Tag: TPP

Sugar and the TPP

How much Australian sugar should be allowed to enter the U.S. market?  That’s a key question the U.S. government must answer prior to concluding the Trans-Pacific Partnership (TPP) negotiations.  The United States is the largest sugar market in the TPP, consuming about 11 million metric tons (MMT) per year.  It also is the largest producer (7-8 MMT) and importer (3 MMT) in the group.  Australia generally is believed to be the most cost-competitive sugar producer among the12 TPP nations.  It also is the largest exporter, annually shipping 3-4 MMT to other countries. 

To complicate matters further, sugar liberalization was explicitly excluded from the 2004 Australia-United States Free Trade Agreement (AUSFTA) due to U.S. political sensitivities.  Australian sugar producers understandably want to redress that omission.  Failure to obtain commercially meaningful access to the U.S. sugar market could lead to rejection of the pact by the Australian parliament.

The U.S. sugar program includes a price-support level for raw cane sugar of 22.25 cents per pound ($490/MT), with refined sugar supported at 26 cents.  Those levels effectively have been raised more than 10 percent to around 24.7 cents ($545/MT) and 30-32 cents, respectively, under the trade-restricting terms of the recent settlement agreement in the antidumping/countervailing-duty (AD/CVD) dispute involving imports from Mexico. (For more on U.S.-Mexico sugar issues, see here and here.)  Mexico is the largest supplier of U.S. sugar imports, generally providing between 1.0-1.5 MMT per year.  Suffice it to say that the agreement between the U.S. and Mexican governments will limit the amount of sugar Mexican producers can export to the United States, and also force that sugar to be sold at higher prices. 

With global raw sugar prices currently at relatively low levels of around 12 cents, Australian cane growers find the possibility of selling more sugar to the United States at high prices to be quite intriguing.  However, those sales currently are limited to the amount allocated to Australia under the U.S. tariff-rate quota (TRQ) regime – a modest quantity of only 87,000 MT.  Australia is asking that the TRQ be boosted by 750,000 MT, an increase of more than nine times.  The United States apparently has offered an additional 65,000 MT (official figure not disclosed), which would not even double Australia’s current access. 

Maui: A Good Start Toward Finishing the TPP

Trade ministers from the twelve nations negotiating the Trans-Pacific Partnership (TPP) met last week in Maui.  Some observers had expressed hopes that the Maui ministerial meeting would produce a final TPP agreement.  The “collapse” in Hawaii has caused some commentators to voice fears that it may not be possible to conclude TPP anytime soon.  Those fears are overblown.  My view is that the Maui meeting qualifies as quite a good start toward actually finishing the TPP. 

Bear in mind that the TPP negotiations have been going on for several years.  The United States became an active participant during President Obama’s first term.  However, until recently, U.S. negotiators have been handicapped by lack of Trade Promotion Authority (TPA, also known as “fast track”).  Other countries were understandably reluctant to try to conclude TPP without assurance that Congress would be willing to vote up or down on the agreement, rather than picking it to pieces with amendments.  So all previous negotiating sessions amounted to warm-up rounds, with the most serious discussions being held in abeyance until the United States finally was ready to engage without reservations.

Maui was the first TPP ministerial at which U.S. negotiators actually were in a position to consider closing the deal.  If all other countries had the same perspective on the issues as the Obama administration, the agreement could have been concluded.  Not surprisingly, other countries have various opinions on key topics.  The Maui talks allowed ministers to put those differences clearly on the table. Undoubtedly, negotiators now have a much better idea of the realm of possible outcomes.  They know what they will be expected to give in order to receive what they want in return.  By last Friday afternoon, it was time for ministers to leave Maui and head back to their capitals for high-level consultations.

The Trans-Pacific Partnership Takes Center Stage

The long process featured hyperbole, demagoguery, fallacy, posturing, horse trading, unexpected tactics, strange political alliances, and several reversals of momentum.  But congressional passage of the Trade Promotion Authority bill was only the warm-up act.  The Trans-Pacific Partnership (TPP) is the headliner, and the process of concluding, ratifying, and implementing it promises more drama.

The TPP is a prospective trade agreement between the United States and 11 other nations, which has been under negotiation for 6 years. The Obama administration made the TPP the economic centerpiece of its “pivot to Asia,” encouraged the participation of other countries, and expanded the scope of the negotiations.  Beyond reducing tariffs and other border barriers, the TPP will include rules governing labor and environmental standards, government procurement, intellectual property protection, investment, supply chains, state-owned enterprises, and much more. The scope of the deal is so broad that the final agreement will likely include 29 separate chapters.

For the better part of a year, the word from TPP negotiators has been that a deal was close and that the main obstacle to its completion was the absence of TPA.  Logically, U.S. trade negotiating partners would be unwilling to put their best offers on the table unless the president could guarantee them that the deal was final and would not be picked apart and amended by Congress.  With TPA now secure, that impediment is gone – and the credibility of those “TPP-near-completion” claims is about to be tested. Just last week, Australia’s Trade Minister Andrew Robb said the TPP was “literally one week of negotiation away from completing.” In about 8 days, that will be proven too rosy a promise.

Trade Promotion Authority and the TiSA’s Immigration “Smoking Gun”

A widespread criticism of Trade Promotion Authority (TPA), which remains in limbo after a surprising legislative mess last Friday, has come from conservative skeptics who believe that TPA will permit President Obama to change US immigration laws unilaterally.  Originally a fringe argument, it gained momentum earlier this month when WikiLeaks published the confidential draft negotiating texts on the Trade in Services Agreement (TiSA), which is currently under negotiation.  Among those texts was an Annex on “Movement of Natural Persons” – one of the standard “modes” of supply (Mode 4) negotiated in trade agreements that cover services.  The leaked annex, TPA critics claimed, was “smoking gun” proof that President Obama was, in fact, secretly negotiating with foreign governments to liberalize US immigration restrictions without congressional input, and that TPA would grant him the power to lift such restrictions in the very near future.  The facts surrounding TPA, TiSA and global services trade, however, effectively rebut such claims.

BACKGROUND

Before getting to these facts, it’s important to understand just what TiSA is.  The TiSA is a plurilateral free trade agreement on services being negotiated among 27 participants (including the US and EU).  TiSA began in 2012 but only picked up momentum over the last year or so, as the World Trade Organization’s (WTO) Doha Round, which also included services, faded.

If signed and implemented, TiSA would likely represent a major economic win for the United States, given that (i) the vast majority of the US economy is services; (ii) the United States has a large comparative advantage in global services; and (iii) unlike goods, global trade in services remains relatively restricted.  TiSA’s basic goals include that each participant offer to all other parties, at a minimum, the best commitments that it has made in preferential FTAs, and, importantly, the eventual “multilateralization” of the agreement into the WTO such that it is open for accession by all WTO Members.  As such, the architecture and principles of the TiSA reflect those of WTO’s General Agreement on Trade in Services (GATS), which was finalized in 1995 and covers all WTO Members including the United States.  Any final, multilateralized TiSA deal would be a very good thing for those who support free markets and, of course, the US global economies.

Despite these benefits, the leaked TiSA has caused an uproar among skeptical (and in many cases, anti-immigration) conservatives.  (It’s also upset anti-trade liberals who see the deal as “global deregulation,” but that’s a canard for another time.)  As mentioned, however, there are a lot facts that undermine the argument that the TiSA represents an immigration “smoking gun.”

Today’s Trade Vote Is Getting A Partial Do-Over Next Week—Here’s Why

A very unexpected outcome during a series of votes on trade policy in the House of Representatives has managed to confuse pretty much everyone today. 

The most important and controversial bill in the package was Trade Promotion Authority, which narrowly passed the House 219-211 with 28 Democrats in favor and 54 Republicans opposed.  Trade Promotion Authority (TPA) will enable the President to conclude the Trans-Pacific Partnership (and other) trade negotiations and submit a final agreement to Congress for an up-or-down vote. 

But in order for TPA to go to the President’s desk, the House must also pass Trade Adjustment Assistance.  That’s because TAA was included together with TPA in the bill the Senate passed last month. 

Normally, Democrats support TAA, which is an entitlement program for people whose jobs are displaced due to import competition.  Many Republicans oppose TAA as a useless, big-government entitlement program.  House leadership chose to hold two separate votes on TAA and TPA to prevent Republicans from voting no on the package out of opposition to TAA. 

That strategy may have backfired.  Because advancing TPA required passage of TAA, Democrats were able to scuttle the whole thing by voting no on TAA.

But it’s not over yet.  Republican leadership is planning a do-over on the TAA vote in order to salvage TPA.  So there’s likely going to be another vote on TAA early next week.  In the meantime, Republican leadership and President Obama will be madly lobbying their respective party members to muster enough support.

For practical purposes, this result means that Congress has kicked the can down the road for a few more days.  Today’s vote was definitely not a win for the President or GOP leadership, but they haven’t been defeated either.  They can still pull out a victory if they can win enough votes next week to pass TAA—a bill that was defeated today by a solid 126-302.

Strange Bedfellows, Schisms, and Subterfuge: Where Does the Trade Agenda Stand?

The Trans-Pacific Partnership is a still-evolving trade agreement that would reduce tariffs and other barriers to goods and services trade between the United States and 11 other countries. It also would likely include provisions designed to protect certain U.S. industries from the full effects of competition.  A TPP agreement, then, would likely increase our economic freedoms in some realms and reduce them in others.  How these pros and cons would be manifest is unclear at the moment, given the fact that the deal is not done.  But it would a mistake to forego the opportunity to evaluate a completed trade deal that could deliver significant benefits. 

It is broadly understood that the TPP negotiations cannot be concluded without the Congress passing, and the president signing, Trade Promotion Authority legislation.  Without TPA, the president could not be sure that any trade deal brought home reflected the official wishes of Congress, and the likelihood that foreign negotiators would put their best and final offers on the table—knowing that Congress could unravel the deal’s terms—is close to zero.

The Senate passed TPA legislation (along with language reauthorizing the Trade Adjustment Assistance program) on May 22.  The House is likely to take up the bill this week.  At the moment, the president is in lockstep with a large majority of congressional Republicans, who support trade liberalization and see TPA as essential to the process.  But some Republicans (mostly from the conservative wing), who are wary of giving this president any more power, have joined ranks with the vast majority of congressional Democrats in opposition to TPA.  Meanwhile, Democratic presidential frontrunner Hillary Clinton—an architect of the TPP as Secretary of State and a potential heir to the trade agenda—has refused to take a position on TPA.

The spotlight on trade policy has generated much more heat than light.  Misinformation abounds.  Rationalizations masquerade as rationales.

This new Cato Free Trade Bulletin is intended to dispel some of the nonsense that has been circulating and to present a brief, objective assessment of what has transpired and what lies ahead for TPA and TPP.

Republicans Should Welcome Trade’s “Burgeoning Bromance”

The skepticism was evident in conservative talk-show host Laura Ingraham’s voice when she referred to the working relationship between President Obama and Senate Majority Leader McConnell as a “burgeoning bromance.” Her sentiment is shared by a number of Republicans in Congress, who are unhappy that Senate and House leadership is working with the president to secure Trade Promotion Authority.

Perhaps it’s no longer axiomatic that trade divides Democrats and unites Republicans.  According to Politico, “about 40 to 45 of the 245 Republicans in Congress are hard ‘nos’ on [TPA]” with many asking: Why would Republicans want to give this president, who has aggrandized his authority and disregarded congressional prerogatives, any more power?  Well, they shouldn’t.  However, TPA would not give the president any power to make mischief.

Trade Promotion Authority is neither a congressional capitulation nor an executive power grab.  It is a compact between the branches, which effectively deputizes the president to negotiate trade agreements on behalf of Congress, which meet parameters and fulfill objectives spelled out by Congress, which are put to votes in both chambers of Congress. 

If the concluded trade agreement meets Congress’s parameters and fulfills its objectives, legislation to implement the agreement is considered without amendments on an expedited timetable by an up-or-down vote.  If the agreement fails to meet Congress’s parameters or fulfill its objectives, it can be taken off the so-called fast-track through a resolution of disapproval.  And, ultimately, members and senators can always vote “no” if they don’t like the deal.  

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