The clock is ticking on the president’s ability to nail shut a key trade bill that could open up markets for U.S. businesses in Asia and other regions.
If the trade agreement, known as the Trans-Pacific Partnership (TPP), doesn't pass, proponents of the bill say, the U.S. will relinquish its leading role in overseas trade, ceding its authority to up and coming world power China. That country has its own trade bill for regional partners in the making. Opponents of the TPP say the bill contains huge giveaways to big businesses and lacks essential protections for labor and the environment.
This lack of middle ground has some business owners, business trade groups, and policy analysts nervous. It's particularly perplexing for business owners, many of whom now think in terms of global markets when assessing opportunities for their products and services.
“This is neither a Democratic nor Republican issue, it is a trade issue and the [politicking] is undermining the entire structure of trade negotiations,” Michael Czinkota, an associate professor of international business and marketing at Georgetown's McDonough School of Business, and a former senior trade advisor for export controls at the Department of Commerce.
At issue is not actually the trade promotion authority, the so-called fast track procedure that would allow the president to finalize negotiations with the 11 other nations who will participate in the TPP, without amendments from Congress. Instead, the whole deal hinges on passage of something called Trade Adjustment Assistance (TAA), a $450 million annual federal project that assists workers displaced by trade agreements, which has existed since the 1970s. TAA was approved as part of the Senate vote a couple of weeks ago, but scuttled in the House vote by members who object to the program's cost.
As part of the rule-making process when the House bill was introduced, the two sections had to be voted on separately, but one could not pass without the other, policy experts said. So the president’s ability to move ahead with the trade bill without the TAA remains an open question.
While there’s a strong chance the president could ultimately corral the votes needed to pass the TAA in he House, which is scheduled for a new vote on Tuesday, businesses will need to consider what will happen if the trade deals don’t pass.
In a speech from Iowa over the weekend, Hillary Clinton suggested that the president could use the opportunity to ask for concessions from other countries involved in the pact. That, she said, could help apease labor leaders and Democrats who oppose the pacts.
Here’s what Clinton said on Sunday:
Our goals should always be to make as many winners as possible…I think that in today’s world it is a very hard road to manage any trade agreement, especially with so many parties…What I have advised…is that the president take the opportunity offered by staunch allies like Nancy Pelosi…and try to figure out how to use this as leverage, to go back to the other countries and say: ‘You want a lot out of this. I need more. Our market is still the biggest, most consumer friendly in the world, but I can’t go forward unless I get X, Y and Z from you. I think that there is at least a potential opportunity for him to take this moment and, as I said, kind [of] turn lemons into lemonade.
But policy experts say Clinton is oversimplifying, as the trade bill negotiations are already far-advanced, and have been negotiated with the partner countries.
“The time to wrangle out more concessions…that ship sailed a long time ago,” says Jim Kessler, senior vice president for policy and co-founder of Third Way, a centrist policy think tank in Washington, D.C.
While the U.S. economy has experienced weak growth since the end of the recession, overseas trade is considered a bright spot that could lead to more economic growth and more job creation. The U.S. manufactured $1.4 trillion of exported goods in 2014, compared to less than a $1 trillion in 2009, and $600 billion in 2004, according to the U.S. Department of Commerce.
Currently, the trade export economy in the U.S. is about 13.5 percent of Gross Domestic Product (GDP), and increasing it by a mere two percentage points would add $300 billion to the economy, by some estimates.
Moreover, organizations such as the National Association of Manufacturers contend that pre-existing trade deals have bolstered exports, with nearly half of all U.S. manufactured exports heading to current trading partners. Yet there's still room to grow, as those 20 partner nations with whom the U.S. now trades only account for 10 percent of the world economy. The TPP alone is expected to loop in 40 percent of the world economy, according to various estimates, with countries including Australia, Japan, Singapore and Vietnam. So the impact on exporters could be much bigger, potentially.
“The TPP is the strongest trade bill ever on labor, the economy, the environment and human rights,” Kessler says. “It is a very good bill.”