Trade Promotion Authority – so far so good

After weeks of political and procedural wrangling the United States Senate has finally approved (22 May) a bipartisan bill authorising the President to conduct trade negotiations and complete the Trans Pacific Partnership (TPP) as well as the Trans Atlantic Trade and Investment Partnership (TTIP). This is welcome news as far as it goes. The bill now proceeds to the House of Representatives where the political debate mostly within the Democratic Party will continue. President Obama faces an uphill battle to convince his own party of the merit of these initiatives. He can count on the support of the larger part of the Republican Party but some protectionist-minded Republicans will also oppose the legislation. In the Senate the TPA largely survived the mark up process and most attempts to add extraneous provisions or “killer amendments” that would have ensured the bill would be dead on arrival either in the House or on the President’s desk. Some complicated provisions remain however – some language on currency manipulation and a potentially poisonous pill aimed at Malaysia’s human rights record. Both elements present challenges for TPP and can hopefully be worked out as the House considers the bill and any differences are ironed out.

TPA matters because it is an essential pre-requisite to completing TPP. The other twelve participants will not be prepared to make their final offers on market access (or in Canada’s case any offer at all on dairy products) without knowing whether the US can commit fully to the negotiation. Resolution of the market access issues is also necessary for the participants to show flexibility in the remaining trade rules issues including intellectual property and investment. However you look at it no TPA means no TPP, at least not for now. The Senate TPA vote probably comes too late for this week’s proposed TPP Ministerial in Guam. Even if Ministers decide to make the trip, there remains too much uncertainty to bring TPP to conclusion.

The clock is ticking on this complex and controversial process. The US risks ceding its traditional leadership on trade to others, especially as APEC meets this week in Boracay and considers next steps towards the Free Trade Area of the Asia Pacific (FTAAP).

This post was prepared by Stephen Jacobi, Executive Director of the NZ International Business Forum (www.nzibf.co.nz)