Is the TPP now in sight?
President Barack Obama and Senate Majority Leader Mitch McConnell (R-KY) scored a dramatic victory on 23 June 2015, persuading 60 senators to head off a filibuster against Trade Promotion Authority (TPA), the minimum number needed. TPA will be enacted by the Senate this week, as the bill itself requires just 51 affirmative votes. At the same time, Trade Adjustment Assistance (TAA) will be packaged with the African Growth and Opportunity Act (AGOA) and a mildly protectionist anti-dumping provision, to get another 60-vote filibuster-proof majority before being enacted.
Obama’s premier legislative accomplishment this term
TPA, TAA and AGOA will then go to the House, as two separate bills, where they will likely be passed next week. The TAA and AGOA bill should enjoy the support of a large number of Democrats, thanks to the artful packaging, while the standalone TPA bill was already passed in the House on 18 June. Thus both bills can soon be signed by President Obama with a flourish; they are likely to be the biggest legislative accomplishment of his second term.
The pro-trade legislative victory at the behest of three political masters – President Obama, Senator McConnell, and House Speaker John Boehner (R-OH) – paves the way to wrap up TPP negotiations in July and seek Congressional ratification by November.1
What TPA does
TPA, also known as ‘fast track’, is a bill about voting procedures on future trade deals negotiated by the president. It promises that both the House and the Senate will give trade deals a speedy up-or-down vote, without amendments. TPA also enumerates 19 “priority negotiating objectives”, and sets forth procedural guidelines.
This is important; Japan and Canada have stated publicly, and other TPP countries stated privately, that they would not put their best offers on the table until Congress enacted TPA. That has now been accomplished, and trade ministers will soon meet to hammer out the final, and hardest, bargains in the TPP agenda.
To be sure, AFL-CIO President Richard Trumka and opposition non-governmental organisations, such as Public Citizen and the Sierra Club, will not go down without a fight. Their sights are now set on the up-or-down ratification vote. They may enlist opposition support from Nobel Laureates Paul Krugman and Joseph Stiglitz. At one time, both distinguished economists were free trade advocates.
Back in 1997, Paul Krugman wrote: “Would President Clinton have suffered his humiliating rebuff over fast-track trade legislation if the administration had not wasted crucial months failing to take the issue seriously? I don’t know. Will that rebuff severely damage the world trading system? I don’t know. Is this the beginning of a more fundamental backlash against globalization? I don’t know that, either.
“What I do know is that the arguments advanced by fast track’s intellectual opponents are stunningly specious.” (Krugman 1997).
But those sentiments were uttered by a different person than the Paul Krugman who now dismisses TPP in his New York Times column, and by a very different person than the Joseph Stiglitz who now spies a global health danger in the TPP’s intellectual property provisions.
In other words, the TPP war is far from over, and the next battle will be fought just as hard as the intense engagement of the past two weeks.
However, it seems more likely than not that TPP talks will roll to a conclusion within six to eight weeks, and Congressional ratification of TPP will probably happen just prior to the APEC Summit in the Philippines in November 2015.
Concluding remarks: Gains from TPP
Assuming this scenario unfolds, the eventual payoff will be substantial, illustrated by the estimates in Table 1. Focusing just on the US, our estimates suggest that the widely disbursed gains – some $77 billion annually – will exceed the concentrated losses incurred by displaced workers by a ratio of 20 to 1 or higher. Displaced workers deserve assistance – the purpose of TAA – but inevitable job losses are not a reason to oppose TPP.
Table 1. TPP12 gains by 2025 (billions of 2007 dollars)
Source: Petri et al. (2012) and author’s own calculations.
References
Hufbauer, G (2015), ”Is TPP in Peril”, VoxEU.org, 15 June.
Krugman, P (1997), “A raspberry for free trade: Protectionists serve up tainted fruit and red herrings”, Slate, 21 November.
Petri, P, M Plummer and F Zhai (2012), “Adding Japan and Korea to the TPP”, Overview note.
Footnote
1 See my column last week for details on the initial maneuvering (Hufbauer 2015).
Previous VoxEU.org columns on TPP
Gary Clyde Hufbauer, Wednesday, June 24, 2015
The Trans-Pacific Partnership agreement would be the largest single trade agreement concluded worldwide for more than a decade. It would transform world trade governance in ways that are hard to predict. This column discusses the machinations inside the US Congress that gave US negotiators the green light to wrap up the TPP talks. If all goes well, the deal may happen just prior to the APEC Summit in the Philippines in November 2015.
Theodore H. Moran, Lindsay Oldenski, Monday, June 15, 2015
The fate of the TransPacific Partnership rests on US Congressional decisions that will be taken in the next few days. This column discusses research that shows TPP is likely to be pro-jobs, pro-trade, and pro-investment. Blocking the TransPacific Partnership is not a way for members of the US Congress to show that they care about the creation of good jobs in the US.
Gary Clyde Hufbauer, Monday, June 15, 2015
The Trans-Pacific Partnership – a trade deal involving the US and 11 partners – has been imperilled by parliamentarian manoeuvres in the US Congress. This column explains the complex links between the trade deal and the Congressional vote and discusses the next steps.
Jason Furman, Friday, February 20, 2015
The US economy has strengthened considerably in recent years, presenting an opportunity to address the 40-year stagnation in incomes for the middle class. This column provides historical and international context for the key factors affecting middle-class incomes: productivity growth, labour force participation, and income inequality. It also outlines President Obama’s approach to economic policies – what he terms “middle-class economics” – which is designed to improve all three.
Jayant Menon, Monday, November 10, 2014
With WTO trade talks on the brink of failure (again), global trade governance is being decided elsewhere. This column argues that China and the US are pushing competing visions for free trade in Asia-Pacific. The US-led Trans-Pacific Partnership, TPP, could be challenged by a China-led ‘Beijing Road Map’ that may be announced at this week’s APEC summit. Neither vision is an end-game but merely one more stroke on an ugly picture of trade agreements characterised by an unsustainable amount of disorder and incoherence.
Tsuyoshi Kawase, Tuesday, July 29, 2014
The regulation of state-owned enterprises in international trade dealings has been cited as a major stumbling block to progress on the Trans-Pacific Partnership negotiations. This column explains the issues of contention, and argues that state-owned enterprises require an explicit and deliberate regulatory treatment. Given their unique properties, a coherent approach to state-owned enterprise regulation would promote progress in negotiations better than the piecemeal of overlapping rules currently considered.
Jayant Menon, Tuesday, July 1, 2014
The Trans-Pacific Partnership (TPP) is taking a long time to conclude. This column argues that the TPP agenda, unlike the Doha round, is more ambitious and controversial. Many see it as skewed in favour of one country – the US. There are fears that even the US may lose interest in the Partnership without the fast-track authority given by the current Congress. The only useful way forward is for countries to take matters in their own hands.
Anabel González, Thursday, May 29, 2014
Mega-regional negotiations will underwrite global governance on 21st-century trade issues and facilitate the proliferation of global and regional value chains. This column writes that Latin American countries would gain from a strengthened and effective WTO to help mitigate the friction and fragmentation that may result from the mega-regionals.
Dennis Novy, Wednesday, May 28, 2014
The negotiations for the Transatlantic Trade and Investment Partnership are about a year old and making only slow progress. This column argues that TTIP is a long-run project that will probably take several years to complete. Despite its significance to global trade, without support from the top echelons of government it might falter.
L Alan Winters, Thursday, May 22, 2014
Most economists cheer the Trans-Atlantic Trade and Investment Partnership that the EU is currently negotiating with the US. This column argues it is a pity that TTIP and other mega-regional agreements have emerged. It sees the exclusion of China in particular as an existential threat to the world trading system. It urges policymakers in the EU to focus instead on the world trading system or even consider an agreement with China.
Lucian Cernat, Friday, November 8, 2013
Trade agenda consists of new and old themes, often closely intertwined. Among the new themes, mega-FTAs– in particular the Trans-Pacific and the Trans-Atlantic Trade and Investment Partnership – have been especially popular. This column discusses the nature of mega-FTAs and their relationship with the multilateral rules. The column concludes that such FTAs promote deep regional integration, but also have positive impact on non-members.
Yasuyuki Todo, Saturday, May 11, 2013
Japan looks set to participate in the Trans-Pacific Partnership (TPP) negotiations. Reflecting the current debate in Japan, this column assesses what effect the Partnership will have on Japan’s growth. Evidence suggests that the economic effects may be far bigger than the current consensus suggests.
This article is published in collaboration with VoxEU. Publication does not imply endorsement of views by the World Economic Forum.
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Author: Gary Clyde Hufbauer is Reginald Jones Senior Fellow at the Peterson Institute for International Economics.
Image: A container ship departs Burrard Inlet in Vancouver, British Columbia March 6, 2009. REUTERS/Andy Clark.
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