On their annual pilgrimage to Silicon Valley, a group of moderate congressional Democrats got an earful recently from some of the tech industry’s most powerful players about why they should support President Obama’s Pacific Rim trade accord.
During stops at Apple, Cisco Systems and GoPro, among others, members of the New Democrat Coalition heard from frustrated tech executives who pleaded with them to help boost global growth and demanded to know why the president’s party was not lining up behind his trade push.
“They were obviously perplexed that trade has become so contentious and so difficult,” said Rep. Ron Kind (D-Wis.), chairman of the congressional coalition.
The emerging support for Obama’s trade initiative in Silicon Valley, a liberal-leaning enclave of cutting-edge businesses, stands in sharp contrast to the fierce opposition from the labor unions that represent the working-class heart of the Democratic Party. The tension reflects mounting anxiety within the party over the nation’s widening income gap and a fear that the trade deal will produce a clear set of winners and losers among U.S. industries.
In making his case for the sweeping, 12-nation Trans-Pacific Partnership (TPP), Obama has sought to reframe the debate, away from a narrow focus on traditional manufacturing jobs to encompass sectors that are ascendant and, in his view, critical to maintaining the United States’ competitive edge in an increasingly interconnected and high-tech global economy.
But the president has run into staunch resistance from his own party, threatening to derail the trade deal, which Obama has made a legacy priority of his second term. The White House also regards the TPP as an important tool in confronting a rising China, because it would shift more U.S. attention to the fast-growing Asia-Pacific region.
The argument between the president and progressive Democrats has gotten barbed and personal, and only a small fraction of House Democrats — about 17 so far — have said they will support the fast-track trade legislation, which was narrowly approved by the Senate last month.
Congressional aides said Obama will have to deliver at least 25 Democrats to ensure passage in the House next week, and both sides are digging in for a showdown.
During their meetings in Silicon Valley, the Democratic lawmakers explained to the tech executives that “the voices of opposition are well organized and very loud and in-your-face,” said Kind, who supports the trade deal.
Opponents of the pact contend that the White House has placed the interests of big business ahead of the concerns of blue-collar workers in traditional sectors.
Administration officials reject that argument and insist that they are committed to reducing tariffs for U.S. producers of rice, beef, poultry and automobiles, whose employees stand to gain from increased access to Asian markets. Obama, who has made narrowing the income gap a centerpiece of his economic policy, has promised high-standard labor and environmental protections in the deal.
But the TPP also aims to strengthen patents for pharmaceutical, financial and information technology companies, extend copyrights for entertainment studios, and safeguard the free flow of data across borders for Internet and software firms. It is in those areas, independent economists have said, that the TPP could have the biggest impact in the United States.
“If we are going to capture the future, then we’ve got to open up markets to the kinds of things that we’re really good at, that can’t be duplicated overseas,” Obama said at the Fairfax Chamber of Commerce in April. “We’re good at innovation. Were good at services. We can create things that other countries can’t create.”
He acknowledged that low-wage manufacturing jobs have been moved overseas and, in many cases, are not coming back. “That ship has sailed,” he said. “What we can do is compete for the high end, where we’re adding value . . . where it’s IT, it’s talent, it’s innovation. That’s the kind of stuff that we can sell all around the world.”
For decades, Democrats have pitched a manufacturing revival as the key to lifting millions more workers into the middle class. In recent months, though, some of the party’s leading economic thinkers have conceded that may not be true, because manufacturing employment is receding around the world as factories become more automated.
Over the past decade, high-tech industries and those that rely heavily on intellectual property have dramatically outperformed traditional manufacturing, Labor Department statistics show. From 2002 to 2012, the combined economic output of Hollywood and “high-tech” industries – including pharmaceutical production, engineering services, and computer and aerospace manufacturing – grew by 30 percent, after adjusting for inflation. Traditional manufacturing shrank by 1.1 percent.
Not surprisingly, Hollywood, another bastion of support for liberal causes, has rallied to Obama’s trade agenda. The Motion Picture Association of America has highlighted the benefits of the TPP at the top of its Web site’s home page, and the association’s chairman, former senator Christopher J. Dodd (D-Conn.), has written two letters to Congress in support of the deal.
Dan Glickman, who preceded Dodd at the association, said the Internet has disrupted distribution models of the entertainment industry, which is concerned about online piracy in China and Europe. Though China is not involved in the TPP, the administration has sought to use the deal to pressure Beijing to begin playing by an international order set by the United States. (The Obama administration is pursuing a separate trade treaty in Europe with similar provisions.)
But Glickman, a former Democratic congressman from Kansas who served as agriculture secretary in Bill Clinton’s administration, added that the “politics of older industries creates a defensive model to preserve the status quo.”
Glickman said that “newer industries accept the need for openness” of international markets, but he acknowledged that the politics of trade have gotten more difficult since the North American Free Trade Agreement became effective in 1994. Organized labor has blamed that agreement, signed by Clinton, for the loss of hundreds of thousands of manufacturing jobs.
“The real thing that motivates you in politics is intensity,” Glickman said. “The men and women in Silicon Valley and in Los Angeles might care very much, but they do not express it as intently as those who are against it.”
In mid-April, 30 chief executives from tech companies, including Cisco Systems, Oracle and AT&T, flew to Washington to meet with more than 40 members of Congress and voice their support for the deal, said Mike Ward, a lobbyist for TechNet, which represents many of the industry’s largest firms.
Ward said the digital economy has grown immeasurably since the last time Congress approved fast-track trade promotion authority — for George W. Bush in 2002.
“That was before the iPhone existed,” Ward said. “The digital economy is now fundamentally different.”
Provisions in the TPP would restrict nations from requiring Internet companies in the United States to house data servers in foreign countries to do business there and would limit the countries from restricting the flow of information across borders.
As low-end manufacturing has moved abroad during the past half-century, the United States has shifted its production focus “into areas we do best,” said Peter Petri, a pro-trade economics professor at Brandeis University. “We’ve switched very heavily toward service, toward data. The wonderful new American companies in Silicon Valley are all about data. We have a disproportionate interest in these new rules.”
Even in Silicon Valley, however, the trade debate has proved divisive. Although the influential Silicon Valley Leadership Group — which represents 390 companies, including Facebook, Google and Microsoft — has lobbied in favor of the fast-track trade legislation, a group of 250 smaller tech companies signed onto a letter of opposition promoted by the Electronic Frontier Foundation (EFF).
They fear that the deal will cement overly restrictive intellectual-property protections on the Internet across the globe, transferring liability to ordinary consumers at home and abroad. Medical service providers, including Doctors Without Borders, have raised objections over patent provisions that they say will make access to lifesaving pharmaceutical drugs difficult for poorer countries.
“Obama is listening to those companies who say, ‘This is what we need to promote U.S. digital economies,’” said Maira Sutton, a policy analyst at EFF. “The problem is that users and smaller tech companies do not have the same amount of influence in the capital as those entrenched industries.”
The tone of the debate has frustrated White House allies who insist that the trade deal does not represent a zero-sum game. Simon Rosenberg, founder of NDN, a liberal think tank, said the progressive argument that the interests of workers have been in a steady decline because of free trade agreements and “corporatist” policies over the past 30 years isn’t entirely accurate.
“Median income soared under Bill Clinton,” Rosenberg said, “and wages have started to rise under President Obama. What this suggests is that while globalization may be inevitable, the struggle of American workers in a new, more competitive age isn’t. In the future, critics of trade would be wise to focus far more on steps we can take to ensure more of our people succeed than in cutting America off from a fast-changing world.”
Jim Tankersley contributed to this report.