Off-Track Trade

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By Rachel Haberstroh

 

Dozens of Malaysian protesters recently dressed up like zombies to demonstrate what they perceive to be a fast-approaching, grim reality in their country — an Obama-backed free trade agreement that they believe will make vital medicine unaffordable. Luckily for them, the bill seems to be dead on arrival in the U.S. Congress. Over the past year and a half, the Obama administration has made significant progress on the Trans-Pacific Partnership (TPP), a free trade deal that would lower tariffs on, and increase engagement with, countries in the Pacific including South Korea, Australia, Vietnam and possibly Japan. However, as the deal nears completion, a rift between the Democrats and the face of their own party has emerged. With abundant concerns about the deal — especially over intellectual property rights, environmental protection and wage depression — it’s unclear whether Democrats will allow President Barack Obama a bipartisan victory on trade before his term is up.

A marker of the Obama administration’s “pivot to Asia,” the TPP would be the largest free trade agreement of the modern age. The White House believes that the deal will provide a boost to the continuing economic recovery and could be an opportunity to solidify Obama’s economic legacy. The deal’s potential is substantial. Under the bill’s structure, new nations can join the agreement so long as they consent to basic regulations. This means that China, the second-largest economy in the world, could join the agreement in the future. If coupled with a prospective Trans-Atlantic trade deal with the European Union, the TPP would put Obama well on his way towards becoming the president responsible for the development of free trade among a large portion of the developed world.

But these reasons alone have been insufficient to sway Congress. At the center of the conflict is whether Congress will grant the president “fast-track authority,” a power that would give him the ability to circumvent Congressional input and complete the TPP bill more quickly. Once completed, the trade bill would go to the House and Senate floors for a straight up-or-down vote; representatives couldn’t offer amendments or repeal provisions within it, allowing the bill to largely bypass dissent. In addition to speeding up the process, fast-track makes trade bills easier to pass, even if certain special interests are not fully placated.

This executive power is seen as a prerequisite to serious free trade negotiations. Joshua Meltzer, a trade scholar at the Brookings Institution and a former Australian trade official, said that unless the administration has fast-track authority, negotiations are “not an endgame.” And its use is by no means unprecedented. In the past, this authority has been used during the creation of the World Trade Organization, during the passage of the North American Free Trade Agreement and for myriad free trade agreements with countries like Israel, Canada and Oman.

In 2000, former President George W. Bush campaigned for fast-track authority. After combating staunch opposition from both sides of the aisle, Bush was able to secure fast-track and retained the authority from 2002 until 2007. Obama faces similar backlash today. Given that the president is from the same party as the legislators, it would seem that Obama ought to have an easier time than Bush did. But Democrats appear to be, if anything, more reticent with Obama. More than 150 members of Congress — all Democrats — sent a letter to the president expressing their opposition to granting him fast-track authority. Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi have publicly stated their opposition to a bipartisan bill that would give the president this power. Many liberals share a fear that allowing the president to use fast-track would give Republicans — and more conservative Democrats — a chance to force a bill that undermines key liberal tenets: protecting the environment, limiting corporate favoritism and diminishing income equality. Opposition has become strong enough that even Vice President Joseph Biden admits that the bill is unlikely to pass both houses of Congress.

Concerns among top Democrats start with the closed nature of the TPP negotiations. Even as the deal nears completion, Congress and the public have just begun to get a glimpse of the bill’s provisions. This secrecy has worried members of Congress, including Senator Ron Wyden, chairman of the Senate Finance Committee, the congressional committee responsible for regulating international trade. Wyden recently proposed legislation that would give members of Congress access to information on the trade bill. Leaks have, so far, been the main source of information regarding the bill.

Apprehension over the environmental impact of the TPP has also caused serious headaches for members of the president’s party. The provisions in the deal pertaining to economic regulation, as recently released by WikiLeaks, seriously underwhelmed environmental activists. The TPP won’t require new trade partners to end practices detrimental to the environment, such as shark fin harvesting, which are illegal in the United States and considered antiquated even for developing nations. Moreover, environmentalists worry that increased trade will lead to an expansion of domestic fracking and heighten the potential for environmental catastrophe during transportation of natural gas overseas.

Since the TPP includes developing nations, it is no surprise that the environmental regulations would not meet current U.S. standards. However, the TPP represents a greater divergence from standard U.S. environmental regulation, failing even to match the precedent of comparable trade deals. While NAFTA did not include much in the way of environmental safeguards, regulations in a 2007 trade deal with Peru authorized by President Bush set a precedent for the importance of environmental policy in trade. Under an agreement between Bush and Congressional Democrats, every trade deal to come would feature strict environmental regulations with the option of sanctions for rule breakers. But the TPP agreement does not follow these guidelines.

If a TPP member nation were to introduce a new environmental regulation or antismoking law, companies could challenge the rule in an international court. This stems from a provision within the TPP agreement that allows corporations to sue foreign governments if they introduce regulations that do not constitute “fair and equitable treatment.” With this and other corporate-centered provisions, Democrats fear that the TPP will prioritize corporate interests over those of the public. Over the course of the bill’s formation, the U.S. trade representative has repeatedly briefed and solicited input from notable business leaders — a pattern that implies creeping corporate influence.

Big business’s influence on the agreement isn’t limited to environmental provisions. In 2012, a letter signed by Senator Chris Dodd, the U.S. Chamber of Commerce and industry representatives was delivered to the president. It urged him to add “comprehensive and high-standards for the protection and enforcement of intellectual property” to the TPP. In several of the agreement’s leaked portions, it seems that Dodd — chairman and C.E.O. of the Motion Picture Association of America — may have gotten his wish. According to the Electronic Frontier Foundation, the TPP’s intellectual property provisions would effectively allow international enforcement of controversial U.S. policies such as the Digital Millennium Copyright Act and would make it more difficult to efficiently transfer data across the web. Criminal penalties would be instituted internationally for copyright infringers even if they download material for personal use. In addition, patent rules for pharmaceuticals mean that U.S. drug companies would be able to raise prices and restrict access to drugs both at home and abroad while freezing competitors out of the market. This has prompted backlash from several congressmen and even Nobel Prize-winning economist Joseph Stiglitz, who is usually an avid supporter of free trade.

The largest concern for liberals isn’t international environmental damage or intellectual property abuse, but a problem much closer to home: national income inequality. The TPP highlights the clash between Obama and his party. Despite the generous portion of the 2014 State of the Union devoted to issues of income inequality, the trade bill that Obama is so vigorously advocating might accrue mixed economic results, with collateral damage for the middle class. The Peterson Institute for International Economics estimates that the TPP will raise U.S. GDP by about $76 billion per year and could increase it by three times that amount should other Asian countries — China in particular — choose to join. However, that $76 billion would go directly towards the people least in need of economic assistance at the cost of domestic jobs. The left-leaning Center for Economic Policy and Research predicts that the top 10 percent of earners are expected to capture about 90 percent of the bonus from GDP growth. And since a free trade agreement will subject domestic businesses to competition from companies with unmatchably low labor costs, lower-income workers may lose their jobs. While Americans will benefit from decreased prices on certain goods, the resulting unemployment will have an even greater impact on the economic vitality of the middle class.

It is little surprise that the public, particularly in states where low-wage jobs are quickly disappearing, does not look fondly upon free trade deals. Approaching a critical election cycle that will determine the possible breadth of Obama’s reach for the last two years of his presidency, the Democrats and their president would do well to proceed with caution. The president’s public approach to the TPP issue is already beginning to reflect this concern. While Obama offered a thorough endorsement of the TPP in the 2013 State of the Union, he only opaquely referenced his desire to pass “bipartisan trade promotion authority” in his 2014 address. A few days later, Reid, when asked about fast-track authority, said, “I think everyone would be well-advised just to not push this right now.” Reid is correct. Obama should indeed abandon his push for fast-track authority. Though it would help to expedite the process, the president will be hard-pressed to win support from his party without proper Congressional review and rigorous transparency.

Right now, though, the Democrats are in a stalemate between a president trying to secure his legacy and a party deeply skeptical of free trade. If one side is to shoulder the blame, however, it is the one that sits in the Oval Office. The president is obliged to realize that going on the offensive will only exacerbate the current situation; the Democrats’ concerns about environmental regulations, corporate influence and income inequality are real and well-founded. Instead of pushing the TPP, he should prioritize his party and use his pulpit to address safer and more palatable issues prior to the 2014 midterm elections, where Democrats are already facing worryingly strong challenges from the right. Should Obama fail to take this higher road, it will soon become evident that this Trans-Pacific free trade bill could be very expensive indeed.

Ezra Kagan ’17 is a potential political science or economics concentrator and a staff writer at BPR.

Ezra Kagan Ezra Kagan (4 Posts)

Ezra Kagan ‘17 is a potential Political Science concentrator and Associate Editor and Staff Writer at BPR.


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