Trade policy hurdles await new US leader

It would be interesting to see how Hillary Clinton and Donald Trump prioritize their trade policy objectives

Will Trump, Clinton scrap the TPP right away or renegotiate it in ways that would make it difficult for other countries to join? Photo: Reuters
Will Trump, Clinton scrap the TPP right away or renegotiate it in ways that would make it difficult for other countries to join? Photo: Reuters

Is it a moment to heave a sigh of relief today, as the brutal US election comes to a close? Given the tight race and vitriolic campaign that centred around so many divisive issues ranging from immigration to racial hatred and bigotry, it is anybody’s guess whether Hillary Clinton or Donald Trump makes it to the White House. But the world’s elite media and their pundits seem pretty confident that Clinton will cross the line. There is also a sense of foreboding that her success might not heal the wounds in the short term.

However, if Trump were to come to power, a la the Brexit—which occurred despite the elite media’s prediction that it won’t happen—it is going to be a different ball game. That he embodies unpredictability and crass authoritarian tendencies is an understatement. As the Sanskrit saying goes, yatha raja tatha praja (as the king, so the people). Perhaps Americans, after inventing constitutional “clientelism” more than two centuries ago, according to political scientist Francis Fukuyama, could be entering a period of heightened intransigence and intolerance.

Nevertheless, it would be interesting to see how these two diametrically opposing candidates prioritize their trade policy objectives. Following the bombastic rhetoric of their campaign, will they scrap the Trans-Pacific Partnership (TPP) right away or renegotiate it in ways that would make it difficult for other countries to join? Will Clinton discard her previous baggage of pro-corporate free trade policies because of the political roots-cum-support from the unions, especially the AFL-CIO (American Federation of Labour and Congress Industrial Organizations), and the anti-corporate-progressive caucus in the senate led by Bernie Sanders and Elizabeth Warren? Will President Trump redefine American trade policies both on the bilateral and multilateral fronts in such a way that it would erase all the existing rules and dribble along in the World Trade Organisation as part of traditional Geneva trade policy envoys’ comfortable narrative? Will Trump’s big-bang version of trade policy—retaliatory tariffs on Chinese and Mexican goods—attract many takers?

That TPP hangs in the balance is well-known. “I have no idea what will happen with TPP in lame-duck (Obama administration),” says professor Crawford Falconer, an international trade policy expert and chair of several trade dispute settlement panels. (The Obama administration, which is already a lame duck, wants the Congress to ratify TPP before he completes his term on 17 January so to ensure that it is part of his legacy.)

Falconer says the TPP “faces two problems”. First, there are “substantive itches which the Republicans need scratched, e.g., patent protection for biologics, financial data flows, etc.” The chair of the US senate finance committee, Senator Orrin Grant Hatch, has made “a point of these being must haves”. “I don’t know if at the technical level the (Obama) administration will be able to give satisfaction on stuff like this,” Falconer told Mint in an interview on 3 November. “But second, even if they (Obama administration) can, it is the overall political climate that is hardest to deal with,” he argued.

What if Trump gets in and if the belligerent anti-Trump Republicans in the Congress vote for it? “Essentially, Republican legislators will effectively be giving the raspberry to their incoming president (and) some of them will be fine with that… But can the House and Senate leadership do that politically?” he asked.

“Not impossible, but a huge task—because make no mistake, it is Republican votes that will do this while relatively few Democrats will vote for it,” the veteran NZ trade policy expert argued. “And while they might get more Democratic votes if they thought it would be fun to tell Trump where to get off, it is hard to see many of them (Democrats) going for it,” he suggested. The Democrats who are guided by AFL-CIO are dead against provisions such as the investor-state dispute settlement.

Does it change if Clinton gets in? “It’s different but not much overall as the administration still has to get Republicans onside (and) to do that, they have to shift the content substance a bit further to the right and they can’t soften the stuff Democrats don’t like because they would lose Republican votes,” Falconer said.

“Do they (Republicans) vote for an agreement that is done on Obama’s watch as his legacy and, more to the point, do they pass up an opportunity to make Hillary squirm in the future as she has to come to terms with what she can do on trade with Congressional Democrat membership that hates TPP?” Falconer asked. Even after the lame-duck administration, it is hard to see either of them—Republicans or Democrats—making TPP a priority next year. It’s just too divisive, too toxic and not a high enough overall priority to push it up the list.

Indeed, “they will take quite some time to get to anything big on trade—whether TTP, TTIP (Transatlantic Trade and Investment Partnership with the European Union), TISA (the plurilateral agreement on trade in services agreement or whatever,” according to Falconer. “It is probably likely that Hillary in her heart of hearts is ‘okay’ on trade, but she really can’t do a backflip on this and certainly not in the first year or two.”

In short, the US seems caught in a dysfunctional political equilibrium, as Fukuyama argued in his book The Origins of Political Order—wherein everyone agrees on the necessity of addressing long-term fiscal issues, but powerful lobby groups can block things because of ideological rigidity and plutocratic interests.

More From Livemint