President Obama scored a major victory this week taking the Trans-Pacific Partnership (TPP) another step to becoming a reality.
|Map Source: Forbes, April 9, 2015 (Added by EconMatters)|
On Tuesday, the Senate voted 60-38 to pass fast track authority for the President, giving him the power to submit trade agreements to Congress for an up-or-down vote without amendments. That came against long odds and the opposition of 14 Democrats who were concerned that without a related workers’ assistance bill, displaced workers would have little chance of staying in the job market.
But after Republican congressional leaders made assurances that an assistance measure will be adopted, 13 of the 14 holdouts were swayed to vote for fast track. Now the President simply has to sign the measure into law.
The TPP isn’t quite a done deal yet, though.
The treaty negotiations are still ongoing, with a number of contentious issues satill up for debate. They range from the length of patent protections to just how open some markets, like Japanese agriculture, will ultimately be. According to U.S. Trade Representative Michael Froman, the soonest those thorny issues could be worked out is next month, though negotiations could drag on longer than that. But even if that optimistic forecast turns out to be true, the TPP still faces some potential roadblocks.
The biggest hurdle by far is still Congress itself. While Congress can now only give the treaty an up-or-down vote, the fast track authorization has been built-in speed bumps aside from the bureaucratic hurdles inherent in a 12-nation treaty. That means even under the optimistic scenario, it wouldn’t come up for a vote before the end of this year or early 2016.
And, as we all know, next year brings a presidential election with it and the cycle has already kicked off with a number of declared candidates. One top of that, the whole House of Representatives will also be up for grabs, along with 34 of the 100 seats in the Senate.
While I hate to reveal my inner cynic, politicians of both parties are acutely aware of which way the wind is blowing and elections are expensive things. Including congressional elections, the 2012 cycle cost America about $7 billion, a significant chunk of which was provided by special interest groups. And a number of interest groups are still either opposed to or on the fence about the TPP.
One big one is the U.S. auto industry which, while it would like to have easier access to foreign markets, is worried about our own market being flooded with cheap imports. In fact, it has been leading the charge for the rules to punish countries which manipulate their currencies to keep their exports cheap.
American farmers are also somewhat guarded on the treaty, worrying that Japan and other countries will continue to favor their own agricultural products. Throw in the labor unions, environmentalists and other groups opposed to the bill, there could still be trouble.
Basically, the closer we are to the 2016 elections before the treaty actually gets to Congress, the more trouble there could be in getting it passed.
As it stands today, I would say there is still a better than even chance that the treaty would win in an up or down vote. The big reason for that is that most industries (including technology, telecommunications and health care) are in favor of it, So are most other companies which hold a lot of intellectual property. They’re also among some of the biggest campaign contributors as well.
The TPP is also an important piece of foreign policy, building an economic barrier around China in the Pacific Rim region. The treaty would essentially be a tool for the U.S. to project soft power – basically cash – into an economically vital part of the world, rather than hard power – tanks, aircraft carriers and boots-on-the-ground. Considering the deal covers 12 countries including the U.S., $1.5 trillion worth of trade in goods and about 40% of global gross domestic product, that’s a lot of soft power.
And the ability to project that soft power is particularly important as U.S.-China relations are only getting tenser. China is widely being blamed for the recent cyberattack targeting the Office of Personnel Management, which reported yielded as many as 10 million unique Social Security numbers and security clearance forms which could compromise American intelligence gathering. Needless to say, the President is going to push hard for the TPP and any other means of sticking a finger in China’s eye.
So while there’s still a chance the Trans-Pacific Partnership could get torpedoed, especially as we get closer to the 2016 elections, I wouldn’t bet against it just yet.The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters. © EconMatters All Rights Reserved | Facebook | Twitter | Free Email | Kindle
Courtesy Benjamin Shepherd for Investing Daily
Courtesy Benjamin Shepherd for Investing Daily