For Clinton, No More Waffling on Trade
They said it couldn't be done. But the U.S., Japan and 10 other countries have agreed to a Trans-Pacific Partnership trade deal, a monster of an agreement. It covers 40 percent of the global economy and 800 million consumers. It will cause considerable pain to sheltered domestic industries.
It also poses a predicament for some U.S. presidential candidates -- and for Hillary Clinton most of all.
For months, she has embraced ambiguity when it comes to free trade. She has tried not to turn her back on her husband's signature trade initiatives while also saying she wouldn't back a deal that didn't protect American jobs and boost American wages.
Now she'll have to choose, knowing that poll-topping outsider candidates in both parties -- Republican Donald Trump and Bernie Sanders, the socialist seeking the Democratic nomination -- are taking fiery, populist stands against free trade. The deal will provide new fuel for both candidates.
Sanders, who has cast himself as champion of unions and working people, said he will vote against it in the Senate. And labor unions and some conservation groups -- two important Clinton constituencies -- quickly declared the pact a disaster.
Clinton thus faces a dilemma (as does Vice President Joe Biden if he decides to run).
The trade agreement's details are bedeviling. The U.S. and Japan, for example, agreed to let Japanese companies sell their cars and auto parts in the U.S., even if up to 45 percent of the item, according to some media reports, is made outside the countries that signed the treaty. (The cap now is one-third.) This means Japan can source more of the work to China, which is outside the partnership. Score one for Japan.
At the same time, the U.S. will only gradually remove protective tariffs on vehicle imports from Asia, and retain the right to snap tariffs back in place if Japan backtracks. Score one for the U.S.
But the biggest prize of all could be that U.S. automakers finally get access to Japanese consumers. Japan had used dubious safety requirements and other bureaucratic mischief to wall off its auto industry from U.S. competitors for decades. Score another one for the U.S.
It's more difficult for Clinton than for other candidates because she is the only one who says her support depends on a test she has set up: Will it save jobs? Will it protect wages?
All trade deals lead to some outsourcing and competition from cheaper imports, and the Pacific Rim agreement won't be an exception; job losses and lower wages will almost certainly occur. In the broader domestic economy, though, trade also creates growth and higher-paying jobs, but that's a harder case to make.
Another major part of the agreement could also put Clinton on the spot. It would essentially give U.S. drug makers eight years of monopoly protection on next-generation drugs (called biologics because they're made from tissue, blood and live organisms) before manufacturers of cheaper generics can piggyback on the brand-name drugs' clinical data to make copycat versions.
The U.S. now gives 12 years of data exclusivity to American drug makers, and at first wanted other countries to match that. But Australia, Chile and others, which now provide fewer years of protection, had wanted the U.S. to agree to only six or seven years, since their national health services must pay more for drugs through the exclusivity period.
Nonprofit and medical groups have made the broader argument that greedy U.S. drug companies are making it too expensive for low-income patients to get life-saving medicines.
Clinton has made the high cost of medicines an issue, proposing steps to prevent drug companies from price gouging. Her opponents will almost surely accuse her of inconsistency if she backs the trade deal, since other countries now have to lengthen their exclusivity periods.
Clinton will also have to be on her toes as the deal winds its way through Congress. Already, lawmakers in both parties have opposed some of the particulars. Republican Senator Orrin Hatch of Utah, for example, opposes the biologics section because it fails to impose the U.S.'s 12 years of exclusivity on other countries.
Over the years, Clinton has gone back and forth on trade. She helped negotiate the Pacific Rim deal as Obama's secretary of State, for example. But she sometimes voted against trade pacts while in the Senate and opposed giving trade-promotion authority to President George W. Bush in 2002. This agreement won't let her waffle anymore.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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