The TPP Trade Deal and the Dilemma of American Liberalism

The Story

On Friday, June 12, the U.S. House of Representatives rejected a bill called Trade Promotion Authority, which would have given President Barack Obama strong negotiating power to conclude a deal known as the Trans Pacific Partnership (TPP). In the works for 10 years, the TPP is a proposed free-trade agreement that would more closely link the American and Canadian economies with those of key Pacific Rim countries, including Chile, Japan, Australia, Vietnam, and six other countries straddling the Pacific Ocean. Participating countries in the TPP would agree to reduce and eliminate protective tariffs on imported goods from the other partners, and open up their markets for freer economic competition.

 

An important step towards facilitating the trade deal was the Trade Promotion Authority bill in the United States. This bill would essentially give President Obama a free hand to negotiate particular provisions of the TPP agreement, and eventually present the entire deal as a complete package for either a “yes” or “no” vote in Congress (as opposed to most other legislative bills, which are often subject to hundreds of amendments that modify specific aspects of a law). The other TPP negotiating countries see this authorization as critical to the success of the deal, as they negotiate concessions that could be politically harmful to their governments. In the absence of any assurance that a negotiated deal would be sent for approval in the United States in a “take-it-or-leave-it” format, TPP members fear that the process will reveal sensitive bargaining positions without receiving an equitable compromise from the United States.

In a somewhat unusual twist for the normally hyper-partisan Congress, opposition to the Trade Promotion Authority bill came from both Republicans and Democrats. One of the key actors behind many Democrats’ resistance was the American labour movement – after witnessing the loss of U.S. manufacturing jobs in the 1990s, as free trade deals came into effect, labour unions coordinated a broad, effective campaign against granting President Obama authority to negotiate this latest agreement. This U.S. opposition has been echoed by the dairy industry in Canada, which currently enjoys an expensive subsidy program that would almost certainly be dismantled if the country joins the TPP (and is also politically powerful, coinciding with many of the country’s key battleground ridings in Ontario and Quebec).

 

President Obama and his allies are currently charting their remaining options towards mustering enough Congressional support to reassure potential TPP partners, but clearly face an uphill battle as the country heads into another election cycle. Meanwhile, several of America’s Pacific Rim allies worry that U.S. inaction, or even withdrawal, from the TPP talks would jeopardize its economic influence in Asia, at a time when China is deepening its economic influence through measures such as the Asian Infrastructure Investment Bank.

 

[Update: The U.S. Senate voted Wednesday to grant President Obama Trade Promotion Authority, backing a second effort led by the President and Congressional Republicans to relaunch the TPP talks.]

Background Articles

• “Labor’s Might Seen in Failure of Trade Deal as Unions Allied to Thwart It“, by Noam Scheiber (New York Times)

• “Failure of Obama’s Trans-Pacific Trade Deal Could Hurt U.S. Influence in Asia“, by Jonathan Soble (New York Times)

• “U.S. Trade Politics Hands Harper a Free Pass“, by Jeffrey Simpson (Globe and Mail)

Key Quote

If you don’t do this deal, what are your levers of power? The choice is a very stark one: Do you want to be part of the region, or do you want to be out of the region?” – Singapore Foreign Minister K. Shanmugam

Context

The Trans Pacific Partnership poses a significant challenge to the unity of U.S. Democrats by potentially pitting two strategic objectives of the liberal movement against each other. On the one hand, Democrats have long enjoyed the support of labour unions, who boost Democratic election campaigns through fundraising and organizing. The most liberal wing of the party has reciprocated by seeking to protect unions and their blue-collar workers against the threats of a globalized economy, in which relatively high-paying manufacturing jobs must compete with lower-cost manufacturing in developing countries. As such, many Democrats and their labour supporters vociferously oppose free trade agreements that remove barriers for developing country competitors to undercut domestic manufacturing industries and their workers.

 

On the other hand, most Democrats tend to favour extending American influence in the world through international institutions and treaties, as opposed to unilaterally exerting influence through military force. This approach stems not only from a moral belief in avoiding war, but also an understanding of the world that emphasizes the complex linkages between countries and other international actors, and thus the limits of acting unilaterally. In this worldview, free trade agreements represent one tool to influence other countries, by deepening economic linkages that make trade partners more dependent on each other’s well-being. As countries deepen their economic interdependence, according to this internationalist theory, they also deepen political and cultural ties and lessen the likelihood of going to war with each other – especially if they are each democracies. In theory, free trade agreements also help grow the economies of all parties involved by opening markets for their strongest industries – outweighing losses in other industries that might be seen by economists as relatively inefficient.

 

Although this tension between protecting American labour and extending American influence through trade has shaped debates on other free trade agreements, such as the North American Free Trade Agreement (NAFTA), the TPP exposes this tension more so than perhaps any other previous agreement. The stakes of this deal are especially high given the competition between the United States and China for influence on the Asian continent. Among the TPP’s proposed Southeast Asian members, the United States already lags China in terms of the total value of exports to those markets (for more details, you can view the top trading partners of proposed TPP members Vietnam, Singapore, Malaysia, and Japan). Should the TPP fail, China will likely continue increasing its economic clout in the region at the expense of the United States, which may translate into greater political and cultural influence, even among historical U.S. allies. For American policymakers wary of China’s rise, this outcome could elicit a more militaristic response as the last remaining option to counter its emergence as a global superpower.

 

Ultimately, Democrats and American liberals have been boxed into a political corner on this issue. Their traditional base of labour voters has been decimated in recent years by Republican attacks on public sector unions, such as Republican presidential contender Scott Walker’s high-profile fight against Wisconsin unions, and a general decline in membership over the last four decades. For the labour movement, the TPP represents a highly visible issue where it can re-assert its political relevance. At the same time, the TPP’s high stakes also makes it a key turning point in America’s relationship with Asia; a failed negotiation, especially after TPP members have offered painful concessions, could spur Southeast Asian countries to an irreversible turn towards China for the economic and political capital necessary to sustain their growth, raising the prospect of a U.S.-China conflict over the long term. Regardless of how this issue is resolved in Congress over the next few weeks, it is almost certain to come back as a potentially divisive litmus test for Democratic candidates in the upcoming presidential primaries.

Discussion Questions

• What motivates the labour movement’s opposition to free trade? How have recent political and economic experiences contributed to its stance on this issue?

• What are the potential ramifications of a failed TPP deal for the United States, and for Asian TPP members? What are the potential ramifications of the TPP if it is ratified by negotiating members?

• Does greater economic interdependence between countries lead to greater political and cultural influence? What are some other ways in which regional and global powers can exert influence in a region?