Obama’s Trade Deal With Asia: Not So Fast

By Paul Sracic  

Photos: Bloomberg, Getty Images; Illustration by A. Babar

The free-trade agreement being negotiated by the U.S. and 11 other nations is considered the economic keystone of the Barack Obama administration’s much-vaunted “pivot” to Asia. If successful, the Trans-Pacific Partnership will liberalize a $2 trillion market, reinforce U.S. standing as the lead promoter of “21st century” trade practices, and revolutionize economic relations between the U.S. and its most important ally in the region, Japan.


Given the complexities of negotiations involving economies ranging from Vietnam to Japan, the failure of recent meetings in Singapore to produce the promised year-end agreement isn’t a surprise. Yet the real question surrounding the TPP isn’t what will happen during the next talks in January. It is what will take place in the U.S. Congress, where the agreement threatens to get snarled in a partisan battle that taps foundational differences between Democrats and Republicans on the relationship between government and labor.
U.S. participation in a final TPP agreement will only happen if President Obama is able to get Trade Promotion (or fast-track) Authority from Congress. Since its creation in the Trade Act of 1974, this authority -- which guarantees that legislation implementing trade agreements won’t be amended on the floor of either house and, after limited debate, will receive an up or down vote -– has been part of every U.S. free-trade agreement.
Such authority will be crucial to reaching a final accord among the TPP nations themselves. Why, after all, would a U.S. partner present its “final, best offer” without some assurance that a counteroffer by the U.S. wouldn’t be amended later by Congress?
Trade Promotion Authority was last granted to President George W. Bush in 2002, and it expired in 2007. Although the influential chairman of the crucial House Committee on Ways and Means, Representative Dave Camp of Michigan, said he expects Congress to pass a bill authorizing fast-track in early 2014, this sounds overly optimistic for several reasons.
First, groups opposed to the TPP -- and there are many, including 151 Democrats in the House of Representatives who complain about inadequate consultation by the White House -- will have no qualms about shooting down Trade Promotion Authority to prevent the agreement’s passage. Second, though some form of fast-track has been in place since 1974 -- and arguably since 1934, when President Franklin D. Roosevelt was given authority to unilaterally lower tariffs -- it raises congressional hackles because it suggests a usurpation of Congress’s constitutional powers. Last month, 22 Republicans sent a letter to the administration saying they would oppose fast-track for just that reason.
There is a third issue that just might make fast-track authority, and therefore the TPP, unachievable. Since 1962, Congress has paired trade agreements with Trade Adjustment Assistance. The idea has been to make trade liberalization more palatable to American workers by providing benefits to those whose jobs are compromised by imports. The assistance includes such items as retraining benefits, relocation funds, income support beyond the expiration of unemployment benefits, and a significant health-care tax credit. Like fast-track, this has to be reauthorized every few years. The most recent adjustment-assistance legislation was passed in October 2011, and tied to votes implementing free-trade agreements (negotiated under pre-2007 fast-track authority) with Colombia, Panama and South Korea.
As the program has been reauthorized, it has also expanded to cover more workers. When Trade Adjustment Assistance legislation moved through the Congress in 2009 (as part of the stimulus bill), the name was changed to the Trade and Globalization Adjustment Assistance Act. This was more than just semantics: The measure now covers manufacturing and service workers who lost their jobs because of imports or outsourcing. Any direct link to free-trade agreements was severed, because workers can qualify whether or not their jobs were jeopardized by a specific trade deal. According to the Department of Labor, 81,510 workers benefited from the program in 2012, at a cost of $575 million.
The broadest extensions of Trade Adjustment Assistance (those provisions covering nonproduction service workers, as well as those that decouple job losses from free-trade agreements) will expire at the end of December. The entire program expires at the end of 2014. Democrats want to move a bill reauthorizing it. Although some Republicans, such as Senator Susan Collins of Maine, support adjustment assistance, others, such as Orrin Hatch of Utah, the ranking member on the Senate Finance Committee, oppose the program, and argue that it shouldn’t be linked to fast-track authority.
Given that Trade Adjustment Assistance involves both unemployment benefits and health-care tax credits, a debate will become subsumed into larger, and bitter, debates about the overall extension of unemployment benefits and the Patient Protection and Affordable Care Act. The problem is, however, that many, and perhaps most, Democrats will not support fast-track without adjustment assistance. For many Republicans, that amounts to a poison pill. And thus the kind of worker assistance that was originally designed to make Trade Promotion Authority more politically acceptable now threatens to have the opposite effect.
When the House last granted fast-track, the measure passed by a single vote. Of course, at the time, a Republican president was asking for authority from a Republican-majority chamber. The situation now is quite different. Rather than reinforcing the image of U.S. leadership in Asia, the TPP may instead make its withering all the more apparent.