Domestic politics slow down Obama’s ‘fast track’ plan to free trade

Reuters

President Barack Obama signs the Korea Free Trade Agreement in the Oval Office of the White House in Washington October 21, 2011.

Trade policy stands at the intersection of a nation’s diplomatic and security strategies and its broad economic goals. Though not necessarily in conflict, security imperatives and economic realities exist in two very different universes, inhabited by very different constituencies and interest groups. The recent history of America’s free-trade agreements with Korea and Colombia are telling examples of the uneasy juxtaposition of diplomatic priorities with domestic economic interests. In both cases, there were strong regional diplomatic and security reasons to buttress an important ally in a dangerous territory; yet in both cases, US domestic conflicts delayed the advancement of US national interests for some years. Diplomacy and security goals, thus, often must bow to former House Speaker Tip O’Neill’s wise observation that ‘all politics is local’.

Though the successful ratification of FTAs with Korea and Colombia are examples of important breakthroughs, the drive to conclude and execute the Trans-Pacific Partnership (TPP) with 12 nations of the Asia Pacific represents a struggle with vastly greater strategic implications for the United States — and it vividly highlights the difficulties of melding the competing diplomatic/security and domestic economic political universes. The difficulty is compounded by the deep divisions in the Democratic Party over trade policy and globalisation.

President Obama, after having trashed past US trade agreements during his 2008 campaign, belatedly endorsed the TPP negotiations at the end of 2009. The reversal was part and parcel of the much-hyped Obama administration ‘pivot’ to Asia. There has certainly been a military and strategic element to the pivot: the stationing of a revolving unit of 2400 Marines in Darwin and decision to shift 60 per cent of US naval forces to the Pacific were important elements of the administration’s ‘forward-deployed diplomacy’. And all this has been played out against the background of increased Chinese belligerence and bullying over conflicts in the East and South China seas, combined with the highly erratic and dangerous behaviour of the new North Korean regime under Kim Jong-un.

Symbolically, however, it is the TPP negotiations and the drive to conclude these negotiations expeditiously that stands as the focal point of the pivot. A successful TPP and the resulting benefits to US businesses and workers will form the economic anchor to persuade Congress and the public that Asia’s security and economic well-being is inextricably linked to US security and prosperity. There are now 12 Asia Pacific nations negotiating the TPP, with another, South Korea, standing in the wings. The membership (adding South Korea) represents over 40 per cent of world GDP and more than a third of total world trade.

Substantively, the TPP aims to create a ‘gold standard’ agreement: meaning that it will set the standard for a 21st century trade regime, including rules for services and investment, intellectual property, health and safety, state-owned enterprises, regulatory transparency and due process, labour and the environment. The key tradeoffs will include balancing the 21st century demands of the US and others against the more traditional 20th century priorities of developing TPP nations in areas like textiles, clothes, shoes, sugar, cotton and dairy products.

The TPP has reached endgame negotiations, where all twelve nations are expected to finally put their bottom line positions on the table. And it is here at this crucial juncture that US domestic politics have crashed the party with as yet incalculable consequences. In his State of the Union address, President Obama called upon Congress to give him so-called trade-promotion authority (expedited rules for Congress to ratify FTAs) in order to conclude the TPP and move forward on parallel negotiations with Europe. Within 24 hours of Obama’s plea, the Democratic majority leader Harry Reid defied the president by signalling opposition to granting trade-promotion authority and warning the administration not to send up such a bill. In the ‘all politics is local’ tradition, Reid’s eye is focused narrowly on holding the Senate in the midterm elections and retaining key support from union and environmental groups who strongly oppose the TPP.

This leaves the ball squarely in Obama’s court: he must quickly decide whether to tackle Reid head on and mobilise other Democratic senators against their own majority leader — or attempt to get an ironclad agreement from Reid to allow a vote on TPP in a lame duck session after the election. He must also forge an alliance with congressional Republicans who — whatever Reid decides — will provide the majority of votes for TPP in both houses of Congress. Other TPP nations will be closely monitoring the administration’s decisions and Congress’ in coming weeks — as a guide to their own negotiating positions.

The outcome of this debate and political battle will have far-reaching consequences. The failure of the US to continue to lead in a successful conclusion of the TPP would likely destroy the possibility of a broader US-led and anchored Trans-Pacific regional economic structure. In its place, the Chinese are already assiduously pushing for a narrower East Asian architecture that does not include the US. And well beyond the economic consequences, future US diplomatic and security leadership and alliances in Asia will be severely jeopardised as US regional allies come to doubt its ability to overcome local forces in order to pursue vital national interests.

 

Claude Barfield is a resident scholar at the American Enterprise Institute for Public Policy Research.

A version of this article was first published here in The National Interest.

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