Fast-track trade deal a setback for some automakers

David Shepardson
Detroit News Washington Bureau

Washington — Key senators and the top House Republican on trade issues said Thursday that they have reached a deal that would allow for a fast-track vote on a 12-nation free trade deal representing 40 percent of the world’s economy.

The deal on Trade Promotion Authority between the top Democrat and Republican on the Senate Finance Committee will lead to a vote next Thursday that could pave the way for reaching a final deal on the Trans Pacific Partnership, said Sen. Orrin Hatch, R-Utah, who chairs the committee at a hearing Thursday.

The announcement is a significant setback for U.S. automakers that have sought tougher provisions on currency manipulation as part of a free trade deal with Japan.

The deal was announced by Hatch, Ranking Member Ron Wyden, D-Oregon, and House Ways and Means Chairman Paul Ryan, R-Wisconsin. The ranking Democrat on the House Ways and Means committee, Rep. Sander Levin of Royal Oak, did not sign on to the deal. It would also extend health care tax credits for thousands of Delphi Corp. retirees who lost insurance coverage and to extend Trade Adjustment Assistance — a program that helps workers who lose jobs because of international trade — be extended as part of a package along with new trade agreements.

Portman said the health care benefits would help 5,000 Delphi retirees in Ohio — especially those who aren’t yet eligible for Medicare. The credit, which expired at the end of 2013, makes health insurance more affordable by providing a 72.5 percent tax credit to eligible workers, allowing these workers to pay only a portion of their qualified health insurance.

The leaders said the deal will boost “transparency by requiring that Congress have access to important information surrounding pending trade deals and that the public receive detailed updates and see the full details of trade agreements well before they are signed.”

The bill establishes new trade-negotiating objectives including measures to combat currency manipulation, and eliminate barriers to innovation and digital trade, among others — but some senators say they don’t go far enough.

“This is a smart, bipartisan compromise that will help move America forward,” Hatch said. “If we want to maintain our nation’s economic leadership and promote American values around the world, we must reach beyond our borders, and this bill is a strong first step.”

Wyden said the bill “ with strong new enforcement tools, Trade Adjustment Assistance and the Health Coverage Tax Credit, sets our country on the right track to craft trade policies that work for more people.”

But Labor unions, Detroit’s Big Three automakers, steelmakers and other major manufacturers are sharply opposed to the measure unless it includes provisions to crack down on currency manipulation, especially by Japan. The Obama administration strongly wants the fast-track authority to complete a massive trade deal.

The U.S., Japan, Mexico, Canada and eight other nations have been negotiating the Trans-Pacific Partnership that would create a free-trade zone comprising 40 percent of the world’s economy for more than four years. Australia, Brunei, Chile, New Zealand, Malaysia, Peru, Singapore and Vietnam are part of the talks. Japanese Prime Minister Shinzo Abe is due in Washington at the end of the month and negotiators would like a deal by then.

Hatch says it is essential that Congress approve fast-track authority for Obama.

“No potential trade partner will give our negotiators their best offer unless they know what issues matter to us most and whether we can deliver on the deal. Simply put, for America to be able to succeed at the trade negotiating table and to set the rules for a fair international marketplace, we must speak with one voice in our demands,” Hatch said Thursday.

The Trans-Pacific Partnership is a cornerstone of the Obama administration’s economic policy agenda. The administration argues that by dropping barriers and tariffs with fast-growing economies it will support millions of U.S. jobs through higher exports. And they argue it will strengthen the U.S. alliance with Japan — an important counterbalance to China’s rising influence. A separate agreement with Europe is also under negotiation.

U.S. Trade Representative Michael Froman said the clock is ticking. He argues that without an Asian free trade deal that China will write the rules — and that trade deals wouldn’t otherwise have enforceable standards on labor, environmental and other issues.

“We cannot change the status quo by sitting on the sidelines. As we speak, China and others are negotiating an agreement that would encompass over three billion people,” Froman said Thursday.

Several senators say the measure shouldn’t be rushed. Sens. Debbie Stabenow, D-Lansing, and Sen, Rob Portman, R-Ohio, plan to introduce an amendment on currency — saying it makes U.S. exports more expensive and Japanese imports cheaper here. “It’s not fair to our workers” Portman said.

Sen. Charles Schumer, D-N.Y., said he used to be a supporter of free trade, but became disillusioned by the loss of jobs. He said the agreement may boost corporate profits but will hurt middle class incomes The Obama administration has privately floated a proposal on currency to Congress, but Schumer said it is not strong enough.

“I don’t know how this passes” without currency provisions, Stabenow said. “Currency manipulation has cost us millions of jobs in the United States.”

Labor unions held a rally with more than 1,000 people on Capitol Hill Wednesday to denounce any new free trade deals. They argue free trade deals with Canada, Mexico and others have cost the United States millions of factory jobs. They also decry that the proposed agreements remain secret.

The AFL-CIO said in the coming days it will launch a massive six-figure advertising campaign to pressure 16 U.S. senators and 36 House members to oppose fast track. The campaign, running through August, will begin with digital ads and may expand into TV, radio and newspaper ads.

“These ads ... congressional meetings and unprecedented grassroots activities will remind politicians that the trade debate is enormously important to working families. We have seen too often how bad trade deals have devastated our communities. ... We want Congress to keep its leverage over trade negotiations — not rubber stamp a deal that delivers profits for global corporations, but not good jobs for working people,” said AFL-CIO President Richard Trumka.

The Obama administration has steadfastly refused to change its position that the free trade deal shouldn’t include any provisions to prevent currency manipulation.

Michigan members of Congress, Detroit’s Big Three automakers and the United Auto Workers have been pushing for at least three years to convince the Obama administration to include provisions in the agreement barring the countries from currency manipulation. But Froman and Treasury Secretary Jacob Lew have repeatedly shown no interest in doing so.

Automakers worry that foreign governments like Japan’s will be able to weaken their currency to undercut U.S. vehicle production.

The U.S. auto industry is worried a deal will be reached that doesn’t do enough to open the Japanese auto sector to American products. Japan has historically imported very few foreign automobiles. The auto sector accounts for more than 70 percent of the U.S. trade deficit with Japan. “Right now Japanese cars are abundant in America. American cars are virtually nonexistent in Japan — and when you talk about that, you talk about opportunity,” Labor Secretary Thomas Perez said last month.

American automakers fear if Japan intervenes to weaken its currency, its automakers eventually will be able to dramatically undercut them, especially when U.S. tariffs are phased out — 25 percent on light trucks and 2.5 percent on cars. Automakers want the tariffs kept in place for at least 25 years or more. And China could seek to enter the free-trade agreement under the same rules down the road.

“We can’t sell automobiles to Japan,” Stabenow said Thursday.

Lew said Thursday the United States “will not tolerate” improper currency intervention, but insisted that other international forums are better suited like the G-20 or International Monetary Fund to address the issues.

But Froman said the measures will support high paying jobs and that talks are still under way to address key auto issues with Japan.

He noted that last year, U.S. exports reached $2.35 trillion, supporting an estimated 11.7 million jobs. “With those jobs paying up to 18 percent more than jobs not related to exports, trade policy has an important role to play in raising wages and living standards for the middle class,” Froman said “In a world where more than 95 percent of all customers live outside our borders, the disadvantages our workers and businesses face are less an inconvenience than an injustice. Fundamentally, trade negotiations are about addressing that injustice by changing the status quo so that it works better for Americans.”

Vice President Joe Biden told reporters earlier this week that the White House would have some difficulty convincing Democrats to vote for fast-track legislation.