Bloomberg Law's weekly International Trade Reporter provides rapid, reliable notification of the most significant developments affecting U.S. trade and international business policy and...
By Cheryl Bolen
May 7 — Just a “small fraction” of House Democrats support trade promotion authority (TPA) legislation and there are an “increasing number” of Democratic senators who are concerned about the bill, said Rep. Sander Levin (D-Mich.).
“So there's going to be a vigorous debate in the Senate,” Levin told reporters May 7 at a breakfast hosted by the Christian Science Monitor. “I don't know the numbers, but I know the intensity of feeling—and it's going to get more intense next week,” he said.
Until it is clear where the Trans-Pacific Partnership (TPP) trade agreement is going, and until remaining problems like transparency are resolved, it is the judgment of many Democrats that they shouldn't give up their leverage and vote in favor of TPA legislation, said Levin, the ranking member of the House Ways and Means Committee.
“I don't have an entire whip count,” Levin said. “TPA is in trouble, and I think it's in trouble because of TPP,” he said.
Senate Majority Leader Mitch McConnell (R-Ky.) has filed to limit debate on the motion to proceed to H.R. 1314, the legislative vehicle for a measure to advance TPA. The TPA bill would allow fast-tracking of trade deals by way of up-or-down congressional votes on pacts negotiated by the Obama administration.
Levin said that he wants to vote for the TPP, but only if it is done right. “Our standard has been that countries need to change their laws before we vote,” he said.
“I think we should vote down this TPA, and I think that will then force a more open discussion of what's in TPP so there's a better grasp of it, better back and forth, Congress won't be in the back seat—as would be true if we pass this TPA, and then as further negotiations continue, at some point there will have to be a TPA, but not at this point,” he said.
Over the years, Democrats have tried to put together a progressive trade agenda that expands trade, but “in the right way,” Levin said. This includes putting issues such as labor rights, environmental protections and medicines into trade agreements, he said.
The TPA put together in the Senate by Sens. Orrin Hatch (R-Utah) and Ron Wyden (D-Ore.) has negotiating objectives, but they are basically “a wish list,” Levin said.
“People need to not dismiss the concern about TPA as essentially politics, or because it's the labor movement, or because it's the status quo,” Levin said. “We understand the pluses of expanded trade if it's done right,” he said.
For starters, the TPP provides an opportunity for the first time in a broad-based agreement to address the issue of currency manipulation, Levin said.
On worker rights, Vietnam would be a party to the TPP agreement, Levin said. “We've never negotiated a trade agreement with a communist country,” he said. “And there have to be changes.”
There are also weaknesses in the environmental provisions of the TPP, Levin said. But because of the process the environmental provisions may be classified, and so they cannot be debated in public, he said. “And we should open those up,” he said.
The administration says that the public and Congress will be able to see the text of the agreement for 60 days, but only after it is completed and without any ability to change it, Levin said.
Levin downplayed the argument used frequently by the administration that if the U.S. doesn't write the rules of the road, China will. “I don't think that China is a basic threat to overtaking the importance of the U.S. economically,” he said.
“To simply say that because of China, we need to pass a defective TPP, misses the importance of the economic issues and I think overstates the security aspects,” Levin said.
Jeffrey Sachs, professor and director of the Earth Institute at Columbia University, said that the argument that the U.S. has to write the rules or China will is a “very strange reading of reality.”
China is a major trading partner with the U.S. and with other countries in the region, and everyone has an interest in writing good rules, including China, Sachs said.
Overall, the ramifications of these agreements go well beyond trade, beyond the mainstream issues of tariff and non-tariff barriers to foreign investment and dispute settlement issues, Sachs said.
“That's a very big deal, because the flow of capital internationally has huge effects on the world economy and on the income distribution in the U.S. and other countries,” he said.
After areas including tariff and non-tariff barriers, another set of issues is regulatory, Sachs said. These agreements include a lot of crucial discussion about drug pricing, patent rights, labor and environmental standards. “One of the biggest worries that many of us have is we don't know what's in them, because they're secret,” he said.
Although a vote for TPA is not a vote for a particular trade agreement, it sets in motion a process in which there is only an up-or-down vote before there has been public debate about many crucial issues, such as intellectual property, the court system, drug pricing or foreign investment flows, Sachs said.
One of the largest “red flags” in trade agreements is the investor-state dispute settlement (ISDS) mechanism, Sachs said. Essentially, ISDS allows companies to sue states in a special ad hoc tribunal that is outside of the court and legal systems of the host countries, he said.
The problem is that this system, which has existed previously, is now being picked up widely and used aggressively, Sachs said. “And many of us think aggressively abused,” he said.
To overrule the capacity of host governments to regulate their markets, social or environmental considerations, such as the packaging of tobacco, is problematic, Sachs said. The corporate sector sees this as an “end-run” around national law, he said.
The White House has tried to be reassuring on this, but the real authorities in law and in economics are deeply worried by the precedents that have been set in this area, Sachs said.
“This is one of those cases where hidden inside a secret text there are reasons for great alarm that have not been debated in the public yet,” Sachs said. “To rush through TPA on this basis in my view would be a disservice to our democracy,” he said.
Levin also said that he was “deeply concerned” by a report released by the White House Council of Economic Advisers (CEA) that found that free trade agreements don't increase outsourcing of jobs overseas (85 ITD, 5/4/15).
“Trade should be expanded, but we need to look at its consequences,” Levin said. Trade is not the only reason there has been income stagnation in the U.S., but it is one of them, he said.
Sachs said, in response to the CEA report, that he prepared a report on both the costs and benefits of trade. “Because it is naive, frankly speaking, to talk about only benefits without talking about costs,” he said.
The CEA finds higher earnings in the export sectors, which may be true, but ignores the import sectors, the effects of import competition and the offshoring of jobs, which has been significant, Sachs said.
“Many of these changes would be detrimental for certain parts of our economy and certain parts of the workforce,” Sachs said.
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