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No Trade Agreement Is Perfect

Barack Obama addressing agriculture and business leaders at a large oval table
President Obama discusses the TPP with agriculture and business leaders, Oct. 6, 2015.
Photo by Bob Nichols, courtesy the U.S. Department of Agriculture on Flickr.

I often find myself leaning on the expression - all right, call it a cliche - that the perfect is the enemy of the good.

I share this with my daughters and my young employees because, as a graybeard (make that gray stubble, when I’m overdue for a shave) I am supposed to say wise things. Trite though it may be, I think this old horse of a saying is one of the wisest ones I know.

Take trade agreements in general, and the newly negotiated Trans Pacific Partnership in particular. It isn’t perfect. No treaty is perfect, because all treaties are products of negotiation and compromise. This is bound to leave at least one of any two parties that negotiate an agreement with less than 100 percent of what it desires. In the case of the TPP, the negotiation did not involve just two parties; it involved a dozen. Every single one of them has some reason to believe the deal on the table is flawed.

Then again, if we all waited for the perfect mate to come along before we agreed to say “I do,” none of us would ever get married.

Here in the United States, neither Democrats nor Republicans will be thrilled with everything in the TPP. In fact most Democrats are almost sure to vote against it when it eventually comes up in Congress, possibly as early as January, though I suspect not until well into the presidential campaign or even after the election.

No trade deal could ever be negotiated that would satisfy the powerful labor union constituency among the Democrats. Treaties are about gaining the greatest good for the greatest number of people. Unions are about gaining the greatest good for their own current and future members. Those interests are not congruent. If one union job is lost in a particular industry, but five nonunion jobs are created in other industries as a result of a deal, unions would oppose that deal. So would many Democrats who rely on union support. It is that simple. Concerns about labor conditions or political restrictions abroad are at best secondary, and at worst a justification for the bigger agenda of protecting vulnerable union labor from competition.

So the Obama administration, which is not known for its warm and supportive tone toward business but which is not reflexively anti-commerce in its overall approach, can count on only limited support from the president’s own party. Prominent party members such as Sen. Elizabeth Warren of Massachusetts and presidential candidate Sen. Bernie Sanders of Vermont have vocally criticized the deal. Hillary Clinton, a former proponent of the TPP as secretary of state, came out against it in an interview last week. The fate of the TPP, then, will ultimately be decided by congressional Republicans. Under the fast-track legislation that was narrowly approved earlier this year, only a simple majority in each house is needed to ratify the deal, and Republicans hold those majorities.

The cool initial reception TPP has received from the GOP is a little perplexing. To an extent, the resistance may simply reflect the partisan ill will that both parties have engendered in the nearly seven years this president has been in office. After the fiasco of a nuclear negotiation with Iran, Republican leaders want to read every syllable in the new deal to ensure there are no booby traps in this one. That is understandable.

Some Republicans will also be swayed by parochial concerns, such as the tobacco industry’s objection that it cannot force foreign governments into arbitration over laws that it sees as targeting American firms in that industry. Given tobacco’s place as the least sympathetic business in the entire universe of legal commerce, that is likely to sway only a relative handful of GOP votes. Likewise, concerns about impacts on the domestic auto industry (raised primarily by Ford thus far) may carry some weight, but Ford gets 25 years of continued tariff protection for its cars and 30 years for its crucially profitable trucks. (Yes, that F-150 does not compete on a level playing field against the Toyota Tundra.) So the objections from Detroit probably won’t carry the day.

Pharmaceutical companies don’t like the fact that some of their advanced drug formulations might get as little as five years of patent exclusivity in some partners’ markets, but the trade-off there comes in the form of more consistent enforcement of intellectual property laws overall - and the prospect that China, not currently part of the TPP, might be drawn into that enforcement regime in the future. That is a huge deal for the American economy, dwarfing the drug makers’ concerns.

Then there is the populist noise that comes out of every presidential campaign. Remember Ross Perot’s “giant sucking sound” in 1992? Republicans might simply want to deep-six this issue until after the election, which is exactly why the North American Free Trade Agreement, to which Perot strongly objected, did not get signed until after that year’s presidential election. It was ratified in 1993 and came into force in 1994.

On balance, if most Republicans ultimately adhere to their pro-trade principles, TPP is going to be ratified, and rightly so. As with all trade deals, the benefits will be widely diffused in the vast U.S. economy, while the costs will tend to be more concentrated and visible in certain industries. But the net effect will be positive for this nation, and every other nation in the pact. Republicans think of themselves as the party of responsible economic policy. TPP will give them a chance to prove it.

To do so, they will need to hold out against the demands for a perfect trade deal, one that will never happen. A deal that does more good than harm is good enough.

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