Setback is Not a Defeat for TPP

The main legislative hurdle to granting Obama Trade Promotion Authority (fast-track) was understood to be in the House of Representatives. This makes the defeat on a procedural vote in the Senate all the more surprising. The minority leader of the Senate (Reid) and one of the leaders of the left-wing of the Democratic Party (Warren) were vocally opposed. However, the defeat little to do with their protests. 

Indeed, a post-mortem analysis suggests that the Senate will likely grant Obama that trade-promotion authority (TPA) in early June. Sixty votes were needed for cloture, but it only received 52.  This includes Republican leader McConnell's vote switch to no to preserve his procedural ability to resurrect the issue later.

There are ten Democrat Senators that favored TPA, but only one voted for the motion.  The Democrats want to link trade authority with three other measures:  1) a program to assist workers that are displaced by globalization; 2) strengthen the response to unfair trade practices; and 3) toughen currency market manipulation retaliation.  The first measure is standard fare and something similar was adopted with NAFTA in 1993.  The second is not very controversial, and in any event, constrained by WTO obligations 

The third one is the most controversial. The obvious solution is to de-couple the currency manipulation component and vote again.  This, or something like this, will probably be the work around.  The more formidable challenge will come from the House.  

Obama's challenges are similar but different from those faced by Clinton in pushing through NAFTA in 1993.  Both worked closely with the Republican Party and managed to secure support for a small minority of their own Democrat Party.  A key difference was that the NAFTA vote took place early in the Clinton presidency, and it is taking place late in Obama's when the presidential power to punish enemies and reward friends considerable diminishes.  

NAFTA was passed by a 234-200 vote in the House and a 61-38 vote in the Senate.  Trade promotion authority for Obama is likely to pass the Senate by a similar margin.  The vote in the House currently looks like it could be decided by less than a handful of votes.  

The purpose here is not to evaluate the merits of the TPA or the TPP.   It is meant to explain to investors, for whom it is important one way or the other, that the failure to deliver 60  votes for cloture is not the end of the issue.  The procedural issue seems surmountable.  The setback is more embarrassing than substantive.    The more trying challenge will in the House of Representatives when the opposition may be encouraged by what happened in the Senate.