Blog No. 36 Free Trade Agreements: Good Policy–and Good Politics for Republicans

Current debate over trade policy revolves around two confusingly similar acronyms: TPP and TPA. The first, TPP, refers to the Trans-Pacific Partnership, a proposed free trade agreement among 12 Pacific nations. The second, TPA, refers to Trade Promotion Authority, (sometimes known as “Fast Track”), which provides for expedited consideration of trade agreements by Congress. The two are closely linked because, in the view of many observers, passage of TPA will be essential to concluding and ratifying the TPP agreement. Together, the TPP and TPA provide an interesting mix of policy and politics.

Republicans have been consistent supporters of free trade agreements for many years, and their voices need to be heard now more than ever. As a matter of policy, it is a critical time to add impetus to the long-delayed TPP trade agreement by granting President Obama the fast-track negotiating authority of TPA that he has sought from Congress.  Although the TPP would bring significant economic benefits to the United States and their trading partners, President Obama has been unable to bring the agreement to closure. One reason for that failure is opposition to his request for fast-track authority from many Democrats in Congress. As a matter of politics, support for both the TPP and TPA will allow the GOP to mitigate their image – often damaging with Independents – of being reflexively opposed to anything the President proposes. Conversely, it will permit Republicans to focus attention on disarray among Democrats concerning an important issue and a failure, thus far at least, of President Obama’s leadership.

The TPP is a giant free trade agreement that has been in negotiation for nearly a decade. The prospective parties are the United States, Canada, Japan and nine other countries (Australia, Brunei, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam) and potentially Korea. It would eliminate tariffs and eliminate or modify many non-tariff regulations covering a broad range of issues. The agreement would govern 40 per cent of U.S. imports and exports and provide an economic counterweight to China.

The Office of the United States Trade Representative summarized the economic benefits from the TPP:

The TPP is the most significant trade negotiation in a generation, and promises significant economic benefits for American businesses, workers, farmers, ranchers, and service providers.

According to an analysis supported by the Peterson Institute, a TPP agreement provides global income benefits of an estimated $223 billion per year, by 2025. Real income benefits to the United States are an estimated $77 billion per year. The TPP could generate an estimated $305 billion in additional world exports per year, by 2025, including an additional $123.5 billion in U.S. exports.

Not surprisingly, the TPP enjoys broad support from the business community for the greater access to Asian markets it will afford. The U.S. Chamber of Commerce, for example, calls the agreement  “America’s best chance to ensure the United States isn’t stuck on the outside—looking in—as Asia-Pacific nations pursue new trade accords among themselves.” 

Nevertheless, the agreement has it skeptics and its critics. Some, for example, fear that labor and environmental standards will not be sufficiently rigorous or enforceable. Others are concerned over increased corporate control over intellectual property. And still others claim that a lowering of tariffs will result in a further loss of jobs to overseas manufacturers. Those views have resonated with many in Congress, principally though not entirely, on the Democratic side. Concerns have also been voiced over the fact that negotiations of the TPP have been conducted in relative secrecy and with less consultation with Congress than many would like. Those objections and concerns have found a focus in opposition to the fast-track authority provided by the proposed TPA.

Fast-track authority for trade agreements was first created in 1974. It reflected an awareness that such agreements would be difficult to reach if our trading partners had to face the prospect of agreements being “renegotiated” in the course of gaining Congressional approval.  As the Senate Finance Committee observed at the time:

Our negotiators cannot be expected to accomplish the negotiating goals … if there are no reasonable assurances that the negotiated

agreements would be voted up-or-down on their merits. Our trading partners have expressed an unwillingness to negotiate without some assurances that the Congress will consider the agreements within a definite time-frame.

Accordingly, the 1974 TPA provided for expedited consideration by Congress culminating in an up-or-down vote without amendments.

Since 1974, TPAs have been in effect intermittently, expiring from time to time, and with renewals being subject to the mood of Congress and the effectiveness of Presidential leadership. The most recent TPA was authorized in 2002 and expired in 2007. The 1974 analysis of the Senate Finance Committee is equally applicable today and many observers view the adoption of TPA as an essential step in bringing the negotiation of the TPP to a successful conclusion. The same dynamics are equally applicable to a number of other agreements currently in negotiation including the Transatlantic Trade and Investment Partnership with the European Union. However, the greatest attention has been placed on the TPP.

The Republican platform in 2012 supported both the TPP and TPA:

International trade is crucial for our economy. It means more American jobs, higher wages, & a better standard of living. The Free Trade Agreements negotiated with friendly democracies facilitated the creation of nearly ten million jobs supported by our exports. That record makes all the more deplorable the current Administration’s slowness in completing agreements begun by its predecessor and its failure to pursue any new trade agreements with friendly nations.

We call for the restoration of presidential Trade Promotion Authority. It will ensure up or down votes in Congress on any new trade agreements, without meddling by special interests. A Republican President will complete negotiations for a Trans-Pacific Partnership to open rapidly developing Asian markets to US products. Beyond that, we envision a worldwide multilateral agreement among nations committed to the principles of open markets, what has been called a “Reagan Economic Zone,” in which free trade will truly be fair trade.

Nearly a year ago, July 30, 2013, President Obama requested that Congress reauthorize TPA. On January 9 of this year, legislation to renew TPA—the Bipartisan Congressional Trade Priorities Act of 2014—was introduced in the House (H.R. 3830) and in the Senate (S. 1900). The legislation would reauthorize TPA for four years with the possibility of a three-year extension. Support for the TPA, however, has come from Republicans rather than the President’s own party.

In January, Senator McConnell called on the President to exert leadership on trade authority: “We need him to step up for American workers and increased exports by bringing his party on board with the trade promotion bill that was introduced just last week.” McConnell said the best way to stimulate the economy is through trade agreements with Europe and Asia.

“With our economy in such dire straits these days, opening new opportunities for American goods through trade should be just a no brainer,” McConnell said. “It’s an issue that used to be fairly bipartisan around here, and it can be again — if the president is willing to lead. Millions of middle-class families and small businesses are counting on him to do just that.”

President Obama did speak of the trade issue, albeit briefly, in his State of the Union Address:

And when ninety-eight percent of our exporters are small businesses, new trade partnerships with Europe and the Asia-Pacific will help them create more jobs. We need to work together on tools like bipartisan trade promotion authority to protect our workers, protect our environment, and open new markets to new goods stamped “Made in the USA.”  China and Europe aren’t standing on the sidelines. Neither should we.

Nevertheless, Majority Leader Harry Reid quickly responded with a public statement that he opposed the authority sought by the President, emphasizing that he had made his position clear  to the Obama administration as well as the outgoing chairman of the Senate Finance Committee, Max Baucus, and his successor Ron Wyden:  “Everyone knows how I feel about this.  Sen. Baucus knows. Sen. Wyden knows. The White House knows. Everyone would be well-advised to not push this right now.”

On the House side, John Boehner entered the fray on February 5, saying that a TPA bill was “in the works” in that chamber and urging the President to bring Senate Democrats into line.  Even in the House, however, the prospects of TPA are uncertain. A week after Boehner’s comments, Nancy Pelosi publicly announced her opposition, a move that was said to  strengthen greatly the effort by “progressive and liberal” members of the House seeking to block TPA and TPP. On the Republican side of the House, support for TPA is much stronger, but far from unanimous: last fall, 22 Republicans signed a letter stating their opposition to TPA. Wary of opposition within his own caucus, Boehner has reportedly suggested that 50 Democratic votes might be needed.

Ironically, President Obama’s best chance for passage of his trade agenda may lie with Republicans increasing their majority in the House and gaining control of the Senate. (There would be historical precedent for such a result. In passing the two signal accomplishments of the Clinton Administration, Welfare Reform and NAFTA, support by Republicans outnumbered that of Democrats in both instances.)

RINOcracy.com believes that, while some of the questions raised with respect to TPA and TPP may be legitimate, both proposals are on balance in the best interest of the country. In our view, they deserve the strong and vocal support of Republicans.