Why a Failure for Fast Track is Bad for Latin America
May 13, 2015
On Wednesday (May 13), the Senate reached a deal to take up a new bill to reauthorize Trade Promotion Authority (TPA), or so-called “fast track” – just one day after the TPA bill was all but labeled dead after a Democratic filibuster.
Broadly speaking, both parties have their skeptics: on one hand, led by the populist wing of the party, all but one of the Senate’s Democrats refuse to back President Obama on fast track unless three other trade-enforcement bills move forward in tandem. On the other hand, traditionally free-trade friendly Republicans find the Tea Partiers in their ranks unwilling to cooperate with the White House. However, Tuesday’s Senate vote was lopsided, Republicans overwhelmingly in favor of TPA and Democrats overwhelmingly against it.
So fast track isn’t dead—at least not yet. The debate will continue raging on in Congress. So, what makes TPA so important? And why is its passage so important for countries in Latin America?
By passing TPA, Congress gives the President the authority to negotiate free trade agreements that Congress cannot later amend—only approve or reject. Ultimately, fast track allows the administration to negotiate credibly with its trade partners abroad, hammering out a deal both sides can count on.
Historically lawmakers have been distrustful when granting TPA. Some look to the North American Free Trade Agreement (NAFTA), concerned that the then-unprecedented agreement didn’t quite deliver on its promises on market access. Others worry that U.S. labor and environmental standards won’t be reflected in our trade deals, which could disadvantage U.S. businesses.
Others look to the benefits of expanding free trade: greater competitiveness, leveraging each country’s strengths, increasing global connectivity, and codifying the protection of U.S. commercial interests with our trade partners.
With all this in mind, this iteration of TPA authorization is particularly important, with a number of high-stakes trade agreements on the horizon: the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP).
The TPP is a 12-country agreement spanning the Pacific Ocean. Members include Australia, Brunei, Japan, Malaysia, New Zealand, Singapore and Vietnam. And the agreement includes 5 countries from the Americas: Canada, Chile, Mexico, Peru, and the United States. The agreement would encompass 40 percent of trade worldwide—an unprecedented behemoth in the global market.
And so many of the TPP’s benefits would play out in the Americas. Of the Latin American countries involved, Mexico arguably stands to gain the most—but all three can look forward to real growth in trade and productivity under the TPP.
For the United States, this agreement sends important signals. On one hand, the so-called “pivot to Asia” doesn’t have to be a pivot away from Latin America—Washington can pursue its relations with both regions concurrently. On the other hand, the White House is demonstrating its credibility and interest in trade relations with the region, pursuing codified frameworks for its ties to our neighbors.
The TPP has important impacts beyond our own trade relations, too. Mexico, a TPP member, is reportedly in discussions for a trade deal with Brazil—an agreement that could provide Brazil with a backdoor both to NAFTA and potentially into the many markets in the TPP. In essence, Brazil has the potential to piggyback on the massive gains Mexico will derive from the agreement, substantially bolstering its profile in global markets.
But without TPA, the TPP is unlikely to see the light of day here in the United States.
The TTIP, on the other hand, is the burgeoning trade deal between the United States and the European Union. Though the agreement is still in its early stages, it’s an important one—both because it would tie together the world’s largest economies and because it provides a pivotal opportunity for North American cooperation.
As the agreement stands, the TTIP includes only the United States and the European Union. But Canada and Mexico each have existing free trade agreements with the EU—and they are joined with the United States in NAFTA.
Should the three North American countries seize the opportunity, TTIP could be the perfect chance for North America to negotiate a trade deal as a continent. This could set a powerful precedent for the future of continental trade in the world, all while revamping the idea of North American regionalism, long overdue 21 years after NAFTA first entered into force.
When we view the two agreements in tandem, they’re still more pivotal. The countries involved in the TPP and TTIP together account for about two-thirds of the global economy and half of global trade. And together, they could add almost US$370 billion to the global economy each year.
But again—without trade promotion authority, the TTIP, like the TPP, seems like a long shot, at best. Failing to achieve these agreements will leave the United States stagnant in its commercial dealings here in the region and all round the world. In contrast, signing and ratifying these agreements with the help of TPA would send all the right signals to our partners here in the Americas—particularly relevant given the efforts to revitalize Washington’s relationship with Brasilia through greater trade facilitation and investment cooperation.
In simplest terms, TPA empowers the White House in its efforts to further free trade in the region, signaling to our trade partners that they can count on the United States—and codifying that confidence.
As Washington continues to redefine itself in the regional context, that confidence is currency.
On a new path with Cuba, deepening its relationship with Brazil and expanding its work with countries in Central America on security issues, the United States has improved its standing in the region significantly. Solidifying the region’s trust in Washington—and doing so through trade that will prove wildly beneficial to many Latin American economies—is the crucial next step.
That isn’t to say that the TPP is a perfect agreement. But regardless of the agreement’s imperfections—because, yes, there will be both winners and losers—this isn’t happening in a vacuum. With Beijing ramping up its presence in the Asia Pacific and the TPP well underway, Washington gains nothing from inaction. But by engaging and being part of the world’s biggest trade deal, the United States has the opportunity to fundamentally shape its own future and that of the future of global trade.
But all of this is contingent on Congress granting President Obama trade promotion authority. As rising powers around the world jockey for their place in the global marketplace, we can’t afford to take ourselves out of the race.
Carl Meacham is director of the Americas Program at the Center for Strategic and International Studies in Washington, D.C.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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