Trans-Pacific Partnership: A Conversation with U.S. Trade Representative Michael Froman

TPP Status and Timeline:

• The Trans-Pacific Partnership (TPP) was finalized after 5.5 years of negotiation in October, published in November, and signed in February.
• The administration aims to pass the agreement within the current congressional session before the end of the Obama term, though the final vote may occur during the "lame duck" period if legislative leaders delay action until after the election.
• U.S. Trade Representative Michael Froman expressed confidence in passage, citing a clear pathway forward and the high costs of delay.
• The Peterson Institute estimates the economic cost of delaying TPP at over $90 billion, equivalent to approximately $700 per American family.
• If enacted, TPP is projected to add $130 billion to the U.S. economy annually and increase U.S. exports by $350 billion.

Key Sticking Points and Negotiated Compromises:

• Biologics and Intellectual Property (IP): The primary dispute involved data protection periods for biologic drugs; the U.S. initially sought 12 years, but the final agreement settles on 8 years (with some countries having 0, 5, or 8 years).
• Industry Support: While many sectors, including dairy, have reached support after six weeks of analysis, the pharmaceutical industry remains a notable holdout, though the administration argues they did not write the chapter to their sole benefit.
• Specific Sector Concerns: Outstanding issues include dairy access for certain members, pork implementation concerns regarding Japan, and financial services/data flow regulations.
• Currency Provisions: TPP includes the first-ever currency chapter in a trade agreement, establishing transparency mechanisms and accountability criteria for exchange rate policies, though it explicitly excludes trade sanctions against central bank interventions (e.g., the Federal Reserve).
• Rob Portman's Opposition: Senator Rob Portman opposed the deal primarily due to the currency provisions, a concern shared by others regarding the lack of enforcement mechanisms for monetary policy.

Legislative Process and Mechanics:

• No Renegotiation: The text of the signed agreement is not open to renegotiation; changes can only be addressed through the implementation bill, legislative interpretation, and administrative action statements.
• Congressional Authority: All changes to U.S. law or regulation must be approved by Congress; no supranational body can override U.S. statutory authority.
• TPA Framework: The agreement utilizes Trade Promotion Authority (TPA), allowing for a simple up-or-down vote without filibuster in the Senate.
• Implementation Strategy: The administration plans to draft an "Statement of Administrative Action" to outline how the U.S. will interpret and enforce provisions, working with partner nations to ensure compliance.

Political Landscape and Opposition:

• Populist Pressure: Both parties face significant pressure from populist movements; the Democratic wing led by Bernie Sanders and the Republican frontrunner Donald Trump have both turned against free trade.
• Hillary Clinton's Position: Former Secretary of State Hillary Clinton has shifted from supporting past agreements to opposing the current TPP, citing insufficient Trade Adjustment Assistance (TAA).
• Trade Adjustment Assistance (TAA): The administration notes a recent six-year renewal of TAA that expanded coverage to service workers and those displaced by globalization forces beyond just FTA partners.
• Rationale for Opposition: Froman attributes the shift in sentiment to wage stagnation and income inequality, noting that while unemployment is at 5%, the visibility of job losses in specific communities outweighs the diffuse, broad-based benefits of trade.

Geopolitical Strategy and China:

• Rules of the Road: The administration frames TPP as a strategic necessity to prevent China from setting trade rules in the Asia-Pacific region through initiatives like RCEP or the Belt and Road.
• Standards vs. RCEP: Unlike China-led agreements, TPP includes binding labor and environmental standards, disciplines on state-owned enterprises, and commitments to a free and open internet.
• China's Reaction: The administration posits that even if China does not join TPP, it will face pressure to "up its game" to compete in a region governed by these higher standards.
• Expansion: Approximately 12 other economies have expressed interest in joining TPP, creating a potential "magnet" for higher standards in the region.

Transatlantic Partnership (TTIP):

• Status: The EU-US Trade and Investment Partnership (TTIP) has completed 13 rounds of negotiations with accelerated progress in the last six months.
• Goal: The objective is to reach a comprehensive framework agreement within the current year, though congressional ratification is not expected before the administration's term ends.
• Challenges: European negotiations face significant headwinds, including the migrant crisis, Brexit uncertainty, the Greek financial crisis, and rising euro-skepticism.

Critique of Protectionism and Current Manufacturing:

• Tariff Proposals: Analyses suggest that Donald Trump's proposed tariffs (45% on China, 35% on Mexico) would likely trigger retaliatory measures, causing a recession and the loss of millions of jobs.
• Manufacturing Reality: U.S. manufacturing production is at an all-time high, though employment is lower due to automation; the administration argues that trade agreements make the U.S. more attractive for investment by lowering barriers and stabilizing the regulatory environment.
• NAFTA and WTO: The administration distinguishes TPP from NAFTA, calling it a "renegotiation" with stronger, enforceable labor and environmental provisions, while noting that China's WTO entry, while impactful, has not been fully managed by existing rules, necessitating higher standards in new deals.

Broader Economic Context:

• Macro vs. Micro: While the macro economy has recovered (14 million new jobs, 5% unemployment), persistent wage stagnation and income inequality drive political anger.
• Asymmetry of Trade: Froman highlights that the benefits of trade are broadly distributed and invisible (lower consumer prices), while the costs are concentrated and highly visible (factory closures).
• Global Leadership: The administration emphasizes that the U.S. cannot be a global leader or competitive if it cedes the role of rule-setting to China or other nations.

Future Agenda and Legacy:

• Additional Agreements: Priorities include an environmental goods agreement (covering 90% of the market) and a services agreement (covering 70% of the global economy).
• WTO Revitalization: The administration seeks to revitalize the multilateral trading system (WTO) as a parallel priority to mega-regional deals.
• Obama's Legacy: Froman cites the avoidance of a global depression, restructuring of the financial sector, the expansion of healthcare to 20 million people, and the withdrawal from two wars as key legacy points, despite lingering public dissatisfaction.