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DAVID KRUSE

By Staff | Jan 24, 2014

Trade Promotion Authority or Fast Track legislation is an authorization given by Congress to Administrations to negotiate trade pacts that are ratified with an up or down vote of Congress.

This keeps Congress out of the weeds in the back and forth of the sausage making of the details of trade deals so that each clause doesn’t become a trade barrier to negotiating a deal.

The Administration has to take the considerations of Congress into account to get ratification, but small group interests cannot derail them.

This was considered to be the only way to negotiate a trade deal as most trading partners would not even waste their time negotiating with Congress and want to deal with whoever is in charge, which should be the Administration in the White House.

As a general rule, Democrats have opposed Free Trade Agreements believing that they costs jobs of their political base as trade pacts open markets for U.S. companies who often relocate overseas.

The net economic result is that while some lose, there are far more winners than losers, so the global economy has grown based upon trade liberalization. There has been a net sum gain for all in these free trade zones.

NAFTA had huge opposition from labor interests who predicted many things such as manufacturing jobs moving to Mexico that did happen. What did not happen was for NAFTA to be the disaster they predicted as U.S. exports also surged as a result, so that it requires a very stinted view to see NAFTA as anything but a tremendous success today.

There is some pain, but it delivers much more gain.

In order to stop new trade agreements from being negotiated, the Democrats let TPA expire so the Obama Administration cannot effectively negotiate any new ones. The trade agreements with Columbia, Panama and South Korea ratified with the support of the Obama Administration were all negotiated by the Bush Administration under previous fast track authority.

As Obama is a Democrat, his administration didn’t have the motivation to challenge labor and go after renewal of TPA until his second term. Washington politicians are now playing politics with the issue as some Democrats will feign support for TPA for public content, while half-heartedly advancing the legislation to undermine it.

The Obama Administration is now asking Congress for TPA as it attempts to negotiate trade pacts with the EU and 12 Pacific nations. They started these negotiations without TPA, but have come to the acknowledgement that they need TPA to finish them.

Both of the pending trade pacts with Europe and Pacific Rim nations have plenty of hurdles to overcome even if the President has the authority to negotiate them.

Europe will continue to protect its agriculture and will not open markets to biotechnology such as GMO products.

They have no evidence of harm, but adopted the precautionary principle that allows them to raise trade barriers on the conjecture that there could be a risk someday that is not evident now, which essentially means that they can enact a trade barrier on anything anytime.

They would have to concede the precautionary principle and open markets to U.S. products that contain biotech ingredients before I see a trade agreement as worth the effort. I don’t think that they will do that.

The Trans Pacific Partnership negotiations have their own trouble. They initially started without the inclusion of Japan.

That understandably alarmed Japan as the U.S. would have FTAs with 11 other Pacific Rim nations, but not Japan, sending trade around them like a rock in a stream.

Given those prospects, Japan quickly sued to be included as negotiations went forward before they stopped. Japan wants in the TPP, but doesn’t want to further reduce its ag trade barriers.

I warned that I believed that the reason that Japan demanded inclusion was not to join the TPP, but to foil it. It doesn’t want the other Pacific Rim nations to have an FTA with the U.S., but it doesn’t mean to give up its ag protectionism either. So joining and undermining the trade talks was Plan B for them.

U.S. ag trade groups say Japan has to completely give up tariffs on virtually all U.S. ag products for them to support the TPP.

I think letting Japan in the TPP was a mistake.

It would have been strategically better for us to have completed the TPP with the other Pacific Rim Asian nations which would have, frankly, forced Japan to then concede to an FTA free of ag protectionism.

To improve the trajectory of global economic growth, Congress needs to re-authorize TPA without limitation to the Obama Administration who then needs to show uncharacteristically aggressive effort to finish trade deals with the EU and Pacific trade partners that are going to concede major issues in the ag sector that would make those new trade pacts valuable.

They are just all playing around with trade. They have not gotten serious yet.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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