Today’s Headlines: Republicans Back Obama on Fast Track Trade Authority

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Today’s Headlines: Republicans Back Obama on Fast Track Trade Authority
April 21, 2015
Tentative Agreement Reached on Fast Track Trade Authority

The 114th Congress seems to be making better progress with legislation, and some of this lawmaking has produced interesting fault lines and coalitions. Such is the case with the bill on restoring the lapsed trade promotion authority (TPA), the so-called "fast track" bill that gives the President a greater hand in negotiating trade accords.

Key Congressional leaders from both sides of the aisle have reached a deal to grant President Obama fast-track authority. Last week, Senators Orrin Hatch (R-Utah) and Ron Wyden (D-Ore.) of the Senate Finance Committee and Representative Paul Ryan (R-Wisc.) agreed on the basic framework of the TPA bill. The legislation is now being drafted in committee and will be sent to the floor for votes at the earliest opportunity.

TPP and TTIP

President Obama intends to use fast-track authority to negotiate two large trade agreements, starting with the Trans-Pacific Partnership (TPP). The TPP covers twelve nations total, combining the US, Canada, Mexico, Chile, and Peru from the Americas with the Pacific nations Australia, Brunei Darussalam, Japan, Malaysia, New Zealand, Singapore, and Vietnam. This group of nations makes up approximately a third of global trade and 39% of global GDP.

The US Trade Representative Office cites an analysis from the Peterson Institute claiming that by 2025, TPP will provide $77 billion annually in real income benefits to the US ($223 billion globally), as well as an estimated $123.5 billion annually in exports ($305 billion globally).

A similar trade bill with the EU known as the Trans-Atlantic Trade and Investment Partnership (TTIP) is also in the works. Thus, the fast track authority is extremely important to the President to allow him to finish negotiating these trade deals before his term winds down.

The Role of TPA

It is difficult, if not impossible, for the executive branch to negotiate meaningful treaties when Congress can pick apart the agreement and add amendments, killing treaties much in the way that controversial legislation can be stalled. TPA retains Congressional approval but limits the process to a simple up or down vote, without amendment.

The TPA bill also sets up Congressional expectations for the trade deals and establishes the rules for the Executive branch to notify and consult with Congress and other entities during the negotiation process. To reach agreement, there were a number of compromises aimed mostly at gathering Democratic support.

Republicans agreed to include negotiating objectives for human rights — a first for trade agreements — as well as protections for displaced workers. Assistance will be extended to include service workers in addition to those in manufacturing, and a tax credit to assist displaced workers in buying health insurance was given a four-year extension.

There are a total of 150 negotiating objectives, covering everything from intellectual property protection to human rights and standards for labor practices and environmental protection. The TPA agreement even addresses currency manipulation at the request of Senator Charles Schumer (D-NY) in a move clearly aimed at China.

Furthermore, the TPA allows Congress an out by allowing a 60-vote majority to "turn off" the TPA authority and allow alterations and amendments to be considered — most likely killing TPP's chances of being enacted. A period of public comment prior to the vote will allow plenty of time for foes of the bill to gather public opinion and influence their Congressional delegations.

Strange Bedfellows

has produced an unusual coalition on both sides of the debate. Traditional Democratic voting blocs such as unions, Latino organizations, and environmental groups have not been sufficiently placated, and are threatening an all-out battle to defeat the bill. They are joined in opposition to TPA by some of the more extreme Republicans, who cannot tolerate giving the President any such authority (or a victory of any sort).

Meanwhile, supporters include most Republicans and business-friendly Democrats, who see the bill as an economic boon and agree that the safeguards are sufficient to keep a bad deal from being approved. In essence, the battle is as much between activists and centrists as it is between Republicans and Democrats.

The Takeaway

The general consensus is that agreements such as TPP and TTIP contribute to global economic growth. The arguments against trade agreements center on how that growth is distributed, and whether that growth comes at the expense of other concerns such as jobs and the environment.

To investors, trade agreements are favorable because of the collective growth. Your challenge is to find the markets that will benefit most from any particular agreement, and invest wisely within those segments. According to the New York Times, for TPP, the winners are expected to be US agricultural interests, pharmaceutical and technology companies, insurance companies, and select larger manufacturers that can take advantage of the export possibilities.

However, it is not a given that fast-track authority will pass — and it's certainly not a given that TPP will pass in an up or down Congressional vote. It is also possible that Congress will decide that TPP fails to meet some of the outlined objectives and rescind the fast-track rules to allow amendments.

TPP and TTIP both have a long way to go, but keep an eye on their progress. Review any available public information on the final agreement, and do a little recon on companies you wish to invest in if it passes. Until then, let your Congressional representatives know your opinion on TPA, TPP, and TTIP—whether you're for it or against it.

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