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Prospects for TPP, TTIP Uncertain Amid Political Pressures

Wednesday, September 14, 2016
Sandler, Travis & Rosenberg Trade Report

The Obama administration’s goals of securing congressional approval of the Trans-Pacific Partnership and concluding negotiations on the Transatlantic Trade and Investment Partnership by the end of 2016 appear to be in jeopardy amid contentious political campaigns and uncertain public opinion trends both in the U.S. and abroad. However, longer term prospects for the two agreements are somewhat brighter.

TPP. TPP negotiations were concluded in October 2015 and the agreement was signed this past February. Nearly all of the dozen signatories are now in the process of completing their domestic approval processes. However, in practical terms the deal cannot take effect for any of them without U.S. participation, which can only be secured if Congress approves implementing legislation.

The Obama administration is continuing to pursue a congressional vote on such legislation during a “lame duck” session after elections in early November and has taken some steps toward making that happen. However, a number of lawmakers have said that specific TPP provisions, including those on intellectual property protection for biologic drugs, dispute settlement, and storage of financial data, will need to be changed to give the agreement a reasonable chance of approval. There have been indications that progress on these issues is being made, though no specifics have yet been made available. It is unclear if such improvements might be sufficient to win over enough House and Senate members for TPP to be approved in a lame duck vote or if the rhetoric of campaign season is too intense to allow for that possibility.

Although Treasury Secretary Jack Lew recently said President Obama would “use every ounce of energy he and those of us in the administration have” to push TPP forward, Senate Majority Leader Mitch McConnell, R-Ky., has asserted that the agreement will not come up for a vote this year. The wording of his statement (referring to “the current agreement”) appears to leave open the possibility that a vote could happen if the concerns noted above are sufficiently addressed, but he also spoke of TPP being “massaged, changed, worked on during the next administration.” Similarly, House Speaker Paul Ryan, R-Wis., has said “we don’t have the votes right now.”

As a result, some observers say the more likely scenario is that lawmakers will take up and approve TPP in the next year or two after sufficient modifications are made and the intense scrutiny of election season has passed, which could allow a greater focus on the deal’s importance to national economic and security interests.

TTIP. Recent weeks have seen an increase in publicly stated opposition to TTIP. French trade minister Matthias Fekl said that “there is no more political support in France” for the TTIP negotiations and that at a Sept. 22 meeting of EU trade ministers he will call for “an absolute clear end [to them] so that we can restart them on a good basis.” French President Francois Hollande added that the current discussions “cannot result in an agreement by the end of the year” and that “the negotiations have bogged down, the positions have not been respected, the imbalance is obvious.” Those remarks followed German Vice Chancellor and Economy Minister Sigmar Gabriel’s assertion that the TTIP talks “have de facto failed, even though nobody is really admitting it,” and that after 14 rounds of negotiation none of the agreement’s 27 proposed chapters have yet been finalized.

However, some observers say these comments do not reflect any real change in the trajectory of the negotiations but instead are merely an example of political opportunism. Despite the stated objective of both U.S. and EU leaders of concluding the talks by the time President Obama leaves office in January 2017, there has been little real expectation of meeting that goal; among other things, both sides are preoccupied with bigger problems and neither is currently in a position (given important elections in November in the U.S. and next spring in the EU) to make the politically difficult concessions needed to reach agreement. In this light, comments that the negotiations will not be concluded this year and that there have been no compromises on problematic issues are not so much a warning of imminent failure as a reframing of the existing situation to score political points.

It does appear that these types of comments are gaining more traction, and among a broader audience, than has historically been the case. With economic and trade growth continuing to struggle worldwide years after they were expected to rebound in the wake of the global financial crisis, policymakers touting more isolationist and protectionist approaches have found a more receptive audience in many countries. In the U.S., for example, presidential candidates from both major parties have vocally opposed TPP and TTIP, and the public response to these positions has prompted congressional candidates, even those who have previously been supportive of trade liberalization measures, to adopt similar approaches. In the EU, concerns that TTIP would lower European health, labor, and environmental standards and increase the power of multinational corporations have sparked mass protests and generated support for opposition parties that want to abandon this and other similar agreements.

At the same time, there is some evidence that public opinion on trade is not as negative as it has often been reported to be and that the unusually intense anti-trade rhetoric of this campaign cycle is not having a commensurate effect at the ballot box. According to press articles, recent polls show that more Americans support free trade than oppose it, particularly among younger, more educated voters as well as those to whom lawmakers have made a concerted effort to explain trade issues and their positions. Other polls have shown majority public support of TPP and TTIP specifically as well. These results seem to have been borne out in primary elections ahead of this fall’s national congressional races in which pro-trade Republicans and Democrats have generally emerged victorious, prompting White House spokesman Josh Earnest to opine that “the political vulnerability facing those candidates that are taking a smart approach to trade might be overstated.”

In the meantime, government officials are continuing efforts to push TTIP forward. Officials have acknowledged that the talks “are now indeed entering a crucial stage” and that concluding them is “going to require the resolution of some pretty thorny [issues].” Nevertheless, they have added, “the ball is rolling right now” and there has been “accelerated progress this year.” It is “not at all surprising that TTIP chapters have not been formally closed” yet, one U.S. spokesman said, because “the nature of trade negotiations is that nothing is agreed to until everything is agreed to” and the most politically difficult decisions are usually saved for the end.

As with TPP, however, there is growing speculation that “the end” will come not this year but in 2017 or possibly 2018. Most recently there has been some speculation that the U.S. and EU could announce by the end of 2016 a preliminary agreement aimed at demonstrating and preserving the progress made in the negotiations thus far while still maintaining the ultimate goal of a comprehensive deal that would be finalized later.

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