Shadow Government

The Trade Endgame

There's still time for the Obama administration to cement its legacy on trade.

US Trade Representative Michael Froman speaks during a press conference at the Office of the US Trade Representative in Washington, DC, December 8, 2015. Froman announced that the US has filed a dispute with the World Trade Organization (WTO) regarding China imposing taxes on imported aircraft and parts, including those made in the US, while exempting Chinese aircraft and parts, which is prohibited under WTO rules.  AFP PHOTO / SAUL LOEB / AFP / SAUL LOEB        (Photo credit should read SAUL LOEB/AFP/Getty Images)
US Trade Representative Michael Froman speaks during a press conference at the Office of the US Trade Representative in Washington, DC, December 8, 2015. Froman announced that the US has filed a dispute with the World Trade Organization (WTO) regarding China imposing taxes on imported aircraft and parts, including those made in the US, while exempting Chinese aircraft and parts, which is prohibited under WTO rules. AFP PHOTO / SAUL LOEB / AFP / SAUL LOEB (Photo credit should read SAUL LOEB/AFP/Getty Images)

With the Obama administration approaching its final months, it’s worth asking the question: At what point is it too late to get things done? The White House provoked this question this month, when spokesman Josh Earnest said of the Transatlantic Trade and Investment Partnership (T-TIP), the pending trade deal with the European Union:

I do not believe that we’re going to reach a T-TIP agreement before the President leaves office, but he’s certainly interested in moving those negotiations forward and in a direction where we can be confident that the economy of the United States will be enhanced through the completion of an agreement hopefully under the leadership of the next U.S. President.

In February 2013, when those T-TIP talks were about to launch, Vice President Joe Biden told the Munich Security Conference, “if we go down that road, we should try to do it on one tank of gas and avoid protracted rounds of negotiations.” Many refills later, negotiators are preparing for a twelfth round of talks next week. At this year’s Munich conference, Secretary of State John Kerry extolled the virtues of the T-TIP, and U.S. Trade Representative Mike Froman said now was the time to conclude the deal.

Earnest was clearly being more candid than the cabinet. For reference, the administration finished the Trans-Pacific Partnership (TPP) negotiations more than 4 months ago and there are serious questions about whether it will get through Congress this year. So, if T-TIP completion seems improbable, what are negotiators to do? Should they call off talks and start packing their offices? Or should they press on to get as far as they can?

While it seems awfully early to give up, the problem is that the administration hasn’t managed to forge a bipartisan understanding on trade policy. Actually, as the debate over the TPP demonstrated, it is not clear they have even forged an understanding within their own party.

After harshly criticizing past trade agreements, President Obama belatedly tried — and failed — to build support for trade agreements among Democrats. Only 28 House Democrats supported granting him negotiating authority last spring. President Obama has trumpeted the completed TPP as the most progressive trade agreement ever, but this week the Sierra Club protested USTR Froman’s California speech in support of what they called a “shark-killing trade deal.” House Ways and Means Ranking Member Sandy Levin (D-Mich.) attended the concluding TPP negotiations in Atlanta last October (unlike his Republican counterparts), but this week announced his opposition to the pact. Leading Democratic presidential candidates Sen. Bernie Sanders and Secretary Hillary Clinton have both pledged their opposition.

While Republican legislators have been substantially more supportive of the administration’s trade agenda (190 voted in favor of negotiating authority in the House), there is hardly a consensus between Republicans and the White House on the sorts of regulatory issues that dominate T-TIP discussions.

Why does this all matter? Because European Union negotiators face a choice. The T-TIP negotiations have proven highly controversial in Europe. Thus, vigorously pursuing the agreement could come at a political cost. What would be the point for them of putting forward an ambitious proposal — and getting lambasted — if everything needs to be revisited in January anyway?

As with judicial nominations, President Obama has every right to fulfill the duties of his office throughout his term. He and his team can pursue trade talks, meet with counterparts, and table his own proposals. The question is how seriously these proposals will be taken.

This is the familiar idea of “back-solving” in game theory: if you see that a bad outcome looms several steps down the road, it can strongly influence choices right now. For the administration and trade talks, the implication may be that it’s later than they think.

Photo Credit: SAUL LOEB / Staff

 

 

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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