June 19, 2015

Previously, on Game of Trade…

US President Barack Obama, with House Democratic leader Nancy Pelosi at his side. REUTERS/Kevin Lamarque

Today’s papers lead with the latest lurch forward of trade policy prospects in the US Congress, prospects which had previously seemed near death. I wrote a piece in Foreign Policy about why this all is important (and why Secretary Clinton should not be so dismissive of process matters).

It is traditional, in intricate ongoing dramatic sagas, to begin a new episode with a recap. If you are just tuning in, here is how we got to where we are.

Setting the scene: Trade Promotion Authority (TPA, also known as “fast track”) sets negotiating instructions for the Executive Branch. If the President follows those directions, Congress promises a timely vote, without amendments and without filibuster in the Senate. The last version of TPA expired in 2007. It is traditional to get negotiating instructions before negotiating, but the Obama administration chose to put it off. Now they’re up against time limits, trying to save the trade agenda.

The battle started in the Senate, where there are 54 Republicans. Remarkably enough, they were sufficiently unified on procedural measures to deliver Trade Promotion Authoriy to a not-so-beloved Democratic President. But you need 60 votes to end debate on a measure in the Senate (unless it is somehow privileged, as trade legislation would be under TPA).

On the first cloture vote in the Senate in May, trade proponents failed. Only one Democrat (Sen. Carper of Delaware) joined all the Republicans in backing the measure (actually, for procedural reasons, the Republican Majority Leader voted against; that let him bring it up again). So, there was no way to proceed to a vote. Then, several days later, despite no obvious substantive changes, a dozen Democrats in the Senate joined in backing TPA and it moved along to the House.

Note that TPA was not moving alone. There are at least four bills that are trade-related, and topics like the Export-Import Bank reauthorization are getting linked as well. This is both the terrain for bargaining and a means to shunt aside “killer amendments” (e.g. a human trafficking clause that would effectively exclude Malaysia from TPP talks; or currency manipulation measures - these can be pushed over to bills that need not move).

The key linkage, coming out of the Senate, was that TPP and a renewal of Trade Adjustment Assistance had to move together (TAA is meant to help workers displaced by trade; it is set to expire September 15; Republicans generally believe it is an ineffective program). In times past, TAA was sufficient to win Democratic backing for trade agreements. No longer. Now it is necessary, but not sufficient. Also in times past, when there was more trust, the linkage might have been accomplished through quiet assurances. Now advocates are looking for written promises.

So, when the package arrived in the House, the leadership crafted a particular rule. It required that TPA and TAA be bundled together. There would be two votes, but a majority was required for both if the measure was to pass. Had the measure passed, it was identical to what the Senate had done, so it would have gone directly to the President for signing. The theory was that Republicans liked TPA, so they would provide a majority of the votes in favor for that; Democrats liked TAA, so they would provide a majority of the votes in favor for that. Two majorities, passed bill, success.

The problem was that when the vote came on June 12, the minority Democrats voted strategically. They realized that, under the rule, a vote against TAA was sufficient to kill the whole package. Minority Leader Nancy Pelosi (D-CA), who had appeared all week to be working on the President’s behalf, suddenly announced that she was opposing the package and would vote against TAA. The TAA vote failed by 302-126 (strategic Democrats joining sincerely-opposed Republicans).

The House went ahead and held the vote on TPA anyway. It passed, but that was just symbolic. Under the rule, the entire measure had failed.

Then began a week of closed-door legislative scheming. The problem was that different coalitions were demanding different things and Democrats in the House were using the leverage they had from Senate agreements to block the bill. The House could have revoted on the TAA portion, and leadership initially suggested it would do so. The idea there was to pressure the President to flip Democratic votes. But the President has seemed completely incapable of persuading anyone in his party (other than some Democratic Senators) and that route looked hopeless.

So, Wednesday evening, a new plan emerged in the House: create a new rule. Send TPA along on its own from the House to the Senate. Do this as an amendment to an existing measure that had already been approved by the Senate, which meant it would need only one cloture vote when it went back to the Senate. And make gentlemen’s assurances that TAA would move later.

That’s what the House did yesterday. They passed a new rule and voted over TPA. It now goes to the Senate. Majority Leader McConnell (R-KY) has already invoked cloture (started that process) and wants to take up the bill on Tuesday.

The problem now lies with Senate Democrats. They no longer have the explicit assurance that TPA and TAA will move together. Do they trust that this will happen and do they allow the TPA vote to go forward? If so, it will pass and go to the President.

One way to maintain the credibility of the linkage would have been for the President to say that he would only sign TPA if TAA arrived as well. But apparently he privately got tired of the game and allowed as how he would sign TPA no matter what.

So the plan seems to be this: Call the House Democrats’ bluff. Pass TPA with Senate Democrats’ cooperation and watch it become law. Then, the leadership will move a TAA bill. With TPA a fait accompli, House Democrats will have no further reason to oppose. You would still need a chunk of House Republicans to provide a majority for the bill, but only a disciplined few dozen, not the bulk.

Stay tuned! We’ll be right back, after this brief weekend break.


Phil Levy is senior fellow on the global economy at The Chicago Council on Global Affairs. Previously he was associate professor of business administration at the University of Virginia’s Darden School of Business. He was formerly a resident scholar at the American Enterprise Institute and taught at Columbia University’s School of International and Public Affairs. From 2003 to 2006, he served first as senior economist for trade for President Bush’s Council of Economic Advisers and then as a member of Secretary of State Rice’s Policy Planning Staff, covering international economic matters. Before working in government, he was a faculty member of Yale University’s Department of Economics for nine years and spent one of those as academic director of Yale’s Center for the Study of Globalization.

His academic writings have appeared in such outlets as The American Economic ReviewEconomic Journal, and theJournal of International Economics. He is a regular contributor to Foreign Policy magazine’s online Shadow Government section and writes on topics including trade policy, economic relations with China, and the European economic crisis. Dr. Levy has testified before the House Committee on Foreign Affairs, the Joint Economic Committee, the House Committee on Ways and Mean, and the US-China Economic and Security Review Commission. He received his PhD in Economics from Stanford University in 1994 and his AB in Economics from the University of Michigan in Ann Arbor in 1988.


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