President Obama talks trade

The great trade debate: nine sticking points

Tracey Samuelson Jun 2, 2015

On Wednesday, Marketplace host Kai Ryssdal will sit down with President Obama to discuss the future of international trade. Here’s a look at what’s on the table:

Among the top issues facing the House of Representatives this summer is whether to give President Obama enhanced power to negotiate trade deals. It’s known as “trade promotion authority,” and passing it means Congress agrees to give completed trade packages a straight yes-or-no vote without amendments or filibusters. 

The Senate passed TPA after vigorous debate in May.

If TPA passes, it would clear the way to move forward with a giant Pacific free-trade agreement among the U.S., Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Together, the dozen nations make up 11 percent of the world’s population and 37 percent of the world’s GDP. Here’s a summary of U.S. objectives for the agreement, known as the Trans-Pacific Partnership or TPP, from the U.S Trade Representative.

Some of the major sticking points in the current trade debates include:

1. Whether free trade is good for the U.S. – and who benefits

In part because we haven’t had a big new trade deal in quite a while, much of the debate about upcoming trade deals circles back to the pros and cons of past free trade deals, whether free trade is, in practice, good for the U.S. and who benefits most from new agreements. While many economists argue there is consensus on the benefits of free trade, others counter trade in the real world is complicated and only as good as the rules that govern it.   

2. Transparency

Drafts of the TPP are classified, which means members of Congress and their staff who meet a required security clearance are able to view the text. Members of trade-advisory committees – which include labor, environmental and business groups, among others – can view negotiating proposals, but not the full document. The agreement won’t be publicly available until the deal is finalized, at which point there is a mandatory review period before Congress votes on it. But some members of Congress and advocacy groups worry the process is not open enough and that by giving the president TPA, they’ll essentially be green lighting the Pacific trade deal without knowing what’s in it.

3. Currency Manipulation

If countries devalue their currencies, it makes their exports cheaper relative to other countries, which gives their exporters a competitive advantage. Therefore, the American Automotive Policy Council, among others, would like to see the TPP include rules against this type of behavior. However, the Obama administration is opposed to including rules about currency manipulation in the deal, arguing that it would limit U.S. monetary policy options and threatened to veto a bill that includes such controls.

Opponents of strong currency control measures also argue that trying to stimulate your domestic economy can devalue your currency even if that’s not the stated goal, and that it becomes a question of a government’s intent and that gets murky very fast. Others say currency manipulation can be narrowly and clearly defined in a way that doesn’t limit U.S. activities.

4. How to resolve disputes

The heart of this issue is whether an independent international tribunal should hear complaints by companies that believe they’ve been harmed by government actions. The argument for such a system is that domestic courts can be biased in favor of their home countries and having independent arbitration protects international investors. The Office of the U.S. Trade Representative points out the U.S. has versions of this in 50 other agreements already, that cases are rarely brought against the U.S. and that the U.S. has never lost one. Opponents say this process could limit democracy by giving companies a vehicle to challenge U.S. regulations, often pointing to an example of how a tobacco company sued the governments of Uruguay and Australia for restrictions they’ve passed on the design of cigarette packaging.

5. Environment

Environmental groups, like the Sierra Club, World Wildlife Fund, and that Natural Resources Defense Council, worry that the TPP could lead to increased fracking and put stress on natural resources. After analyzing a draft chapter of the Pacific trade agreement released by Wikileaks, the environmental groups warned that environmental provisions aren’t as strong as previous agreements.

6. Intellectual Property

Intellectual property provisions of the TPP are especially controversial as they relate to pharmaceutical patents. But Doctors Without Borders and Oxfam are concerned the deal could lengthen the duration of pharmaceutical companies’ patents and therefore restrict access to more affordable generics.

7. China

The Pacific trade negotiations do not involve China, and the Senate failed when it tried to pass an amendment requiring Congressional approval for new countries to join the deal. Sen. Sherrod Brown (D-Ohio), who sponsored the amendment, said China had already expressed interest in joining the TPP and that because of its size, “a deal of that scale demands that the American public weigh in.”

President Obama has frequently evoked China while calling for the passage of TPP, saying that if the U.S. doesn’t write the rules on global trade, China will.

8. Human Rights

The Senate passed a human rights measure seeking to bar countries complicit in human trafficking from receiving the benefits of a trade deal passed under TPA. The White House opposes such a provision, as it says it would exclude Malaysia from the TPP.

9. Trade Adjustment Assistance

Trade has winners and losers – that’s often repeated regarding these deals. The idea behind Trade Adjustment Assistance is to provide assistance to workers displaced by trade deals. It is favored by labor unions, like the AFL-CIO, but whether this assistance is renewed and how much funding it receives have been sticking points.

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