Trade advocates wrestle with TPA ‘poison pill’

A Senate amendment would preclude the U.S. from fast tracking the sprawling TPP trade agreement if it includes Malaysia due to concerns over the country’s handling of human trafficking.    Late last week, key committees in both houses of Congress advanced legislation that would renew Trade Promotion Authority for the president.
   The moves were lauded far and wide by trade advocates who have been waiting for such legislation to enable the United States to provide impetus on three key multilateral global trade deals.
   However, a single amendment approved in the Senate Finance Committee threatens to have repercussions for the most pressing of those deals – the Trans-Pacific Partnership, a sprawling deal among the United States and eleven other Pacific Rim nations.
   Analysts have long viewed the TPP as a measure by the United States to combat China’s massive influence in global trade, and one of the negotiating members of the TPP consortium is Malaysia.
   That’s important because the amendment in question is one that would preclude Malaysia from participating in a trade deal under a so-called “fast track” provision. The amendment, put forth by Sen. Robert Menendez, D-N.J., would prohibit countries that appear on an annual list the United States compiles of the world’s most egregious offenders of human trafficking from participation.
   In the 2014 list, Malaysia is categorized as a Tier 3 country in the report (the lowest tier), largely due to the alleged practice of luring workers from poorer nations and prohibiting them from leaving until their contract is finished. Experts expects Malaysia to remain a Tier 3 country in this year’s report as well.
   The implications for TPP are clear. If the TPA bill passes through both houses as is – with the Menendez amendment – it would prohibit the United States from agreeing a fast-tracked trade agreement with Malaysia. It wouldn’t be as simple as removing Malaysia from TPP negotiations, however.
   The United States has significant clout in negotiations, but it cannot unilaterally remove a party from the deal, National Foreign Trade Council President Bill Reinsch said in a briefing on the TPA bill last week. Reinsch did note, however, he has heard that Malaysia is considering withdrawing from TPP discussions due to concerns it cannot meet unrelated economic obligations mandated by the deal.
   But the Menendez amendment threatens to create complications in what has otherwise been relatively clear-cut progress for the TPA bill. Reinsch said most other amendments that might have been attached to the deal have instead been attached to a currency bill put forth by Sen. Charles Schumer, D–N.Y., because there were differences between the House and Senate versions of that bill, requiring that it go to conference.
   House and Senate versions of the TPA bill are expected to be largely similar, and the hope among trade advocates is that the bill can go to a vote on the floor without conferences between the houses, Reinsch said.
   The Menendez amendment could scupper those hopes, however, if the House version does not contain such an amendment, since Menendez reiterated this week that he has no intention of withdrawing the amendment.
   Further clouding the issue is the political sensitivity of the amendment, which has been dubbed a “poison pill” by those following the issue closely. Because few politicians would want to be seen voting against an amendment that penalizes nations involved in human trafficking, the fast track element of the TPA bill could be in jeopardy.
   That would affect not only TPP discussions, but also those between the United States and the European Union on a free trade agreement.
   There are other options as well. The United States, and potentially other TPP members, could pressure Malaysia to step aside from the deal until they have met human trafficking expectations. Alternatively, TPP could progress along a slower timeline with Malaysia still involved – the Menendez amendment only prohibits countries on the human trafficking watchlist from being in fast track trade deals.
   Neither is particularly palatable, especially considering the TPA bill got solid support in committees from both Democrats and Republicans. The bill is due to be argued in the House (where it must originate as revenue legislation) in the coming weeks.