Debunking the Myriad TPA/TPP Myths

A trade policy nerd can only be subjected to blatant protectionist nonsense for so long.  So, after months of hearing/reading/seeing myths about Trade Promotion Authority, the Trans-Pacific Partnership and free trade more broadly, I finally cracked.  The result is a 3500+-word debunking of the nine most common myths (just like old blog times!).  The intro and direct links are below.

Enjoy!

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Top Nine Myths About Trade Promotion Authority And The Trans-Pacific Partnership

The current debate over Trade Promotion Authority proves, once again, that the classic description of the anti-globalization movement—as “largely the well-intentioned but ill-informed being led around by the ill-intentioned and well informed”—still holds true. Despite the tireless efforts of trade policy experts to explain why TPA and the U.S. trade agreements it’s intended to facilitate are, while imperfect, not a secret corporatist plot to usurp the U.S. Constitution and install global government, myths and half-truths continue to infect traditional and social media outlets.

Because these myths—originating with the same old anti-trade bedfellows that have been with us for decades—have duped a lot of good folks who are otherwise predisposed to support liberty and free markets (including some in Congress), and because the House of Representatives is poised to vote on TPA in the coming days, here is one last debunking of the top nine myths about TPA, the Trans-Pacific Partnership (TPP), and U.S. free-trade agreements (FTAs) more broadly.

To save some time, you can skip to your favorite myth by clicking on the links below.

Myth 1: TPA and U.S. FTAs are unconstitutional and undemocratic!

Myth 2: TPA grants the president new and unlimited powers!

Myth 3: TPA sets legally binding congressional rules for U.S. trade negotiations!

Myth 4: Once TPA is approved, Congress will be powerless to stop TPP or other FTAs!

Myth 5: TPP is being negotiated via a dangerous and unprecedented level of secrecy!

Myth 6: FTAs, completed via TPA, undermine U.S. sovereignty!

Myth 7: TPP is a secret backdoor for a parade of horribles (and TPA lets that happen)!

Myth 8: FTAs (and free trade generally) benefit large corporations at the expense of working people!

Myth 9: TPA doesn’t matter!

Perspective, Ctd.

Just as I was drafting last night's blog post on the supposed "American free trade renaissance", a detailed - and totally depressing - dispatch on the Trans-Pacific Partnership arrived in my inbox from foreign policy gadfly Chris Nelson of "the Nelson Report."  Nelson collected various quotes from US and foreign business reps (aka the people who are paid to be eternal trade optimists) on the latest round of TPP negotiations in Singapore, and, boy, does it paint a different picture than the pretty one being paraded around by USTR today.  I won't bore you - and steal all of Nelson's intellectual property - by cutting and pasting the entire download, but here are the some of the lowlights (bold are Nelson's commentary; italics are quotes from his anonymous, in-the-know sources):

...the background story at Singapore TPP. Not a happy group of campers. Mexico is just saying no to everything, apparently...in contrast to Canada which is being lovely. Viets totally focused on their one chapter...textiles/apparel and shoes, and US not giving them anything to work with. No one excited about Japan, because it's really not true many chapters finally closed...nearly all still open thru brackets. So if Japan joins, the deal gets kicked further and further down the road. Oct/Bali as a deadline...a joke, and Indonesia's not in TPP anyhow. And Kirk hanging on really depressed folks. US negotiators can't show any flex, even if they wanted to, until the new guy named. Zients? Zero industry/biz support...just WH. 

... 

"Mexico seems only to have defensive issues, nothing positive except for beef. We'd thought Mexico would play a sort of supportive role as a member of the 'US bloc'. My god if we're having this hard a time now with Mexico, which is mainly fixated on its own ag and apparel issues, what will happen when Japan comes in across the board, it's one of the world's most complex economies!"  

... 

In fact, as a practical matter Japan won't be compelled to "swallow" all the already-settled chapters, for the basic reason that so many "difficult issues" remain in brackets, and thus remain to be negotiated, perhaps at the Leadership level. A related problem for the outside business observers not allowed in the room:

"We're not even allowed to know the names of the chapters at this point. It's a really stupid parlor game. That made the so-called 'stakeholder briefings' an exercise in frustration".

...

Vietnam? Not negative like Mexico, but very, very, very focused on "just one thing...textiles and apparel, and shoes", and making no bones about it. But here's the problem...so far, in the absence of new guidance from the White House (including no successor to Ron Kirk) USTR negotiators have no flexibility on textiles, apparel and shoes, even if they were so inclined, observers feel.

"So Vietnam has every right to be angry and frustrated, and in the corridors, they made no bones about it!"

Thailand has similar concerns prompting it to lay back and not decide whether to join, it's agreed.
... 

Business observers frankly confess to "not being sure what to make of the SOE [State-Owned Enterprise] issue. The Vietnamese tell us it's no longer a big problem, with SOE's now only involved in a small percentage of their economy. So we don't know what's 'reality'." 

... 

Finally, a big impediment we kept hearing about could really be called the "third problem" from above... 

"we have no USTR nominee, and that was on everyone's lips"... 

Going forward, the issue is that so long as Kirk's replacement isn't even named, much less confirmed, neither USTR negotiators, nor US trading partners, can have an intelligent discussion on possible deals on anything "sensitive", including all those pesky brackets. Business reps cite as sample problems which cannot even be approached, much less resolved until a new USTR is in place...what about US pharmaceuticals and patent protection? What about US tobacco, very important in Asia, if no longer here?
 
"With Kirk just hanging-on, no US negotiator or any trade partner can make any concessions until a replacement is confirmed, presumably also with TPA instructions, yet the US keeps pushing everyone else to put concessions on the table. How can they?"

Not a pretty sight, eh?  Maybe all of this gets worked out over the next few months, but, after reading the above, it seems that at least a little skepticism and caution is warranted.  So isn't it about time that the real TPP negotiations, the Obama administration's questionable handling of them, and the President's real trade policy get reported by the mainstream press here in the states?

Maybe that's just too much to ask.

Attention NC Businessfolk: Learn About US FTAs in Greensboro

As you many have noticed, things have been pretty quiet around here for the last week or so.  This has mostly been due to the Labor Day holiday and a rather, ahem, spirited work schedule of late, but it's also because I've been working hard on few fun extracurriculars, including my new Cato Institute paper on American subsidy and anti-subsidy policy (more on that later) and several upcoming speaking engagements.  The first one of those events is next week: I'll be speaking at a US Commercial Service event in Greensboro, NC on how to take advantage of the new US Free Trade Agreements.  As I know you're all very curious about it, here's the skinny:

Benefiting from the Colombia and Korea Free Trade Agreements

The Colombia and Korea Free Trade Agreements (FTAs) entered into force on May 15, 2012. On the day of implementation, over 80% of U.S. industrial goods exported to these countries began duty-free entry.

• Colombia is the fifth largest economy in Latin America with the third largest population. Colombia is the 3rd largest market for U.S. exports in Latin America.  

• Korea is the United States' 7th largest trading partner. The U.S.-Korea FTA has the potential to increase U.S. exports to Korea by USD 10-12 billion.

Hear from industry and government experts about market opportunities in these two countries, and how your company can leverage the FTAs to make sales. You will learn how FTAs impact NC businesses, market opportunities, how to take advantage of the FTAs, and the importance and impact of FTAs.

A more detailed brochure on the event, including registration information, is here.  If you're in the area and are looking to get your business more involved in the international trade game, this is a good place to start.

And I'll be returning to a more normalized blogging schedule in the very near future.  (I'm sure you just can't wait!) 

Hope to see you in Greensboro.

2012 GOP Platform on Trade: the Good, the Bad, and the Really Ugly

The Republican Party has released its 2012 Platform, and it's pretty much what you'd expect given the past few months of campaign and congressional rhetoric: it mostly supports free trade, yet does so in a mercantilist way and contains some pretty harsh - and indeed protectionist - words for today's trade bogeyman, China.  In fact, the platform seems like it was almost entirely lifted from Gov. Mitt Romney's 2011 economic plan, for the better and the worse.  Although there are various trade-related elements throughout the platform, the main "international trade" section can be found on pages 6-7 and I'll focus on it tonight:

International Trade:
More American Jobs, Higher Wages, and A Better Standard of Living

International trade is crucial for our economy. It means more American jobs, higher wages, and a better standard of living. Every $1 billion in additional U.S. exports means another 5,000 jobs here at home. The Free Trade Agreements negotiated with friendly democracies since President Reagan’s trailblazing pact with Israel in 1985 facilitated the creation of nearly ten million jobs supported by our exports. That record makes all the more deplorable the current Administration’s slowness in completing agreements begun by its predecessor and its failure to pursue any new trade agreements with friendly nations.

This worldwide explosion of trade has had a downside, however, as some governments have used a variety of unfair means to limit American access to their markets while stealing our designs, patents, brands, know-how, and technology—the “intellectual property” that drives innovation. The chief offender is China, which has built up its economy in part by piggybacking onto Western technological advances, manipulates its currency to the disadvantage of American exporters, excludes American products from government purchases, subsidizes Chinese companies to give them a commercial advantage, and invents regulations and standards designed to keep out foreign competition. The current Administration’s way of dealing with all these violations of world trade standards has been a virtual surrender.

Republicans understand that you can succeed in a negotiation only if you are willing to walk away from it. Thus, a Republican President will insist on full parity in trade with China and stand ready to impose countervailing duties if China fails to amend its currency policies. Commercial discrimination will be met in kind. Counterfeit goods will be aggressively kept out of the country. Victimized private firms will be encouraged to raise claims in both U.S. courts and at the World Trade Organization. Punitive measures will be imposed on foreign firms that misappropriate American technology and intellectual property. Until China abides by the WTO’s Government Procurement Agreement, the United States government will end procurement of Chinese goods and services.

Because American workers have shown that, on a truly level playing field, they can surpass the competition in international trade, we call for the restoration of presidential Trade Promotion Authority. It will ensure up or down votes in Congress on any new trade agreements, without meddling by special interests. A Republican President will complete negotiations for a Trans-Pacific Partnership to open rapidly developing Asian markets to U.S. products. Beyond that, we envision a worldwide multilateral agreement among nations committed to the principles of open markets, what has been called a “Reagan Economic Zone,” in which free trade will truly be fair trade for all concerned.

I've been over most of these ideas before, so there's no need to get long-winded tonight.  Instead, here's a quick summary of the good, the bad and the ugly in the GOP platform's international trade section:

The Good. The platform expresses unequivocal support for international trade and free trade agreements.  Especially noteworthy is (i) formal party support for the Trans-Pacific Partnership - something we've suspected but not really heard from the GOP's top dogs; and (ii) a loud call for restoration of Trade Promotion Authority - an absolutely critical legal tool for the President's ability to effectively negotiate new trade deals.  Although I'll start complaining in just a second, the GOP's embrace of international trade is definitely a good thing, especially given the economic anxiety out there right now and the strong anti-outsourcing and anti-trade stuff we've been hearing from most Democrats.  Maybe the Dem Platform will surprise us and not contain similar protectionist positions this time around, but until then, the GOP remains the better party when it comes to public support for good trade policy.

The Bad.  The platform continues the failed approach of selling free trade through a single-minded focus on exports and reciprocal trade (i.e., only opening our market if others open theirs).  As I've repeatedly discussed, this strategy is not only economically ignorant, but it also undermines public support for free trade by reinforcing the erroneous notion that imports - and by extension the US trade deficit - are somehow bad for the US economy.  The platform also errs in its support for Romney's "Reagan Economic Zone" - a silly idea from a practical perspective (I've yet to read serious, apolitical trade policy expert express even lukewarm support) and one that implicitly abandons the existing multilateral negotiating framework at the WTO.  That, in my opinion, is a serious mistake - the WTO is and will remain the only real mechanism for broadbased, multilateral trade liberalization, and any alternatives are dangerous non-starters.  The GOP certainly isn't abandoning the WTO altogether - the text above promotes the use of WTO dispute settlement, and the platform on page 49 supports Permanent Normal Trade Relations with Russia in order to reap the benefits of Russia's WTO accession - but the Reagan Zone strongly implies that the GOP no longer sees multilateral negotiations through the WTO as viable.  And that, in my opinion, is a mistake, regardless of the big mess that is the Doha Round.

The Ugly.  I guess it shouldn't be a surprise, but it's really a shame that America's "free market" party has warmly embraced Romney's zealous contempt for all things China trade-related.  This includes support for (i) countervailing duties on Chinese imports due to currency manipulation; (ii) mysterious "punitive measures" on foreign firms found engaging in IPR theft; and (iii) support for a "Buy AmericanAnything-But-Chinese" procurement policy.  Leaving aside for the moment the fact that each of these proposals raises serious legal and practical concerns (see, e.g., here on currency; there's not really a vehicle under US law for the second; and the third could violate WTO rules if it singled out China), there are much bigger problems with such talk: 

• First, the scary chest-thumping overshadows far more legitimate gripes about bad Chinese trade policies (like subsidies and IPR enforcement).  When you're screaming about attacking imports and investment, people tend not to notice your more subtle gripes about real problems in the Chinese market. 

• Second, and more importantly, these proposals expressly condone self-destructive retaliatory protectionism that defies economic sense and free market principles.  As I've repeatedly warned, there is absolutely no reason why such "logic" couldn't be applied to other "offending" countries, and the protectionist slope is very, very slippery.  Saying "we only meant it for China" is likely not going to serve as an adequate defense when the well-funded protectionists come knocking on the White House door.  And, by empowering these anti-trade forces, such proposals also won't help improve tepid American support for free trade.  In short, Pandora's Box has been opened, and it remains to be seen whether Republicans can control the nastiness inside.  The Democrats - who once supported things like NAFTA, China trade and the WTO (see, e.g., Bill Clinton) - sure couldn't.

Granted, each of the GOP's China trade proposals allows for ample wiggle-room, and it's very likely that a President Romney would pursue a much less aggressive approach (indeed, the platform later on page 49 states that the GOP "welcome[s] the increase in trade and education alliances with the U.S. and the opening of Chinese markets to American companies").  Regardless, "Commercial discrimination will be met in kind" is a recipe for heightened protectionism and possibly a trade war, not a responsible, economically and legally sound policy from the supposed "adult in the room" on US international trade policy and politics.  And the sign that such rhetoric - in GOP's defining policy document, no less - sends to the rest of the world is nothing short of embarrassing.  The only bright side for Republicans, I guess, is that the Democrats' platform promises to be even worse.

Hooray, lesser of two evils!

More to come, I'm sure.

New Podcast on TPP (UPDATE: Team Romney Reverses Course, Supports Japan's Inclusion)

The good folks at Coffee & Markets had me on again to discuss international trade stuff.  This time, we went over the Trans-Pacific Partnership negotiations and whether a Romney administration would pursue the same course - on TPP and trade issues more broadly - as the Obama administration.  (As always, I try to be optimistic - really, I do! - but it's hard out there for a free trader these days.)

The full podcast is available to stream or download here.  Enjoy!

UPDATE: From Chris Nelson of the Nelson Report comes excellent news that Team Romney has reversed course on the Governor's earlier (and depressing) skepticism re: Japan's inclusion in the TPP.  Top Romney econ adviser Glenn Hubbard tells Japan's Nikkei[$] that the Governor is very much in favor Japan's participation in the Asia-Pacific FTA:

Q: Can you tell us about Mr. Romney's policies toward Japan and other Asia-Pacific partners? Japan is especially anxious to know what's happening with the TPP.

HUBBARD: I think Gov. Romney fully supports the TPP and Japan's participation in it. He is trying to promote a variety of free-trade initiatives around the world. The present U.S. administration has both neglected more free-trade openings and, frankly, neglected Asia in particular. And I think that's just not something Gov. Romney will do. He's spoken a lot about China, but I think his concern is really the U.S.'s standing in Asia, writ large. And, obviously, Japan is our longest-term ally in the region.

Great news here.  I mean, the China-bashing is nauseating but almost excusable from a purely-cynical political perspective. The Japan stuff, on the other hand, was truly beyond the pale.  Further proof that, China nonsense notwithstanding, a Romney administration would likely be much better for US trade policy than the last three-plus years under President Obama.

Good News: Canada Joins the TPP, But At What Price?

As expected, the US and Canadian governments announced today that Canada would join the Trans-Pacific Partnership negotiations.  (To get caught up, Peter Clark has some great backstory on the recent machinations.)  First up with the good news was Canadian PM Harper:

Opening new markets and creating new business opportunities leads to jobs, growth and long-term prosperity for all Canadians," said Prime Minister Harper in a statement about the Trans-Pacific Partnership (TPP).

"A TPP agreement will enhance trade in the Asia-Pacific region and will provide greater economic opportunity for Canadians and Canadian businesses."

Then USTR made its formal announcement:

President Obama announced today that the United States and the eight other countries negotiating the Trans-Pacific Partnership (TPP) Agreement have extended an invitation to Canada to join the TPP negotiations, pending successful conclusion of domestic procedures. In addition to the United States, the current TPP countries are Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam.

“Inviting Canada to join the TPP negotiations presents a unique opportunity for the United States to build upon this already dynamic trading relationship. Through TPP, we are bringing the relationship with our largest trading partner into the 21st century,” said Ambassador Kirk. “We look forward to continuing consultations with the Congress and domestic stakeholders regarding Canada’s entry into the TPP as we move closer to a broad-based, high-standard trade agreement in the Asia-Pacific region.”

Next steps will parallel those for Mexico, which was also invited to join the TPP negotiations yesterday. The Administration will shortly notify Congress of our intent to include Canada in the TPP negotiations. The notification will trigger a 90-day consultation period with Congress on U.S. negotiating objectives with respect to Canada. We also will publish a notice in the Federal Register seeking public comments.

As I said last night, the addition of the conservative, (mostly) free-market Harper government to the TPP negotiations is undoubtedly a good thing for proponents of of trade liberalization in both countries.  Hopefully its participation will reinvigorate the flagging talks and encourage more countries to jump on the TPP bandwagon.  And, as Heritage's Derek Scissors noted yesterday, Mexico's inclusion is also a very good thing - an important point that I unfortunately neglected to mention in my rush to get into the weeds of the NAFTA partners' negotiating status.  

Speaking of that status, while the benefits of adding Mexico and Canada are clear, what isn't clear at this stage is precisely what Canada conceded to the United States in order to finally - finally - get Washington to sign off on its Northern neighbor's TPP participation.  The Obama administration told Inside US Trade [$] that Mexico (and presumably Canada) would not be able to participate in any way - not even as an observer - until the full 90-day period for congressional consultations had expired, essentially meaning that neither party will join any TPP talks until mid-September or so.

But once they get the all-clear on that front, will there be any limitations on their participation?

As I noted yesterday, the Obama administration last Friday allegedly asked both Canada and Mexico to agree to some pretty onerous procedural conditions before it would agree to let them join the TPP - essentially demoting the Canadians and Mexicans to "second-class" participants.  However, before today's big announcement, Harper surrogatesmade clear that they would in no way accept such a demotion:

Canada and Mexico were told they could join if they agreed to several conditions that ensured new entrants didn’t slow down negotiations. Canada and Mexico could not reopen any agreements already reached among current TPP partner countries – unless these nations agreed to revisit them. And the two nations would not have “veto authority” over what was agreed upon by the original members.

Both countries were also supposed to agree to this before they’d even seen the latest version of negotiating texts.

A Canadian official said Monday there was no way Canada would agree to be a junior, or second-class, member at the talks.

So what exactly did they agree to?  I honestly have no idea, nor do others who are watching Canada's TPP participation very closely.  And when asked about what Canada gave up to join the talks, PM Harper and other Canadian officials weren't entirely clear:

Harper said there were no conditions attached to Canada's entry to the TPP talks when asked if he would put supply management on the negotiating table.

"Canada has not agreed to any specific measures in terms of an eventual Trans-Pacific Partnership Agreement," he said.

"Canada aims, whenever it gets into a trade negotiations, to promote and to protect all of its interests across all the range of industries ... and Canada's record in terms of dealing with those particular issues in trade negotiations under our government has been very strong and that will continue to be our position," he said.

He said Canada would not seek to undo any progress already made by existing TPP partners and that the negotiations were in very preliminary stages. "As in any negotiations, nothing is agreed to until everything is agreed to by all parties."

Canada's accession to the TPP will take a period of time, he said, without giving details....

Gerald Ked, parliamentary secretary to the minister of international trade, reaffirmed on Tuesday that Canada did not give anything away to be part of the talks.

Sounds strong, right?  Well, Harper and Ked appear to be talking mainly about substance (in particular Canada's controversial system of agricultural supply management), not about process (in particular whether Canada is a "full" TPP participant will the same procedural rights as all other countries).  On that front, the Canadians' strong statements are, well, less strong, although Harper is most definitely correct that the agreement is far, far from finished, so Canada's agreement not to harm completed FTA chapters is a very minor concession.

I'm sure that we'll find out about these details in due time.  In the meantime, let's celebrate Canada's and Mexico's entry into the TPP - it was a long and arduous path that required a lot of hard diplomatic work from both US allies (unfortunately).

Now if only we can get Japan on board.

(I know, I know, best to quit tonight while I'm still in a good mood.)

Mexico Joins TPP as a "Second-class" Participant; Will Canada Follow? [UPDATE: Looks Like Canada's In]

The big news of the day was that, as has been expected for the last week or so, Mexico has joined the ongoing Trans-Pacific Partnership negotiations.  USTR formally announced the news this morning: 

President Obama announced this morning that the United States and the eight other countries negotiating the Trans-Pacific Partnership (TPP) Agreement have extended an invitation to Mexico to join the TPP negotiations, pending successful conclusion of their domestic procedures. In addition to the United States, the current TPP countries are Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam.

“We are delighted to invite Mexico, our neighbor and second largest export market, to join the TPP negotiations,” said Ambassador Kirk. “Mexico’s interest in the TPP reflects its recognition that the TPP presents the most promising pathway to boosting trade across the Asia Pacific and to encouraging regional trade integration. We look forward to continuing consultations with the Congress and domestic stakeholders as we move forward.”

After Mexico expressed its interest in joining the TPP last November, the United States briefed Mexico about the status of the TPP negotiations and the high standards and objectives that the TPP countries are seeking in the agreement. The United States also discussed with Mexico its ability to negotiate on issues that are a priority for the United States in the TPP. Mexico has assured the United States that it is prepared to conclude a high-standard agreement that will include issues that were not covered in the North American Free Trade Agreement (NAFTA).

Conspicuously missing from today's announcement was any mention of Canada, the other NAFTA signatory that expressed interest in joining the TPP - and has been furiously lobbying for it - at the same time as Mexico back in November 2011 (and shortly after Japan made a similar request).  As I noted back in April, it had become quite clear that the United States was blocking Canada's entry into the TPP, but rumors began swirling last week that the accession of both NAFTA partners was possible during this week's G20 summit, leading some to fearlessly predict that Canada would be joining Mexico in the TPP this week.

Those predictions clearly haven't come true (yet), but after learning the stringent negotiating conditions that the Obama administration demanded Mexico and Canada accept before agreeing to let them join the TPP negotiations, I gotta say that I really can't blame the Canadians for balking.  According to Inside US Trade [$], the Obama administration essentially demanded that the two countries accept "second-class" status in the negotiations before the US government would let them join.  In particular:

Last Friday (June 18), the Obama administration sent a letter to both Canada and Mexico that made clear that the U.S. could support both of them joining the talks if they agreed to at least two conditions. These conditions appear designed to ensure that these potential new entrants do not slow down the pace of the negotiations.

The first condition stipulated that Canada or Mexico would not be able to reopen any agreements that have already been reached among the current nine TPP partners, unless those nine members agreed to revisit something to which they had previously agreed, sources said.

One source said Canada and Mexico would have to agree to this condition without even having seen the negotiating texts in their current states.

In addition, the letter made clear that Mexico or Canada, if they were to join, would not have "veto authority" over closing out chapters in the future. In essence, this means that if the nine original members reached agreement in a chapter, Canada and Mexico would have to go along with it, one source said.

This source said that, in essence, this condition means that Canada and Mexico would be something less than full negotiating partners if they were to join.

The US letter raises concerns on several levels.  Procedurally, it's clear that Canada and Mexico would have less negotiating authority than all other TPP participants with respect to completed and future FTA provisions.  While, as noted below, the TPP's extremely-unfinished state limits the impact of the former issue (even though that had to be agreed sight-unseen!), the latter issue could be significant where, for example, all TPP partners agree on FTA text that would disproportionately benefit themselves and disproportionately harm Mexico or Canada.  Such limitations could not only hamstring Canadian and Mexican negotiators on these and other FTA provisions (kinda hard to demand concessions when everyone knows that you can't really hold up the agreement if you don't get your way), but also create serious political pain at home.  Just how do you explain to domestic constituents that you are absolutely powerless to prevent their pet issues from being on the TPP chopping block?  Would the United States ever agree to such conditions? (Stop laughing.)

On principle, the US demands are just as unpalatable - if not more so.  As noted above, Canada and Mexico requested admission to the TPP more than eight months ago, but the United States is only now agreeing to consider each nation for admission and is using time constraints as the primary reason for imposing onerous negotiating restrictions on each nation.  If the United States had agreed to admit Canada and Mexico back in November when they first requested it, the negotiations would've been far less advanced, and such limitations would have been groundless.  (And it's not like admission to the TPP automatically requires a long, drawn-out process.  For example, Malaysia, which unlike Canada and Mexico does not have an FTA with the United States, requested admission to the ongoing negotiations in 2010 and was admitted very shortly thereafter.)  In short, the United States needlessly delayed Canada's and Mexico's admission for eight months, and then demanded that each country accept "second-class" status because the negotiations were too far along.

Talk about chutzpah.

Perhaps worse is the fact that, even though the TPP parties have been going at it since late 2009, the negotiations really aren't all that advanced.  And as Greg Rushford recently explained in a must-read piece on the precarious state of the TPP, US negotiating positions are partly to blame for the TPP's slow pace:

Meanwhile, US trade negotiators in the TPP have been playing small ball, acting as if Uncle Sam can continue to get away with just about anything. One veteran trade observer calls the American game: "ad hoc mercantilism." You don't have to look far to see why.

New Zealand is being asked to reform its pharmaceutical-procurement practices (which it really should), while being informed that there will be no talk --- at least before the Nov. 6 U.S. vote --- of giving the Kiwis more access to protected American dairy markets. The U.S. has informed the Australians that Uncle Sam is not interested in talking about increasing Aussie access to U.S. sugar markets. The Canadians are pressed to demonstrate their willingness to dismantle some of their protectionist agriculture schemes as one price of entry into the TPP talks. Can anyone imagine the reaction in Washington, should the Canadians say that to prove their good faith, the Americans should first agree to make the U.S. farm program more market-oriented? But Washington doesn't mind telling Ottawa such things.

There's even talk that Obama has positioned himself to be the anti-smoking advocate, by proposing that cigarettes be excluded from tariff cuts in the TPP --- while the same Obama wants to promote the export of U.S. tobacco leaf, an obvious sop to voters in the politically important battleground states of North Carolina and Virginia. While it's difficult for outsiders to know how serious the president is on tobacco issues, the White House pressures on Vietnam and Malaysia are at least transparent, if embarrassing.

The Vietnamese (and Malaysians) are being bullied --- there's no better word for that --- into accepting a complicated and economically unwise scheme where they would agree to buy American yarn and fabric to make apparel --- if they have any hopes to get around high U.S. tariffs on imported clothing and footwear.

Meanwhile, Obama is demanding that Prime Minister Nguyen Tan Dung reform that Southeast Asian country's state-owned enterprises. The Vietnamese agree that their SOEs need long-overdue reforms to make them more transparent and market-oriented. Still, imagine the political heavy-lifting required to restructure nearly 40 percent of the Vietnamese economy. But while he asks a lot of Hanoi, the American president doesn't like being asked to cut tariffs on clothing that isn't made in America anyway.

Barack Obama was 13-years old when Hanoi won the Vietnam War in 1975. Does the president really understand how determined the Vietnamese can be, when their core interests are involved?Today, Prime Minister Dung has the welfare of more than two million Vietnamese clothing and footwear workers to consider. Many of these people are women who come from poorer parts of the country --- and their prime minister is supposed to sell them out to please the U.S. textile lobby? U.S. Trade Representative Ron Kirk was born in 1954, the year the Vietnamese Communists defeated the French in the battle Dien Bien Phu. Mr. Kirk has said that Vietnam is only a "small country" that will give in to U.S. pressure in the TPP. Perhaps he will be proven right. Still, does the U.S. trade negotiator appreciate that history suggests otherwise?

The U.S. insistence on ad-hoc mercantilism --- making demands upon other countries to summon the political will to open their markets, while stonewalling suggestions the Americans might do more of the same --- explains why the TPP process is nowhere nearly ready to be completed by the end of this year.

Yet the United States is proposing significant procedural conditions on Canada's and Mexico's TPP admission to ensure that the nations "do not slow down the pace of the negotiations."

Seriously, how much slower can they get?

Despite these concerns, Mexico has apparently agreed to the United States' conditions and will now join the ongoing negotiations.  Good for them, although I do wonder whether the pressure of hosting the G20 summit and the mounting expectation that Mexico would join the TPP were just too much for the Calderon government to resist.  On the other hand, the conservative Harper government - and its long history of butting heads with the, ahem, less-conservative Obama administration - has yet to cave to the United States' demands and has instead merely expressed "delight" in being offered a chance to join the talks.  So one of the United States' biggest trading partners and closest allies (and one of the world's better trade liberalization proponents) remains excluded from the only proactive US trade liberalization effort currently ongoing.

"Delightful," indeed.

Certain TPP-watchers, like Canada's Peter Clark, tell me that "it ain't over till it's over," and that Canada could still end up a TPP participant before the G20 adjourns.  Canadian news reports echo Clark's sentiments and suggest that a big Canadian announcement will arrive tomorrow (Tuesday) morning.  I'll believe it when I see it, but there's simply no question that free-market Canada's entry - in any capacity - would be a welcome boost to the flagging negotiations (if only Japan were as close).  But if Harper and Obama leave Cabo San Lucas without any formal TPP announcement, it would be extremely difficult to blame Canada for not wanting to bow to the United States' unreasonable demands.

[UPDATE: The Wall Street Journal tweets Tuesday morning that "Canada's Invitation Into TPP To Be Announced Later Tuesday - Source".  Good.   More to come, I'm sure.]

Is Missing American Trade Leadership Beginning to Bear Protectionist Fruit? (Hint: Kinda Looks Like It)

Over the past few years, I and several other US trade-watchers have lamented the United States' dwindling leadership on global trade and economic issues and warned of that trend's troubling potential ramifications.  It appears that at least one of our breathless predictions may finally be coming true.  Starting in mid-2009 - when it became depressingly clear that the Obama administration viewed trade in mostly political terms and thus would not be advancing a robust, proactive free trade agenda - we free traders expressed grave concern that US recalcitrance could harm not only US companies and workers, but also the entire global free trade system.  As I explained in a 2009 oped urging the President to adopt a robust pro-trade agenda (as outlined in this contemporary Cato Institute paper):

Since the 1940s, the US has led the charge to remove international barriers to goods, services and investment. The result: a global trade explosion that has enriched American families, spurred innovation, enhanced our security and helped millions escape poverty. Every US president since Herbert Hoover has championed free trade because of its proven benefits....

Because of today's rules-based multilateral trading system and the interdependence of global markets, US fecklessness on trade shouldn't lead to devastating protectionism akin to the Smoot-Hawley-induced tariff wars of the 1930s. But it's still a problem. In 2008, global trade contracted for the first time since 1982, and protectionist pressures abound. The WTO's Doha Round is comatose, even though an ambitious deal could inject US$2 trillion into the reeling global economy. Considering the US has steered every major trade initiative in modern history, any chance for significant progress on trade will disappear without strong American leadership - in word and deed.

Since that time, the President has clearly not taken free traders' advice.  The WTO's Doha Round is dead, despite a pretty good opportunity to force the issue back in late 2010.  The Obama administration took three years to implement already-dusty FTAs with Korea, Panama and Colombia and actually insisted on watering the deals down with new protectionist provisions in order to finally agree to move them.  And while countries around the world are signing new trade agreements left and right, we've signed exactly zero and have eschewed important new participants and demanded absurd domestic protectionism in the one agreement that we are negotiating (the TPP).  Meanwhile, on the home front the President has publicly championed mercantilism, as his minions quietly pursued myriad efforts to restrict import competition and consumer freedom, embraced competitive devaluation and maintained WTO-illegal policies (while publicly denouncing protectionism, of course).

Pretty stark when you lay it all out like that, huh?

Despite this depressing state of affairs, it did not appear that the United States' diversion from its long free trade legacy had resulted in a tangible increase in global protectionism (although the death of Doha certainly isn't a good thing).  Unfortunately, a new blog post from the FT's Alan Beattie indicates that those chickens may finally be coming home to roost:

One of the very few bright spots in governments’ generally grim recent performance of managing the world economy has been that trade protectionism, rampant during the Great Depression, has been relatively absent.

That may no longer be the case. The WTO, fairly sanguine about the use of trade barriers over the past few years, warns today that things are getting worrying. The EU made a similar point yesterday. And this monitoring service has been pointing out for a long time that a lot of the new forms of protectionism aren’t counted under the traditional categories, thanks to gaping holes in international trade law.

After glancing at the bi-partisan protectionism on display in the 2012 US presidential campaign, Beattie concludes that, on the global trade stage, "things are looking scarier than they have for a while."  I'm certainly inclined to agree, and one need only look South to Brazil's frighteningly rapid transition from once-burgeoning free trade star to economically-stagnant, unabashed protectionist to see a scary example of why.

And while I agree with Beattie that the world still isn't likely to descend into a 1930s-style trade war - we can thank the WTO and the proliferation of free market economics for that - the rising specter of global protectionism is undoubtedly distressing.

And, of course, it has risen just as America's free trade leadership has faded away.

Now, as we all know, correlation does not necessarily mean causation, and it's frankly impossible to know just how much the dearth of US trade leadership has actually affected global trade policies.  But I think it's pretty safe to say that it certainly hasn't helped matters.  Just ask yourself this: how can the US admonish Brazil or any other country about its distressing mercantilism when the President is himself routinely preaching - and his administration is busy implementing - similar policies?  How can we decry the global "currency wars" when we're discretely advocating a similar strategy?  How can we push back against nations' increasing use of market-distorting subsidies or regulatory protectionism when we're....

I think you get the idea.

As I've frequently noted here, it was a Democrat - Secretary of State Cordell Hull - who over 70 years ago began a global free trade movement that until very recently had been led - in word and deed - by Republican and Democratic administrations alike.  And while the distressing recent spike in global protectionism may not have been caused by a lack of American trade leadership, it is very, very likely not going to recede until the United States regains its long-held place at the front of the trade liberalization pack.

[Final note: it looks like former USTR and current World Bank chief Robert Zoellick agrees.]

Guess Who's Blocking Canada's Participation in the TPP [UPDATED]

Back when Japan announced that it was interested in joining the ongoing Trans-Pacific Partnership negotiations - which currently include the United States, current US FTA partners Australia, Chile, Peru, and Singapore, as well as new FTA partners Brunei, Malaysia, New Zealand and Vietnam - I noted that admitting the economic power and close US ally was a no-brainer.  Certain TPP participants (and their political allies at home), however, weren't so gung-ho about Japan's inclusion in the agreement, and Japan has its own internal politics to sort out, so our friends in Tokyo are still waiting around to see if they're on the TPP VIP Guest List.  Joining Japan on the wrong side of TPP's velvet rope are Canada and Mexico, who announced their interest in joining the agreement shortly after Japan.  Readers of this blog know my affinity for the Harper Government's pro-market, pro-trade reforms over the last few years, so of course I think that Canada's inclusion in the TPP would be a very welcome development.

Unfortunately, however, it appears that certain members of the Obama administration don't agree, and thus the United States might just be the last holdout on Canada's TPP participation.  My source for this juicy gossip, you ask?  Well, none other than PM Harper himself:

Harper sat down with Obama and Mexican President Felipe Calderón for their first such meeting in almost two years -- and the last before Calderón leaves office this fall -- and for all the jovial friendship on display for the cameras in the Rose Garden, some issues clearly rankled.

The meeting, which came up considerably short of the advertised three hours, ended without Canada getting an invitation to join negotiations for a new Trans-Pacific Partnership....

Canada's system of supply-management of eggs, milk and other farm products is seen as a stumbling block to participation in the new free-trade zone.

In scripted remarks, Harper emerged from the meeting to say he was "especially pleased" Obama had welcomed Canada's interest in the trade talks.

But he later pointed the finger squarely at the White House for holding up Canada's formal inclusion. "Our strong sense is that most of the members of the Trans-Pacific Partnership would like to see Canada join," Harper told an audience at the Woodrow Wilson Center. "I think there's some debate, particularly within the (Obama)  administration, about the merits of that."

For his part, Obama did not duck a question that specifically asked if Canada's dairy and egg marketing boards would have to go in order for Canada to join the party.

"Every country that's participating is going to have to make some modification," Obama said, flanked by Harper and Calderón at a news conference in the Rose Garden. "That's inherent in the process because each of our countries has their own idiosyncrasies, certain industries that in the past have been protected."

The prime minister did not answer a direct question on whether he was prepared to abandon the marketing boards, but said his government would do what is needed to protect industries. "Canada will attempt to promote and to defend Canada's interests, not just across the economy but in individual sectors as well," said Harper.

Although some of Canada's agriculture policies are undoubtedly suspect, the idea that its marketing boards - which have been in place for several decades and haven't impeded NAFTA (as a new IBD editorial helpfully notes) - are preventing the United States - one of the largest agriculture-subsidizers on the planet - from signing off on Canada's TPP participation is laughable.  The laughs get even louder when one considers that the "too protectionist" Canada has been unilaterally opening large swaths of its market to imports, while the "free trade" Obama administration has been working hard, in FTA negotiations and via US trade law, to keep ours closed (and to keep those US farm subsidies firmly in place).  Or when one considers the Obama administration's long history of playing the "you're too protectionist on issue [X]" card to justify FTA-related delays (just ask South Korea or, as noted above, Japan).

Then again, if I were in the White House (stop laughing) and had to choose between (1) admitting into the TPP the unilaterally-liberalizing, corporate tax-cutting, FTA-completing Harper Government (and its directly-competitive Canadian farmers, manufacturers and service providers), or (2) just making up some silly "protectionist" excuse in order to stall Canada's admission and cover for my own government's trade/tax policy ineptitude, I'd probably be pretty darn tempted to choose Door #2 too.

Of course, if I were in the White House (seriously, stop laughing), the United States wouldn't be in this embarrassing position to begin with.

UPDATE: A reader passes along this great 2010 op-ed from Peter Clark on the United States, ahem, recalcitrance re: Canada's admission to the TPP.  Clark focuses on one reason for the White House's exasperating Canada-TPP position that I glossed over last night but deserves direct mention: rampant US mercantilism.  US exports already have mostly-duty-free access to the Canadian market through NAFTA, and, as mentioned above, if Canada is allowed into the TPP, competitive Canadian exporters would gain equal footing with their US counterparts in the rapidly-developing, high-demand TPP (especially Asian) markets.  Clark further notes that Canada would likely not support the United States' mercantilist push to retain all the sweet, sweet carveouts and import protection that are embedded in its existing FTAs with TPP participants like Australia.  His arguments seems quite logical - and depressing - to me.  Alas.  (Clark raises other issues in another good, detailed op-ed from earlier this year.)

Exploring Partisanship and FTAs in the US Congress

Keith Hennessey has a great analysis on his blog of the recent congressional votes on the Korea, Colombia and Panama FTAs, and the results are pretty much what anyone reading this blog would expect: Republicans overwhelmingly supported the FTAs, while a majority of Democrats opposed them.  The whole thing is worth reading, but here's a great summary chart that he put together:

Hennessey posits that this partisan breakdown is why President Obama sat on the agreements for almost three years:

The two years of renegotiations were politically convenient for President Obama, as they allowed him to avoid asking Speaker Pelosi to bring up legislation that most of her caucus opposed....   

All three FTAs split his party deeply with most of his partisan allies opposed.  By taking two years to renegotiate the FTAs, he did not have to put his House allies in an uncomfortable position while he was relying on them to enact the stimulus, health care, and Dodd/Frank.

Readers of this blog will know that I've been saying this for years now: the FTAs' delay was clearly a case of the President putting his own political interests above the interests of American exporters and consumers (and the US economy more broadly).

Hennessey also uses his analysis to make some broader conclusions about congress and "free trade."  The most astute conclusion, in my opinion is that "[t]he [FTA] renegotiation and a Democrat in the White House provided more political cover for on-the-fence Democrats to vote aye. That would suggest these ratios are a free trade high water mark for the Democratic party."

I'm definitely inclined to agree there too, but I'd strongly caution against using FTA votes as a barometer for "free trade" support more generally.  You may think I'm picking nits here, but this is a pretty important distinction if you're trying to measure partisan support for "free trade," not just FTAs.  As you may recall, the FTAs were sold by the White House and congressional Republicans on purely mercantilist (exports only) grounds, and many Republicans who voted for the FTAs have supported or proposed anti-trade measures in the past.  For example, 16 Senate Republicans recently voted for the horribly-protectionist China currency bill, and Sen. Jeff Sessions singlehandedly blocked implementation of the trade liberalizing GSP program last December.  So while Hennessey's FTA analysis gives us a great idea about future congressional support for other trade agreements (e.g., the under-negotiation Trans-Pacific Partnership), and gives us a gauzy sense of which political party supports "free trade" more broadly, it probably shouldn't be used to determine future partisan support for non-FTA trade legislation.  Unfortunately, GOP support drops significantly when a trade agreement isn't involved.

Lazy? Really, Dude?

At this weekend's APEC summit, President Obama explained to the audience why, in his humble (stop laughing) opinion, American international trade and investment efforts have lagged over the last few years:



For those of you too lazy to watch the full clip, the money quote from President Obama's answer on why US exports and investment have struggled is the following:

We’ve been a little bit lazy over the last couple of decades. We’ve kind of taken for granted — ‘Well, people would want to come here’ — and we aren’t out there hungry, selling America and trying to attract new businesses into America.

No, seriously.  That's what he said.

Now, I could start some typical Lincicomian (fake word) diatribe pointing out the little fact that the Obama administration had a unique opportunity in January to assert US leadership on global trade and finish the struggling, ten-year old (and now basically dead) Doha Round of multilateral trade negotiations, the conclusion of which would have produced immense market access benefits for US exporters and investors.

Or I could point out that, during Obama's time in office, almost every country on the planet - including our biggest competitors in the EU, Canada and China - has pursued and implemented free trade agreements at a breakneck pace, while the White House's only unique bilateral or regional trade contribution was last weekend's announcement of the "broad outlines" of a Trans-Pacific Partnership Agreement that was (a) actually started by the Bush administration and (b) originally supposed to be finished last week, rather than just, ahem, "outlined."

Or I could point out that Obama administration protectionism - in the form of "Buy American" provisions or the just-resolved ban on Mexican trucks or US tariffs on Chinese tires and chicken or trade remedies duties on key raw materials and other industrial inputs - has cost US exporters billions of dollars in lost export opportunities or increased production costs.

No, instead, I think that nothing hits home the ridiculousness and temerity of the President's accusations of American "laziness" in the international arena better than his almost-three-year delay of completed US trade deals with Panama, Colombia and Korea - deals that Obama himself sold to the American public as great export, investment and jobs vehicles, yet sat moldering in an Oval Office desk due to the President's political cowardice.  As I said in July when President Obama falsely accused Congress of preventing those deals from being completed "right now":

Actually, Mr. President, that could have been done in 2008, had then-Speaker Pelosi (D-CA) not rewritten the longstanding congressional-executive agreement on Trade Promotion Authority (and "fast track" before that) when President Bush tried to implement the US-Colombia FTA. 

And that could have been done in 2009, had you not shelved the FTAs in order to placate your party's protectionist wing. 

And that could have been done in 2010, had you not demanded that each one be renegotiated in order to further stall the agreements and to pay off powerful domestic constituencies. 

And that could have been done earlier this year, had you simply submitted the renegotiated FTAs' implementing legislation to a Republican-controlled House of Representatives that was literally begging for you to do so. 

And that even could have been done last week, had you not attached a "poison pill" to the US-Korea FTA in the form of an expensive and highly controversial Trade Adjustment Assistance (TAA) expansion that congressional Republicans had already voted down in February and had repeatedly warned would be deal-killer. 

And, despite all of this, Mr. President, you and Congress could still implement these FTAs right now if you would just submit clean FTA implementing legislation to the House and Senate pursuant to [Trade Promotion Authority].

Instead, it took three more months to finally push these slam-dunk trade deals through Congress, and they still won't enter into force for several more months.  Until they do, American exporters and investors remain at a disadvantage in key global markets vis a vis some of their stiffest foreign competition.

So, after explaining just how lazy we've been on global trade and investment, I'm sure the President wrapped up the APEC summit and got right back to work ensuring the rapid implementation of the Colombia, Panama and Korea FTAs, the completion of the TPP Agreement and the resuscitation of the Doha Round, right?

Yeah, umm, well:

President Barack Obama is playing golf this afternoon at the Mamala Bay golf course at Joint Base Pearl Harbor-Hickam.

And yet we're the lazy ones.

Podcast on FTAs, China Currency and Trade Policy/Politics

The folks at RedState's "Coffee & Markets" had me on this morning to talk FTAs, China currency and US trade policy/politics.  Unsurprisingly, I lack the technical expertise to download the podcast and post it here, but you can just click over to RedState to listen there or download it to your iPod.

Enjoy!

New Op-Ed: "One Cheer (At Most) for Our New Free Trade Agreements"

The Daily Caller today published a new (and somewhat depressing) op-ed of mine.  Here's the tease:

The recent congressional passage of U.S. free trade agreements with South Korea, Panama and Colombia has elicited an outbreak of Beltway backslapping. Some congratulations are certainly warranted, but a closer look at just how these FTAs arrived on the president’s desk reveals serious problems with not only the agreements themselves, but also the current state of U.S. trade policy.

Uh oh.  Be sure to read the whole thing here.  Your thoughts, as always, are welcome in the comments.

The FTAs' Price Tag, ctd.

By the time most of you read this, the House and Senate will have passed implementing legislation for the Korea, Colombia and Panama FTAs, thus ending a long and tortuous path for these trade agreements.  But before we put the FTA saga to bed for good, I've been looking at a few of the more, ahem, interesting details surrounding these deals.  Last night I went through the CBO scoring of the implementing legislation, and noted that it increased merchandise processing fees on imports from countries other than the three FTA partners to the tune of about $4.3 billion.  I forgot, however, to examine the CBO scoring of the expanded Trade Adjustment Assistance and Generalized System of Preferences legislation accompanying the FTAs.  As you'll recall, this legislation is only being considered now because President Obama refused to formally submit the FTAs to Congress unless he had assurances that expanded TAA would get reauthorized.  The CBO report (conveniently released only late last week) on TAA/GSP is available here, and the key table laying out the new TAA-related spending and revenues (i.e., taxes) is below:

As you can see, the President's demands that TAA expansion be included with the FTAs will cost US taxpayers over $1.1 billion over the next five years.  Meanwhile, an increase in the merchandise processing fees from 0.21% to 0.3464% ad valorem on US imports will offset the cost of TAA expansion by raising over $2.4 billion in new customs fees paid by US importers (and, thus, American consumers).  The TAA bill then lowers those fees to only 0.174% in 2016, allegedly providing some $600 million in "savings" for US import consumers between 2016 and 2019.

And there's where things get a little more interesting.

As I noted last night, the CBO score for the KORUS also raises revenues (again, $4.3 billion) by increasing merchandise processing fees.  The schedule for those new fees is here:

Now, please notice how the KORUS-related fee increase (also from 0.21% to 0.3464%) doesn't begin until 2016 - just as the TAA-related fee increase is supposedly lowered to 0.174% (a little lower than the current 0.21%).  In short, there are conflicting merchandise fees - and thus budgetary effects - in 2016-2019. (And, in case you're wondering, I also checked the text of the legislation, and each bill amends the exact same provision of US law - 19 USC 58c(a)(9)).

So what the heck is going on here?  I'm certainly no budget guru, but I only see two options:

(1) Assuming that the KORUS law supersedes the TAA law, then those $600 million in consumer savings don't actually exist.

(2) Assuming that the TAA law supersedes the KORUS law, then those $4.3 billion in consumer taxes don't actually exist.

I don't know about you, but I'm guessing it's the former scenario, and if so, we can add another $600 million to CBO's scoring of (and thus the price tag of) the expanded TAA bill.

Sweet.

Obama's Jobs Speech Reveals His True Trade Priority

Last night, President Obama once again mentioned how pending FTAs with Korea, Panama and Colombia can help kickstart the ailing US economy, but his speech contained a subtle, yet significant, rhetorical shift that laid bare his real priority: passing a $1 billion worker subsidy in the form of the dubious and controversial (and greatly expanded) Trade Adjustment Assistance.  As you may recall, over the last two months Obama has repeatedly called on Congress to pass the FTAs "right now," despite the fact that Congress can't actually implement the deals because the White House has refused to send them to Capitol Hill until the GOP relents on TAA expansion.

Several of us called the President on his misleading rhetoric, yet it continued (again and again and...).  But last night, President Obama didn't actually call on Congress to pass the FTAs:

So, some things we can do on our own. Other steps will require congressional action.... Now it’s time to clear the way for a series of trade agreements that would make it easier for American companies to sell their products in Panama and Colombia and South Korea – while also helping the workers whose jobs have been affected by global competition. If Americans can buy Kias and Hyundais, I want to see folks in South Korea driving Fords and Chevys and Chryslers. I want to see more products sold around the world stamped with the three proud words: “Made in America.” That’s what we need to get done.

Notice here that the President did not say "pass a series of trade agreements"; he said "clear the way" for the deals.  Of course, the only thing standing in "the way" of the FTAs is the President, and he won't get out of "the way" until TAA expansion is secure.

And just how secure, you ask?  Well, according to Harry Reid - who's certainly working in concert with the President - nothing but TAA's passage into law will free the three FTAs.  As Cato's Sallie James discovered yesterday:

After much back-and-forth on sequencing and strategy [subscription required], and many fine words from both sides about how the long-pending trade agreements with Panama, Colombia and South Korea are a bipartisan priority (President Obama’s failure to send the agreements for a vote notwithstanding), Senate Majority Leader Harry Reid (D-Nev.) finally laid all his cards cleanly on the table yesterday.

A deal reached in August seemed to imply that the House would merely have to put Trade Adjustment Assistance to a vote before passage of the trade agreements, but yesterday Senator Reid said that the Senate would not vote on the trade agreements unless and until the House PASSES (not merely “considers”, as the Republican House leadership was always careful to specify) an extenstion of Trade Adjustment Assistance. (By the way, just to clarify, the stimulus-enhanced version of TAA is the main issue here. The basic TAA program has been running without authorization since the start of the year, when OMB ruled that it could continue unauthorized, so long as it was funded. So while the entire program “needs” reauthorization, the 2009 version is the most urgent priority for TAA advocates and their political supporters.)

So there you have it, folks, with all the niceties stripped away: If TAA doesn’t pass, then Harry Reid will ensure the trade agreements won’t even see the Senate floor. Pay the bribe, or pay the price.

Reid's statements establish, unequivocally, that when President Obama last night called on Congress to "clear the way" for the pending FTAs, what he actually meant was: "Hey Republicans, pass TAA expansion into law or the FTAs will never, ever see the light of day."

And that, my friends, is The Chicago Way.

Tuesday Quick Hits

I'm travelling this week, so blogging will remain light, but here are a few things to keep you going:

• Senate Minority Leader Mitch McConnell (R-KY) takes to the op-ed pages today to explain what many of us have been saying for a month now: President Obama's "blame Congress" strategy for the continuing stagnation of US FTAs with Colombia, Panama and Korea is extremely disingenuous.

• Mitt Romney released his economic plan today, including a detailed section on trade policy (starting at p. 41).  I'll have a lot more on this later, but for now let's just say that, on US-China trade, Governor Romney regrettably appears to have taken a page right out of Donald Trump's China playbook.  (Jon Huntsman's recently-released plan was far less antagonistic.)

• The WSJ today explains how Korea is facing a serious inflation problem because its trying to competitively devalue its currency as in the face of continued easy money policy in the United States.  If this all sounds familiar, it should: China's having the same problem for much the same reason.  Crazy how basic economics works, eh?

• Speaking of China, the WSJ reports that its "low wage export engine" is starting to "sputter" due to labor cost inflation and competition from other low-cost countries like Vietnam.  Shocking, I know.

• The WSJ rightly explains that Asia's impressive increase in high net-worth individuals is a good sign for those economies (and the global economy more broadly), but it's troubling that some of that increase is due to cronyism and government patronage rather than merit.

That's it for tonight, folks.

Right Now, pt. 3 [UPDATED]

It appears that the mainstream media are finally - finally - realizing that, as I've said for the last month, the President's repeated calls on Congress to move pending FTAs with Korea, Colombia and Panama "right now" are more than a tad misleading.  On Saturday, the WSJ editorial board joined me in openly questioning the President's claims:

President Obama says he wants to get the U.S. economy growing, so here's a tip that may help: In order for Congress to ratify free-trade agreements, the White House must first send the signed deals to the other end of Pennsylvania Avenue.

On his three-state tour in the Midwest this week, Mr. Obama repeatedly told audiences that the Korea, Colombia and Panama free-trade deals would all be law by now if not for an obstructionist Congress. Passing the deals is something Congress "could do right now," he said.

Except that's not true. Congress can't pass the agreements "right now" because it doesn't have them. They are still sitting on the President's desk. Seriously.

When finally confronted with this obvious-yet-unreported hole in the President's arguments, White House spokesman Josh Earnest was, well, less-than-prepared to explain:

If you are surprised to learn this, you are not alone. White House deputy press secretary Josh Earnest only learned the news on Friday during a press conference. Asked why the FTAs haven't been sent, he responded, "We have not sent them over?"

That was followed by what might be called an awkward moment. "I will say this—I mean, there has been an active dialogue that's been underway between the United States trade representative, other members of the Administration, with the appropriate Congressional leaders in the committees of jurisdiction. We are in a place where we have seen Republicans advocating for passing these free trade agreements for quite some time," Mr. Earnest explained. He also pointed out that "these three trade agreements combined would create or support about 70,000 jobs here in the U.S."

A reporter persisted and asked, "Well, when are you going to send them over?" "But I can tell you that there's no reason—I mean, there's agreement here about the benefits of these trade agreements getting through the Congress, both here at the White House and Democrats and Republicans on Capitol Hill. Mr. Earnest referred reporters to "Congress or the USTR on the legislative mechanics of this," adding that "there is bipartisan agreement on this and it's something that we should move on really quick."

You have got to be kidding me.  The transcript of Mr. Earnest's revealing comments is available here.  Given Earnest's total ignorance on the process of implementing the FTAs, it's pretty clear that the White House doesn't have a concrete plan on how it will advance and finalize the agreements once Congress returns from recess.

In Mr. Earnest's defense, maybe that's because members of the President's own party are openly bragging about how they're going to submarine the trade agreements:

Sen. Sherrod Brown (D-Ohio) is strongly considering offering his China currency bill, co-sponsored by Republican Sen. Olympia Snowe (Maine), as an amendment to a standalone worker-retraining measure that is expected to begin movement through the House and Senate next month, a Senate aide told The Hill.

Brown would offer his currency legislation -- which would direct the Commerce Department to treat currency undervaluation as a prohibited export subsidy -- to a streamlined version of a Trade Adjustment Assistance (TAA) bill worked out in late June by the White House, House Ways and Means Chairman Dave Camp (R-Mich.) and Senate Finance Chairman Max Baucus (D-Mont.).

“Extending Trade Adjustment Assistance is an important step to respond to job loss caused by foreign competition. But addressing unfair trade practices like Chinese currency manipulation can prevent job loss by ensuring a level playing field for American manufacturers facing a flood of cheap Chinese imports,” Brown said in a recent statement. “With up to 2 million jobs that may be hanging in the balance, Congress must take action immediately.”

The Senate Minority Leader Mitch McConnell (R-Ky.) and Senate Majority Leader Harry Reid (D-Nev.) have agreed to allow amendments to the TAA bill and require a 60-vote threshold for the adoption of amendments, making it more challenging for the upper chamber to change the measure.

Adoption of the Brown-Snowe amendment would further complicate passage of TAA and likely draw out completion of the trade deals with Colombia, Korea and Panama, as the White House hasn't agreed to accept any other changes....

Earlier this week, in a speech to the United Steelworkers, House Minority Leader Nancy Pelosi (D-Calif.) said China's currency manipulation must be addressed before sending the trade deals up to Capitol Hill....

Other lawmakers and U.S businesses have expressed concern about the currency issue, which they say China deliberately undervalues to benefit Chinese exporters along with the lack of regulatory transparency, policies that favor Chinese domestic domestic businesses and a lack of protection for U.S. intellectual property....

Earlier this month, the White House and congressional leaders reached a general agreement to pass TAA, an Obama administration demand, along with the trade deals, although there are still several process issues that remain to be worked out.

One avenue is for the House to approve a Generalized System of Preferences (GSP) bill, which expired in December, followed by Senate approval of GSP with the attachment of Trade Adjustment Assistance (TAA), a program that helps workers hurt by trade deals.

That amended bill would return to the House and then Obama administration would submit the three pending trade deals with Colombia, Korea and Panama.

The House would then hold four separate votes, one each on the trade deals and another on the TAA-GSP measure. The trade package also could include the Andean Trade Preferences Act (ATPA), which may wind up in the Colombia accord.

Then the four bills would go to the Senate for final approval.

Given the small number of legislative days in September, this process would likely not be concluded until October.

Clearly, congressional passage of the FTAs will require an airtight plan and strong White House leadership in order parry House and Senate Democrats' attempts to attach a China currency "poison pill" (or anything else) to the TAA, GSP or FTA legislation.  Mr. Earnest's cluelessness on the procedural basics surrounding the FTAs hardly inspires confidence that the President's team has all of these important details worked out.  And unfortunately for US exporters and consumers, the White House is quickly running out of time - Congress returns from recess on September 6.

Hey, remember earlier this month how the FTAs were as good as finished?  Yeah, me neither.

UPDATE:  The Washington Post's Glenn Kessler joins the WSJ in finally noticing that the President's "right now" schtick is misleading, giving his statements "One Pinocchio" in his FactChecker column:

The administration has clearly played a balancing act, trying to attract Democratic support without losing significant Republican backing. We’re not going to judge who is more right on the history leading up to this point, but we do think it is a highly selective recounting of that history for the president to suggest GOP lawmakers are blocking the deal because they are putting party before country. There is actually strong support for these agreements within the Republican Party — just like there is strong support for trade adjustment legislation among Democrats.

There may be a philosophical dispute over aid for companies harmed by free trade, but the administration in the end is responsible for making passage of TAA a condition for submitting the trade deals. Moreover, Obama leaves the distinct impression that Congress is sitting on the bills, when in fact they have not yet been officially submitted for consideration.

Kessler doesn't quite understand that the White House is arguing over the passage of a $1B TAA expansion, not the old TAA program, and he's pretty kind to Obama for giving him only one "pinocchio" for his repeated, and clearly erroneous, claims that GOP obstructionism is holding up the trade agreements.  But it's still nice to see that even sympathetic media are opening their eyes to the administration's rampant FTA distortions.

Right Now, ctd.

For the last several weeks, I've been hoping that someone in the US business community would speak out against the President's repeated, and utterly disingenuous, calls on Congress to pass pending FTAs with Korea, Panama and Colombia "right now."  This unfortunate talking point was something I decried last month when President Obama first starting using it, and, finally, a business leader (J. Patrick Boyle, President and CEO of the American Meat Institute) has done the same in The Hill today:

Passing trade deals is something that “Congress can do right now,” remarked President Obama Monday at a town hall meeting in Cannon Falls, Minnesota.

Not so fast. The truth is that Congress can’t do anything on free trade agreements “right now,” because the President has yet to send the agreements to Congress for final approval, despite receiving recommendations on the agreements from Congress on July 7.

The President often mentions that in January 2009 he inherited a very difficult economic environment. He also inherited three negotiated and signed Free Trade Agreements (FTAs) with Korea, Colombia and Panama. The only step left for the Obama administration was to submit the agreements to Congress for ratification: a step yet to be taken.

But that is something the president could and should do “right now.”

The President likes to talk about “creating jobs and stimulating the rural economy.” If the administration continues to sit on these trade agreements, as it has since President Obama took office more than two and a half years ago, then Congress will be left in the “do nothing” position on free trade agreements, having never been afforded the opportunity by the Obama administration to ratify the pacts that will expand U.S. trade opportunities abroad and create more jobs at home.

Results of an impact study coordinated by the American Meat Institute highlight the high opportunity costs and job creation potential at home resulting from full implementation of these FTAs. Our study found that passage and implementation of the Korean, Colombian and Panamanian FTAs would represent an additional $2.3 billion in exports and create 29,524 badly needed jobs here at home. Many of these jobs are in rural areas of the U.S. where prospects of true economic development are seldom presented.

Not only is this roadblock hindering job creation, it’s also causing U.S. farmers, ranchers and food processors continual loss of global market share to our competitors, such as the European Union, Canada and Australia.

In his speech, the President noted that, “There is no shortage of ideas to put people to work right now. What is needed is action on the part of Congress…”

In terms of passing these trade agreements, truly creating jobs and growing the rural economy, the ball is in your court, Mr. President.

Excellent stuff and kudos to Mr. Boyle for having the courage to call the President's, ahem, bluff.  Meanwhile, FoxNews recently ran a great piece on the broader harms caused by the White House's continued failure to submit these deals to Congress:



Of course, the President's supporters and cynical political strategists (often-redundant terms, I know) might argue that the White House's continued delay of these FTAs and other free trade policies are simply the political price that he has to pay in order to ensure that anti-trade American labor unions don't abandon him during the 2012 presidential election.  Except, well, that argument is dead wrong:

Organized labor won't sit out President Obama's reelection campaign and let a Republican win the presidency, the AFL-CIO's political director said Wednesday.

Despite the frustration labor activists have expressed toward the administration for the deals it has cut with congressional Republicans, Obama is still a better alternative to a potential Republican president, said Michael Podhorzer, the labor federation's top politics officer.

"I don't think that the labor movement will be on the sidelines with President Obama," he said in a sit-down interview with The Hill Wednesday.

Podhorzer said that the union is likely to announce this fall that it's creating a so-called "super-PAC" that can spend and receive unlimited amounts of campaign donations. Podhorzer said the labor federation has been limited by election laws to contacting just its own members but that with a super-PAC, the AFL-CIO can expand its outreach to non-union voters as well....

But the union could still send a message to Democrats by boycotting the party's 2012 convention in Charlotte, which some AFL-CIO affiliates are considering, according to an Associated Press report last week. The union's governing council will monitor the situation, Podhorzer said, and make a decision largely "determined by what the Democratic Party does between now and the end of the year."...

Though unhappy with the president at times, the AFL-CIO will likely go through its formal process sometime next year to officially endorse Obama, considering his GOP opponents.

Sure, he's getting a super-PAC, union votes and organized labor's vaunted get-out-the-vote "ground game," but the AFL-CIO might boycott the 2012 Convention due to the President's failure to achieve Total Labor Victory during his first term.  That'll show him, guys.  Way to stick to your, ahem, guns.

So, yeah, it's no wonder the White House has bagged the FTAs at the expense of American exporters and consumers.  We wouldn't want the unions to boycott the White House Christmas Party too, now would we?