June 22, 2015
The Trans-Pacific Partnership (“TPP”), which is designed to reduce various trade barriers between the United States and eleven Pacific Rim nations—Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam—hangs by a thread in the United States Congress. The immediate question is not the ratification of any future treaty. Rather, it is over whether the President should receive “fast-track” authority to negotiate a treaty on behalf of the United States, over which the Congress can exercise only an up-or-down vote, with no amendments allowed, after a maximum of 20 hours of debate.
Passing the fast-track measure, which is supported by the Republicans and President Obama, would be a win for free trade. But anti-trade forces, including Hillary Clinton and Nancy Pelosi, are conspiring against it.
From a game theory approach, fast-track is a good solution to a complex two-stage bargaining game. At stage one, the President and his trading partners are well aware of the prospect that the Congress could turn down a trade treaty if it is perceived, no questions asked, to put the United States in a worse position. So Congress will agree to a treaty that is better than the status quo ante for the U.S., but not so one-sided that it will drive our potential trading partners away. Hence, a stage one agreement will leave everyone better off.
Read the full article at the Hoover Institute: Hillary Clinton VS. Free Trade