidential election season, TPP would need to go through Congress this year. So TPA just needs to pass before the end of the year, right?

Not quite. Although the negotiating process for TPP has been quite opaque and opponents have decried the lack of transparency, there are provisions for transparency built into the back end. In the past, TPA bills have required the executive to allow Congress a certain number of legislative days to consider an agreement (and note that there are distinctly fewer legislative days in a year than calendar days — the House is scheduled to have a total of 132 in 2015, for example). Further, before this Congressional clock starts, there is supposed to be a set period of time for the United States International Trade Commission to conduct an analysis of the deal. The text is also supposed to be released 60 days prior to signing of the trade deal.

This sort of calendar backsolving brings us to a big unknown: implicit in the fixation with U.S. politics, it is easy to forget that there are 11 other TPP countries with politics of their own. They still have to agree to a deal, too. The United States has had repeated summits with Japan that failed to yield an agreement, in large part because the United States lacked TPA. Nonetheless, the shape of a deal with Japan seems relatively clear, once the administration does its homework. This is less true of Canada, however. Canada has a national election coming in October and Canadian negotiators have not been eager to take on the politically sensitive dairy industry before it was clear the United States was ready to deal. Other countries, too, have likely postponed politically difficult concessions. There is negotiating to be done. And you never know when one of the countries’ presidents will dismiss the entire cabinet, potentially throwing a wrench in the works. Thus, sometime between the passage of TPA and the start of all the Congressional countdown clocks, there has to be time to conclude the TPP. How much time is unclear.

In some popular games, three strikes mean you’re out. But in this amalgamated metaphorical game, the rules are less clear, so there is still hope. There is a remarkable amount at stake, both in terms of economics and geopolitics. We do not know quite when the buzzer will sound on this game, but it cannot be long now. If TPA has not passed by the end of May, expect to see a lot of dejected pro-trade players with their heads in their hands.


Phil 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.

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