American votes on trade

The U.S. Presidential election gets underway in earnest in less than a week with the first votes in the Iowa caucuses on February 1.  Unlike many past electoral battles, both the Republican and Democratic primaries feature serious contests between multiple candidates. 

A bumper crop of candidates are jockeying to be the last person standing in their party and to reach the general election on November 8.   

In addition to electing a new president to replace outgoing Barack Obama, Americans will be voting on all 435 members of the House of Representatives for new two year terms and one third of the Senate (34 of 100 seats). 

An American election can have all sorts of consequences, of course, but of particular interest to readers of Talking Trade may be the implications of a contested election on a crowded 2016/2017 trade agenda. 

In trade, Congress has a number of important issues to consider.  Most critically, the Trans-Pacific Partnership (TPP) continues to move ahead.  The official legal texts were just released and will be signed on February 4 in New Zealand. 

Next up, the ITC has to issue a report on the expected consequences of the TPP.  This report is due in May and will likely be used (or misused) as fodder for both sides.  At any time after this report is finished, the President could ask Congress to begin the ratification procedures. 

Of similar economic importance to the TPP, the Trans-Atlantic Trade and Investment Partnership (TTIP) negotiations with the European Union is supposed to wrap up this year. 

Also in the pipeline, the Trade in Services (TiSA) officials just pledged to conclude negotiations in 2016.  While it is unlikely that this services talk will be ready to present to Congress this year, it nevertheless represents the kind of deal that a new Congress and President may have to address in early 2017.

These three agreements alone present a complex set of challenges for current and potential Presidential and Congressional candidates. 

To make getting trade deals done more difficult, the current crop of candidates from both parties running for the highest office have views of trade that range from lukewarm to decidedly unhelpful. 

What is very unusual, in this upside down electoral cycle, is which candidates and parties are most strongly anti-trade.  In the past, Democrats were less enthusiastic about trade agreements, fearing the effects on workers, jobs and the environment. 

In large part to head off their potential objections, American negotiators included chapters on labor and environment in the TPP over often-strong opposition from other TPP member governments.

Candidate Hillary Clinton has not been enthusiastic about the TPP, despite having promoted the benefits to the United States from the agreement when she served as Obama’s Secretary of State.  Her position, once in office, could shift.  Her Democratic challenger, Bernie Sanders, is strongly in opposition to the TPP citing traditional concerns about labor and environment. 

What is new for 2016 is that Republicans are also not wildly excited about trade this cycle.  In the past, the party was generally willing to vote for trade deals.  For example, while contentious, voting just seven months ago produced support for the Trade Promotion Authority (TPA) to allow the conclusion of the TPP negotiations (and other trade deals). 

The vote count was 60-37 in the Senate, with the support of 13 Democrats and the opposition of 5 Republicans (including 2 running for President).  In the House, the vote count was 218-208 (28 Democrats voting yes while 50 Republicans opposed). 

Since then, positions have hardened.  Even supporters of the TPA vote and the TPP in the past, including Republican Speaker of the House Paul Ryan, have suggested potential problems voting in favor the TPP if it comes before Congress now. 

In part, this is because Republican candidates for President appear to have gotten strong public support for an anti-trade message.  The current front-runner, Donald Trump, has consistently argued against greater trade, at one point threatening to slap Chinese imports with 45% tariffs, for instance. 

Ted Cruz, who voted for TPA in the Senate, is now a vocal opponent.  He has suggested that he remains in favor of free trade, but not “corrupt” back-room deals that harm immigration. 

This puts the trade agenda—and TPP approval—into an interesting spot.  In the past, many Democrats who likely supported trade policies did not need to go out in front of voters having cast controversial votes in favor of trade because they could count on Republican colleagues to push trade over the line. 

Many Republicans, and most of what are now called “establishment Republicans,” have supported a trade agenda for years or decades.  Much of the ongoing trade agenda in the United States, such as lowering trade barriers overseas to American exports, pushing for standards regulations that are consistent with American regulations, expanding access for American services providers and investments, fit squarely in the traditional agenda of the Republican party. 

These objectives have lead to substantial benefits for many in the party, particularly for the traditional donor base. 

However, this election cycle has seen increasing tensions in the Republican party.  A rise of protectionism appears to have led many candidates to push back against free-trade and free-market ideas.  Perceptions matter and many potential voters on the campaign trail seem convinced that global trade has caused them to suffer significant economic harm with limited benefits.

Marco Rubio and Jeb Bush did defend free trade in the Republican debate held earlier this month and have supported the TPP.  But neither candidate is currently polling very well. 

For candidates running for the House or the Senate, the message seems clear—many primary voters seem to be responding better to messages about closing off America from foreigners than to traditional language about the benefits of greater engagement with the outside world.

This puts TPP approval, especially, into a very peculiar place.  Many are arguing that the agreement is most likely to be approved in the lame duck session (after the general election is finished on November 8 but before the new President and Congress are seated in January 2017).

However, if protectionist enthusiasm continues to build, it could be increasingly difficult to mobilize a winning coalition around getting the TPP ratified. 

Interesting times indeed.  Time to pay greater attention than ever, perhaps, to early electoral states like Super Tuesday on March 1 when a dozen states vote or March 15 when some key swing states select their preferred primary candidates to see which types of arguments actually carry the day in the voting booth.  Do Americans that are urging protectionism or freer markets show up to vote?  Are politicians swayed by perceptions too?