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Despite Stinging Setback, Controversial Trade Bill Not Dead Yet
Atlantic Council / June 15, 2015

By Larry Luxner

With the House of Representatives set to hold a do-over vote by June 16 on a worker retraining program whose defeat has stalled US President Barack Obama’s entire free-trade agenda, there’s a glimmer of hope that the overall package—which enjoys more support from Republicans than from Obama’s fellow Democrats—could still squeak by.

Jason Marczak, Deputy Director of the Atlantic Council’s Adrienne Arsht Latin America Center, warned if the House shoots down the Trade Adjustment Act (TAA) for a second time, neither the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) would have any chance of passage—even though House lawmakers narrowly approved “fast-track” legislation by a 219-211 vote last week.

TPP’s demise, he warned, would benefit only China in the long run.

“If it doesn’t pass, it effectively takes the United States out of negotiating two of the world’s largest regional agreements in the absence of any movement at the WTO [World Trade Organization],” Marczak told The New Atlanticist in a June 12 interview. “These agreements—especially TPP—will effectively set the global trade rules, since the twelve nations [that have signed TPP] represent such a vast amount of global trade and GDP.”

Marczak warned that if Congress sinks TPP, “China will strike an agreement and Chinese labor standards will become global labor standards. Chinese environmental standards will become global environmental standards. Without these agreements, we’re ceding to China the ability to put forth and dictate what the global trade rules will be.”

On the fast-track legislation, known as Trade Promotion Authority (TPA), twenty-eight Democrats joined 191 Republicans in supporting Obama, though the earlier vote on TAA was defeated by a coalition of 144 Democrats and 158 Republicans.

“It seems like a temporary defeat for the President. Right after the Trade Adjustment Assistance bill was resoundingly defeated, the anti-trade crowd was celebrating the end of TPA, which would effectively mean no TPP or TTIP,” said Marczak.

“But events quickly changed course when surprisingly enough Democrats rallied behind supporting the overall TPA bill,” he explained. “The night before, [House Minority Leader] Nancy Pelosi agreed to sequence the bills so that TAA would go first, [knowing that] if TAA didn’t pass, then they wouldn’t get enough Democrats to support TPA.”

On June 15, Democratic presidential front runner Hillary Rodham Clinton—campaigning in Iowa—called on Obama to listen to Pelosi and other Democrats who want TPP to include tougher labor protection for American workers facing Asian competition.

“In order to get a deal that meets these high standards, the president should listen to and work with his allies in Congress, starting with Nancy Pelosi, who had expressed their concerns about the impact that a weak agreement would have on our workers, to make sure we get the best, strongest deal possible,” said Clinton, speaking at a campaign rally in Des Moines. “And if we don’t get it, there should be no deal.”

Marczak said the irony is that TAA “was always supported by Democrats” precisely to help the very workers who would be displaced by trade agreements such as TPP.

“But the Democrats were forced to vote against one of their own pet programs,” he said. “The only reason TPA passed in the Senate three weeks earlier was because Trade Adjustment Assistance was added to the bill. Without it, the Senate wouldn’t have been able to get enough Democrats to support it.”

Larry Luxner spoke to Marczak, who has been following the trade debate in Congress carefully. Here are excerpts from our interview:

Given last week’s House vote, what is your immediate prognosis for President Obama’s overall trade agenda?

The fact that TPA as a standalone bill passed the House means the President’s trade agenda has taken a hit, but it’s still alive. The question now becomes how to convince enough Democrats to support TAA. The unions told them to vote against this program, which helps average workers. But now that TPA passed, it’s possible they’ll find some way to be able to move TAA or send it back to the Senate.

Without Trade Promotion Authority, would either TPP or TTIP have any chance of passage in Congress?

Without TPA, those bills are effectively dead. Our negotiating partners have no desire to give things up when they know that Congress can go ahead and line-by-line edit an agreement that has been signed by twelve countries. That’s no way to negotiate a trade agreement.”

What if it doesn’t pass? What are the long-term implications for the US economy?

If it doesn’t pass, it effectively takes the United States out of negotiating two of the largest regional agreements in the absence of any movement at the WTO [World Trade Organization]. These agreements—especially TPP—will effectively set the global trade rules, since these twelve nations represent such a vast amount of global trade and GDP. If it doesn’t happen, China will strike an agreement, and Chinese labor standards will become global labor standards. Chinese environmental standards will become global environmental standards. Without these agreements, we’re ceding to China the ability to put forth and dictate what the global trade rules will be.

What are world leaders saying about this latest development on Capitol Hill?

It shows the vibrancy of US democracy. In a lot of other countries, the president wants something and the congress or parliament rubber-stamps it. This is an incredibly difficult thing to move forward. Something that has such consequences for the country should go through a lot of debate, but it also reinforces the current tendency in the United States to retract from global engagement. However, TPP is not overwhelmingly supported in all the other countries either. There’s large resistance to it in Japan. The Japanese are really concerned about being forced to lift some of the protectionist barriers that have long been critical to the Japanese economy.

What kind of reaction are you seeing from Latin America?

Mexico has benefitted significantly from more open trade, and Chile has the most free-trade agreements of any country in Latin America. Peru also benefits from trade with Asia. We have more FTAs with Latin America than with any other region of the world, so it’s very much a part of our hemispheric strategy. All the countries that have opened up and engaged with the US have benefitted, especially the Mexicans—not just on the trade front, but also in deepening their relationship with the United States. Mexico’s transformation over the last twenty years is, in large part, due to the opening created by NAFTA. It’s a carrot for being able to change long-overdue domestic laws to conform to agreements that would facilitate greater openness and foreign investment.

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