Why Corporations Are Freaking Out About Obama's Big Trade Deal

Why Corporations Are Freaking Out About Obama's Big Trade Deal

WASHINGTON -- Steve Biegun is not exactly a left-wing radical. During the Bush years, he served as an adviser to Secretary of State Condoleeza Rice and Senate Majority Leader Bill Frist, a Republican from Tennessee. When John McCain named Sarah Palin as his presidential running mate in 2008, the campaign brought on Biegun to help the new vice presidential contender bone up on conservative foreign policy.

But as the current head of Ford Motor Co.'s international lobbying operations, Biegun now finds himself allied with environmental activists, labor unions, and some of the most progressive Democrats in Congress -- all raising strong objections to President Barack Obama's proposed Trans-Pacific Partnership trade deal, or TPP.

"When I came here, we supported every trade agreement, and not a single one worked for us," Biegun told HuffPost in March. "I don't know how you ask somebody who puts in a hard day at an automotive plant to support a free trade agreement that allows another country to cheat them. Because that's what it is. It's cheating."

Biegun is talking about currency manipulation, particularly by Japan, the world's third-largest economy. By lowering the value of the yen, the Japanese government can make its own goods cheaper than those of international competitors, without harming the living standards of Japanese workers. Currency cleverness is a major reason why the U.S. exported a total of less than 50,000 cars to Japan during Obama's entire first term, even though Japan doesn't impose tariffs on U.S. vehicles. Without language to prevent currency manipulation, Ford won't support the TPP.

"Japanese companies make good cars," Biegun says. "But they're not that good."

It's not unusual for major corporations to wage trade battles in Washington. It's unusual for them to lose -- especially with backing from unions and a bipartisan congressional coalition that includes a majority of members of the president's own party. And a currency policy doesn't seem to be going anywhere. Rep. Sandy Levin (D-Mich.) the top Democrat on the House Ways and Means Committee -- the critical trade panel -- has prevented streamlining the TPP through Congress, based on currency considerations. And last week, Rep. Michael Michaud (D-Maine) sent a letter to the administration seeking action on currency manipulation. His office said he hasn't heard back, and doesn't expect to.

As Obama travels to Asia to shore up support for the TPP, something strange is happening on Capitol Hill. Business groups accustomed to winning in Washington are seeing their interests trumped by foreign policy considerations that at times appear confused or incoherent.

"Geopolitics is an overriding consideration in a lot of these things," says Biegun. "Do we want Japan to have a fully restructured and open economy that is beneficial to American exporters ... or do we just want Japan to know we love them by turning our automobile market into another form of foreign aid?"

Trade pacts are typically a hybrid of economic policy and state diplomacy. But the Obama administration's quest for the diplomatic symbolism of a TPP deal now seems increasingly divorced from its economic consequences.

It's not just a car thing. On Monday, 64 members of Congress sent a letter to the top U.S. trade negotiator urging him to get better TPP terms for American farmers, after Japanese media reports indicated that the U.S. would let Japan keep high tariffs on wheat and rice. U.S. agriculture is dominated by behemoths like Monsanto, Tyson and Cargill, but most of those companies work with smaller farmers in hundreds of congressional districts. As a result, the list of signatures on the letter spans the full House ideological spectrum, from liberal firebrand Rep. Alan Grayson (D-Fla.) to tea partier Rep. Steve King (R-Iowa).

"We are concerned Japan, a member of TPP, has not yet made a comprehensive offer on market access," the letter reads. "We now seek assurances from you that the U.S. will not close TPP negotiations ... unless Japan has agreed to eliminate tariff and non-tariff trade barriers to agriculture."

The Office of the U.S. Trade Representative told HuffPost it would respond to the members of Congress who wrote the agriculture letter, and referred questions about currency issues to the Treasury Department, which declined to comment.

For 25 years, conventional Washington wisdom has held that good diplomacy includes free trade deals like the North American Free Trade Agreement and the World Trade Organization treaties. These pacts, the thinking goes, discourage military conflict by making nations dependent on each other for economic prosperity, and by transferring economic power from governments to corporations.

This perspective isn't unique to Obama or to Democrats. Rep. Paul Ryan (R-Wis.) once helped shepherd a free trade pact with Bahrain through Congress, despite the country's notorious human rights abuses. Ryan's rationale was that expanding trade with the U.S. would encourage democracy in Bahrain.

"It's the carrot approach," Ryan said in 2009. "This is a way to help expand democratic capitalism, because through each of these trade agreements we require things like the rule of law and forcible contracts, women's rights, advancements towards openness, transparency and democracy."

Today, Bahrain remains a human rights hellhole, albeit one with tax-free access to U.S. markets. But a more frightening consequence of this foreign policy framework was raised in January, when Japanese Prime Minister Shinzo Abe addressed the World Economic Forum in Davos, Switzerland.

Abe compared the current relationship between China and Japan to the state of play between the U.K. and Germany in 1914, before the outbreak of World War I. In the case of the U.K. and Germany, Abe said, countries that had very deep economic ties ended up going to war with each other.

"The system we have now … has seen massive consolidation at almost every level," says Barry Lynn, a senior fellow at the nonpartisan New America Foundation. "When you go down the supply chain, you see massive consolidation, ... so if you have a physical disaster, a natural disaster, an epidemic or a political problem that breaks the flow of trade, then the whole system doesn't work."

In other words, international economic codependence may discourage some small conflicts. But the network of foes and allies doesn't guarantee peace in a crisis, and the web of trade relationships makes military conflicts and diplomatic standoffs more complex.

Under Obama, the U.S. has been more aggressive than under any other U.S. president about trade enforcement -- particularly with China, bringing multiple important cases before the WTO. And the administration has made no secret about making the TPP a central tenet of Obama's "Pivot to Asia," intended to counterbalance the economic and political power that China now exercises.

Meanwhile, a dispute between Japan and China over which nation should control a few uninhabited islands in the South China Sea has resurrected a mutual hostility that dates back to World War II. Japan is by far the biggest fish in the pond for TPP economic policy, with an annual economic output higher than every other country involved in the talks combined, excluding the U.S. With the China-Japan tensions unresolved, the Obama administration appears to be letting Japan get what it wants from TPP.

"You'll see the foreign policy community always applauding free trade agreements," Biegun says. "That should be a hint, it's not about trade. The foreign policy community is about giving gifts to other countries, helping friends and allies."

It's a dynamic familiar to progressive critics of Obama's negotiations with congressional Republicans, who say the president's eagerness to secure a bipartisan deal has made him unable to defend important policy priorities of the Democratic Party.

But for critics of the past quarter-century of trade policy, the current state of TPP talks is more frustrating. The administration seems to be doubling down on the foreign policy failures that helped fuel today's quagmire.

"All those people's livelihoods were traded away a generation ago for peace and prosperity," Lynn says. "But what has actually happened is that they have traded away peace and prosperity and taken us to the brink."

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