Zachary Keck

2016 Election Could Derail Asia Trade Pact

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Zachary Keck

2016 Election Could Derail Asia Trade Pact

While the midterms buoyed the TPP, the auto industry and 2016 president election could ultimately derail it.

2016 Election Could Derail Asia Trade Pact
Credit: flickr/Barack Obama

As expected, the Republican takeover of the Senate in the U.S. midterm elections this week appears to have buoyed the Trans-Pacific Partnership. However, the politics of the 2016 presidential election could ultimately derail the trade pact.

Back in April, I noted that a Republican victory in the November midterm elections could strengthen the Asia pivot in several ways. Most importantly, the Republican Party tends to be more supportive of free trade agreements, and thus their takeover of the Senate would bolster President Obama’s chances of gaining Trade Promotional Authority or otherwise ratifying the treaty.

This appears to be on track. At a press conference following the Republican electoral victory, Sen. Mitch McConnell (R-KY), the presumptive Senate Majority leader when the next Congress begins, was asked what specific areas he thinks the GOP and President Obama can come together on.

“Trade agreements,” McConnell answered, according to a transcript provided by CNN. “The president and I were just talking about that right before I came over here. Most of his party is unenthusiastic about international trade. We think it’s good for America. And so I’ve got a lot of members who believe that international trade agreements are a winner for America… I said send us trade agreements. We’re anxious to take a look at them.”

President Obama echoed this sentiment during a press conference he gave at the White House shortly after McConnell’s wrapped up. During his opening remarks, the president said the two parties can “work together to grow our exports and open new markets for our manufacturers to sell more American-made goods to the rest of the world.” He added, “That’s something I’ll be focused on when I travel to Asia next week,” referring to the TPP, which is expected to be a topic of discussion on the sidelines of regional summits over the next few weeks.

That being said, neither Trade Promotion Authority (TPA) nor the TPP is assured passage in the U.S. Congress. With TPA, for example, Congress agrees to vote up or down on trade pacts without offering up any amendments. This is seen as crucial for empowering U.S. diplomats in their ongoing negotiations with TPP counterparts. However, by passing fast track legislation, the GOP-controlled Congress would essentially be relinquishing power to the president. Given the GOP’s reflexive opposition to all things Obama, this seems counterintuitive. Already, some Tea Party members have begun calling TPA “Obamatrade.”

That being said, both McConnell and House Speaker John Boehner have said in the past they support giving Obama TPA to facilitate new free trade agreements. Other crucial Republicans, such as Senator Orrin Hatch, who is likely to chair the Senate Finance Committee, have also come out in favor of fast track authority. According to the Financial Times, the “growing consensus” among senior Washington officials is that “the fast-track bill has become about as likely a piece of economic legislation as can be imagined passing through the new Congress.”

The bigger obstacle to TPP passage in the U.S., then, is the likely substance of the TPP, and how that impacts the looming 2016 presidential election. With the midterms out of the way, the election-centric American political elite will soon be fixated on the 2016 presidential election, with many of the potential candidates expected to announce whether they will run or not early next year.

This is problematic given that it is widely believed that Japan is fiercely resisting removing tariffs and other trade barriers that protect its agriculture and automotive industries from foreign competition. Agricultural interest groups are particularly influential in Japan’s ruling Liberal Democratic Party, which is largely based on rural support. Indeed, the LDP has adopted a resolution recommending that Japan withdraw from the TPP talks unless it can maintain tariffs on rice, wheat, beef and pork, dairy products, and sweetening resources.

The agricultural lobby is also influential in the United States, and especially on Capitol Hill. Already many agricultural groups in the United States — including the National Association of Wheat Growers, U.S. Wheat Associates, USA Rice Federation, the National Pork Producers Council and the International Dairy Foods Association — have called on the administration to negotiate a TPP without Japan unless it caves on agricultural tariffs. Furthermore, some of the products the LDP are seeking to protect — notably pork — are largely produced in states like Iowa and North Carolina that are fairly competitive in U.S. presidential elections.

Japan’s insistence on protecting its auto industry is a far larger problem as the 2016 presidential election heats up. American automakers and trade groups have long protested Japan’s automotive tariffs, claiming that Japan is the most closed auto market in the industrialized world. The U.S. auto industry has already demonstrated its weight on Capitol Hill when it comes to the TPP. Last year nearly 20 percent of the Democratic caucus in the House of Representatives sent a letter to the president opposing Japan’s entry into TPP talks largely on the grounds of its automotive tariffs. “Nowhere is the closed nature of Japan’s markets more evident than in the auto sector,” the lawmakers wrote, “where Japanese policies and practices have been carefully honed – over generations – to keep out American and other foreign cars and parts.”

All of this comes to a head in Ohio. The state of Ohio has long been exceptional in selecting the presidential candidate who ultimately wins the election. However, in recent elections it has emerged as the premier battleground state. This is particularly true for the Republican Party. No Republican has ever won the White House without winning Ohio, and in recent years it has become nearly impossible for them to do so. As Dan Balz, a respected political journalist who wrote a highly praised book on the 2012 presidential election, put it: “It may have been mathematically possible for Romney to win the election without Ohio, but politically it was almost unthinkable.”

Because it borders the state of Michigan, which is ground zero for the American auto industry, Ohio’s economy is highly intertwined with the auto industry’s success. It is estimated that one in eight jobs in Ohio are tied, directly or indirectly, to the auto industry. The auto industry has a presence in 80 or more of Ohio’s 88 counties. Many believe that Romney all but lost the 2012 election when he wrote an op-ed in the New York Times in 2008 arguing that the auto industry should be forced to go through a structured bankruptcy rather than be bailed out by the government. The NYT editorial board’s headline for the piece — “Let Detroit Go Bankrupt” — became a huge liability for Romney in 2012.

It’s safe to assume that the Republican Party learned its lesson from Romney’s 2012 experience. It cannot afford to alienate the auto industry if it hopes to win the White House. And that, more than anything else, could doom the TPP.