In One Week, Obama’s Ambitious Trade Pacts Are Coming Apart
Big trade deals across both oceans were supposed to be two marble monuments the Obama administration bequeaths to posterity. But as the president completes his second term, it’s more likely that he’ll leave behind a half-built and poorly carved stone memorial.
The fate of Obama’s trade deals wasn’t clear even a matter of days ago. But it was altogether a terrible week for Obama’s trade policies.
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First came statements from senior German and French officials that talks on a trans–Atlantic accord covering trade, investment, and corporate governance were essentially dead-ending. Then came the European Commission’s judgment—over vigorous American objections—against Apple’s very favorable tax deal with Ireland.
Now let’s pivot to Asia, as they say in Washington these days.
On Friday, Obama left for a Group of 20 Summit in Hangzhou, a two-day event that runs through Monday. The meeting was supposed to be an unofficial victory lap in a Chinese city for the U.S.–led trade deal signed by 12 Asian nations.
Except there was no victory to celebrate. Resistance to the Pacific pact now mounts even among Democrats, thanks in part to Bernie Sanders. Getting Capitol Hill’s approval during the lame-duck period after the November elections was Obama’s ace in the hole, but even this now looks unlikely.
Some Asian signatories now complain: “You invite us to a party, Mr. President, and now you’re not showing up?” Not your best pre-summit atmospherics.
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After years of deliberation, the Trans-Pacific Partnership and the Trans-Atlantic Trade and Investment Partnership are nothing if not vaulting in their ambition. There were problems from the first suggesting these deals would never succeed.
One the Obama administration simply doesn’t have the nous to structure and negotiate accords of this magnitude and complexity.
Two, these agreements are too technocratic. They take no account of diverse cultures and social priorities in Asia and Continental Europe both—operative factors that simply can’t be ignored.
Three, the corporate beneficiaries of these agreements had too great a role in drafting them, and they did their work in secret. Anyone who counts the democratic process non-negotiable was bound from the first to be against Obama’s way at these accords.
“We write the rules of the road for trade in the 21st century,” Obama boldly declared in defense of the TTP earlier this year. He meant, “We, not the Chinese”—who are pointedly excluded from the accord.
While Europeans require and get more politesse, this principle underlies the TTIP, too. And the Europeans are finally responding, as follows.
“Uh-uh” is a good summary of their position.
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“In my opinion, the negotiations with the United States have de facto failed, even though nobody is really admitting it,” Sigmar Gabriel, Chancellor Merkel’s economics minister (and also vice-chancellor) declared in Berlin last week.
That’s not quite true. François Hollande has said this for months and did so again shortly after Gabriel spoke. “The [European] positions have not been respected, and the imbalance is obvious,” France’s president said. “It is better that we face up to this candidly rather than prolong a discussion on foundations that cannot succeed.”
The European perspective is important to understand. While protests have been widespread, the EU favors a comprehensive agreement but finds the Americans too unyielding. In 14 rounds of talks, Gabriel noted, the EU and the US haven’t agreed on a single stipulation in the 27 chapters of the TTIP under negotiation.
Gabriel pointedly contrasted this to the Comprehensive Economic and Trade Agreement the EU concluded with Canada this summer. As the European Commission reported, “The agreement will fully uphold Europe’s standards in areas such as food safety and worker’s rights. It also contains all the guarantees to make sure that the economic gains do not come at the expense of democracy, the environment, or consumers’ health and safety.”
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It’s on precisely such points the Obama administration stumbles. “We mustn’t submit to the American proposals,” Gabriel insisted when he drew the comparison between the TTIP and CETA.
There are many ways to read a $14.5 billion tax judgment against Apple that Margrethe Vestager, the EC’s commissioner for competition, announced last week. Treasury Secretary Jack Lew, Apple, and Ireland all vigorously assert the ruling has no basis in law; the latter two intend to appeal.
The award for subtlety goes to Tim Cook, Apple’s chief executive, who called the decision “total political crap.” He simultaneously declared that Apple would now repatriate a fraction of its $215 billion offshore stash, which seems a poorly calculated response to crapulousness.
The Irish were especially furious with the EC decision. They had made a calculated decision to opt for jobs over revenue and constructed a binding contract that would hold up in most developed countries in the world.
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Viewed more broadly, the Apple case is another marker of the fault line in the trade negotiations: The U.S. and Continental European views of such questions as corporate freedom, regulation, and taxation have fundamental differences rooted in culture, politics, social values, and economic philosophy. The next president needs to begin recognizing this.
Asians have similar differences with Anglo–American liberalism, but the democratic process is not so deeply rooted among the TTP’s Asian signatories. While there’s plenty of resistance to the Pacific pact, leaders in Japan, Singapore, and elsewhere have therefore had an easier time overcoming it.
Obama hasn’t, to state the obvious. And it’s a supreme irony that opposition to the Trans–Pacific accord rose to audible decibels just before Obama’s farewell jaunt through Asia.
Talk about hanging your leader out to dry.
“You have put your reputation on the line,” Lee Hsien Loong, Singapore’s straight-talking prime minister told Obama during a recent state visit. “And if at the end the bride doesn’t appear at the altar, I think there are going to be a lot of people who are going to be very hurt, really damaged for a long time.”
That moment can’t have been other than embarrassing. The TTP’s only hope now may lie in Hillary Clinton, should she win in November, reversing her position. It is a prospect with some promise.
Be that as it may, it suddenly looks certain that Obama’s not going to walk down two aisles he thought he would. You can have a goodly part of something or all of nothing is the lesson the administration doesn’t seem to grasp.
