International negotiations are inherently tricky. They require two levels of negotiation: international and domestic. Negotiations become even trickier between democracies, illustrated by Japan and the United States, since negotiators cannot guarantee that their domestic legislative bodies, held accountable by their voters, will approve the commitments made in the international phase of negotiations. Overcoming this hurdle is a critical step toward meaningful outcomes that benefit all countries involved in a negotiation. The Trans-Pacific Partnership (TPP) is at the cusp of such a critical step. It is therefore vital for the US House of Representative to approve Trade Promotion Authority (TPA). If TPA is defeated, Robert D. Putnam’s logic of two-level games predicts that the United States will find itself lacking negotiating credibility in the fastest-growing region of the global economy.
Despite naysayers who claim few payoffs exist, the TPP is designed to create economic gains for every country involved by opening protected domestic markets, ending discrimination against foreign products, and harmonizing best business practices within the Asia-Pacific region. These gains, however, are realized only when individual countries are able to offer politically difficult concessions that benefit the domestic economy overall, but may pain a few individual groups and politicians. These reforms spur productivity gains at home and “buy” reform commitments abroad that benefit domestic firms that export and invest in the partner countries. For example, if the Canadians are willing to expend the political capital needed to reduce tariffs on dairy imports, exporters from both Chile and New Zealand stand to gain increased market access. In return, Chile might be willing to improve its intellectual property standards, which help musicians, artists, and pharmaceutical companies in Canada as well as the United States. International trade negotiations thus “unlock” the gains from trade that would otherwise not be politically possible. This cycle can be considered the “first-level” of international negotiations, resulting in agreements that require countries to impose politically difficult costs on a small group of their citizens in order to realize larger overall gains for the rest (more on this below).
However, negotiators from democratic countries cannot fully commit to these promises. Domestic legislative bodies must approve any agreements made at the first level. This problem is particularly acute in the United States, where the executive and legislature are entirely separate; in parliamentary systems (where the executive is the head of the legislature) this hurdle is easier to overcome. Nonetheless, domestic political juggling becomes the “second level” of negotiations and, in many ways, a completely separate process. US negotiating partners, such as Japan, are well aware of the second level and insistently ask US negotiators, “How can you stick to your commitments once individual members of Congress get their hands on the agreement?” The US response is, “You are right, we can’t.” This dilemma gets at the core logic of “fast-track” authority, contained in TPA, to conclude the TPP and future agreements, such as the Transatlantic Trade and Investment Partnership (TTIP).
At its core, TPA requires Congress to vote up or down on any trade agreement submitted by the president.1 More specifically, members of Congress cannot amend the implementing legislation once tabled, unlike most legislation. This added constraint enables US negotiators to assure their Japanese counterparts that Congress is less likely to change the terms of an agreement reached in international bargaining. While this is not an iron-clad guarantee since such changes can still be made before the impending legislation is submitted, it provides additional assurances there will not be any large-scale changes to the negotiated deal. This logic explains Japan’s current position quite nicely: Before offering significant concessions on agricultural market access, Japan is waiting to see whether Congress finally passes TPA. If not, why would Japanese negotiators make serious commitments on agriculture if their US counterparts cannot credibly stick to their own commitments on automobiles and other manufactured goods?
The structure of the US Congress further complicates the second level of negotiations. It is no secret that politicians seek to maximize the gains of any legislation for their individual constituents. A House member from Chicago worries how an agreement might impact an auto parts plant in Chicago; but a senator from Illinois worries about the entire state—Peoria, the headquarters of Caterpillar, might gain, while the auto parts plant in Chicago might lose. Hence, House members typically look out for losing and gaining firms in their individual districts, while Senators take a broader view of the whole state, perhaps the whole nation, and place greater weight on widely dispersed benefits to individual households when they buy low-cost goods at Target or Walmart. In policy jargon, House members have an incentive to pursue “particularism,” or policies that might harm or benefit their small group of constituents but not the whole state or nation.
Trade agreements, put simply, almost always benefit the economy as a whole—but in a dispersed manner—at the expense of a few specific firms and workers—in a concentrated way. Economic calculations show that benefits exceed costs by a very large multiple—more than 10 to 1—but the benefits are dispersed and the costs are concentrated. For example, cheaper low-end textiles imported from Malaysia will benefit all fashion designers across the country and all shoppers at Gap, Zara, and multiple other retailers, but domestic clothing and apparel firms in a few politically influential congressional districts might lose market share. This creates an incentive for those individual members of Congress to alter agreements in ways that hurt the nation as a whole. TPA sets forth broad objectives that Congress expects to see in the TPP and other agreements but prevents members from adding provisions designed exclusively for their home districts in the final TPP agreement.
Failure of the House to approve the TPA would have two clear negative consequences. It will reduce the overall “win-set” of a potential agreement and will hobble US negotiators in making credible commitments to their trading partners. Conversely, approving TPA would overcome these political dilemmas and send a strong, credible signal of US commitment to further engagement with the Asia Pacific.
Putnam, Robert D. 1988. Diplomacy and Domestic Politics: The Logic of Two-Level Games. International Organization 41, no. 3: 427–60.