On Wednesday, I reported on a local analysis of the Trans Pacific Partnership trade deal, which argued, among other things, that the TPP is not primarily a trade deal at all – but more of a package of entitlements for US corporates and financiers. What was missing from Wednesday’s story was the sudden flurry of lobbying activity in recent days by the Obama administration to pressure member countries into concluding the TPP deal, while at home, Obama simultaneously tries to achieve the “fast track” Trade Promotion Authority (aka TPA) that would enable him to steer the final deal through Congress relatively unscathed.
These two things are linked in a chicken and egg fashion. If Obama can complete the TPP deal – or nearly so – he will be far better placed to achieve TPA from a sceptical Congress. And if he looks like getting TPA he will be better able to convince sceptical leaders in many TPP countries to take the political risk of completing the deal, because Obama would be looking able to deliver on his side of the bargain. Without the White House having TPA, the leaders of TPP countries could well catch a lot of political flak at home for supporting the deal, only to see Congress unpick the TPP provisions and rewrite them, clause by clause. TPA is crucial to the TPP, and vice versa.
Presumably, the TPP completion drive is on the agenda for the talks this week between Prime Minister John Key and Aussie PM Tony Abbott. According to this morning’s edition of Washington Trade Daily, the Aussies are talking up the prospect of the TPP being almost a done deal:
The 12-nation Trans-Pacific Partnership (TPP) free trade agreement is close to being “sealed,” Australian Minister for Trade and Investment Andrew Robb says…Mr Robb told AAP on Saturday he would wait for formal TPP discussions scheduled “in a couple of weeks.”… US President Barack Obama had set a deadline to clinch the TPP deal by the end of 2013 and is facing growing pressure from members of Congress critical of the secrecy around the discussions.
Mr Robb dismissed similar critics in Australia. “It is nonsense to suggest that people are in the dark,” Mr Robb, who attended the G’Day USA ball in Los Angeles on Saturday, told AAP. He was upbeat about the countries agreeing to the TPP. “It’s ready to be sealed,” Robb said. “A few big things have to end up back on the table yet, but it is close. I would hope we are going to see progress obviously this year and sooner rather than later.”
Again the double talk: is it close to being “sealed” or are we only likely to see “progress this year”? Whatever, the US knows there is still a lot of work to be done to be done. Yesterday, the WTD also detailed the efforts being made by US Trade Representative Michael Froman:
U.S. Trade Representative Michael Froman is leading an escalating campaign on two fronts–foreign and domestic, the Wall Street Journal reported… Mr. Froman and his staff are holding bilateral meetings with countries in the Trans-Pacific Partnership talks to address remaining issues, most notably tariffs and quotas. He highlighted Japan and Canada as countries where the U.S. is still seeking a “high-level of ambition in market access.” Detroit auto makers have criticized Japan for putting up barriers in its domestic car market, while many countries say Tokyo needs to open up its traditional – and politically sensitive – barriers to agricultural products, including rice and beef. Meanwhile, U.S. dairy producers say Canada is unfairly restricting imports.
Meanwhile, officials from TPP countries are following the progress of fast track in Congress, since they may not want to put their politically sensitive final offers on the table if Congress is unlikely to approve the final trade agreement, according to trade experts and former U.S. officials. “People are always curious about Washington, and it gives me the opportunity to update them about that as well,” Mr. Froman said, describing his overseas meetings. His staff is meeting with officials in Canada today and had recent meetings with Japan, Malaysia, Vietnam, Singapore and Brunei. The other TPP countries are Australia, New Zealand and Mexico.
Note that Australia and New Zealand are not being treated by Froman as countries where his lobbying efforts are required. At home though, the main stumbling blocks to Obama getting the TPA he needs to advance the TPP are located within his own party – and his main opponent is Democratic House Majority Leader Harry Reid. Reid is a fascinating figure: as the UK Financial Times pointed out (in a recent paywalled article) he is the son of a gold-miner who killed himself with a handgun, and his mother had to take in washing from a local brothel to make ends meet. Before entering politics, the Financial Times also noted, Reid had been the Nevada Gaming Commissioner, and as such was the model for the character in the film Casino who denies the Robert De Niro character access to Las Vegas casino operations. Here’s how the Financial Times summed up Reid’s personal interest in blocking both the TPP and its related Trade Promotion Authority:
Reid has one goal in mind: to retain his job as Senate majority leader in the November midterm elections. The hardscrabble Democrat from Searchlight, Nevada, has never met a trade deal he liked. Nor, more important, does he think the voters like them much either. In spite of the pick-up in US growth, most Americans say they are pessimistic about their economic prospects. Electoral forecasters say that the Senate could tip either way in November: Republicans need to win just six of the 36 seats up for grabs to regain the majority. By a quirk of the calendar, most of the seats in play are held by Democrats…Passing TPA is just the kind of thing that would alienate the trade unions, whose financial support Reid needs for the six or seven states that will decide the Senate (pay close attention to the races in Alaska, North Carolina, Louisiana and Arkansas).
Nor does Reid owe Obama any favours, the FT reports – if anything the reverse is the case:
Without Reid, the $US787 billion stimulus might not have gone through in 2009, nor Obamacare in 2010 – the two most important bills enacted since Obama came to office. But it goes both ways. If Reid does not want TPA to pass, it will go nowhere. [And] If Obama cannot persuade his own party in Congress to support the talks, then China’s neighbours will take their cue. They are already riddled with doubts about Washington’s readiness to take on its own vested interests – textiles and sugar among them. Can Obama get Reid to change his mind? It is hard to see what the White House could offer that would satisfy Reid’s union allies and still enable the US to negotiate concessions from its trade partners.
Is the White House likely to treat the TPP outcome as being more important than Democratic success/survival in the midterms? Hardly. The next crunch point for the TPP will be the ministerial trade talks in a few weeks time in Canada. Meanwhile, the misgivings voiced earlier this week in New Zealand have been echoed by this recent report from the Economic Policy Institute think tank on the TPP and its likely negative impacts on jobs, wages and manufacturing – and on the trade deficit as well. The EPI found that since deals such as the TPP tend to see import-competing jobs displaced by export – related jobs (which tend to pay less) the result tends to be that wages become further depressed and inequality increases:
The next time someone from the White House makes outlandish and one-sided claims about the benefits of the TPP or the proposed TTIP with Europe, he or she should be asked about the effects on imports, foreign direct investment, and outsourcing. More important, we must query the net effects of those deals on jobs, wages, and worker income, especially for production workers who make up 70 percent of the labor force…It is also important to ask who wins from these trade deals, and who is lobbying for them….Public officials should be held accountable for assertions that trade and investment deals create jobs, or that they will generate higher wages in the United States. Experience with NAFTA, KORUS, and China have shown that these deals cost jobs and depress wages in the United States….Senator Reid has reached a wise decision to table discussion of fast track legislation for these trade deals…
Does John Key really want to spend any more political capital in election year on the dubious – and quite possibly doomed – TPP initiative?