Capitol Hill Update: Pacific Trade Deal Takes the Spotlight

Focus on Capitol Hill over the past week has been on providing the president with trade promotion authority in order to finalize the Trans-Pacific Partnership trade agreement. Several challenges remain to passage

What Is the Trans-Pacific Partnership?

Recent news headlines around the pending trade deals have been full of acronyms. In this month’s Capitol Hill update, we explain the components of the pending trade deals and update our readers on the progress to date. The Trans-Pacific Partnership (TPP) trade agreement has been the impetus behind recent legislative debates over trade deals. This partnership agreement, which excludes China, would enhance trade and investment among the 11 member countries, and proponents indicate that it would help the United States and its trade partners better compete with China.

In order to provide the president the authority to finish negotiations around the TPP and allow for faster approval of the trade deal, Congress is in the process of passing a trade promotion authority (TPA) bill by which the administration can finish negotiating the TPP trade deal with the 11 other nations and then Congress would have the option of an up or down vote on the final trade deal. The debate on Capitol Hill lately has been focused on giving the president trade promotion authority to finish negotiations on the TPP. The debate has primarily centered around two main issues raised by opponents of the TPP. First, there are the potential adverse effects on U.S. workers from the trade deal. Second, should tougher language around currency manipulation target China? An agreement was struck last week that would allow the Senate to vote separately on bills to address the opposition’s concerns. Both bills were passed last week before the Senate voted to open up debate on providing the president with TPA. The TPA is still awaiting final passage, which is expected sometime this week and at this point looks likely to make it through the chamber. However, it is less clear that the bill can make it through the House of Representatives, which is expected to take up the measure in June.

What Could the TPP Mean for U.S. Trade?

Given the political sensitivity around trade deals in general, most of the specific details of the TPP remain unknown. We do know that the pending agreement contains provisions to enhance e-commerce, improve crossborder trade in financial services, provide greater market access for goods, open up competitive access for telecommunications providers, and open up market access for textiles across member countries. While there are positive and negative effects of many of the known provisions, it is difficult to discern the net effect on employment and top-line GDP in aggregate until the final agreement is solidified. That said, when looking at the current trade situation, all 11 countries combined accounted for 45 percent of total U.S. exports in 2014, representing roughly 4 percent of nominal GDP. In addition, the secondary effects on specific sectors of the U.S. economy may, in fact, be even larger. We will continue to follow this issue.