Why the New U.S. Trade Agenda Is Such a Hard Sell

Trade policy is in trouble in the United States right now primarily because it is not ‘trade policy’. Instead, U.S. President Barack Obama has framed his trade agenda around parallel agreements on regulatory cooperation that should make it easier for transnational enterprises to distribute their manufacturing processes across national borders without facing redundant regulatory requirements or losing control over intellectual property rights. This regulatory cooperation is a good idea and yet the devil is in the details. Unlike a more ‘traditional’ trade negotiation over tariff schedules and market access, both the aggregate and the distributive consequences of this type of agreement are more subtle. Worse, the language used to describe both the process of negotiation and the agreements themselves is largely impenetrable. Worst of all, these are negotiations where fundamental principles are involved.

Subtlety is as a hard place to start and so let me begin the argument by illustrating the impenetrability of the language. Last week two things happened to stall U.S. President Barack Obama’s policy agenda for international trade. First, on Wednesday, the European Parliament (EP) failed to vote its support for the trans-Atlantic trade and investment partnership (TTIP). Members of European Parliament (MEPs) did not vote against TTIP, but enough of them looked ready to do so to convince EP President Martin Schulz to postpone a definitive vote until the Autumn. Among many other factors, Schulz calculated that there is no reason for MEPs to battle over TTIP before the U.S. President received the trade promotion authority (TPA) necessary to force the U.S. Congress to give an up-or-down vote on any negotiated agreement.

In a vote on Friday, the Congress did offer TPA to the President. This vote was essential for the Obama Administration to win approval for the trans-Pacific partnership (TPP). This is in addition — and arguably more important — than the advantages TPA would offer for TTIP. Soon thereafter, however, the House Democrats voted against a related measure for trade adjustment assistance (TAA). That was the second setback. Since the President needs to sign TPA and TAA together to ensure that enough members of Congress will support TPP (and TTIP), he needs to send TAA back to Congress. Ironically, the Democrats have a much greater historical attachment to TAA than to TPA. They voted against TAA because they have deeper problems with TPP and TTIP. Given this opposition, it is hard to see what the MEPs are to make of the House Democrats’ mixed voting record or how Schulz will organize the trade agenda in the EP along with it.

With this introduction, it is easy to guess why the U.S. trade agenda is so difficult. The avalanche of acronyms is off-putting on its own. Then there is the putative impact on jobs. This is where the subtlety becomes important. Depending upon who is speaking, the Obama Administration and it surrogates argue that the Pacific and Atlantic oriented trade agreements will either increase the volume or the quality of employment; the most optimistic members argue that the two agreements will increase both the quantity and the quality at once. Meanwhile detractors argue that was not the experience with previous regional trade agreements. They worry more about who will lose out from any new arrangement than who will benefit. They also worry about the increase in income inequality that will result from enhanced competition with firms from abroad.

These are all legitimate considerations. Both the opacity of the language and the ambiguity of the employment consequences are important. Nevertheless, there is also a deeper problem. Neither TPP nor TTIP is a conventional trade agreement; as I mentioned at the outset, the two negotiations deal more with patterns of regulatory cooperation than with tariff schedules or market access. This creates two dilemmas. First, it focuses attention on the exceptions rather than the rules. Second, it forces negotiators — and, more important, the parliamentarians or members of Congress responsible for ratifying any agreement — to debate the principles underlying the regulatory process.

The idea that any process of regulatory cooperation would focus attention on the exceptions rather than the rules seems counter-intuitive — particularly when contrasted with the obvious peaks on a tariff schedule. Nevertheless, that is how the conversation works. In a straightforward trade negotiation you establish the principles for tariff protection and market access, and then you negotiate over the exceptions. The goal is to liberalize as much as possible. As a consequence it is relatively easy to tolerate exceptions so long as the broader objective remains in focus.

A negotiation over regulatory cooperation is different because it takes place at a higher level of abstraction. The first question is how to come up with a general rule. The second question is how to legitimate or justify — with some added rule — why exceptions should exist and which should be tolerated in the interest of coming to some kind of agreement. This higher level of abstraction shifts the focus of attention from the general rule — which lends itself to generalizations — to the justification of exceptions — which do not. As a result, the exceptions become the centre of the conversation. If you want to talk about TTIP in the European Parliament, be prepared to wrestle with chlorinated chicken; if you want to talk about TPP in Congress, focus attention on conditions of employment.

These conversations about the exceptions are anything but idiosyncratic. On the contrary, they reveal a lot about the fundamental principles at work in the regulatory process. These are the principles that underlie choices about the best approach to food safety, environmental protection, and workplace equality. No choice is unambiguously correct; each involves complex trade-offs over important social values related to responsibility, innovation, opportunity, justice, and all the rest. Moreover, these trade-offs differ depending upon the wider institutional environment — which is to say the clutch of state, market, and social relationships within which the regulations are supposed to operate. More simply, the impact of TPP will be different in Asia and the United States; the impact of TTIP will be different in the United States and Europe.

When you add everything together — the complexity of the language, the subtlety of the benefits, and the ambiguity surrounding the various trade-offs between important non-monetary values, it is small wonder that the Obama Administration’s trade agenda is so hard to sell Congress or in the European Parliament. Worse, efforts to simplify the sales pitch are likely to make matters worse rather than better by fostering unrealistic expectations and so leaving hostages to fortune. Success is possible in such complex cross-border arrangements for regulatory cooperation. It is also worth the hassle. The European Union’s internal market is a good illustration. But such successes are hard won over decades of sustained effort. That is why I argued in the Journal of European Public Policy almost a decade ago that European experience would be a bad model for a global trade agenda. It remains to be seen whether the same conclusion holds for the two large regional arrangements being negotiated by the Obama Administration. Rest assured, though, any progress will be difficult.


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