Midterm Series: How the elections will affect US trade policies

Midterm Series: How the elections will affect US trade policies

A Republican Senate could drag out negotiations between the United States and EU, and between the United States and Pacific Rim countries, for at least the next 2 years. This is the second Insight in a GRI series on the US midterm elections. Read the first Insight of the series here: Will independents determine US midterm elections?

The US midterm elections will likely see a House of Representatives Republican majority, perhaps stronger than it is now. This is due to a number of factors: redistricting creating few competitive seats, lower turnout of key Democratic constituencies in midterm elections, and the “6-year itch” of the President’s party losing support in Congress in the middle of the President’s second term. Whatever the reason, the House will remain in Republican hands.

In the Senate, determining which party will control the chamber is much more difficult to gauge. A number of key races in Southern and battleground states-notably North Carolina, Iowa, Michigan, Louisiana, Arkansas, New Hampshire, Alaska, and Colorado-place current projections at between a Democratic majority of 52-48 and a Republican majority of 55-45.

There are additional complications, notably which party Greg Orman (independent running in Kansas against embattled Republican incumbent Senator Pat Roberts) would caucus with, which he has yet to firmly indicate, if he wins against Roberts.

With most attention focused on which party would control each chamber, there has been little discussion of what the incoming class would likely do in terms of policy. In trade, a complicated intertwining of regional, partisan, and national interests are likely to create a significant hurdle for the successful conclusion of two of the United States’ most significant free trade negotiations to date: the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP).

Together, these two sets of negotiations involve over 40 countries and include 11 of the 20 largest economies on Earth. The potential for significant trade liberalization and barrier reduction (especially in TPP) could meaningfully expand economic opportunities both for the OECD and the Pacific Rim.

However, both sets of negotiations have slowed considerably, due in large part to the ongoing stalling of a significant law that affects US trade negotiation: Trade Promotion Authority. Under U.S. constitutional law, the United States Senate has the authority to amend international treaties, and the consent of the Senate to any international treaty is necessary to become law.

However, it was recognized as far back as the 1930s that the ability of Congress (especially the Senate) to become involved in U.S. trade barriers has two major drawbacks: logrolling risks are rampant and localized interests could overwhelm national interests, making the country as a whole worse off.

In 1934, power began to shift in international trade negotiations from Congress to the White House with the Reciprocal Trade Agreements Act (RTAA), which gave the President the ability to reduce tariffs by as much as 50% through bilateral trade agreements. In 1974, this expanded to include the Trade Promotion Authority (TPA) which effectively gives the White House a free hand in negotiating trade agreements, subject to Congressional “guidelines”.

Once an agreement is signed between the U.S. and the other negotiating parties, the agreement is sent to Congress, where, through the TPA, it can only have an up-or-down vote, not subject to amendment or filibuster.

The TPA, also known as fast track, expired in 2007 with the Trade Act of 2002. Since then, it has not been renewed, and current negotiations to reintroduce fast track have been bogged down in Senate and House committees. The responses of both the transatlantic and transpacific countries, understandably, have been a reticence to conclude an agreement with the United States that might have to go through an amendment process in the Senate, which would trigger renegotiations and further concessions than those previously agreed to.

So where do the midterm elections come into this issue? Given that the Senate has struggled under Democratic control to provide the President with fast track authority (along with the House Republicans), it appears far less likely that such authority will be provided if the Senate shifts in favor of the Republican Party.

For example, the Senate Finance Chairman, Ron Wyden (D-OR) has been reluctant to extend conventional fast track authority to the White House (noting a lack of input and access from Congress), but has signaled he may agree to something similar with safeguards, which he terms “smart track”. The ranking member of the committee, Orrin Hatch (R-UT), has given little indication he would support either fast track or Wyden’s “smart track” if he gains the gavel with a Republican flip (although historically Senator Hatch has supported U.S. FTAs).

Earlier opposition to extend fast track authority appeared in 1994, when Republican opposition in the House against President Clinton’s desire to extend the authority halted fast track until 2002 (with a Republican Congress and President extending the authority that year).

Given that experience, it would seem that a united Republican Congress is unlikely to provide further authority to a Democratic President in trade negotiations, especially on a lower-priority issue for most Americans that is without a natural constituency or major Congressional backers (in contrast to a similar internationally focused issue with an Executive/Legislative branch power divide like defense).

Other considerations increase the possibility of fast track authority, though it is doubtful that they would be particularly compelling in shifting Republican opposition. For example, the Republican Party may determine that, in order to become more viable in the 2016 Presidential and Congressional elections, the party would have to provide concrete examples of legislative accomplishments to illustrate what a unified Republican White House and Congress could do.

The prospect of damaged relations with major U.S. allies involved in negotiations – such as the EU, Canada, Japan, Australia and New Zealand – could spur Congressional action to grant fast track authority. However, given the Republican Party’s historical reluctance to provide a Democratic President with major legislative victories (especially ones related to international affairs), as well as the possibility that such an agreement could illuminate the potential of a Democratic President in 2016, chances appear higher that a Republican Senate would be disinclined to provide fast track authority at this time.

Ultimately, a Republican Senate could drag out negotiations between the United States and EU, and between the United States and Pacific Rim countries, for at least the next 2 years. In addition to bogging down negotiations, possible political shifts in TPP countries in the interim could make successful agreement less likely over time (especially in New Zealand, Malaysia, and Japan).

In the European Union, the pro-TTIP European Commission under Juncker makes this likely, although shifting political or economic realities could reduce the political will and increase domestic opposition to the agreement. Overall, the 2014 midterm Congressional elections could significantly reduce the likelihood of ratifying the two largest free trade agreements in history.

Categories: North America, Politics

About Author

Brian Daigle

Brian is an energy and Latin America researcher at a political consulting firm in Washington, D.C. He is a London School of Economics (LSE) graduate in political science and political economy, where he focused on trade and transatlantic relations. Brian received his dual BA in political science and history at the University of California-San Diego.