'Fast-Track' Trade Promotion Authority Hits a Speed Bump

May 13, 2015International Tradeby Marc Chandler

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The surprising defeat of trade promotion authority is a setback for Obama.

The main legislative hurdle to granting Obama Trade Promotion Authority (fast track) was supposed to be in the House of Representatives. This makes the defeat on a procedural vote in the Senate even more surprising. Vocal opposition came from the minority leader of the Senate (Reid) and one of the leaders of the left wing of the Democratic Party (Warren). However, the defeat had little to do with their protests.

Indeed, a post-mortem analysis suggests that the Senate will likely grant Obama that trade-promotion authority (TPA) in early June. Victory was sixty votes, but it only received 52.  This includes Republican leader McConnell's vote switch to no to preserve his procedural ability to resurrect the issue later.

Ten Democrat Senators favored TPA, but only one voted for the motion.  The Democrats want to link trade authority with three other measures:  1) a program to assist workers displaced by globalization; 2) strengthen the response to unfair trade practices; and 3) toughen currency market manipulation retaliation.  The first measure is standard fare, similar to NAFTA in 1993.  The second is not very controversial, and in any event, constrained by WTO obligations

The third one is the most controversial. The obvious solution is to de-couple the currency manipulation component and vote again.  This, or something like this, will probably be the work around.  The more formidable challenge will come from the House. 

Obama's challenges are similar but different from those faced by Clinton in pushing through NAFTA in 1993.  Both worked closely with the Republican Party and managed to secure support for a small minority of their own Democrat Party.  A key difference was that the NAFTA vote took place early in the Clinton presidency, and it is taking place late in Obama's when the presidential power to punish enemies and reward friends considerable diminishes. 

NAFTA passed by a 234-200 vote in the House and a 61-38 vote in the Senate.  Trade promotion authority for Obama is likely to pass the Senate by a similar margin.  The deciding votes in the House currently looks like it could less than a handful.

The purpose here is not to evaluate the merits of the TPA or the TPP.  Instead, it is to explain to investors, for whom it is important one way or the other, that the failure to deliver 60 votes for cloture is not the end of the issue.  The procedural issue seems surmountable.  The setback is more embarrassing than substantive.  The more trying challenge will in the House of Representatives when the opposition may be encouraged by what happened in the Senate.

Setback is Not a Defeat for TPP is republished with permission from Marc to Market

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