IN HIS state-of-the-union address Barack Obama asked Congress to give him “fast-track” authority to negotiate trade deals. Shortly afterwards his most important ally on Capitol Hill hinted that he might block it. As Senate majority leader, Harry Reid can do just that: no bill gets a vote without his say-so. But would he really stiff Mr Obama? Much depends on the answer.
Studies suggest that proposed deals with Asia and Europe could generate global gains of $US600 billion a year, with $US200 billion of that going to America. And that understates the benefits, since the deals would spur competition in the market for services, which make up most of rich countries’ output but are seldom traded across borders. Opening industries like finance and transport to greater competition could bring great savings to consumers.
Mr Obama has never been an ardent free-trader, yet his second term got off to a promising start. The Trans-Pacific Partnership, a deal with large Pacific-rim economies, is close to completion; America and Japan are hammering out the rules for farm goods. European and American trade wonks continue to meet regularly, hoping to wrap up a “next-generation” trade agreement as early as next year.
To make all this happen Mr Obama needs “trade promotion authority” (usually known as “fast-track”), which would let him negotiate deals and then present them to Congress for a simple yes-or-no vote, with no chance for lawmakers to rewrite the details. Without such authority, America’s trading partners cannot take the White House seriously as a negotiator. Fast-track was last granted to George W. Bush in 2002 and expired in 2007. Since Republicans are generally pro-trade and Democrats are generally loyal to Mr Obama, most people in Washington at first assumed that Congress would give it to him without a fuss.
But with elections looming and lawmakers in a populist mood, that is far from certain. Late last year roughly half the members of the House wrote to Mr Obama declaring their opposition to fast-track; most were from his own party. In early January a bipartisan group of senators introduced a fast-track bill. Mr Obama spoke up for it in his state-of-the-union address, but only in passing and in mercantilist terms. The aim is “to protect our workers, protect our environment and open new markets to new goods stamped ‘Made in the USA’,” he said; without mentioning that cheap imports raise living standards.
Barely had he left the podium when Mr Reid mugged him. Answering questions from reporters, he reiterated his opposition to fast-track and advised its backers “not [to] push this right now”. Insiders doubt that Mr Reid would kill the bill outright. Haggling in the Senate may yield a new version with enough about labour standards and the environment to satisfy the protectionists. If so, Mr Reid will probably allow a vote, and the bill should pass. The White House remains publicly optimistic.
Yet damage is already being done. Michael Froman, Mr Obama’s trade representative, says negotiations have not been affected by the politicking in Washington. However, even if Mr Reid’s rebellion was partly for show (his seat is at risk in 2016), it still worries America’s trade partners. Shinzo Abe, Japan’s prime minister, may be reluctant to offend voters at home for the sake of a trade deal that America’s legislators might promptly torpedo. Similarly, the French, who have been a constant pain in talks between America and Europe, could argue that since America’s leaders seem determined to attach conditions to a fast-track bill, France’s demands for carve-outs deserve consideration, too.
At home meanwhile, Democratic opposition could harden. Some lawmakers may see an opportunity to put daylight between themselves and their Republican foes ahead of November’s elections. With corporate profits looking healthy and wages still stagnant almost five years into the recovery, some may be tempted to portray Republican backing for free trade as support for fat-cat corporations.
Mr Reid’s surprise rebuke suggests that Mr Obama needs to communicate better with his allies. And if he wishes to prevent two of the most promising trade deals in a decade from unravelling, he will need to make a far more full-throated case for the benefits of free exchange.
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