Fighting the secret plot to make the world richer

PRESIDENT BARACK OBAMA is itching to sign one of the biggest trade deals in American history. The Trans-Pacific Partnership (TPP) would link 11 economies of the Pacific rim—including Japan and Singapore—with America. These 12 countries together account for 40% of world GDP and one-third of trade (see chart 1). As well as dismantling tariff barriers, the TPP is meant to tackle tough issues such as intellectual property, labour and environmental standards. American trade negotiators predict that by 2025 the TPP will make the world $220 billion a year richer.

Many Democrats, however, fiercely oppose it. Sandy Levin, a Democratic congressman, growls that he is “out to defeat” Mr Obama’s plans. Hillary Clinton has conspicuously withheld her endorsement. Labour unions hate the TPP. If it passes, it will be because Republicans in Congress, for once, back Mr Obama.

The geopolitical aspects of the deal are hardly controversial. Friendly ties with Asian allies are obviously important. China has been flexing its military muscles over disputed islands and is trying to build up regional influence with projects such as the Asian Infrastructure Investment Bank, of which America is not a part. The TPP could help America retain its sway in Asia, boosters argue. If the 12 TPP countries plump for common trade standards (for instance, mutual recognition of regulatory approval processes in medical services), then those rules—not China’s—could function in effect as global ones, given the fat chunk of world GDP they would govern.

Congressional Republicans and Mr Obama argue that by boosting exports, the deal would make America richer. Jason Furman, the chairman of the president’s Council of Economic Advisers, says that by 2025 the TPP would raise American incomes by 0.4% per year. Public support for foreign trade is high. Gallup finds that 58% of Americans see it mostly as an opportunity—a figure that has risen 17 percentage points since the recession—and only 33% see it as a threat. Republicans’ views have not changed much, but the proportion of Democratic voters who see trade positively has shot up from 36% to 61% since 2008 (see chart 2). This may be because Democrats are more likely to be in jobs that benefit from globalisation, or it may simply be because there is now a Democrat in the White House pushing trade deals instead of a Republican.

Nonetheless, opposition to the deal is strong. Democratic politicians are much less trade-friendly than Democratic voters or the country as a whole. Many fret that imports from low-cost countries such as Vietnam will hurt American workers in industries such as carmaking and textiles.

This is not a foolish worry. Globalisation has filled people’s shopping trolleys with cheaper, better goods: the US Chamber of Commerce estimates that imports boost the average American family’s purchasing power by $10,000 a year. However, trade has probably also held down blue-collar workers’ wages in rich countries. A new paper, from Ann Harrison of the University of Pennsylvania and colleagues finds that if there had been no imports, median real wages in America in 2008 would have been 3% higher than they actually were. For workers in menial tasks, they would have been 15% higher. Another paper found that a quarter of the employment decline in American manufacturing from 1990 to 2007 was caused by competition from Chinese imports.

Yet it is difficult to blame trade deals for this. America has no free-trade agreement with India, yet imports of goods from there have more than doubled over the past decade. Though many Democrats see NAFTA, a deal with Canada and Mexico that Bill Clinton signed in 1993, as a disaster for America’s workers, the consensus among economists is that it did not have much effect on the labour market. The effects of the latest deal are unlikely to be very different. What is more, thanks to pressure from Democrats, any trade deal would also include extra “trade-adjustment assistance”: ie, help for those whose jobs may be threatened by it.

Barack Obama, corporate shill?

This will not reassure everyone. The TPP is big—there are nearly 30 chapters—and since large chunks of the negotiations are kept secret, many worry that American workers, human rights and the environment will soon be at the mercy of the “global corporate agenda” that Mr Obama somehow represents. Many of these concerns are overblown. In TPP negotiations America is pursuing provisions similar to the “May 10th Agreement”, a deal which included workers’ rights and has appeared in other American trade pacts.

Other parts of the TPP will irk greens. In recent months America seems to have softened its language on the environment, possibly to win over poorer trading partners. Mr Levin complains that the TPP “does not address whether or how climate-change issues should be handled”.

The TPP might not be so controversial if talks were conducted openly. Jeffrey Schott of the Peterson Institute, a think-tank, argues that although negotiators need input from those who will be affected—including businesses and trade unions—making the negotiations public might make it difficult to balance the demands of competing interest groups. However, secrecy may now be so strict that it ends up irritating everyone. In an attempt to make the plan stick, senior Democrats say that a final trade agreement must be subject to public consultation before Congress votes.

Many Democrats also grumble that the TPP says little about “currency manipulation”, by which countries deliberately hold down their currencies to boost exports. According to a paper from the Peterson Institute, currency manipulation may be responsible for half of America’s “excess unemployment” (joblessness above what economists call “full employment”). Among the countries the paper designates as “currency manipulators” are Japan and Singapore. Some simple, even lax, rules on currency manipulation would appease many of the sceptics, though such manipulation is fiendishly hard to define.

Economists worry that cluttering up trade pacts with rules about labour, greenery and currencies dilutes the benefits of free trade and gives its opponents extra tools to block the deals entirely. However, there is scant chance of getting any deal through Congress without such sweeteners. On April 16th congressional leaders settled on a bill to give Mr Obama “Trade Promotion Authority” (TPA), also known as “fast track”. This is very important: if the bill passes, it would allow the president to negotiate a deal and then submit it to Congress for a yes-or-no vote, with no amendments. Without this power, it is hard for Mr Obama to make credible promises, since Congress could shred them later. Past deals have nearly always been negotiated using fast track, which expired in 2007.

Mr Obama’s ability to conclude TPP and an even bigger proposed pact with Europe, the Transatlantic Trade and Investment Partnership, hinges on him getting fast-track authority. Most Republicans in Congress, where they hold a majority in both chambers, are likely to support him—they believe in free trade and are keen to show that they can govern. But both TPA and TPP will need a few Democratic votes to pass. And with so many Democrats in Congress, not to mention darlings of the left such as Elizabeth Warren, either anti-trade or seeking to build a post-Obama identity, that is far from assured.