[CTC] Trade bills face bumpy ride in Senate

[Arthur Stamoulis]

POLITICO
Trade bills face bumpy ride in Senate

By Victoria Guida 

5/12/15 6:48 PM EDT
Tuesday’s failure to pass a procedural hurdle in the Senate was just the first of many speed bumps facing President Barack Obama’s trade agenda, which also must overcome stumbling blocks on human trafficking, currency manipulation, worker retraining and investors’ legal rights.

The White House and Republicans may be able to regroup after Tuesday’s setback, and they’ll surely try. But even if the Senate eventually takes up the fast-track trade bill, they’ll still have to address issues that have riled up the Democrats’ liberal wing and its labor and environmentalist supporters — and those issues promise to dominate the debate.

House Speaker John Boehner acknowledged the difficult path ahead for the legislation, saying that while his chamber will continue to try to advance the fast-track bill, “success will require the president and his party to rethink their approach to this important issue.”

These are among the roadblocks the bill’s supporters will need to navigate:

Human trafficking — Sen. Robert Menendez slipped a provision into the bill in committee that would prohibit fast-tracking of trade deals with countries that have serious human trafficking problems. That would be a massive headache for the administration, whose negotiating partners in a massive trans-Pacific trade deal it’s trying to wrap up include Malaysia, a country that the State Department has labeled as a hotbed of human trafficking.

If the language stays in as is, then even if trade promotion authority passes, it essentially wouldn’t cover the proposed Trans-Pacific Partnership. And the TPP is basically the whole reason the administration is fighting so hard for the legislation.

The New Jersey senator said Monday that the administration has been reaching out to human rights groups to find a compromise — apparently to somehow keep fast-track authority for the Asia-Pacific deal while not seeming to ignore human rights violations.

“I’m asking my colleagues to keep this amendment in the bill and help fight the scourge of modern slavery in the countries we trade with,” Menendez said on the Senate floor.

The human trafficking amendment is the only difference between the House and Senate versions of the bill, which would allow Obama to submit the trade agreement to Congress for an up-or-down vote, without amendments.

Currency — Should Congress require the Obama administration to crack down on trading partners who devalue their currencies?

A range of senators will argue it should, including Democrats Debbie Stabenow of Michigan, Sherrod Brown of Ohio and Chuck Schumer of New York and Republicans Rob Portman of Ohio, Jeff Sessions of Alabama and Lindsey Graham of South Carolina.

But lawmakers have offered two separate proposals on how to crack down: One would target Japan by trying to get rules into the TPP, while another would go after China by allowing the administration to fight currency manipulation by imposing protective duties. China and Japan both have policies that devalue their currencies, although China’s approach is much more direct.

The fast-track bill already contains language on currency, although that language merely suggests that the administration pursue binding obligations through the Asia-Pacific deal.

Members who have pushed the currency issue to the forefront worry that China’s and Japan’s practices give those countries a trade advantage by making their exports cheaper and U.S. manufactured goods less competitive. But the Obama administration fears putting currency rules in the trade agreement could backfire by restricting the Federal Reserve’s ability to take actions that indirectly lower the value of the dollar, and the Treasury Department argues that what Japan does isn’t that different from what the Fed does.

Treasury’s message is basically this: We’re making progress by talking with these countries. Enforceable action will just make our trading partners mad.

Senate Majority Leader Mitch McConnell said after the vote that he couldn’t agree to Democratic demands to bundle the customs and enforcement bill containing the currency provision directed at China with the fast-track legislation because the currency language would prompt Obama to veto the entire package.

“Look, we need to be clear here. The currency issue on TPA is a killer,” the Kentucky Republican said. “The president would veto the bill. It would defeat the bill. That’s why in committee they sensibly reached the conclusion to deal with currency on the customs bill.”

Schumer, who championed that amendment, said he was told the same before offering the proposal in the Finance Committee markup last month.

“My goal is not to use currency to kill the TPA bill. It’s to get currency passed,” the New York Democrat said just before Tuesday’s vote.

Trade remedies — About those protective duties: The executive branch puts them in place in two circumstances, to combat unfair subsidies and to fight unfairly low prices, when a foreign company sells goods in the U.S. at a lower price than in its home market. U.S. manufacturers and unions are especially focused on these duties because of worries that foreign countries can sell products at unsustainably low prices, put U.S. companies out of business and then charge whatever they want.

But changing the laws governing U.S. anti-subsidy and dumping investigations is tricky. For one thing, U.S. manufacturers that purchase foreign parts have an interest in being able to buy them at cheaper prices. They also worry that duties merely allow domestic companies to put up tariffs to preserve their market share.

So the fight in the trade bill debate is essentially this: What level of injury should domestic producers have to prove before the duties are allowed? The Senate’s customs and enforcement bill — a companion to the fast-track legislation — contains changes to the injury standard that would make it easier for producers to put protective duties in place.

Worker retraining — Republican leaders have agreed to move the renewal of a worker retraining and benefits program in tandem with the fast-track bill, with the retraining specifically for people who have become unemployed because of jobs moving offshore.

But they’ve suggested paying for the Trade Adjustment Assistance program by extending Medicare cuts, which won’t fly with Democrats, for whom both programs are a priority.

House Ways and Means Chairman Paul Ryan has agreed to try to find a different offset for the costs of the aid program, but so far that hasn’t been resolved.

The Wisconsin Republican’s counterpart in the Senate, Hatch, who is Finance Committee chairman, has blasted the program, which can be used as an extension of unemployment benefits for a certain time period, as a “gift to the unions.” But some Republican senators, like Rob Portman, are aligned with Democrats in supporting the workers’ aid.

Brown has called it “morally reprehensible” to consider passing trade deals without renewing TAA.

Investor rights — This issue really rankles Sen. Elizabeth Warren (D-Mass.), the liberal firebrand who is sparring with Obama over the trade legislation.

Modern U.S. trade agreements include what’s known as an “investor-state dispute settlement” clause, which allows companies to sue foreign governments for violating their rights by enacting regulations that ruin a company’s business prospects. Opponents like Warren call that a way for multinational corporations to undermine public interest regulations.

“A Republican president could easily use a future trade deal to override our domestic financial rules,” Warren said last week. “And this is hardly a hypothetical possibility: We are already deep into negotiations with the European Union on a trade agreement, and big banks on both sides of the Atlantic are gearing up to use that agreement to water down financial regulations. A six-year fast-track bill is the missing link they need to make that happen.”

Expect opponents to try to strip the dispute process from the negotiating objectives in the fast-track bill.

Supporters of the dispute clause, including the Office of the U.S. Trade Representative, say it merely amounts to arbitration, noting that investors can only seek damages — they can’t overturn any U.S. law or regulation. And they say U.S. investors need this protection, alleging that countries like China have every interest in undermining American companies.

“[B]usinesses of all sizes face a tough global economy, where foreign governments continue to close their markets, discriminate against us, steal our technology, or otherwise deny our businesses a fair shake,” said Linda Dempsey, vice president of international economic affairs at the National Association of Manufacturers. “Investment rules, enforced through [investor-state dispute settlement], provide vital recourse against unfair treatment and must continue to be a priority in new trade agreements.”
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