Topic: Trade and Immigration

Fast Track Is a Waste of Time

As Cato’s Dan Ikenson has pointed out before, the Obama administration likes grand trade policy proposals, like the Trans-Pacific Partnership or the proposed U.S.-EU trade agreement, but isn’t putting in the political effort needed on the domestic side to secure approval of these agreements.

The president’s decision to nominate Senator Max Baucus (D-MT) to be the next U.S. ambassador to China is a perfect example of this problem.  Three years into negotiations toward the Trans-Pacific Partnership agreement, the president finally decided to seek fast track trade promotion authority this fall, and Baucus has been instrumental in putting together a bipartisan bill.  With Baucus being sent to China, there will be no prominent Democrats in either the House or the Senate supportive of fast track.

This development should surely not engender confidence in the ultimate success of the TPP, but there’s one counterintuitive way to help bring much-needed focus to U.S. trade policy:  Stop worrying about fast track.

Fast track authority is an arrangement between the president and Congress designed to ease the passage of trade agreements.  Congress agrees to hold a timely, up-or-down vote on future trade agreements.  In exchange, the president agrees to adopt a series of negotiating objectives demanded by Congress.

Many trade advocates believe that fast track authority is necessary to gain Congressional approval of free trade agreements, but I have a new bulletin out today explaining how, right now, fast track will do more harm than good.

First, with the current partisan alignment in Congress, we don’t need fast track to pass the TPP.  And second, the negotiating objectives Congress imposes through fast track include bad policies that could disrupt the negotiations at this late stage, and even delay completion of the agreement.

If there were a chance that Congress would use the fast track bill to make the TPP a better free trade agreement, then I would support it.  But there is absolutely no indication that anyone in Congress is going to push for that.  Taking up fast track now accomplishes nothing of value, but will serve as divisive political theater while ultimately reducing the quality of the TPP.

You can learn more by reading the bulletin.

The Economic Impact of NSA Spying

At some point, I hope someone does a thorough, empirical study of the impact of NSA spying on U.S. companies.  But for now, all we have is anecdotal evidence, like this:

Today Brazil’s government announced it won’t buy $4.5 billion worth of US fighter jets in a move attributed to anger over controversial US intelligence-gathering that targeted Brazilian citizens and officials, including president Dilma Rousseff.

The Brazilian government’s official statements pointed to performance and cost issues as the reason to pick Sweden’s Saab AB to develop 36 fighters, though many observers had believed Boeing had the upper hand while bidding to expand Brazil’s air force.

Calling the decision “disappointing” in a statement, Boeing says it isn’t done trying to sell to Brazil, a major client for the company’s commercial air business, noting that ”over the next several weeks, we will work with the Brazilian Air Force to better understand its decision.”

One way to understand it: “The NSA problem ruined it for the Americans,” a Brazilian government official told Reuters. Public opinion turned against the US, and Brazil is leading the charge for a United Nations resolution that would limit electronic surveillance. Edward Snowden, the former National Security Agency contractor whose leaks revealed the US surveillance, obliquely requested asylum in Brazil earlier this week, but it looks the country isn’t interested in hosting the whistleblower.

Today, a White House panel charged with assessing American electronic snooping released a report urging new limits on US intelligence agencies. One of its recommendations is to more carefully assess the costs of surveilling foreign leaders like Brazil’s Rousseff. On this front, Brazil’s decision on the fighter planes is a costly object lesson for the US government.

Bali’s Lessons for Trade Negotiators

The future of multilateral trade has presented some vexing questions for policy watchers over the past few years. With the Doha Round of multilateral trade negotiations hopelessly stalled and the proliferation of regional and bilateral agreements in its stead, contemplation and debate about the fate of the World Trade Organization, its successful adjudicatory body, international trade governance, and globalization have been all the rage.

December continues to shine a particularly bright light on these issues, as U.S. and EU negotiators are in Washington this week discussing the proposed bilateral Transatlantic Trade and Investment Partnership. Last week, negotiators from the United States and 11 other nations met in Singapore in an effort to advance the regional Trans-Pacific Partnership deal. The week prior, representatives of 159 WTO members were in Bali, Indonesia for the Ninth Ministerial Conference (MC-9), where a multilateral agreement was reached on a set of issues for the first time in the WTO’s 19-year history.

The significance of the Bali deal depends on whom you ask. Those heavily vested in the current architecture of the multilateral system tend to hail Bali as proof that multilateral negotiations are back in business and that there is renewed promise for completing the long-stalled Doha Round. Frankly, taking 12 years to forge an agreement on trade facilitation (basically, reform of customs procedures, which constitutes a tiny fraction of the Doha Round’s objectives) plus some concessions to permit more subsidization of agriculture in the name of food security is not exactly convincing evidence that Doha Round negotiators have demonstrated their cost effectiveness or the utility of this approach.

How Dare They Not Want Us to Spy on Them!

Some members of Congress are upset that other countries around the world are taking action to protect their citizens from the U.S. spy machine.  But rather than doing something within their own power to address the economic backlash from  U.S. policies by, say, changing the policy, these members of Congress are blaming others and threatening to bully them.  According to an AP report:

Germany has asked European Union officials to consider restrictions that would prevent U.S. companies from processing commercial and personal data from customers in Europe. That could affect the flow of information and hurt U.S. businesses such as Google, Facebook, Apple and Amazon.

A bipartisan group of House members — 12 Democrats and six Republicans — has sent a letter to U.S. Trade Representative Michael Froman, insisting that nations abandon such efforts as a condition of pending trade pacts. (emphasis added)

Maybe reducing the ability of Americans to do business with foreigners is the only way to keep terrible harm from coming to U.S. companies impacted by this scandal.  I’m skeptical, so let’s ask them:

Lawmakers sent the letter a week after a coalition of businesses including Google, Apple, Yahoo, Facebook and Microsoft penned its own, asking Obama to curb the surveillance programs.

Silicon Valley has been fighting in the courts and in Congress for changes that would allow them to disclose more information about the secret government orders they receive. Several companies are introducing more encryption technology to shield their users’ data from government spies and other prying eyes. (emphasis added)

Since option B solves the problem and increases liberty, let’s try that one first, please.

(I would be remiss not to point out the House Intelligence Committee’s strident condemnation just last year of Huawei, and their subsequent recommendation that U.S. companies avoid doing business with the Chinese telecom giant to ward off vague dangers of cyber espionage.)

Ohio Backs off of REAL ID

Sometimes there are setbacks to the efforts of the Department of Homeland Security, the American Association of Motor Vehicle Administrators, and state motor vehicle bureaucrats to quietly knit together a national ID. If this story is true, Ohio appears to be breaking with the national ID plan.

What’s remarkable about this case is Ohio’s recognition that the federal government will never act on the threat that TSA will refuse drivers’ licenses and IDs from states that decline to implement the REAL ID Act.

Ohio is among a growing number of states that are refusing to comply with federal standards intended to toughen access to driver’s licenses. … The states are betting that federal officials do not implement plans to accept only “Gold Star” licenses as proof of identity to fly on commercial flights or to enter federal buildings and courthouses. “We’re not so sure the federal government” will only honor IDs that meet its requirements, [Ohio Department of Public Safety spokesman Joe] Andrews said.

Time was when states fell in line at the suggestion of this federal government threat. Eight-and-a-half years after REAL ID became law, the states may be recognizing the inability of the feds to coerce them into implementing their national ID.

Cuba: Global Free Trade Champion?

I would like to second Simon Lester’s ambivalent endorsement of the trade agreement reached by WTO members in Bali last week.  Despite cheers from governments and embarrassingly unrealistic claims of economic value, the new WTO agreement on trade facilitation is hardly something for free traders to get super-excited about. 

There was some excitement, however,  when a bit of last-minute diplomatic drama at the talks threatened to derail everything.  Cuba, it turns out, had some genuine demands for actual trade liberalization and indecorously refused to be ignored.  As reported by Inside U.S Trade [$]:

Cuba and three other Latin American countries – Bolivia, Venezuela and Nicaragua – had withheld consensus from the so-called Bali package consisting of a trade facilitation agreement as well as agriculture and development components.

Specifically, Cuba had refused to endorse the package until its demands were met for a provision in the trade facilitation deal that would prevent countries from applying discriminatory measures to goods in transit. This was aimed at counteracting a part of the U.S. trade embargo that prevents ships that engage in trade in Cuban ports from unloading cargo in the U.S. for 180 days thereafter.

After Cuba’s demands on trade facilitation came to the fore as the last outstanding issue on the evening of Dec. 6, WTO Director-General Roberto Azevedo held consultations throughout the night with the U.S. and Cuban delegations until 6 am. At that point, the two sides agreed to compromise language to address Cuba’s demands, according to an informed source.

The compromise language consists of one sentence in the Bali ministerial declaration that appears immediately after a sentence adopting the trade facilitation deal. It states: “In this regard, we affirm that the non-discrimination principle in Article V of the [General Agreement on Tariffs and Trade] 1994 remains valid.”

This “compromise” means that the U.S. takes on no new obligations, and the embargo remains as is.  Cuba wasn’t looking for an end to the embargo with its demands, merely recognition that this one small component of the embargo violates the brand new, U.S.-approved WTO rules. 

It’s difficult to imagine, however, that the process could have worked out any differently.  If there’s one thing that’s clear about the new WTO package at this point, it’s that the deal will not have any meaningful impact on U.S. trade policy.

Something is amiss when the global trading system’s achievements depend on the United States convincing Cuba and Venezuela to stop demanding freer trade.

Trade Talks Are Heating Up

There’s suddenly a lot going on in the trade negotiating world.  Unfortunately, there is not as much free trade involved as one might hope or expect.

Over the weekend, the members of the WTO reached an agreement on several issues, the main one being “trade facilitation”.  This was touted as a big deal because it is the first time the WTO agreed on just about anything in its almost 20 years of existence.  In addition, supporters talked up its potential “$1 trillion” increase in global trade. 

It’s important to understand, however, that this agreement is not an agreement under which all countries will lower tariffs or barriers to trade in services, which is the traditional kind of trade agreement.  My colleague Dan Ikenson wrote about trade facilitation here. Reading through a draft of the agreement, it seems to cover two things.  First, it tries to achieve “good governance” in customs procedures, such as through requiring an appeals process for customs decisions.  And second, it requires governments to speed up the import process where possible, for example by letting frequent traders use expedited procedures. These are all good things, but it is not the same as using trade agreements to rein in protectionism. Also of note is how it accomplishes these things.  Basically, it will be rich country governments paying, through money and training, for improvements to customs procedures in developing countries. Is that the best way to accomplish all this?  I’m not really sure, to be honest, but that’s what they are doing.

Next up is the Trans Pacific Partnership (TPP), an agreement being negotiated by 12 countries in the Pacific region.  Those talks have started up again, with a goal of finishing by the end of the year. (Probably won’t happen, but it’s good to have goals, I guess).  What’s fascinating about these talks is how many non-free trade issues are involved.  Someone just leaked a summary of where the parties stand on all the issues.  What jumps out at me in this document is that about half the issues deal with environmental law or intellectual property!  Not that there is no free trade at all in there, of course.  There is the traditional tariff lowering as well.  But there are so many other things to be ambivalent about.

And finally, next week the Europeans will be in town for another round of negotiations on the Transatlantic Trade and Investment Partnership (TTIP).  These talks are in a much earlier stage than the others.  The big issue being talked about here is what to do about “regulatory trade barriers.” Some on the left fear that this will mean lowering everybody’s regulation to a least common denominator.  Some conservatives and libertarians worry that it will mean more regulation, as regulations are harmonized around higher standards.  In practice, I think it is unlikely to mean either of these things.  I don’t see much of a role for international law, through trade agreements, to make substantive regulatory policy, and I would be surprised if the TTIP does much of this.  But where I think international agreements could help is pushing countries to remove the impact of divergent regulations.  For example, if the U.S. and EU both regulate for auto safety, but do it differently, why can’t both sides sell their cars in the other market as is, based on the assumption that the regulations are functionally equivalent?

So that’s a basic round-up.  There are some modest successes, and some issues causing distractions from actual free trade, but things are moving forward, for better or worse.  (How’s that for a not-so-ringing endorsement?)