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The ABCs of TPA, TAA, and TPP

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The ABCs of TPA, TAA, and TPP

June 16, 2015

Confused about the trade deal currently under consideration by Congress? Feeling a bit rusty on the acronyms for various trade-related measures? Join the club. This user's guide should provide you with everything you need to know to follow the play-by-play.

On Friday, the House of Representatives did not reject a measure authorizing President Barack Obama to negotiate free-trade deals without congressional interference. (That would be Trade Promotion Authority, or TPA, otherwise known as "fast track.") Nor did the House nix the free trade deal the United States is negotiating with 11 Pacific-Rim countries, known as the Trans-Pacific Partnership, or TPP. 

What the House rejected by a vote of 126-302 was something called Trade Adjustment Assistance (TAA), a program that provides help - job training, extended unemployment benefits, health care subsidies - to workers who are adversely affected by a trade agreement. 

"We want a better deal for American workers," House Minority Leader Nancy Pelosi said in announcing her intention to vote "no" on TAA. Only 40 Democrats voted in favor of the measure. Some members opposed the measure because of a proposal, eventually scrapped, to pay for TAA with modest cuts to Medicare providers. But by and large, the no-vote was simply an attempt "to slow down fast track," as Pelosi said.

So the Democrats voted no on the one element of any trade deal that they support whole-heartedly. 

Got it? Let's move on.

Immediately after voting down TAA, the House passed TPA on a largely Republican party-line vote of 219-211. Yes, the same GOP that doesn't trust Obama to dispense Halloween candy has now given him blanket authority on trade. 

Just to review: We have House Democrats opposing worker assistance, not to mention their president, and House Republicans supporting Obama. 

Congress faces some procedural hurdles on what to do next. The House GOP leadership wants to hold another vote on TAA if it can drum up enough support to pass it. Because the Senate already passed a trade bill combining TAA and TPA, the House needs to pass a similar measure in order for Congress to send it to the president for his signature. The Senate will not pass a bill without TAA. 

Whatever the outcome, it's important to focus on the trade agreement itself, which would lower or eliminate tariffs on goods and reduce barriers to entry for service providers of all 12 nations, ranging from rich to poor, from developed (the U.S. and Canada) to developing (Vietnam and Malaysia). The deal would facilitate cross-border investment as well. 

But the TPP is about much more than trade. As the president has said repeatedly, the agreement will "level the playing field" by imposing stricter labor and environment standards - on other countries. The TPP would protect the right of collective bargaining, discourage trade in goods produced by forced labor, including child labor, and hold trading partners "accountable for protecting wildlife, forests and oceans." 

When Obama frames the agreement in those terms, "the implicit assumption is that trade agreements harm American workers unless foreign countries change their regulations," said Bill Watson, a trade policy analyst at the libertarian Cato Institute. "That’s an argument against free trade."

What about enforcement? Will there be a bureaucratic structure that determines the maximum hours and minimum wage for a Peruvian clothing-factory worker and monitors conditions to ensure strict compliance? Those details haven't been outlined just yet. Every trade deal since Nafta in 1994 has included some form of worker and environmental protection in the text of the agreement, according to Watson. (Nafta's worker protection provisions were part of a side agreement.) There is every reason to believe that Obama will push for equal, if not more stringent, enforcement mechanisms for the TPP.

Of course, "a free trade deal that protects American workers" is something of an oxymoron. Free trade eliminates all tariffs and barriers to allow for the free flow of goods and services among countries. For workers, free trade is a case of Darwin's survival of the fittest. Production migrates to countries that have the greatest cost advantage. U.S. consumers and businesses get access to cheap foreign goods. Domestic manufacturers see the cost of raw materials go down, enabling them to lower their prices and become more competitive. The nation is better off, as are all nations that are parties to free trade.

Yes, there are losers in the short run. Low-wage workers may see their jobs - even their factory - shipped overseas. In the long run, new jobs will be created in industries where the United States holds a comparative advantage, some of which don't even exist today.

Obama's entire trade pitch - "the more we sell abroad, the more jobs we create at home" - is a thinly disguised mercantilist argument: the idea that a country can export its way to prosperity. It's a mistake to think that the advantages of free trade are limited to the export side.

Most economists are aligned in their view that all nations, rich or poor, benefit from free trade. That's not going to convince organized labor and its supporters in Congress. Then again, if TPP had a more effective messenger, not to mention an accurately-articulated message, it would clarify the benefits from trade. Without either, the public is subject to the whims of politicians, which helps explain the confusion.

 

Caroline Baum is a contributor to e21. You can follow her on Twitter here.

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