Obama Sets Sights on 2016 TPP Approval, Despite Political Landscape

25 February 2016

US President Barack Obama said on Monday that he was “cautiously optimistic” that Congress will be able to pass the Trans-Pacific Partnership (TPP) Agreement, pledging to submit the necessary legislation for lawmakers’ approval this year.

“We’re going to sign to enter this agreement, presented formally with some sort of implementation documents to Congress at some point this year,” he told the National Governors Association. “And my hope is, is that we can get the votes.”

The TPP was signed earlier this month by trade ministers from 12 Pacific Rim countries, a group that covers approximately 40 percent of global GDP. (See Bridges Weekly, 11 February 2016)

Of these 12 countries, the US makes up the largest economy in the talks, with its ratification therefore being crucial in order for TPP to meet the necessary threshold to enter into force. Under the terms of the trade pact, the first-best scenario for ratification involves all 12 signatories passing the deal in their respective legislatures within two years. Otherwise, at least six economies making up 85 percent of the group’s GDP must do so. (See Bridges Weekly, 12 November 2015 and 8 October 2015)

However, congressional leaders have lately indicated that the trade pact is set to face an uphill battle in Washington, and not just because of political timing.

Speaker of the House Paul Ryan, the Wisconsin Republican who helped draft the 2015 Trade Promotion Authority legislation when he served as chair of the Ways and Means Committee, said earlier this month that the current vote count does not bode well for the trade deal.

“I don’t think the votes are there right now because of the concerns about what’s in the TPP,” he told journalists on 11 February, in comments reported by CBS News.

“The point is we shouldn’t bring something up if we’re not confident that we have the support there for it,” he continued, arguing that it is the White House’s task to shore up the necessary backing to get the deal passed.

The renewed, revised version of Trade Promotion Authority (TPA) was enacted into law last summer, following a heated congressional fight that brought front and centre the concerns both in Washington and among the wider American public over the TPP and other trade pacts. (See Bridges Weekly, 2 July 2015)

TPA sets both the priorities that international trade pacts must meet, as well as the terms for securing “fast track” approval procedures for voting such deals through Congress – in other words, a straight up-or-down vote, without amendments by lawmakers.

Trade enforcement bill

In separate, though related, news, Obama signed into law on Wednesday the Trade Facilitation and Trade Enforcement Act of 2015, after the deal obtained Senate approval earlier this month. The trade enforcement pact, which had been part of a bundle of trade bills – including Trade Promotion Authority – under consideration last year, will entail a major revamping of Washington’s customs law.

“The President has been clear that our trade agreements must allow our workers and businesses to compete fairly with the rest of the world, and where that is not happening, we have and will continue to take action,” said a statement from the White House Press Secretary following the Senate’s passage.

Calling the legislation “an important milestone in our trade agenda,” the statement stressed the legislation’s potential to improve the enforcement of trade-related laws, including “unprecedented new tools to address unfair currency practices.”

The currency-related provisions in the bill includes a set of definitions for what constitutes “currency manipulation,” as well as requirements for the US Treasury Secretary to report to Congress every six months “a report on the macroeconomic and currency exchange rate policies” of all major US trading partners.

The amendment also requires the US President to undertake “enhanced bilateral engagement” – with the potential to take additional remedial steps – with any countries that are found to be manipulating their currencies.

Notably, the final Trade Promotion Authority (TPA) enacted last year did not include enforceable currency manipulation terms, despite efforts by some US lawmakers to do so. At the time, American finance officials had warned that doing so would ruin the prospects for completing the TPP.

After the TPP negotiations were concluded last year, the 12 countries involved issued a joint declaration through their finance ministers committing themselves to setting up a currency forum – with annual meetings – aimed at improving their cooperation on macroeconomic issues. (See Bridges Weekly, 12 November 2015)

Whether the passage of this additional enforcement legislation will ease some of the remaining concerns among US lawmakers about the TPP, including on currency, remains unclear.

White House presses on, despite election politics

Another factor looming over the TPP ratification process is the ongoing US election process, with Republican and Democratic candidates’ sparring amongst themselves for their respective party’s nomination – and later, the White House.

At press time, two Democratic candidates and five Republican candidates remained in the running, after primaries held in Iowa, New Hampshire, South Carolina, and Nevada. Next week’s “Super Tuesday” primaries – held concurrently across various states and territories – could potentially be a game-changer for both parties going forward.

Of those candidates remaining, both Democratic candidates have raised concerns over the TPP, as have some of the leading Republican contenders, casting doubts over whether the deal would receive the necessary backing to secure ratification under the next president and Congress.

The White House has, for its part, acknowledged that the campaign rhetoric – as well as other content-related compromises that have sparked concerns from US lawmakers, such as the tobacco carve-out agreed in TPP – could create some complications going forward.

“The presidential campaigns have created some noise within, and roiled things a little bit within the Republican Party as well as the Democratic Party around this issue,” said Obama. “I think we should have a good, solid, healthy debate about it.”

While TPP has arguably attracted the most attention, another major pact – the Transatlantic Trade and Investment Partnership (TTIP) being negotiated with the EU – is also trying to make significant strides during Obama’s final year in office, despite the election-year hurdles. (For more on TTIP, see related article, this edition)

An annual White House report pegged TPP – as well as other planned trade deals, such as the Trade in Services Agreement (TISA) and TTIP – as having the potential for “a large effect on output.”

The 22 February report cited the findings from a Peterson Institute for International Economics study, which indicated that the TPP could yield a boost in US real incomes – while also warning that even a one-year delay in implementation could yield costs of US$94 billion.

“The complicated global economic environment underscores the importance of the President’s trade agenda in opening new markets and ensuring a level playing field for US firms,” the White House report said, referring to the TPP as the “centrepiece of that agenda.”

ICTSD reporting; “Speaker Ryan: Not enough votes for TPP trade deal,” CBS NEWS, 11 February 2016; “Senate Sends Sweeping Trade Enforcement Bill to Obama,” THE NEW YORK TIMES, 11 February 2016.

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