Almost ten years ago under President George W. Bush, Democrats in the House and Senate voted overwhelmingly against the last controversial free trade agreement to come before Congress, the Central American Free Trade Agreement (CAFTA). Now leading Democrats in Congress are threatening to deny or delay, giving President Obama the Trade Promotion Authority (TPA) essential to complete two of the largest free trade agreements in American history, the Trans-Pacific Partnership (TPP) and the Transatlantic Partnership (TTIP). These agreements have enormous potential for creating hundreds of thousands of jobs and an almost one percent increase in U.S. GDP without adding to the deficit.
If the Democratic Party cares about jobs, the deficit and the economy, it needs to embrace trade promotion authority and the two trade agreements for a number of reasons.
For one thing, these pacts dwarf CAFTA, which involved five small Central American states. By 2020 some three-fifths of global GDP will come from Asia. TPP would help position the U.S. to take advantage of the growth of Asian markets.
TTIP with the European Union would be even bigger. The U.S. has the world’s largest trade and investment relationship with the EU states. U.S. companies invest more than three times as much in tiny Ireland as in China. The bilateral trade relationship supports more than five million jobs in our respective markets. Some 60 percent of transatlantic trade is between affiliates of EU and American parent companies. TTIP would increase U.S. GDP by more than 0.5 percent without any taxpayer money.
Second, both agreements advance our strategic and commercial interests. TPP would support the Obama Administration’s “pivot” to Asia by enhancing America’s influence in the region, and create pressure for market reforms in non-market economies. Likewise, a successful transatlantic trade agreement would reassure our European allies with whom we work closely on issues from Iranian sanctions to Syria and Afghanistan, that we continue to see them as a crucial partners in solving global problems.
Third, Japan has joined the TPP negotiations, which will require it to open its markets to agricultural and manufactured goods and services. We remember the rift in U.S.-Japan relations when President Clinton and his tough trade negotiator Mickey Kantor demanded that Japan open its auto market. More than 20 years later, U.S. and other foreign firms still face huge trade barriers in Japan.
Today is the best opportunity in the post-World War II era to drive real change in Japan through the TPP negotiations. After more than a decade of “lost” years of Japanese slow growth and deflation, the current prime minister Shinzo Abe is combining stimulative fiscal and monetary action — known as “Abenomics” — with a courageous willingness to drive real economic reform. That reform will require Abe to take on his own domestic agricultural and industrial interests. He can do this more effectively within a multilateral process like TPP, where he can point to other gains for Japan.