Who Is Really Trying to Rewrite the Rules for Trade?

May 5, 2015 Issues: Trade

President Barack Obama regularly warns that if Congress doesn’t approve fast-track legislation to grease the way for his ambitious Asian trade agenda, then China would wind up writing trade rules in the region to the disadvantage of U.S. workers and businesses.

Republicans have picked up on the trope, including such notable conservatives asTexas Sen. Ted Cruz, as did Washington Post columnist Robert Samuelson.

Trouble is, there’s little evidence that China has any interest—or ability—to write such rules and have any other countries adopt them. For the most part, China follows the U.S. lead on trade policy.

When the Asia-Pacific Economic Cooperation forum met in Beijing last fall, for instance, Beijing’s big trade idea was to push a vague Free Trade Area of the Asia Pacific—an idea that the U.S. had championed earlier. (The U.S. managed to get the FTAAP sidelined this time because it worried FTAAP could interfere with concluding the 12-nation Trans-Pacific Partnership.)

But there is actually a major power center looking to write very different rules of trade:  liberals in Mr. Obama’s Democratic party and their allies in consumer and environmental groups.

In April, House Rep. Sander Levin (D., Mich.) introduced a bill that would present a very different direction for U.S. trade policy. The “Right Track for the Trans-Pacific Partnership Act of 2015,” called for a deal that would crack down on currency manipulation, toughen enforcement of labor and environmental standards and ease intellectual-property protection to make sure new medicines are more widely available.

The Democratic alternative would also vastly weaken arbitration panels that investors in TPP nations can use to challenge domestic laws. Liberal Democrats and others argue that such panels give companies a way to bypass courts and attack domestic regulation.

The U.S. has pushed such arbitration panels as a way to make sure U.S. companies didn’t get trapped in corrupt, unfair legal systems in developing nations. Brandeis University economist Peter Petri said that China lines up with the administration on wanting a strong arbitration system. “China is becoming more an important international investor sometimes in places where there isn’t a strong domestic court system or one that won’t discriminate against outsiders,” he said.

The Levin bill had a short shelf-life. Ways and Means Committee Chairman Paul Ryan, (R., Wis.)  quickly blocked a vote on the measure. But trade remains a populist issue and Mr. Levin’s ideas for rewriting trade rules could surface again as the U.S. and other nations struggle with changes wrought by globalization.

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