This week, the Senate will vote on whether to grant Obama “fast track” authority to negotiate the TPP agreement, which involves a dozen countries around the Pacific and could impact 40 percent of U.S. trade.
If the “fast track” framework passes, Congress would hold only an up-or-down vote on the TPP once it is finalized, without amendments. But Congress could also repeal that fast track authority if the TPP is not to its liking, and try to push changes to it, before any final vote.
Warren has previously claimed that the TPP’s controversial Investor-State Dispute Settlement provision, or ISDS, could undermine or chill public interest regulations in the U.S. and other participating countries, and could even undercut Dodd Frank financial reform, one of Obama’s signature achievements. The ISDS is designed to create a neutral international arbitration mechanism that creates a stable legal environment, facilitating investments in countries where investors might fear unfair legal treatment by foreign governments. Obama has strongly rejected Warren’s arguments in the interview with Yahoo and elsewhere.
I spoke to Senator Warren about their disagreements. A lightly edited and condensed transcript follows.
THE PLUM LINE: What’s your response to the latest from President Obama?
SENATOR WARREN: The president said in his Nike speech that he’s confident that when people read the agreement for themselves, that they’ll see it’s a great deal. But the president won’t actually let people read the agreement for themselves. It’s classified.
PLUM LINE: But don’t you get 60 days to review it after the deal is finalized, with the authority to revoke fast track?
WARREN: The president has committed only to letting the public see this deal after Congress votes to authorize fast track. At that point it will be impossible for us to amend the agreement or to block any part of it without tanking the whole TPP. The TPP is basically done. If the president is so confident it’s a good deal, he should declassify the text and let people see it before asking Congress to tie its hands on fixing it.
PLUM LINE: Doesn’t the current framework allow for the revocation of fast track authority?
WARREN: The whole point about fast track is to grease the skids so that 51 votes will get it through…it takes a majority to get rid of [fast track].
PLUM LINE: The push-back from the administration is that the ISDS will be written in such a way that there is no authority to override Congressional [and other countries’] regulations.
WARREN: If the president has changed ISDS to solve the problem, then the text should be released so that legal experts can look at it.
PLUM LINE: Is there a scenario under which ISDS could be written the way he says it is being written?
WARREN: I’ve sat with many legal scholars to talk about this issue, and I have not seen a draft that would do what the president says he has already accomplished….Hillary Clinton in her book raised concerns about precisely this issue. Just last week, some of the top legal and economic minds in this country, including the president’s mentor from Harvard, Laurence Tribe, and Nobel-prize-winning economist Joe Stiglitz, raised exactly this concern.
PLUM LINE: Is it theoretically possible to write ISDS in a way that precludes it from overriding regulation?
WARREN: It doesn’t directly tell countries to repeal regulations. It imposes a financial penalty, which has caused countries to change their regulations…[ISDS mechanisms] never had the authority to override regulations. What they had was the authority to impose a monetary penalty directly against the government and its taxpayers. That’s the point at which governments have backed up and said, “we can’t afford this, we’ll just change the law.”
PLUM LINE: You can’t envision even in theory a way to structure ISDS that would assuage your concerns?
WARREN: Once a group of independent arbiters, whose decisions cannot be appealed, can issue a money judgment of any size, then the ISDS problem arises….Here’s what you could do. If corporations had to go through the same procedures that anyone else has to go through to get the trade deal enforced, then the problem wouldn’t exist.
Now, if a labor union says, ‘Vietnam promised not to work people for a couple of dollars a day, and to raise working conditions, and then failed to do it,” they have to get the U.S. government, through the trade rules, to go to Vietnam and prosecute the case. If corporations had to do the same thing, then it would be a level playing field…ISDS gives a special break to giant corporations, a break that nobody else gets.
PLUM LINE: What you’re arguing is that six years of fast track, plus ISDS, could ultimately result in the weakening of financial regulations? You’re not saying ISDS itself would do that?
WARREN: Absolutely right…six years means that whatever the Obama administration has committed to won’t bind the next president. If that president wants to negotiate a trade deal that undercuts Dodd Frank, it will be very hard to stop it.
PLUM LINE: Couldn’t a Republican president simply go straight at Dodd Frank? Would this be any easier than that?
WARREN: Absolutely. Because trade will be fast tracked for six years….A direct run at Dodd Frank potentially takes 60 votes in the U.S. Senate. But doing it through trade authority needs to be done with 51 votes.
PLUM LINE: But wouldn’t that require a direct change to U.S. legislation?
WARREN: It’s possible to punch holes in Dodd Frank without directly repealing it. For example, harmonization of the capital standards and leverage ratios could be adjusted to help the big banks without ever directly contradicting Dodd Frank. But the effects of Dodd Frank would be severely undercut.
PLUM LINE: Is there no scenario under which you ultimately support TPP?
WARREN: Trade deals matter…I am worried about key parts of this trade agreement. I would like to see changes. I believe in trade.
I understand that we want to be a nation that trades, that trade creates many benefits for us. But only if done on terms that strengthen the American economy and American worker. I should say the American family, because that’s what this is really about.
UPDATE: In case it’s not clear enough from our exchange, in a recent speech, Senator Warren went into more detail about why six years of fast track authority could put Dodd Frank at risk under a future Republican president:
“In the next few weeks, Congress will decide whether to give the President Fast Track authority. That authority would prevent Congress from amending trade deals and reduce its ability to block trade deals — not just for the upcoming transpacific trade deal, but for ANY trade deal cut by ANY president over the next six years…“This is a long-term problem — a six-year problem, if Fast Track passes. A Republican President could easily use a future trade deal to override our domestic financial rules. And this is hardly a hypothetical possibility: We are already deep into negotiations with the European Union on a trade agreement and big banks on both sides of the Atlantic are gearing up to use that agreement to water down financial regulations. A six-year Fast Track bill is the missing link they need to make that happen.”