Trump and Sanders Shift Mood in Congress Against Trade Deals

GERMANY HAMBURG PORT

A man cycles past the CSCK Indian Ocean container ship, operated by China Shipping Container Lines Co., during loading operations at the Eurogate GmbH & Co. KGaA KG shipping terminal at Hamburg port in Hamburg, Germany, on Tuesday, June 2, 2015.

Photographer: Krisztian Bocsi/Bloomberg
  • Change endangers Trans-Pacific Partnership, future trade pacts
  • ‘Gravity has shifted’ toward worker protections, Kaptur says

Congress has embraced free trade for two generations, but the protectionist bent of the 2016 election campaign may mark the end of that era.

The first casualty may be the 12-nation Trans-Pacific Partnership, which was already facing a skeptical Congress. A European trade pact in the works may also be in trouble.

Lawmakers from both parties are taking lessons from the insurgent campaigns of Donald Trump and Bernie Sanders, which have harnessed a wave of discontent on job losses by linking them to free-trade deals. Even Hillary Clinton has stepped up criticism of the pacts.

While past presidential candidates have softened their stance on trade after winning election, the resonance of the anti-free-trade attacks among voters in the primaries may create a more decisive shift. Opponents of these deals are already sensing new openings.

"The gravity has shifted,” said Representative Marcy Kaptur, an Ohio Democrat. She said it could give new traction to proposals like one she’s put forth that would reopen trade deals with nations that have a trade deficit of $10 billion with the U.S. for three years in a row.

The success of Trump and Sanders in Rust Belt states and elsewhere will make it even harder, if not impossible, for Congress to back TPP, even in a lame-duck session after the election. Lawmakers say it could also hamper a looming agreement between the U.S. and the European Union if it looks like the next president would change course.

“It’s a very heavy lift at this point,” said Representative Charlie Dent, a Pennsylvania Republican and longtime free-trade advocate, noting that all three remaining presidential contenders have expressed reservations about the TPP.

Platform Fight

Among Republicans who back free trade, some wonder how the Republican Party will address it in the platform that will be drafted at July’s nominating convention in Cleveland. They note that Trump, who says he wants to impose 45 percent tariffs on Chinese goods and reopen past trade deals, is miles apart from House Speaker Paul Ryan, a free-trader and convention chairman who met with the iconoclastic billionaire last week to start sorting out stark policy differences.

“There are enough strikes against us, those of us who believe in free trade,” said Senator Jeff Flake, an Arizona Republican. “I would hope the position doesn’t go the other way.”

Lawmakers who want more U.S. worker protections built into trade deals say they’re emboldened, and note that Democratic front-runner Hillary Clinton -- whose husband helped push the North American Free Trade Agreement through in 1994 -- also is leaning more their way. 

Under pressure from Trump and Sanders on trade, Clinton has raised concerns about the TPP, pointing to currency manipulation protections and the impact on American jobs. While she’s left open the possibility of supporting it with changes, she signaled this month that she would oppose a vote on TPP during a lame-duck session of Congress.

“The fact that it’s bubbling up in both parties, particularly through candidates who were not the first choice of their respective party leaders but took it straight to the people, was the most unexpected development in this campaign so far,” said Kaptur.

Targeting Clinton

Trade is shaping up as a central element of Trump’s attacks on Clinton as the likely Democratic nominee. Trump has called these deals "horrible," saying they were negotiated by "real dummies." Sanders has also attacked Clinton on the issue, saying they’re designed to “throw American workers out on the streets.”  

In a victory speech after his Indiana primary win this month, Trump pointed to her support of NAFTA, which was first advanced by President Ronald Reagan, negotiated under George H.W. Bush and enacted by Bill Clinton.

China is his top target. Trump says if elected president he’ll declare China a currency manipulator, which he says would force China to stop unfair practices or face countervailing duties. He also says Bill Clinton made a mistake by promising in January 2000 to include China in the World Trade Organization.

In a recent foreign policy speech, Trump said of China, “We can both benefit or we can both go our separate ways. If need be, that’s what’s going to have to happen.”

Trump’s primary wins in manufacturing states like West Virginia, Indiana, Pennsylvania, Illinois and Michigan underscore that elected Republican officials long have had free-trade positions that are out of kilter with party voters, says Michael Moore, a professor of economics and international affairs at George Washington University.

“His basic strategy is to put the industrial states potentially in play -- Pennsylvania and Michigan,” Moore said. “Ohio is in play already. If you can put those other states in play, you might be able to redraw the electoral map. He wants to pull swing voters in the Rust Belt.”

Trump’s supporters in this year’s primaries stand out for their negative view of U.S. engagement in the global economy. A March Pew Research Center poll found that 67 percent of registered Republican voters who back Trump say free trade deals have been a bad thing for the U.S. Just 31 percent of Clinton supporters hold that view, and 38 percent of Sanders supporters think they’re a bad thing. The March 17-27 poll of 2,254 adults had a margin of error of 2.4 percentage points.

No Panic

Business groups that back free trade say they’re responding by gearing up efforts to highlight the benefits, but see what’s occurring more as posturing than a lasting policy shift.

“At this stage of the game, politics are driving things more than policy,” said John Frisbie, president of the U.S.-China Business Council, which includes Ford Motor Co. and Microsoft Corp. as members. While “China’s an easy target,” the next president will want to address the complexities faced by U.S. companies wanting to expand their markets, he said.

U.S. Chamber of Commerce President Tom Donohue told reporters Friday that things will likely calm down after the elections, and he still expects a vote in December or early next year on enacting the Pacific Rim trade pact.

“I believe after the political machinations are over, we’re going to be moving very, very quickly,” he said. He said Clinton as a former secretary of state has a strong understanding of the need to expand trade in Asia, and that Trump if elected wouldn’t be able to keep his get-tough stances in the face of high levels of U.S. joblessness.

For its part, organized labor sees new openings in the debate on free trade given the success of Trump and Sanders.

“Those two insurgent campaigns have cut through the rhetoric of the political elites in both parties,” said Thea Lee, deputy chief of staff at the AFL-CIO, noting that the impact on the typical American is getting more emphasis. “In that sense, we’re having a more healthy debate. It’s more about working people.”

Endangering TPP

In the shorter term, many lawmakers who support free trade say there’s little chance that the TPP deal can clear Congress this year.

The Pacific Rim deal “was already in trouble,” said Senator Richard Burr, a North Carolina Republican facing a tough re-election in November. “It probably means it won’t see the light of day or it may mean that we go back and renegotiate it, which I personally think would be a good thing.”

Senate Finance Chairman Orrin Hatch, a Utah Republican, says he hopes Trump will modify his views and still wants to advance the trade deal in December before a new president is inaugurated. White House Press Secretary Josh Earnest last week urged lawmakers to act this year, saying it is “very, very unlikely that the next president will be more enthusiastic about TPP than this president.”

Dick Durbin of Illinois, the No. 2 Democrat in the Senate and one of President Barack Obama’s closest allies in the Capitol, said the White House shouldn’t bother.

“I would counsel the White House, don’t even try” to seek a vote on the trade pact this year, Durbin told reporters. Asked if he thought Clinton might drop opposition to the current pact, just as Obama shifted on some trade issues after he won White House in 2008, he said, “I don’t think so. I think she’s made it clear where she stands on TPP.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE