TPA and TPP: At The End of the Road, or Just Another Bend?
Not since the last multi-lateral round of trade negotiations — the so-called Uruguay Round — was completed twenty years ago has so much attention been given to trade on both sides of the Atlantic. The U.S. has the Trans-Pacific Partnership (TPP) with eleven Asia rim countries nearly wrapped up and ready to be sent to Congress for approval. Though further from fruition, the Transatlantic Trade and Investment Partnership, or TTIP, covering the United States and the EU countries, likely has greater economic rewards and promises even deeper economic integration between the world’s two largest economies. In fact, TTIP has already aroused so much interest in Europe that members of the European Parliament tabled over 200 amendments to a proposed agreement that hasn’t even been written yet!
But, most people on either side of the Atlantic don’t appreciate the arcane rules for trade agreements that exist in the United States. Neither TPP nor TTIP can even get to the launching pad without a preliminary step occurring — that is the passage of Trade Promotion Authority (TPA) which allows the president to conduct trade negotiations. Last week’s vote in Congress defeating the worker retraining provisions of the U.S. President Barack Obama’s TPA legislation caught trade mavens around the world by surprise and left them bewildered as to what might happen next.
So, perhaps this is a good time to try to unpack a few of the myths and mysteries surrounding Trade Promotion Authority and the underlying agreements it seeks to launch — the Trans-Pacific Partnership, and the Transatlantic Trade and Investment Partnership.
Trade legislation is simultaneously among the most technical and least understood areas of legislation that Congress tackles, while at the same time being politically complex and convoluted. The trade negotiation itself covers multiple areas of interest, ranging from the obvious levels of tariffs, or duties, imposed on imported products, to much more subtle and complex issues confronting international commerce — protection of intellectual property rights, use of genetically modified products in agricultural exports, making procurement rules fair and uniform, and how trade disputes can be settled — to name but a few. Such negotiations require a great deal of horse trading and jockeying for position. Not unlike a negotiation over a contract for a complex business transaction, both parties prefer to keep their negotiating positions under wraps until a deal is made and both — or multiple — parties have an agreement.
Thus, the argument that TPP is a “secret” negotiation is simply not true. It is exactly the same process that has been adhered to in every trade negotiation of the last fifty years. And no part of the agreement can go into effect without the full disclosure and debate in Congress. But the very fact that negotiations take place behind closed doors leaves the trade agreement open to charges of “secret deals” being made on everything from immigration to repeal of the bank regulations imposed by the Dodd-Frank Act. It is all the more ironic that labor unions are making the most noise about this “secrecy” considering most union-management contracts are negotiated behind closed doors.
Why does the president need Trade Promotion Authority at all? Why not just negotiate agreements with other countries and submit them to Congress like any other piece of legislation the president wants to put before Congress? The answer goes to the very heart of trade agreements. No country — or countries, if we are talking about a regional or multinational trade negotiation — wants to put their best offer on the table until they know there is a complete package. When a trade agreement is initialed and a handshake made, other negotiators need to be assured there will be a simple up or down, yes or no vote in Congress or parliaments of other nations around the table. Were Congress allowed to make piecemeal changes to the agreement as they debate, it would mean there is no final agreement and everything would go back to square one.
Thus, more than 40 years ago, Congress and the president devised a process known as “fast track,” now more benignly—or obscurely—named “Trade Promotion Authority.” It is not, as some have suggested, a grant of sweeping or unlimited powers to the President. In fact, it is quite the opposite. With this legislation, which normally precedes the negotiation for a trade agreement, Congress sets the parameters for the President’s negotiators — which countries are to be included, the specific areas of commerce subject to the negotiation, a schedule for consulting and reporting to Congress during the negotiation, and a deadline for completion. In return, when the president sends the completed agreement to Congress for approval, Congress agrees to consider it and give an up or down vote within 60 days. The agreement is not a treaty which would only be subject to ratification by the Senate because it changes many provisions of law, notably tariffs, or taxes. It must be considered by both the House and Senate as legislation.
So, passage of TPA is an essential precursor for consideration of any major trade agreement. Without enacting it into law, no agreement can be finalized, the last deals made, and the veil lifted on its provisions.
Then there is the caboose at the end of this train — Trade Adjustment Assistance (TAA). This is money set aside to retrain workers who lose their jobs as a result of a trade agreement, like if a company relocates offshore as a result of lowering tariff barriers, for example. The retraining programs are usually administered by labor unions. Thus, while Republicans view the programs with suspicion for being wasteful, most Democrats embrace them as added support for labor union activities. While not a part of any trade negotiation with other countries, TAA has always been considered required “bait” to get the necessary votes for the president’s negotiating authority. The current TPA legislation passed by the Senate included $2.9 billion for TAA.
Which brings us to the current impasse. The legislation passed by the Senate a few days earlier included both the underlying TPA for Obama and the TAA retraining program money. But there was a problem in the House on both sides of the aisle. With a narrow vote expected on TPA, some Republicans balked at voting for it if it included what they considered an ineffective worker retraining program. Democrats, on the other hand, objected to the offsets the Senate had used in the legislation to pay for the TAA. While not reducing any Medicare programs or benefits, it made some other changes within Medicare.
After intense negotiations within their own caucus and with the minority leader, Speaker John Boehner and his team agreed to do two things: change the package of offsets so it did not include any changes to Medicare, and separate the vote on TAA from the main vote on TPA so Republicans who wanted to vote no on worker retraining programs could do so and still support trade. Democrats would get worker retraining money and not have to vote to give the president trade negotiating authority.
This strategy turned out to be a huge mistake. Labor unions and other anti-trade activists in and out of Congress immediately sensed that cutting the umbilical cord between the two programs provided a means for defeating TPA. Even as Republican leadership was gradually gaining ground on the vote for TPA with the support of Obama and the handful of pro-trade Democrat members still in the House, defeating TAA would mean the legislation was not the same as had passed the Senate. The legislation could not be sent to the president for signature. A vote for TPA became symbolic.
So what happens now? Several scenarios can be suggested. Since Democrats are suffering from the same malaise that has afflicted Republicans throughout the Obama years — dissension within the ranks — the GOP leadership might decide to leave Obama twisting in the wind and make no further attempt to pass TPA. This would be a huge geopolitical and economic mistake but it might be tempting.
Second, they could try to round up — or rather make Democrats round up—votes for the TAA and pass it on a second try, making the legislation “whole” again and ready to go to the president. This scenario would be a real stretch, however. Democrats have already fallen on their swords, voting against a program dear to their hearts in order to defeat something they regard as far worse. Few, if any, Democrat votes would be changed on a second run, and it is impossible to envision getting 218 votes from Republicans for a program so universally disliked.
Third, Senate Majority Leader Mitch McConnell could take the bill back from the House, strip TAA so it is identical, pass it and send it to the president. The catch here, of course, is the 60 vote requirement in the Senate necessary to get any legislation passed a filibuster. Democrats in the Senate who provided the critical votes to pass TPA are unlikely to vote for it without worker retraining provisions.
Fourth — and most likely — is a variation on the third scenario. The Senate could pass TPA without any worker retraining provisions but pass a separate bill including them and send it over to the House for consideration. This scenario only works if Obama buys into it. Were he to pledge that he will hold TPA at his desk until he gets the separate TAA bill, then Democrats in the House are in the driver’s seat again. By voting down TAA once again they could effectively force Obama to veto his own much wanted trade authority legislation. He would have to warn Democrats he intends to sign the TPA legislation in any event, leaving them with little choice but to vote for worker retraining — the program they like so much.
Such political machinations seem unworthy of a country that has historically led the world on trade and is even today the largest trading country on the planet. If TPP is aborted before birth by the failure to give it the oxygen it must have from TPA, and if TTIP never gets any further than the preliminary work that has already been done, then the United States will have forfeited its leadership role in a world of growing commercial ties. Just as they have done with the creation of the Asia Infrastructure Investment Bank, China is likely to rush into the vacuum and create its own set of trade relationships in Asia. But this time, they will be writing the rules. With TTIP stopped dead in its tracks, they may be able to do the same globally.
There is still time for Congress to make TPA work, but the window is narrowing. If
TPP and TTIP are to become realities, this is the time for bold leadership, not vacillation. It is the time for determination, not hesitation.
The views expressed in GMF publications and commentary are the views of the author alone.