This Congress doesn’t want to look as totally dysfunctional as the last one so the leadership is working through things with the administration that can give the appearance of bipartisan progress even if it doesn’t amount to anything.
This congress thinks it has a candidate in forwarding Trade Promotion Authority for President Obama. TPA, also called Fast Track, allows the administration to negotiate a free trade agreement that is then put to an up or down vote of the entire Congress.
Someone has to have the authority to speak for the U.S. to make trade deals and a 535-member negotiating team will never accomplish that.
FTA opposition knows that so if they can withhold negotiating authority from the President they have effectively blocked any trade deal from ever being finished.
These trade deals require some give and take and the President has to make the decision what to demand and what to concede and Congress can just say no if it doesn’t like his deal.
Trade protectionists would rather not let it get that far to get put on the spot.
Democratic Congressional leadership, Sens. Nancy Pelosi and Harry Reid, are protectionists and they blocked congressional action on Trade Promotion Authority. The irony was that they were denying it not to a GOP President, but to one of their own.
They did not trust President Obama to negotiate a fair deal. Now with the GOP in charge of both Houses, they decide what provisions get voted on and one of the first pieces of legislation will be a new authorization for Trade Promotion Authority for the President.
Paul Ryan is championing TPA in the House and Orrin Hatch is doing so in the Senate, both in accordance with party leadership.
For a GOP Congress to give a Democratic President this trade authority will make them look broad-minded and bipartisan which will gall Democrats to no end.
The trade agreements ratified under President Obama’s watch had been negotiated by George W. Bush who had TPA, which expired for Obama.
This President has been working on FTAs with the European Union and with Asian Rim countries in a pact including Japan called the Trans-Pacific Partnership.
Getting TPA from Congress doesn’t mean that these trade pacts will get done, but they are virtually impossible to finish without TPA. This controversy has revealed just how trade protectionist that the Democrats have become.
They still bash NAFTA finished by Bill Clinton.
Trade is extremely important to the ag sector, so it was revealing to hear Sen. Debbie Stabenow, the former chair of the Senate ag committee, say she was unsure how she would vote on TPA for President Obama.
That is her putting her party ahead of the ag sector and made even more conflicted when she voiced support for opening trade with Cuba.
It would be most interesting to see what Hillary Clinton says about TPA and trade.
As I noted, the prospects to finish FTAs with Europe and Japan are questionable. I don’t think the one with Europe can be consummated.
I don’t think they will open their markets to fair ag trade conceding things like GMOs. I don’t think that is something that we can concede to them.
They have built a protectionist wall around its ag sector much thicker and taller than Japan has.
The result has been to increase the cost of food in Europe which is a drag on their struggling economy and something that European Central Bank Quantitative Easing can’t fix.
The EU exports its food protectionism through its rejection of gene biotechnology, keeping other nations from adopting GMOs that would help them for fear of losing access to the EU ag market.
Japan protects sensitive ag industries such as rice, but not to the extremes that Europe goes to rejecting science as trade policy.
The initial TPP was being negotiated with 11 Asian Rim nations and the Japanese, worried that an Asian trade pact would form around them, sued to be let in.
Once allowed into the negotiation, they reneged on the premise held by the rest of the group that ag tariffs go to zero.
This negotiation is pretty straight forward and doesn’t hide behind things like phyto-sanitary rules or GMOs. Japan accepts science better than most other nations.
In part, that is because Japan is dependent on ag imports and doesn’t want to inflate the cost of food to Japanese consumers as is done in Europe.
Japanese Prime Minister Abe won a renewed political mandate which included finishing a TPP. I think that there is a reasonable prospect that if President Obama receives TPA that he can deliver a TPP.
That is why the Democrats are fighting to block the TPA.
The strength in the U.S. dollar is going to squeeze ag exports and the ag economy so now is the time that a breakthrough on trade barriers is sorely needed to keep goods moving in a less competitive currency environment for U.S. agriculture.
I will bet that the Office of the U.S. Trade Representative has made progress with Japan and that it’s not far from completion of a deal when the political roadblocks in the process are removed.
Strategically, the U.S. needs to put together the TPP in order to balance China’s trading power in the region.
If we can consummate a TPP with nations that have combined economies equaling 40 percent of global GDP, then there will be more pressure put on Europe to move forward into the real world and accept a trade overhaul in order to avoid becoming isolated.
Trade liberalization has slowed to next to nothing. The global economy is seeing tepid growth and badly needs the boost that a reduction in trade barriers can produce.
Presidential TPA is a start.
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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