U.S. Trade Representative Michael Froman is reaching the end of negotiations over the Trans-Pacific Partnership, a free-trade agreement almost five years in the making. The accord would wrap the United States, Japan and 10 other Pacific Rim countries into a humongous free-trade zone with almost 800 million consumers and 40 percent of global output. It could increase U.S. exports by $78 billion a year and create hundreds of thousands of jobs over the next decade.
A deal would provide a welcome boost to a dawdling economy, but it won’t happen unless Congress soon gives President Barack Obama fast-track authority, also called trade-promotion authority, which lets the president submit a treaty for a straight up-or-down vote.
Without fast-track authority, the U.S. won’t be able to negotiate the deal on favorable terms, so Congress won’t approve it. In turn, that could sideline free-trade talks between the U.S. and the European Union as well as efforts to write a much-needed global rulebook for trade in services.
If those initiatives fall apart, countries will most likely resort to narrow, two-way deals that put U.S. exporters at a disadvantage. Asians will have another reason to scoff at the notion of a U.S. pivot toward them. U.S. credit card companies and insurers will continue to be barred from some countries. Malaysia will maintain steep tariffs to keep out American-made cars. Canada will keep protecting its dairy industry with tariffs of 250 percent on U.S. imports. And the list goes on.
Congress’s thinking on fast-track authority is puzzling even by that body’s standards. Democrats resist the idea because they blame trade for job losses; Republicans resist it because they say Obama is a bad negotiator. In both cases, denying the president this authority — no major trade pact has been approved without it — only makes their apprehensions come true.
Granted, when trade pacts go into force, companies sometimes close factories and ship jobs offshore, where weaker environment and labor laws mean lower costs and fatter profits. Yet most studies conclude that the biggest U.S. free-trade accord so far, the 1994 North American Free Trade Agreement, produced net new jobs and achieved its other intended benefits.
The trans-Pacific accord would improve on NAFTA by exposing countries to lawsuits and penalties if they failed to enforce domestic environmental laws or denied workers the right to form unions and bargain collectively. Labor and environmental rules would be part of the main treaty, not in a side deal that countries can ignore, as happened under NAFTA.
Some liberals point out that U.S. exports to South Korea have fallen since the free-trade deal of 2011. But that was mainly because of a slowdown in South Korea’s economy: Its imports from China fell almost as much.
Democrats also complain that TPP negotiators have been willing to share details with industry groups but not with lawmakers and consumer advocates. The U.S. trade office has sought to address this by forming a public-interest advisory panel and by clarifying that members of Congress can see anything they want (although they can’t make copies and staff viewings are limited).
Most Republicans are free-traders, yet some worry that the TPP would invite exports from state-owned Asian companies whose undisclosed government subsidies give them a competitive edge. While the TPP wouldn’t bar state-owned enterprises (the U.S., after all, has its own version of these with Fannie Mae, Freddie Mac and the U.S. Postal Service), it would require more financial transparency.
The toughest trade disputes almost always get resolved in the final weeks of talks. That’s when countries that want something (say, U.S. access to Japan’s agriculture market) must give something in return (say, access to America’s sugar market). Other countries, though, are reluctant to strike these bargains if Congress might rewrite them. Knowing that Congress can’t unpick a deal would help bring them to the table.
This doesn’t mean Congress should step aside altogether. It has the power to shape trade treaties under the Constitution. It should state its goals in broad terms and insist on real consultation — in exchange for passing a fast-track measure. That would give the president’s negotiators maximum leverage in the final weeks of talks.
If lawmakers deny the administration that leverage, they have no grounds to complain if the U.S. ends up with a bad deal or none at all.