Understanding the (Potential) Trade Deal that has Obama at Odds with Democratics

Joel Anderson  |

The last week has seen another knock-down, drag-out fight between the President and members of the Senate dead-set on preventing a vote on a bill Obama considers important. Yawn, right? Old news. Except, this time, it was Democrats using filibuster rules to prevent debate on a bill advanced by the President: authority to negotiate a broad trade agreement with some 11 other Pacific nations.

Boy, that’s got to be a punch in the gut for the President, right? The very same people who have had your back for six years end up doing pretty much the exact same thing they’ve been calling out Republicans for. I mean, the guy just can’t get a win, huh?

However, beyond the politics lies another question: what exactly is this all about? For now, the entirety of the news coverage seems to fixate on the political wrangling without much (or any) analysis of the deal itself.

So, for those of you confused as to what, exactly, this thing is that has the Democrats at each other’s throats, here’s a look at this trade agreement, and what it might mean to America.

What is the TPP?

The TPP is the Trans-Pacific Partnership. It’s a trade agreement that’s been in the works since June of 2005. Starting with Brunei, Chile, New Zealand, and Singapore, the pact has expanded over the years to include 12 Pacific nations, with two more expressing interest.

On its surface, the trade agreement is relatively simple. It would open up the entire zone to trade freely with one another, without having to worry about tariffs or other customs-induced expenses. Think NAFTA, but with an ocean in the middle. Basically, the goods produced in any of the fourteen countries could freely be exported to any of the other fourteen countries, without paying for the right to do so.

Or at least, that’s what we think the trade agreement consists of. No one really knows what, exactly, is in this trade agreement. The specifics remain classified. The hullabaloo from this last week wasn’t actually about the TPP, it was about the TPA.

So, Wait, What is TPA?

Trade Promotion Authority, also known as “fast-track” authority. That’s part of why President Obama may be so perturbed.

The current issue getting debated is not the trade deal itself, it’s the authority for the President to negotiate that deal. If passed, TPA would mean that the trade bill would ultimately get an up or down vote from congress without amendments. Needless to say, the potential to hammer out a final deal with the other nations involved is pretty limited if those nations think congress might alter portions of the deal after they become signatories.

So, basically, Obama is just asking for the authority to finish a deal that congress could then vote on. But, despite not relinquishing the authority to shoot down the final agreement in the long run, many Democrats have balked at the idea of even giving Obama the authority to finish a deal that they would get to vote on.

Democrats don’t want to vote on the fast-track authority without knowing what’s going to be in it, and the President can’t be sure of what’s going to be in it until he has fast-track authority. So, in other words, it’s basically gridlock-as-usual for congress.

Why Are So Many Democrats Upset About This?

Simply put, there’s a large contingent of the party that is pretty sure that these deals are great for big, multi-national corporations, while being pretty bad for the majority of the American people. This is a legitimate concern. However, it’s important to remember there’s a pretty clear political element to this.

Unions typically HATE free trade agreements, and they’re a crucial voting block for Democrats. The erosion of manufacturing jobs in the United States has laid the once-powerful unions low, virtually erasing their membership as more and more companies move manufacturing overseas, where labor is cheap and plentiful. A deal like this would essentially ensure that process continued. Goods manufactured in China and other Asian countries could be exported to the United States without barriers.

There’s also concern regarding the way the trade agreement might affect environmental regulations. The fear is that certain environmental regulations in the United States could be overturned by a trade agreement as “nontariff barriers to trade (NBTs).” This could even extend to other elements of US law, with Senator Elizabeth Warren even claiming that the agreement could be used to broadly undermine regulatory efforts.

The opposition to free trade agreements has its roots in NAFTA. Yes, it HAS been over 20 years since that went into effect, but the memory has not faded for those who felt it hurt them the most (cough cough UNIONS cough cough).

Why is President Obama so in Favor of the Trade Agreement?

Well, in essence, because President Obama and other supporters of the TPP would assert that the battle the TPP’s opponents are trying to fight was already fought and lost years ago. And that the economic factors that destroyed American manufacturing over the last 20 years were a lot bigger than any one free trade agreement.

If NAFTA was the primary reason for an exploding trade deficit and declining manufacturing at home, it’s odd that so many of our imports have ended up coming from Asia, where we don’t have a similar free trade agreement. Basically, like it or not, the United States economy is not your father’s economy. We no longer manufacture consumer goods for export. We import consumer goods that are made in places where wages are lower. And it wasn’t a lack of tariffs on Mexican goods that made this happen – the trends that landed us here are global in scope.

That’s what appeals to so many about the TPP. The concession, that it will be easier for Asian countries to export their cheap goods to the United States, is not a major one. What little barriers do exist now obviously haven’t done much of anything to slow imports or protect domestic producers.

Meanwhile, where the US economy has been really cooking has been in precisely the sort of areas where the TPP would be beneficial. Intellectual property, for instance. For a nation with a booming entertainment industry and rapid growth for its tech sector, protecting intellectual property like the iPhone is arguably a lot more important in the long run. The same is true for agriculture, where the United States has long been a dominant producer that can never find enough export recipients, and the pharmaceutical industry, where American companies produce a wide variety of treatments used by the rest of the world.

So, from where Obama’s sitting, the democrats opposing the TPP are entrenched in the past, clinging to the idea of American manufacturing long after its death, and, in doing so, refusing to protect areas of actual growth. Anti-trade democrats, in his eyes, are effectively fighting hard to protect the economy of our past at the cost of the economy of our present and future.

And, speaking of the future, there’s the issue of China. A notable absence from the partnership, competition with China is a key driving element to the deal. The United States could be on the verge of a new Cold War. Only now, instead of using the Third World to fight political proxy wars with the Soviet Union, we’ll be using the Third World to fight economic trade wars with China. Cutting a deal like this would help thrust the United States into an economic leadership role that could define the nature of future trade agreements.

Laying out a framework that will protect the intellectual property of American tech firms that could eventually be extended to China is arguably a lot more important to our economy and American job creation than making consumer goods made in Asia marginally more expensive. At least, that’s the case from Obama and other pro-trade voices.

So Who’s Right?

As is almost always the case in economics, it’s entirely impossible to say with any degree of certainty which side of this debate is “right.” Opening up trade barriers would make it easier for cheaply-manufactured goods to flow into the United States, and easier for the companies that still make things in the United States to move shop. That said, it sure seems like the cat’s already out of the bag on that one, and it could just as easily be true that the ability to ship more American goods overseas will outweigh whatever jobs we lose out on.

Suffice to say, President Obama needs to build/protect a legacy while a lot of congressional Democrats need to look good for their union supporters. Unfortunately, the nature of economics, one couched in uncertainty and defined by its lack of concrete answers, has never jibed with the nature of politics. The two combined makes for an ugly mix that rarely benefits anyone in the long run.

However, for the time being, it appears as though Democrats are willing to set aside their qualms long enough to at least give Obama the authority to finish an agreement. Who knows what the final product will look like – let alone whether anti-trade Democrats will ever be interested in voting for it – but, for the time being, it looks as though Democrats are willing to give Obama enough rope to hang himself.

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