Public Citizen Inc. : Thursday Senate Finance Committee Fast Track Trade Hearing to Be Contentious

Jan. 15, 2014

Thursday Senate Finance Committee Fast Track Trade Hearing to Be Contentious

Fast Tracking the Trans-Pacific Partnership Conflicts with the President's Efforts to Counter Income Inequality, a Key Focus of the State of the Union Address

Note: At 10 a.m. Thursday, the Senate Finance Committee is holding a hearing on a bill (3830) to give the president Fast Track trade authority.

WASHINGTON, D.C. - Thursday's hearing on the long-delayed legislation to establish Fast Track authority for President Barack Obama's priority Trans-Pacific Partnership (TPP) agreement could be a donnybrook, Public Citizen said today. Five Finance Committee Democrats announced opposition when it was introduced last Thursday.

"Democrats want to talk about job creation and tackling income inequality, which are also expected to be the main themes in President Obama's State of the Union speech, but the 20-year record of NAFTA shows that deals like the Trans-Pacific Partnership would only contribute to income inequality as more middle-class jobs are lost," said Lori Wallach, director of Public Citizen's Global Trade Watch.

One of the only things that economists agree on regarding the North American Free Trade Agreement (NAFTA), which marked its 20th anniversary of being in effect on New Year's Day, is that such trade pacts are a major contributing factor to growing U.S. income inequality. Obama is expected to dedicate much of his State of the Union address to plans for battling income inequality while he is also pushing for Congress to Fast Track the TPP, which would expand the NAFTA model to more nations.

This conflict is likely to be among the problems raised by committee Democrats with U.S. Sen. Max Baucus' (D-Mont.) Fast Track bill. A study published by the Peterson Institute for International Economics estimated that as much as 39 percent of the observed growth in U.S. wage inequality is attributable to trade trends. Since the January 1, 1994, implementation of NAFTA, the share of national income collected by the richest 10 percent has risen by 24 percent, while the top 1 percent's share has shot up by 58 percent.

"Many members of Congress are asking why we would agree to give up our authority to make sure the Trans-Pacific Partnership is not NAFTA on steroids, particularly when we've seen what NAFTA has done to American workers," Wallach said.

Not a single House Democrat agreed to co-sponsor the Fast Track bill. The "Bipartisan Congressional Trade Priorities Act of 2014" had imminently departing Baucus (D-Mont.) as its only Democratic sponsor, along with U.S. Rep. Dave Camp (R-Mich.) and Sen. Orrin Hatch (R-Utah.)

But getting Fast Track for TPP is a top priority of President Obama. The legislation replicates the Fast Track mechanism found in the 2002 grant of Fast Track, which more than 150 House Democrats announced in a November 2013 letter that they would oppose, as did several dozen House GOP.

"The Trans-Pacific Partnership is a Trojan horse for a host of awful measures that have nothing to do with trade and would never get through Congress in the light of day. Only five of the draft trade pact's 29 chapters are about international trade. This grab bag should not be pushed through Congress without a real debate over each of its impactful measures. The trade pact would threaten food safety, raise medicine prices and roll back Wall Street reforms. The Trans-Pacific Partnership would offshore millions of American jobs, ban Buy American policies and sneak in threats to Internet freedom," Wallach said.

Democratic and GOP presidents have struggled to persuade Congress to delegate its constitutional trade authority via Fast Track. Fast Track has been in effect for only five years (2002-2007) of the 19 years since passage of NAFTA and the agreement that created the World Trade Organization (WTO).

"Democrats are saying, 'No more Fast Track process that sidelines Congress from determining trade agreements' contents,' because today's pacts like the Trans-Pacific Partnership  invade Congress' domestic policymaking authority and set binding rules on food safety, medicine patents and pricing, copyright and Internet freedom, immigration and much more," Wallach said.

While many focus on the number of jobs lost from NAFTA and similar pacts, the most significant effect has been a fundamental alternation in the composition of jobs available to the 63 percent of American workers without a college degree. The United States has lost millions of manufacturing jobs during the NAFTA era, even as overall unemployment has been largely stable (excluding the fallout of the Great Recession) as new low-paying service sector jobs have been created.

The qualityof jobs available, and the wages most U.S. workers can earn, have been severely degraded. According to the U.S. Bureau of Labor Statistics, two out of every three displaced manufacturing workers who were rehired in 2012 experienced a wage reduction, most of them more than 20 percent. It is not only those who lost a job to NAFTA who face downward wage pressure: as increasing numbers of workers displaced from manufacturing jobs joined the glut of workers competing for non-offshorable, low-skill jobs in sectors such as hospitality and food service, real wages have also fallen in these growing sectors under NAFTA.

The shift in employment from high-paying manufacturing jobs to low-paying service jobs has contributed to overall wage stagnation. The average U.S. wage has grown less than one percent annually in real terms since NAFTA was enacted even as worker productivity has risen at more than three times that pace.

Twenty years of evidence of NAFTA's contribution to U.S. income inequality makes fast tracking a massive TPP NAFTA expansion a hard sell among Democrats, Public Citizen said. Passing Fast Track in the first half of 2014 before lawmakers' attention turns to midterm elections would require a full court press by Obama in addition to the massive corporate campaign that is already gearing up. How Obama handles Fast Track in his State of the Union address will be one sign of whether such a White House campaign is forthcoming. 

What happens at the Finance Committee hearing could be a preview of the coming battle.

Meanwhile, proponents of the Camp-Baucus Fast Track bill are trying to highlight the bill's inclusion of some new negotiating objectives for trade pacts that were not included in the 2002 Fast Track. But the underlying Fast Track process included in the bill ensures that these objectives are entirely unenforceable. Whether or not the president obtains the listed negotiating objectives, the Camp-Baucus bill would empower the president to sign a trade pact before Congress votes on it, with a guarantee that the executive branch could write legislation to implement the pact and alter wide swaths of existing U.S. law, obtaining both House and Senate votes within 90 days. That legislation would not be subject to markup and amendment in committee, all amendments would be forbidden during floor votes and a maximum of 20 hours of debate would be permitted in the House and Senate.

Democratic and GOP presidents alike have historically ignored negotiating objectives included in Fast Track. The 1988 Fast Track used for NAFTA and the pact that established the WTO included a negotiating objective on labor standards, but neither pact included such terms. The 2002 Fast Track listed as a priority the establishment of mechanisms to counter currency manipulation, but none of the pacts established under that authority included such terms.

Congress' willingness to support Fast Track has also declined markedly because "trade" agreements have increasingly invaded Congress' domestic policymaking prerogatives. The TPP includes chapters on patents, copyright, financial regulation, energy policy, procurement, food safety and more - it would constrain the policies on these matters that Congress and state legislatures could maintain or establish. Fast Track is outdated 1970s technology being applied to 21st century pacts.

Prior to Fast Track and starting with Franklin Roosevelt's presidency, Congress gave Tariff Proclamation Authority (TPA) to presidents. But it covered only tariffs, not the broad subject matter included under Fast Track. The mechanism allowed the executive branch to implement reciprocal tariff cuts only within bounds set by Congress. Notably, this "TPA" was entirely different than Fast Track, which is sometimes called Trade Promotion Authority (TPA), as it pertained only to tariffs. (Public Citizen's 2013 book, "The Rise and Fall of Fast Track Trade Authority," provides an in-depth history of Fast Track and U.S. trade authority.)

Due to Fast Track's controversy, President George W. Bush spent two years and extraordinary political capital to obtain the 2002-2007 Fast Track grant, which passed a Republican-controlled House by one vote and expired in 2007. A two-year effort by President Bill Clinton to obtain Fast Track trade authority during his second term in office was voted down on the House floor in 1998 when 171 Democrats were joined by 71 GOP who bucked then-Speaker Newt Gingrich.

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