Washington begins the week with some hope for the Trans-Pacific Partnership, an ambitious free trade deal that would span 12 countries, thanks to a bill ironed out by lawmakers from both parties that would give President Obama authority to finalize negotiations for a deal.
All they need to do is pass it—but there are lots of reservations. Republicans don’t trust Obama, but Democrats don’t always trust trade. Senator Chuck Schumer, a senior Democrat with ties to business, says he’s not behind this deal (paywall).
Presidential contender Hillary Clinton, walking the line between Democratic voters and the wealthy funders she needs to run her campaign, released a statement that lays out exactly what it will take for her—and many Democrats—to support TPP.
Let’s examine Clinton’s statement in context—and find the red flags that show the most contentious issues:
Hillary Clinton believes that any new trade measure has to pass two tests: First, it should put us in a position to protect American workers, raise wages and create more good jobs at home.
This first condition isn’t easy: While advocates of the TPP can say it will increase economic growth, it’s tougher to make the case it will raise average wages. As Josh Bivens of the labor-backed Economic Policy Institute argues, trade deals like these will drive down wages, since they rely on boosting America’s capital-intensive sectors at the expense of labor intensive ones. Economists would expect an increase in higher-paying white-collar and creative work, but perhaps not enough to balance out negative pressure on manufacturing and other tradable sectors.
Second, it must also strengthen our national security.
This case is easier to make: Many analysts see the deal as a way to protect the economic rules that have benefitted the US as emerging market economies aim to supplant it as the world’s richest. It also aims to bolster US cybersecurity.
We should be willing to walk away from any outcome that falls short of these tests. The goal is greater prosperity and security for American families, not trade for trade’s sake.
This is becoming something of a slogan in the TPP-skeptic community.
She will be watching closely to see what is being done to crack down on currency manipulation…
This is maybe the biggest red flag: Policies used by other countries to artificially boost their international lending and exports—like artificially devaluing their currency—are seen as a key reason for slow US growth. Treasury Secretary Jack Lew lambasted these countries, which include the prospective TPP participants South Korea and Japan, last week. But he has also said that putting currency manipulation provisions in a trade deal would be counter-productive, in part because it’s hard to separate currency manipulation from normal monetary policy.
…improve labor rights, protect the environment and health, promote transparency, and open new opportunities for our small businesses to export overseas.
Trade unions and environmental groups, two major Democratic constituencies, will press hard on the first two issues, but transparency is a newer issue: The deal has been negotiated in the dark, and leaks of the draft deal appear to show US delegates moving away from US law. Part of the current bill gives lawmakers and their staff more access to the negotiating process.
As she warned in her book, Hard Choices, we shouldn’t be giving special rights to corporations at the expense of workers and consumers.
This point from Clinton’s statement refers to the practice of investor-state challenges, where companies can bring governments into legal arbitration for a variety of practices or regulations that impinge on their business. Companies like to portray it as a way to get redress if a government were to seize its operations or otherwise act contrary to the law, but in practice it is often used to challenge regulations that cost companies money—most notably, cigarette companies have had success challenging health laws designed to reduce smoking.