One significant change expected from the GOP assuming control of both houses of Congress in Washington would be for momentum toward negation of expanded trade agreements to resume. Sen. Nancy Pelosi, D-Calif. and Sen. Harry Reid, D-Nev. were not telling the whole truth when they claim to support trade but refused to advance Trade Promotion Authority to the president.
U.S. Trade Representative Michael Froman had been attempting to negotiate trade deals with Asian Rim trading partners and the Eurozone. However, negotiations are not very serious when the representative has no authority to make deals. If this were a business negotiation no one would waste their time on such foolishness.
Congress has typically authorized the president to negotiate trade agreements while retaining the power to approve or disapprove them in an up or down vote. Congress has the final word, but there cannot be 435 negotiators for the U.S. in the room.
The Democratic Congressional leadership knew that by denying the president TPA they would never see the opportunity to vote down a trade agreement because none would ever make it that far to get to them. Pelosi and Reid are protectionists.
Now it will be the Republican leadership that decides whether to restart trade negotiations for real and that will be evident in when and how they grant President Obama and his USTR Trade Promotion Authority, which is also called “fast track legislation.” Reid blocked it in the Senate. McConnell can push for a vote.
The Chamber of Commerce, which helped re-elect a lot of Republicans in the mid-term election, wants trade momentum started again. USTR Froman claims to have made good progress negotiating a Trans Pacific Partnership, but they would be leaving the most contentious deal making until last, seeking the authority to make the tough decisions.
The lack of fast track is just one of the obstacles to finishing trade agreements. Frankly, I do not think that Europe will make the concessions necessary to finish a trade deal with them.
They use the precautionary principle rather than science to define what trade they can block and as long as they ban GMOs it is a no-go from our perspective. It is not a given that European Union negotiators have the authority to make a deal. EU lawmakers gave member states the right to block GMOs even if the EU body has approved them. That poisons the well for an EU trade agreement. The problems with trade during the Obama administration went deeper than just opposition to FTAs.
Just like good Republicans can’t vote for any tax increase, good Democrats have to oppose trade agreements. President Obama did not have what I would call a strong trade strategy. Japan does. A TPP without Japan would have put Japan at a disadvantage.
We should have finished the TPP with the 11 other nations without Japan and then approached Japan with the terms already defined. That would have given us great leverage.
Now, Japanese intransigence to eliminate tariffs on several sensitive commodities is blocking the entire agreement.
A TPP without China would put China at a disadvantage. Beijing promoted a trade pact with 21 countries at an Asia Pacific Economic Cooperation meeting being hosted there. China wants in on the game.
Trade liberalization through the World Trade Organization is stalled so that is why there are attempts being made between trade partners around the world to negotiate bilateral agreements. There are a number of them in the works but the TPP is the only one that the US has great prospects of finishing and only then if there is a change in Washington and Tokyo.
Also at work in the background are growing attempts to gain advantage in trade through currency wars. Weak economies are devaluing their currencies in order to gain advantage in trade. The US is the life preserver that they are all attempting to grab on to as the strongest economy in the pool at the moment. By devaluing their currency relative to the dollar it makes their goods cheaper to export and our goods more expensive to buy therein giving them a competitive trade advantage. That may work in the short term but eventually a strong dollar will pull those dependent on export markets under, particularly in the ag sector.
Trade liberalization has stopped and nations have turned inward in a protectionist stance. That tells me that we are not out from under the prospects of 1930s like trade contraction overcoming us yet. House Speaker John Boehner now has the largest GOP majority in the House since 1929. In the 1930s it was the Republicans who were the trade protectionists with Herbert Hoover signing Smoot-Hawley tariffs into law. Congressional Republicans have an opportunity to change history on trade.
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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