Economics, International economy, U.S. Economy

OK, Mr. President, who leads the Democratic Party on trade?

Senate Democrats (Flickr) (CC-BY-2.0)

Senate Democrats (Flickr) (CC-BY-2.0)

Not a day after President Obama called for a bipartisan effort to move ahead with congressional authority (so-called fast track authority) to conclude trade deals with dispatch, Sen. Harry Reid (D-NV) the small bore, Democratic special interests-obsessed Senate majority leader defied the president, throwing down the gauntlet on trade. He told reporters: “I’m against fast track.” And he added: “Everyone knows how I feel about this.  Sen. Baucus knows, Sen. Wyden (new Finance Committee chairman) knows. The White House knows.” And he warned finally, in a direct threat to the White House: “Everyone would be well advised to not push this right now.”

There will be lots of ink spilled over this development, which jeopardizes the two mega trade agreements with the Asia Pacific and Europe that the president has identified as central elements of his second term agenda. Here are first reactions:

*This will become a real test of Obama’s leadership: he belatedly advanced an ambitious trade agenda knowing that it was in the national interest but also knowing that he faced a deeply divided party, with labor and environmental organizations adamantly opposed to moving forward in this area. On the positive side, the president did pick the best man to lead the fight: Michael Froman as USTR. But the White House itself—and the president personally–has been, if not AWOL, certainly hesitant to vigorously push the trade agenda. Even in the State of t he Union address, there was only a tepid, passing sentence: “We need to work together on tools like bipartisan trade-promotion authority to protect our workers, protect our environment, and open new markets to new goods stamped ‘Made in the USA.’” Froman will need all the help he can get—from the president personally—either to move Reid from active to passive opposition, or to work around him.

*Republicans should keep their powder dry: resist the temptation to blast the president (with some justice) for a failure of leadership and just leave it at that. As I’ve written earlier, while they are not perfect free traders, Republicans espouse (and yes, this includes Tea Party Republicans who in 2011 overwhelmingly supported the Panama, Korea and Colombia FTAs), freer trade as an extension of their domestic agenda of deregulation and free market competition. Republicans leaders in both the House and Senate should reaffirm their support for the recently introduced bipartisan Trade Promotion Authority bill—and make clear that on this issue they will work with the White House, even if congressional Democrats fade away. Speaker is said to have demanded that the president produce 50 Democratic votes in the House. Bad mistake: this should now be revised to demand just enough House Democrats to produce a majority of at least ONE.

*With Reid’s defection and defiance, the next several months will be a crucial testing time.  While our 11 trading partners engaged in the endgame for the Trans-Pacific Partnership Agreement negotiations have not used the lack of fast track as an excuse to withhold final trade liberalization offers, they no doubt now are watching closely to see if the president can still lead on trade (including galvanizing a rump element in his own party) and if Republicans will step into the breach, even in the face of personal distaste for the Obama presidency. American disarray at this point could lead to an unraveling of TPP negotiations.

As for Harry Reid, it just goes to show that even political Hobbits have to be reckoned with.

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