Congressional leaders say no lame-duck TPP vote, Trump buys time to chart trade policy
This week leaders in the House and Senate made clear that the Congress would not be voting on the Trans-Pacific Partnership (TPP) during the lame-duck session. The 12-nation free trade agreement that President-elect Donald Trump once referred to as a "disaster" for the U.S. economy would be put on hold with a very uncertain fate under a new administration.
Senate Majority Leader Mitch McConnell told reporters on Capitol Hill that a final vote on TPP "is certainly not going to be brought up this year" and any action on the deal should be left to the next administration.
House Speaker Paul Ryan indicated that he simply did not have the votes to ratify the deal, guaranteeing that the TPP is dead, at least until January 2017.
"I think the jury is still out on what happens to TPP," economist Peter Morici said when asked about the fate of the agreement under Trump. "There is going to be a reassessment of trade policy generally, and in that context, the administration's position toward TPP would emerge."
But according to a policy road map, leaked by Trump insiders to the press, Thursday, Donald Trump may consider dropping out of the Trans-Pacific Partnership altogether within his first 100 days in office, unless certain demands are met.
The idea of reopening negotiations on the largest concluded multi-lateral trade deal in history may be difficult, but it is not without precedent.
After the 1992 election, President Bill Clinton was in a position where he could not accept NAFTA as it had been negotiated by his predecessor, George H.W. Bush. Despite Bush concluding the negotiations with Canada and Mexico, Clinton re-negotiated the agreement to include supplemental provisions on the environment and workers rights, measures that ultimately got the deal passed in the Democratic Congress.
VP of policy at the US-ASEAN Business Council, Marc Mealy cautioned that trying to bring 11 nations back to the drawing board to rehash the complex agreement is likely to be a tall order, even for the man who built his career making deals.
"Many of the other members of TPP had real serious domestic political debates and some of the governments took a lot of heat for reaching the agreement," Mealy said. Some of the governments that spent a lot of political capital to negotiate the deal with the United States "may have to reconsider their current domestic political environments to pursue a 'renegotiated' agreement."
After ten years of negotiations under two U.S. administrations, the Trans-Pacific Partnership was signed on Feb. 4, 2016 by representatives of Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. The deal covers an economic area that represents 40 percent of the world's GDP.
In a September meeting of representatives from all 12 nations in Tokyo, Japanese Economic Minister Nobuteru Ishihara affirmed that all signatories agreed they would not renegotiate the deal. Prior to that meeting, Singapore Prime Minister Lee Hsien Loong made his position clear to U.S. officials: his government had no desire to reopen negotiations again with "no prospect of doing better and every chance of having it fall apart."
Canadian Government spokesperson, Austin Jean, emphasized that the House of Commons has not yet concluded its consultations to assess the impact of TPP, but looks forward to working "very closely" with President-elect Trump on a range of issues, including trade.
The time frame for countries to ratify TPP is two years, so the Trump administration and Republican-controlled Congress has until Feb. 4, 2018 to decide if or how they want to handle the deal. According to Morici, two years is already a long time and "windows can be extended."
In addition to the two-year TPP ratification deadline is a parallel race for economic influence in the Asia Pacific. The Regional Comprehensive Economic Partnership (RCEP) is a 16-nation free trade agreement that includes the 10 ASEAN countries, four of whom are TPP members, along with China and India. With lower standards for labor and the environment, it is possible the RCEP parties could conclude their free trade agreement before the United States moves on TPP.
Members of the Obama administration, from Secretary of State John Kerry to Defense Secretary Ash Carter to U.S. Trade Representative (USTR) Jason Furman have pitched the argument that failing to enact TPP would make the United States an outsider in the Pacific, would leave a vacuum in the Pacific that would be filled by an increasingly aggressive China, and would overall harm U.S. interests.
The thought of the United States losing economic influence to China would seem to be at odds with Trump's position throughout the election. On the campaign trail, Trump reserved some of his harshest rhetoric for America's second largest trading partner, accusing China of restricting market access, unfair trade practices, devaluing the Yuan, and otherwise "ripping us off like nobody has ever seen."
But Trump has said that he is confident to take on trade issues with China, where he sees the United States having untapped economic leverage. China sells the United States upwards of $440 billion in good, according to the latest census data. If Trump makes good on his campaign promise to levy tariffs on those goods, it could seriously hurt Beijing.
According to Morici, Trump administration's attitude towards the Trans-Pacific trade deal will ultimately be shaped as a result of how the new president decides to handle trade with China, Morici asserted. Whether or not the United States can effectively deal with its TPP partners, "will hinge heavily on how effective we are with China."
In the meantime, the most important indicators will be Trump's nominees to key foreign policy and economic positions in his cabinet, Miles Kahler, an expert in international economic relations at the Council on Foreign Relations says. "The vast majority of those who work on Asia-Pacific policy in the foreign policy [community], whether Republican or Democratic, are very much in favor of TPP," Kahler said, specifically as a way to reinforce American foreign policy goals in the region. Of course, Trump, the victorious outsider, may choose to steer clear of traditional establishment figures.
One possible indicator of both a Trump approach to China and trade more generally, is the listing of business leaders who worked in sectors that were traditionally hurt by past trade agreements. For example, Dan DiMicco, former CEO of Nucor, the largest U.S. steel producer as USTR on the transition team.
As a final word of caution, Morici cautioned against "silly" assumptions that trade agreements will be "ripped up and thrown out the window" because Trump won the election.
"Anybody who has built hotels around the world realizes that shutting down global trade is a silly thing to do."