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Harry Reid deals body blow to Obama on trade

The Wall Street Journal | 30 Jan 2014

Harry Reid deals body blow to Obama on trade

His opposition to fast-track authority for trade deals puts him at odds with President’s economic agenda

By William Mauldin and Siobhan Hughes

WASHINGTON—Senate Majority Leader Harry Reid broke publicly with the White House Wednesday on trade policy, instantly imperiling two major international trade deals and punching a hole in one piece of the economic agenda the president outlined in his State of the Union address a day earlier.

Mr. Reid told reporters he opposed legislation aimed at smoothing the passage of free-trade agreements, a vital component to negotiating any deal, and pointedly said supporters should back down.

“I’m against fast track,” Mr. Reid (D., Nev.) said, using the shorthand term for legislation that prevents overseas trade agreements from being amended during the congressional approval process. “I think everyone would be well-advised just not to push this right now.”

The move spells trouble for two sets of complicated talks, one with the European Union and the other with countries in the Asia-Pacific region. Both deals likely would have required such a “fast track” approval to clear the Congress. The U.S.’s negotiating partners wouldn’t likely commit to a final agreement that could be unpopular back home without assurances that it couldn’t be modified by U.S. lawmakers.

Mr. Reid declined to say whether he would stop fast-track legislation from coming up for a Senate floor vote, but other senators said his opposition was important. “You can kiss any new trade deals goodbye,” said Sen. John Cornyn (R., Texas.) “I think the majority leader’s focus is on the November elections and he doesn’t want to expose his vulnerable members to controversial votes.” Added Gary Hufbauer, senior trade expert at the Peterson Institute for International Economics in Washington: “It’s a one-two punch against trade policy,” he said.

Mr. Reid’s comments amplified a fight within the Democratic Party over trade at a surprising moment. Mr. Obama said in the State of the Union speech that fast-track authority and the trade deals would help boost hiring at small businesses, which he said account for 98% of U.S. exporters. Mr. Reid’s opposition places him as the leader among Democrats who contend trade deals are bad for U.S. workers.

A White House official suggested the administration would continue to press for what is formally known as trade promotion authority, saying that Mr. Reid’s position on this particular issue was well known. “We will not cede this important opportunity for American workers and businesses to our competitors,” the official said.

How the administration will do that isn’t clear. Many Democrats say free-trade agreements don’t do enough to stem the flow of jobs overseas and don’t require trading partners to observe strict-enough labor and environmental rules. Some are concerned the Asia-Pacific pact under negotiation would siphon U.S. jobs to low-income countries such as Vietnam. Some conservative and tea-party Republicans oppose giving fast-track authority to Mr. Obama, complicating the Republican position.

The U.S. Chamber of Commerce, one of the biggest supporters of the trade agreements under negotiation, said the Obama administration has a decision to make on how hard to fight against its own party. “This puts the president front and center in terms of how bad does he want a trade agenda,” said Myron Brilliant, executive vice president at the Chamber. “We think he does.”

The strongest business support for trade negotiations comes from companies that do the most business overseas, including Hollywood studios and exporters of heavy machinery. Others with a U.S. focus, such as textiles and auto makers, are worried the trade deals could expose them to what they say is unfair competition from abroad. Agricultural concerns would likely only support trade pacts that significantly open export markets, especially Japan.

U.S. officials had hoped to finish talks on the Trans-Pacific Partnership, which includes Japan and other Asian and Pacific nations but not China, last year. Sensitivities over basic tariffs and quotas, especially in agriculture, have held the talks back.

The latest developments come amid growing skepticism in Japan about the U.S.’s commitment to free trade. “It’s up to the resolve of the U.S. government,” Japan’s economy minister, Akira Amari, told reporters in Tokyo Thursday morning. “If the president comes to the negotiating table with a strong enough determination to wrap it up by spring, other countries will follow suit.”

Japanese Prime Minister Shinzo Abe has been pressing forward with free-trade deals to keep pressure on domestic industries to do long-overdue reforms—even as it has drawn criticism from farm groups.

Mr. Reid, whose state has a heavy union presence, has long opposed trade deals. He also represents a caucus with several vulnerable Democrats up for election in November who might have been forced to choose between Mr. Obama and the unions that help finance campaigns.

“I think there’s a lot of dubiousness in our caucus to fast track, given that every time we sign a free-trade agreement it seems other countries violate the rules and we don’t,” said Sen. Chuck Schumer (D., N.Y.), a member of the Senate Democratic leadership.

Unions opposing the trade deals cheered the move. “For those of us who want to have a progressive trade agenda, it means that we’re encouraged,” said Larry Cohen, head of the Communications Workers of America, one of the most vocal unions criticizing the current trade negotiations.

Celeste Drake, a trade-policy specialist with the AFL-CIO, a union confederation, said Mr. Reid’s comments offered “a great opportunity to get off the fast track to bad trade deals and open the policy window to a better deal for workers.”

Fast-track authority, which would require lawmakers to vote on trade deals with limited procedural hurdles and no opportunity to make changes, expired in 2007 and hasn’t since been renewed.

Until now, the top Senate Democrat had avoided publicly disagreeing with the White House on trade legislation. On Wednesday, he said he made clear the depth of his opposition to Senate Finance Chairman Max Baucus (D., Mont.), who recently unveiled the fast-track bill, and Sen. Ron Wyden (D., Ore.), who is presumed to become chairman of the committee if Mr. Baucus is confirmed as the next U.S. ambassador to China.

Mr. Wyden has also expressed concerns about the existing fast-track bill and thinks it needs to be rewritten, an aide said. An aide to Ways and Means Chairman Dave Camp said the Michigan Republican, who would be in charge of such a bill in the House, would like to have bipartisan support before moving legislation.

—Mitsuru Obe in Tokyo contributed to this article.

Write to Siobhan Hughes at siobhan.hughes@wsj.com and William Mauldin at william.mauldin@wsj.com