Trans-Pacific Partnership Faces Difficult Legislative Terrain

Hogan Lovells  On October 4, 2015, trade ministers from 12 Pacific Rim countries announced the conclusion of the Trans-Pacific Partnership agreement (TPP). TPP, a foreign policy legacy item for the president, represents nearly 40% of the world’s GDP. The agreement now requires congressional approval, using the “fast-track” process in the trade promotion authority bill (TPA) signed by President Obama in June. Although TPP needs only a simple majority in each House to pass, shifting coalitions signal a difficult political terrain. The TPP debate is important for any company involved in international trade and investment.  Process and Politics  When President Obama submits TPP to Congress, the implementing legislation will follow the procedures provided by TPA. TPA provides for special, expedited consideration of trade agreements by Congress. It sets specific deadlines for votes, limits debate, and allows no amendments. This is particularly important in the Senate, where filibusters and the amendment process can slow and even kill legislation.     Even with these special “fast-track” procedures, the political terrain for legislation implementing TPP remains difficult. In the past, the traditional coalition for passing legislation implementing free trade agreement consisted of a large number of Republicans and a limited number of business-oriented Democrats. However, Democratic support may be even more difficult to find in the 2016 presidential election year, when the Democratic Party candidate for president is likely to oppose the agreement. Former Secretary of State Hillary Clinton, for example, has said that the TPP agreement did not “meet my standards.” Representative Ron Kind (D-Wis.), chairman of the New Democrat Coalition in the House, has expressed optimism that more Democrats will support TPP once they see the agreement than the numbers that voted for TPA. But that may be difficult in a politically sensitive election year, as President Obama increasingly becomes a lame duck President.

Turmoil among Republicans also threatens support for the deal. It frequently falls upon the Speaker of the House to round up Republican votes. Regardless of whether the House elects a caretaker to succeed Speaker John Boehner (R-Ohio), who plans to resign effective early November 2015, the difficulties faced by a new Speaker rounding up votes for TPP will be magnified by the presidential election. In addition, some Republicans have expressed concerns that TPP may have gone too far in its labor provisions. Moreover, certain sectoral groups may be unhappy with the content of the deal, especially for tobacco, biologics, and the Big Three U.S. automakers. These interests also could reduce support for the deal. Strategy for Timing There are several options for the Obama Administration to submit TPP implementing legislation to Congress. The choice depends on which option is most likely to garner enough votes to pass TPP. Submit in Early 2016: The TPA law requires the president to notify Congress of his intent to sign a trade agreement like TPP 90 days in advance of doing so. The president is expected to announce his intent to sign soon to give more flexibility to move implementing legislation anytime during 2016. Because TPA prevents amendments, the House Ways and Means Committee and the Senate Finance Committee will likely hold “mock mark-ups” of draft legislation so the president can incorporate their suggestions into the ultimate legislation implementing the agreement. This may mean the president cannot formally submit the agreement for a Congressional vote before April-May 2016. The subsequent Congressional debate and votes might occur over the next three to five months, causing the debate to occur during the heat of the 2016 presidential and congressional campaigns.   Lame Duck Session in November and December 2016: President Obama could also submit implementing legislation during the lame duck session, after elections and during the last months of his term. Debating TPP after elections might remove some politics and give retiring or newly re-elected members more flexibility to support TPP. But members might also feel pressure to commit against the agreement during their campaigns, leaving the Obama Administration in a strongly disadvantageous position from the outset. Also, President Obama’s influence may be limited after a new president is elected.   Submit in 2017: If TPP appears unlikely to pass, the president might wait for the next administration to push TPP through Congress. For example, President George H.W. Bush negotiated the North American Free Trade Agreement, but President Clinton shepherded implementing legislation in 1993 after he won the 1992 election. Waiting until a new administration, however, creates risks for TPP: the new president may oppose the agreement, and Congress may have a different make up. For legacy reasons, President Obama may also want to complete the agreement while in office. Hogan Lovells will continue to monitor the legislative terrain for TPP for new developments. Original