Tag: trade

Europe’s Solar Cartel Enforcers Struggle to Keep Prices High

In what has been aptly named “the world’s dumbest trade war,” both Europe and America have fought to limit imports of low-cost Chinese solar panels.  Much to the chagrin of anyone who likes solar power, the United States and the European Union have imposed high tariffs on Chinese panels in order to protect their own subsidized domestic industries. 

In 2013, the EU negotiated a deal with Chinese solar manufacturers that exempted them from the duties as long as they agreed to sell panels above a set minimum price.  By managing trade in this way, European authorities are essentially creating a solar cartel that divvies up market share among established companies who agree not to compete on price.

But cartel arrangements are notoriously difficult to maintain because any member of the group can ruin the scheme by reneging.  This would seem especially likely when the cartel arrangement was forced on them involuntarily by government in the first place.

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.  

Trade Promotion Authority and the Trans-Pacific Partnership: The Heavy Lifting Lies Ahead

On Friday night of Memorial Day weekend, the U.S. Senate passed the Bipartisan Congressional Trade Priorities and Accountability Act, better known as Trade Promotion Authority (TPA), by a vote of 62-38.  In light of what appeared to be formidable opposition pressing difficult demands that could have seriously prolonged the Senate TPA debate or derailed the Trans-Pacific Partnership (TPP) negotiations altogether, passage of the bill in relatively short order is a credit to the commitment of Majority Leader McConnell, Finance Committee Chairman Orrin Hatch, and Finance Committee Ranking Member Ron Wyden to getting it done.  But proponents of the trade agenda still have a long road ahead.

When Congress reconvenes next week, debate and consideration of a similar TPA bill will be one of the first orders of business in the House of Representatives.  Getting to 218 votes will test the persuasive powers of Ways and Means Chairman Paul Ryan, Speaker John Boehner, and President Obama, who will need to woo Democratic support without losing Republican support in the process. The goal is to pass TPA in a form that is sufficiently similar to the Senate version to avoid the need to reconcile different versions in conference, which would necessitate a second vote in the House. 

Meanwhile, with trade negotiators seeing some progress on TPA, the TPP talks appear to have begun to move into the “end-game” phase.  Although it is uncertain how long this phase of the negotiation might last – because it remains unclear how many issues are outstanding, how much distance there is between the parties, and whether unexpected demands requiring alterations to previously settled parts of the agreement will be made – it is now evident that the soonest Congress could vote to implement the TPP is early 2016, with the distinct and growing possibility that the matter will fall to a lame duck Congress and president or, even, to the next president and the 115th Congress.

Stay tuned for an analysis that fleshes out some of the issues likely to affect the direction and outcome of the trade agenda, including some possible hurdles and other twists and turns in the road.

Time for Hillary to Speak Up on Trade

The Washington Post ran an editorial on Wednesday indicting Hillary Clinton for her silence on the trade agenda. Yesterday morning, the Post published an op-ed by Robert Kagan of Brookings titled “Clinton’s Cowardice on Trade.” Both pieces offer some valid observations, but the matter deserves more scrutiny still.

Is it just me or do others see it as presumptuous, disrespectful, and even contemptuous that the person who expects to head the Democratic Party ticket next year feels entitled to her silence on the single most divisive issue confronting that party? Trade policy is causing a schism between Democrats, and Clinton chooses to showcase her leadership bona fides by … refraining from taking a position? And what does that say about the judgment of her steadfast supporters, whose return silence countenances an evasion akin to deceit? On the other hand, Clinton’s supporters are accustomed to accommodating a more expansive definition of honesty, so perhaps they’re oblivious.

If I were an engaged Democrat, I’d demand to know, now, where Hillary Clinton stands on trade. And if I were a presidential candidate with a reputation for favoring expedience over principle and whose most compelling claim to the White House is that I really, really want to be president, I would want to demonstrate my worthiness by taking a firm position, explaining to my party why I believe that position is the right one, pointing out (as President Obama has) that many of the Left’s objections to trade are based on fallacies, and sticking to it, even if it alienates some factions. Making some people unhappy is a necessity of leadership.

Like President Obama, Hillary Clinton has a history of flip-flopping on trade, so people are understandably confused. As First Lady, she advocated on behalf of her husband’s efforts to forge NAFTA. As a U.S. senator, she was a solid protectionist, voting against trade barriers only 31 percent of the time and against trade-distorting subsidies only 13 percent of the time. As a candidate for president, she expressed skepticism and, at times, indignation about trade agreements and joined with the political left in vilifying NAFTA. As secretary of state, she not only embraced the Trans-Pacific Partnership (TPP), but was instrumental in making it the centerpiece of the administration’s “pivot to Asia.” Today, in the midst of a debate that will make or break the TPP and shape next year’s Democratic Party platform and more, Clinton is mum.

The Trade Promotion Authority legislation struggling to gain support from congressional Democrats would extend the terms of TPA through the entirety of the next president’s first term and into the second (it would expire in July 2021). It is a tool that would be welcomed by any president who sees trade agreements as channels for economic growth and diplomacy. Clinton’s silence implies indifference to the outcome of the TPA debate in Congress and, thus, indifference to trade liberalization as a policy tool. Clinton is well aware that the most important aspect of U.S. foreign policy to most countries is our trade and commercial policy.

So, unless the former top U.S. diplomat, as president, would turn her back on the TPP she once embraced, and pull the rug out from under the Transatlantic Trade and Investment Partnership—outcomes that would deprive the economy of valuable growth opportunities, offend 39 foreign governments, and reinforce perceptions of U.S. decline—she should affirmatively endorse TPA now.

Clinton’s endorsement would signal leadership and provide cover for scores of Democrats in Congress who are wary of the party’s dash to the far left. It would provide refuge for members who want to be on the economically responsible side of the schism. It would create an environment where it is safe to say the anti-trade, progressive emperor is stark naked. 

Rand Paul’s “No” on Trade Promotion Authority Gets It Backwards

Not entirely unsurprisingly, the Senate failed to reach cloture on Tuesday, falling eight votes shy of the 60 needed to start the timer on debate over Trade Promotion Authority (TPA), which will be needed to conclude the Trans-Pacific Partnership (TPP) negotiations and bring it to a timely vote in Congress.  The cloture vote concerned two of four pieces of trade legislation voted out of the Finance Committee two weeks ago (TPA and Trade Adjustment Assistance).  Senate Majority Leader Mitch McConnell excluded the other two bills, which contain language that would attract Democratic support. So, while I wouldn’t bet the ranch on TPA’s passage, there’s still room for horse trading.

In more surprising (and disappointing) news, one senator who will say “no” if TPA makes it to the floor for a vote is Rand Paul, who explained his reasoning on a New Hampshire television news broadcast:

We give up so much power from Congress to the presidency, and with them being so secretive on the treaty, it just concerns me what’s in the treaty.

Let me take Paul’s issues with power, secrecy, and content in order.

Nike, Trade, and the Left’s “Race to the Bottom” Canard

To capitalism’s detractors, Nike symbolizes the Dickensian horrors of trade and globalization – a world ripened for mass exploitation of workers and the environment for the impious purpose of padding the bottom line. They are offended by President Obama’s selection of Nike headquarters as the setting for his speech, last week, in which he touted the benefits of the emerging Trans-Pacific Partnership agreement. But Nike exemplifies the redeeming virtues of globalization and illustrates how self-interested capitalism satisfies popular demands – including, even, the demands of its detractors.

Fealty to the reviled bottom line incentivizes companies like Nike to deliver, in a sustainable manner, what those genuinely concerned about development claim to want. U.S. and other Western investments in developing-country manufacturing and assembly operations tend to raise local labor, environmental, and product safety standards. Western companies usually offer higher wages than the local average to attract the best workers, which can reduce the total cost of labor through higher productivity and lower employee turnover. Western companies often use production technologies and techniques that meet higher standards and bring best practices that are emulated by local firms, leading to improvements in working conditions, environmental outcomes, and product safety.

Perhaps most significantly, companies like Nike are understandably protective of their brands, which are usually their most valuable assets. In an age when people increasingly demand social accountability as an attribute of the products and services they consume, mere allegations – let alone confirmed instances – of labor abuses, safety violations, tainted products, environmental degradation, and other objectionable practices can quickly degrade or destroy a brand. Western brands have every incentive to find scrupulous supply chain partners and even to submit to third party verifications of the veracity of all sorts of practices in developing countries because the verdict of the marketplace can be swift and unambiguous.

Nike remembers the boycotts and the profit losses it endured on account of global reactions to its association with “sweatshop” working conditions in the past. Mattel’s bottom line took a beating when some of its toys manufactured in certain Chinese factories were found to contain dangerous levels of lead paint. There have been numerous examples of lax oversight and wanting conditions, but increasingly they are becoming the exception and not the rule.

Bridging the Hatch-Wyden Divide Over Trade Promotion Authority

The eyes of the international trade community are fixed on Senators Orrin Hatch (R-UT) and Ron Wyden (D-OR), upon whom responsibility for crafting bipartisan Trade Promotion Authority (TPA) legislation has fallen. At last report, Senate Finance Committee Chairman Hatch and Ranking Member Wyden were at an impasse over some important components of the bill, passage of which is widely considered necessary to concluding the long-gestating, 12-nation Trans-Pacific Partnership (TPP) agreement. That agreement must be concluded before the Transatlantic Trade and Investment Partnership (TTIP) negotiations make any progress. Those negotiations will have far-reaching implications for the multilateral trading system, including China, India, Brazil and other countries not currently party to these mega-regional trade agreements. Hence, TPA’s outcome is of worldwide interest.

Trade Promotion Authority has been maligned as a congressional capitulation or executive power grab.  It is neither. The U.S. Constitution grants Congress the authority to “regulate commerce with foreign nations” and to “lay and collect taxes, duties, imposts, and excises” and grants the president power to make treaties with the advice and consent of the Senate. Accordingly, the formulation, negotiation, and implementation of trade agreements require the involvement and cooperation of both branches. TPA is a compact between the branches that obliges these respective constitutional authorities, while guaranteeing an up-or-down vote by Congress, on an expedited basis, of any trade agreement negotiated by the executive branch with foreign governments, provided that the agreements meet the objectives spelled-out by Congress in the legislation. This conditionality is often ignored or brushed over by news reporters, who either spend too much time with trade skeptics or who are looking to economize on words.

Without such a compact, trade agreements would be nearly impossible to conclude because foreign negotiators – knowing that any agreement reached would be subject to congressional revisions – would never put their best offers on the table.  The process of negotiating and renegotiating with 535 officials (instead of one agency, the Office of the U.S. Trade Representative) would make for an interminable process too cumbersome and costly to pursue.  For practical purposes, negotiations have to occur between small parties vested with the authority to speak on behalf of those whom they represent. Trade Promotion Authority is the solution.