Tag: trade

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.

Fear of Chinese Economic Hegemony

In the context of discussing the Trans Pacific Partnership (TPP), and the U.S. role in the Asia-Pacific region, Robert Kagan of Brookings raises the specter of competition with China and says this:

Economically, China would like to turn Asia into a region of Chinese hegemony, where every key trade relationship is with Beijing.

Along the same lines, law professor Noah Feldman says:

China is using its close economic relationship with its neighbors as leverage to build its geopolitical position. Its ultimate goal is to displace the U.S. as the regional hegemon.

I’m puzzled by statements like these.  What do Kagan and Feldman think Chinese economic “hegemony” in Asia would look like?  What exactly do they fear?

I don’t know the answer to what’s going on in their minds, but I have tried to look at what China is actually doing.  One thing it is doing is signing trade agreements with other countries in the region.  So are these trade agreements part of a scheme to dominate its neighbors?  Well, the text of the agreement China signed with Australia was just released, so let’s take a look at some of what it says.  As described by the Australian government, China would liberalize a lot of its trade with Australia, including the following:

  • Health and aged care services: China will permit Australian service suppliers to establish profit-making aged care institutions throughout China, and wholly Australian-owned hospitals in certain provinces. This will greatly expand the Australian private health sector’s offering of medical services through East Asia.

So Australia is touting the agreement as a way to build hospitals in China, and more generally to sell products there. (Australia also notes that 92.9 per cent of China’s imports of resources, energy, and manufactured products from Australia will enter duty free right away, with most remaining tariffs removed within four years.) This makes the whole idea of China’s “economic hegemony” sounds a lot less scary. Rather than setting up a system to compete with the United States, China seems to be participating in the same rules-based, liberalizing trading system that the United States and just about everyone else is in.

I wrote more about this issue in a recent Free Trade Bulletin.

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.

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.

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