from The Internationalist and International Institutions and Global Governance Program

The Odd Couple: Democrats, Republicans, and the New Politics of Trade

A policewoman removes a man protesting the Transpacific Partnership (TPP) as U.S. Trade Representative Michael Froman testifies before a Senate Finance Committee hearing on January 27, 2015.

April 1, 2015

A policewoman removes a man protesting the Transpacific Partnership (TPP) as U.S. Trade Representative Michael Froman testifies before a Senate Finance Committee hearing on January 27, 2015.
Blog Post
Blog posts represent the views of CFR fellows and staff and not those of CFR, which takes no institutional positions.

More on:

International Organizations

United States

Trade

Diplomacy and International Institutions

Politics, as the saying goes, makes strange bedfellows. This is certainly true in today’s fast-changing U.S. trade debate. The Obama administration has counted on strong GOP support for the centerpiece of its second term agenda: the Transpacific Partnership (TPP). Suddenly, right-wing Republicans are making common cause with left-wing Democrats, attacking the proposed twelve-nation blockbuster deal. The reason for this odd coupling? A little thing called sovereignty.

Once upon a time, trade politics on Capitol Hill were predictable. Republican legislators were, on balance, supportive. They depicted trade liberalization as an engine of growth and prosperity, the international accompaniment to deregulation and lower taxes at home. Congressional Democrats were skeptical, warning of massive job losses and a regulatory “race to the bottom.” They charged Republicans of shilling for corporate America and showing indifference to the plight of the American worker. Republicans, in turn, accused Democrats of protectionist pandering to union bosses and tree huggers.

Given these dynamics, a Democratic president seeking trade promotion (or “fast track”) authority needed to cobble together a legislative coalition heavily reliant on GOP support to counterbalance opposition from his own party. Bill Clinton used this approach to win passage of the North American Free Trade Agreement (NAFTA) and to secure U.S. entry into the World Trade Organization (WTO).

President Obama has taken the same approach, working with Republicans like Senator Orrin Hatch of Utah and Representative Paul Ryan of Wisconsin to try to secure trade promotion authority for his administration. Those plans now risk being upended by the outrage of conservatives and libertarians over a draft of the emerging trade deal.

The lightning rod in this case is a provision for “Investor-State Dispute Settlement” (ISDS). The ISDS procedure would create a binding arbitration mechanism whereby private companies that believe that they have received unfair or discriminatory treatment from governments of other TPP nations can challenge those governments and seek compensation. This international panel of arbitrators would not be composed of professional judges, but by independent lawyers operating under rules established by the United Nations Commission on International Trade Law or the International Center for Settlement of Investment Disputes.

The TPP would not be the first trade agreement to include an ISDS provision—not by a long shot. The United States is already a member of fifty accords containing such clauses. But TPP would be the first time the provision has been included in a mega-trade deal. And while the United States has only rarely been subject to ISDS complaints in the past, critics predict that it will increasingly become a target as TPP empowers nine thousand foreign-owned firms to bring cases against U.S. federal, state, and local governments.

As might be expected, left-leaning groups denounce ISDS provisions as a threat to regulations that keep U.S. citizens and workers safe and employed. The lobbying group Public Citizen warns that the TPP “would grant foreign corporations extraordinary new powers to attack the laws we rely on for a clean environment, essential services, and healthy communities.” The United States Trade Representative’s office has tried to dispel such fears, but it has not helped its case by keeping the emerging text secret while consulting heavily with U.S. corporations in the drafting process.

On Capitol Hill, Senator Elizabeth Warren of Massachusetts was quick to the barricades. “Agreeing to ISDS in this enormous new treaty would tilt the playing field in the United States further in favor of big multinational corporations,” she warned in the Washington Post. But she also added an interesting wrinkle. “This isn’t a partisan issue. Conservatives who believe in U.S. sovereignty should be outraged that ISDS would shift power from American courts, whose authority is derived from our Constitution, to unaccountable international tribunals.”

Mission accomplished. Since the New Year, a growing number of diehard conservatives in Congress, such as Representative Dana Rohrabacher of California, have joined liberals like Representative Rosa DeLauro of Connecticut in opposing Obama’s trade agenda. Tea Party Republicans, skeptical of both Wall Street and international organizations, are making common cause with left-wing legislators, making it more difficult for GOP leaders Mitch McConnell and John Boehner to deliver the sort of legislative majorities in the Senate and House that Obama needs to secure the TPP. As a clearly tickled Senator Bernie Sanders of Vermont, an independent who caucuses with the Democrats, told the New York Times, “Some of my conservative friends are worried legitimately about the issue of sovereignty.”

Outside Congress, conservatives are similarly divided. The influential Club for Growth, a political action committee, supports the TPP. So does the powerful Heritage Foundation, which argues that the “arbitration of freely accepted commitments…does not undermine national sovereignty.” The libertarian Cato Institute takes a contrary view, regarding ISDS as a giveaway to foreign companies at the expense of U.S. ones, as well as portending greater challenges to U.S. laws and regulations. Elsewhere on the right, reports the New York Times, both the conservative Eagle Forum and TheTeaParty.net are “strongly opposed” to the TPP.

These fissures are challenging what has been a longstanding anomaly in the conservative defense of U.S. sovereignty. For decades, the U.S. right wing has resisted treaties that would bind the United States (and other countries), in spheres ranging from human rights to environmental protection to nuclear weapons. But international trade treaties have generally been given a pass. The deepening TPP debate suggests this era is ending. (Indeed, one wonders if today’s divided Republican caucus would have succeeded in delivering U.S. entry into the WTO—an organization that commits its members to accept a binding dispute resolution mechanism, including the decisions of an independent Appellate Body.)

For liberal skeptics of trade on Capitol Hill, the growing sovereignty concerns of their Republican counterparts are a godsend. For President Obama, they are a nightmare. With approximately 150 of 188 House Democrats having already signed a letter opposing fast track, the president will lean overwhelmingly on Republican support to get the 218 votes he needs for trade promotion authority. He may not get it from the fragmenting GOP caucus. For six years, Republicans in Congress have been dead set against handing Mr. Obama any sort of legislative victory. In this case, the bogeyman of an unaccountable international tribunal with the ability to rule on behalf of foreign corporations against the U.S. government—as well as state and local governments—only adds to the president’s TPP hurdles.

More on:

International Organizations

United States

Trade

Diplomacy and International Institutions

Close