Tradewinds, headwinds

by Robbin S. Johnson
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Congressional approval of the T.P.P. faces many headwinds.

WASHINGTON — After years of negotiation capped by a 5-day marathon session in Atlanta, the 12 countries party to the Trans Pacific Partnership (T.P.P.) concluded a deal on Oct. 5. This should have completed the second stage in the process of concluding this trade agreement. The first stage was the narrow passage by Congress earlier in 2015 of presidential “trade promotion authority” (T.P.A.), sometimes called “fast track,” which commits Congress to voting the agreement up or down without amendment.

The third and final phase is congressional consideration of the deal. President Obama, in remarks at the U.S. Department of Agriculture, already has promised to lead a broad discussion of the pact’s merits as he pushes for its passage. If he is successful, it will represent a major victory and a key cornerstone in his administration’s foreign policy pivot to Asia.

Congressional approval, however, faces many headwinds. Included are: traditional opposition to trade agreements, including some within agriculture; the politics of a presidential election, which has caused several candidates to withhold support; distractions from other issues, including Mideast turbulence and domestic concerns about economic inequality; pressures to renegotiate some provisions; and strategic concerns around the idea of an agreement that excludes major economies, including the BRICS (Brazil, Russia, India, China and South Africa).

U.S. domestic debate

The U.S. domestic debate over TPP promises to be vocal and divisive. The deal itself is complex, with some 30 chapters covering a wide range of commercial and related issues and raising a number of legitimate questions about whether it is a good deal and for whom. Because trade deals also always appear to have winners and losers, those interests will square off. The Oct. 6 issue of The Wall Street Journal reported on likely winners and losers based on International Trade Commission data and a Peterson Institute for International Economics analysis.

The article called out agriculture, especially grains, oilseeds, animal products and fruit, as benefitting from tariff reductions and other reforms contained in the agreement. Large U.S. manufacturers — like Boeing and Caterpillar — also stand to gain, as well as many of the companies in America’s growing tech industry. These players, as well as major business groups like the U.S. Chamber of Commerce and the National Association of Manufacturers, will urge T.P.P. passage.

Potential losers flagged in the WSJ article included large pharmaceutical companies, whose protection for proprietary biologics will fall from 12 years to as little as 5 years. U.S. dairy and sugar interests have expressed concerns. The tobacco companies also were prevented from suing foreign governments over anti-smoking warnings, and there are concerns that the currency manipulation provisions to be contained in a parallel agreement will not be strong enough to curb such actions. These interests may oppose, or at least not support, T.P.P.

More generally, the administration and other supporters likely will stress that more than 18,000 tariffs are cut, with a large benefit to the United States, which typically has had lower duties. T.P.P. also will bring important predictability to the 40% of global commerce covered by the deal. Pushing back will be labor groups, who fear loss of jobs and downward wage pressures, and environmental groups, even though the deal includes new environmental provisions, including restraints on trade in protected species.

Debate over T.P.P. also will unfold against a backdrop of presidential politics. Already, Bernie Sanders has condemned the result as a “disastrous” deal benefitting big companies, and Donald Trump has called it a “terrible deal.” Hillary Clinton also has been critical of the deal as she seeks to line up organized labor support. Republicans seeking conservative and Tea Party endorsements also may be wary of expressing support.

Meeting on the battleground

The largest battleground is expected to be the House. It is here where individual congressional districts most visibly reflect the views of winners and losers. T.P.A. barely passed the House, and some conservative Republicans may be reluctant to hand President Obama any kind of victory. A close, long fight may be expected, with Speaker Paul Ryan and the new House leadership likely to play pivotal roles in the outcome.

Trade agreements can be more difficult to pass in times of economic uncertainty as well. That is the current situation in the United States. Trade deficits are large and growing in spite of falling oil prices and imports, as exports collapse under the weight of an appreciating dollar. Imports from China also are surging, and the sharp drop in the Chinese currency and its stock market are further unsettling elements.

While T.P.P. covers about 40% of global commerce, what it excludes may be seen as strategically more important. The BRICS countries, along with Western Europe, are critical to a stable, growing world economy. This is why some in the global trade community favor multilateral negotiations, like the Doha Development Round, over regional pacts.

T.P.P., as an element of both foreign policy and domestic economic policy, also could find itself struggling for attention in both spheres. Internationally, the battle against terrorists continues to take center stage. Domestically, a complex debate about economic inequality and what to do about it seems to be emerging as a major issue.

All of these headwinds make approval of T.P.P. arduous and likely to be slow in coming, at best. Like the North American Free Trade Agreement before it, there will probably be delays, maybe even renegotiations. At this point, at least, it is far from clear that it is either a good or a done deal.

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