TPP Now in Sight

The Trans-Pacific Partnership agreement would be the largest single trade agreement concluded worldwide for more than a decade. It would transform world trade governance in ways that are hard to predict. This column discusses the machinations inside the US Congress that gave US negotiators the green light to wrap up the TPP talks. If all goes well, the deal may happen just prior to the APEC Summit in the Philippines in November 2015.

Gary Clyde Hufbauer
Reginald Jones Senior Fellow, Peterson Institute for International Economics

President Barack Obama and Senate Majority Leader Mitch McConnell (R-KY) scored a dramatic victory on 23 June 2015, persuading 60 senators to head off a filibuster against Trade Promotion Authority (TPA), the minimum number needed. TPA will be enacted by the Senate this week, as the bill itself requires just 51 affirmative votes. At the same time, Trade Adjustment Assistance (TAA) will be packaged with the African Growth and Opportunity Act (AGOA) and a mildly protectionist anti-dumping provision, to get another 60-vote filibuster-proof majority before being enacted.

Obama’s premier legislative accomplishment this term
TPA, TAA and AGOA will then go to the House, as two separate bills, where they will likely be passed next week. The TAA and AGOA bill should enjoy the support of a large number of Democrats, thanks to the artful packaging, while the standalone TPA bill was already passed in the House on 18 June. Thus both bills can soon be signed by President Obama with a flourish; they are likely to be the biggest legislative accomplishment of his second term.

The pro-trade legislative victory at the behest of three political masters – President Obama, Senator McConnell, and House Speaker John Boehner (R-OH) – paves the way to wrap up TPP negotiations in July and seek Congressional ratification by November.1

What TPA does
TPA, also known as ‘fast track’, is a bill about voting procedures on future trade deals negotiated by the president. It promises that both the House and the Senate will give trade deals a speedy up-or-down vote, without amendments. TPA also enumerates 19 “priority negotiating objectives”, and sets forth procedural guidelines.

This is important; Japan and Canada have stated publicly, and other TPP countries stated privately, that they would not put their best offers on the table until Congress enacted TPA. That has now been accomplished, and trade ministers will soon meet to hammer out the final, and hardest, bargains in the TPP agenda.

To be sure, AFL-CIO President Richard Trumka and opposition non-governmental organisations, such as Public Citizen and the Sierra Club, will not go down without a fight. Their sights are now set on the up-or-down ratification vote. They may enlist opposition support from Nobel Laureates Paul Krugman and Joseph Stiglitz. At one time, both distinguished economists were free trade advocates.

Back in 1997, Paul Krugman wrote: "Would President Clinton have suffered his humiliating rebuff over fast-track trade legislation if the administration had not wasted crucial months failing to take the issue seriously? I don't know. Will that rebuff severely damage the world trading system? I don't know. Is this the beginning of a more fundamental backlash against globalization? I don't know that, either.

"What I do know is that the arguments advanced by fast track's intellectual opponents are stunningly specious." (Krugman 1997).

But those sentiments were uttered by a different person than the Paul Krugman who now dismisses TPP in his New York Times column, and by a very different person than the Joseph Stiglitz who now spies a global health danger in the TPP’s intellectual property provisions.

In other words, the TPP war is far from over, and the next battle will be fought just as hard as the intense engagement of the past two weeks.

However, it seems more likely than not that TPP talks will roll to a conclusion within six to eight weeks, and Congressional ratification of TPP will probably happen just prior to the APEC Summit in the Philippines in November 2015.

Concluding remarks: Gains from TPP
Assuming this scenario unfolds, the eventual payoff will be substantial, illustrated by the estimates in Table 1. Focusing just on the US, our estimates suggest that the widely disbursed gains – some $77 billion annually – will exceed the concentrated losses incurred by displaced workers by a ratio of 20 to 1 or higher. Displaced workers deserve assistance – the purpose of TAA – but inevitable job losses are not a reason to oppose TPP.

Table 1. TPP12 gains by 2025 (billions of 2007 dollars)

Source: Petri et al. (2012) and author's own calculations.

Hufbauer, G (2015), ”Is TPP in Peril”,, 15 June.

Krugman, P (1997), “A raspberry for free trade: Protectionists serve up tainted fruit and red herrings”, Slate, 21 November.

Petri, P, M Plummer and F Zhai (2012), “Adding Japan and Korea to the TPP”, Overview note.

1 See my column last week for details on the initial maneuvering (Hufbauer 2015).

(This article first appeared in VoxEU on June 24, 2015. Cross-posted with permission.)

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