McConnell: Outlook ‘bleak’ for TPP this year

With help from Doug Palmer and Victoria Guida

MCCONNELL: ‘BLEAK’ OUTLOOK FOR TPP THIS YEAR: Senate Majority Leader Mitch McConnell has all but ruled out the possibility of Congress voting on the Trans-Pacific Partnership this year, but he said the deal could still be modified and put to a vote in 2017 or beyond.


“The biggest problem right now is the political environment to pass a trade bill is worse than any time I've been in the Senate because we're right in the middle of this presidential election year, [and] the candidates are all against what the president has negotiated,” the Kentucky Republican said in an interview with Agri-Pulse’s Open Mic.

But McConnell also said he had substantive problems with the agreement, focusing in particular on tobacco and pharmaceutical issues that Republicans have raised. “The good news is the deal does not go away. It's still there. It can be modified,” he said. “Trade promotion authority is for six years, so the next president will still have the authority under which they can negotiate a deal and send it up for an up-or-down vote.”

“So ... it looks bleak for this year,” McConnell said, adding he couldn’t make any guarantees about a Senate vote on the trade deal in the lame-duck session, as many supporters are hoping for. It’s understandable that President Barack Obama would want the deal to pass while he’s still in office, “but that's just a matter of bragging rights,” he added.

Turning to Cuba, McConnell said he knows many farmers favor ending the embargo. But he said he was “still not very happy” with Obama’s opening to the island and brushed off any chance of Congress voting to normalize relations with Cuba in 2016. “I don’t think that’s going to happen this year,” the majority leader said. To listen to the full interview, click here.

IT’S THURSDAY, MAY 5, and welcome to Morning Trade, where we suspect some of our dear readers might erroneously raise a margarita later tonight to toast Mexican independence rather than the actual significance of this date, which marks the outnumbered Mexican army’s improbable victory over the better-equipped French at the Battle of Puebla in 1862. Happy Cinco de Mayo! Got any trade news to share? Let us know: [email protected], [email protected], [email protected].

WATCHDOG: KORUS DEFICIT RAISES RED FLAG: Public Citizen's Global Trade Watch says Commerce Department data showing that the trade deficit with South Korea has grown by $16 billion since the deal went into effect in 2012 is a sign of what's to come under the TPP.

“[M]uch of the TPP text was literally cut and pasted from the Korea agreement, so to see what a disaster the Korea deal has been is a stark warning,” the group’s director, Lori Wallach, said in a statement Wednesday after the release of the data. “President Obama has repeatedly asked that the TPP not be judged against his predecessors’ failed trade deals, but now we can see the disastrous results from [his] signature trade package.”

The trade deficit with South Korea has increased more than with any other free trade partner, think tank Third Way found in a recent report. Public Citizen says that a comparison of the periods from April 2011 to March 2012 and April 2015 to March 2016 shows that average monthly exports to South Korea have fallen in 11 of the 15 most commercially important sectors. Those include a nearly 23 percent drop in machinery and an almost 7 percent decrease in electronics, which together make up about 30 percent of all U.S. sales to the country.

Agricultural exports to South Korea have fallen 19 percent, or $1.4 billion, while agricultural imports from the country have grown 34 percent, or $123 million.

ADMIN PAINTS A DIFFERENT PICTURE: But the Office of the U.S. Trade Representative has put forward data that show the deficit could have been larger without the free trade deal. South Korean imports of goods from the U.S. were down by just under 3 percent, according to the country’s statistics, compared to imports from Japan, which were down almost 15 percent; imports from the EU, down 8.4 percent; and imports from Australia, down 19.4 percent, USTR said in a fact sheet earlier this year.

At the same time, the U.S. share of South Korea’s imports has risen from a pre-FTA level of 8.5 percent to slightly over 10 percent in 2015, it added.

The agency also said exports of U.S. goods and services to South Korea overall were up by just over 1 percent between 2014 and 2015, driven by mostly services exports, which increased more than 8 percent.

Commerce Secretary Penny Pritzker also took a positive view of the figures, saying the data indicated “encouraging signs” of improvement for the U.S. trade deficit in the first quarter — and that trade deals like the TPP would further the trend.

“It is critical that this agreement enters into force as quickly as possible so that U.S. exports can continue to drive economic growth and job creation around the country,” Pritzker said in a statement. She added: “Since 2009, U.S. goods exports to FTA partners have grown faster (53 percent) than our exports to the rest of the world (34 percent).”

Read the Commerce Department’s data here: http://1.usa.gov/189Huwp.

THREE AMIGOS SUMMIT DATE SET: President Obama, Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto will meet in Ottawa on June 29 for the North American leaders summit, the White House announced Wednesday.

Obama will address a joint session of the Canadian Parliament, where he likely will urge approval of the TPP, which includes the three NAFTA countries, Japan and eight other countries in the fast-growing Pacific Rim region.

"The summit is further recognition of the value of a more integrated North America to advance the security and prosperity of the continent," the White House said in a statement. "It also highlights the importance of continuing to strengthen the bilateral and trilateral ties between United States, Canada and Mexico.”

PELOSI LEADS DELEGATION ON TPP LATIN AMERICA TRIP: Meanwhile, House Minority Leader Nancy Pelosi is with a bipartisan delegation of lawmakers in Chile this morning on the last leg of a trip to three TPP countries in Latin America. The group began Sunday in Mexico, where they met with Peña Nieto and other senior officials to discuss the TPP as well as security, migration and human rights concerns.

“We underscored the economic benefits to both of our countries of an integrated economy in North America and discussed the Mexican government’s recently proposed labor reforms,” Pelosi said in a statement after meeting the president. Later, at a press conference, the California Democrat urged the Mexican people not to worry too much about Trump. “This election will come and go, and so will Donald Trump,” she said.

The group, which met with Peruvian Prime Minister Pedro Cateriano on Wednesday, includes four lawmakers who voted for trade promotion authority: Reps. Richard Hanna (R-N.Y.), Texas Democrats Henry Cuellar and Beto O’Rourke; and Michael Fitzpatrick (R-Pa.). It also includes seven who did not: California Democrats Pelosi, Lucille Roybal-Allar, Linda Sanchez, Peter Aguilar and Norma Torres, and Michelle Lujan-Grisham (D-N.M.) and Ruben Gallego (D-Ariz.). The lawmakers are expected to meet with Chilean President Michelle Bachelet in Santiago.

ARGENTINE AMBASSADOR: MERCOSUR FLAWED: In other Latin American news, Argentina’s ambassador to the United States, Martín Lousteau, was candid about the limitations of the Mercosur agreement between his country, Brazil, Uruguay, Paraguay and Venezuela at this week’s annual Council of the Americas meeting at the State Department.

“I think we put the bar for ourselves too high when we did a customs union,” Lousteau said, referring to the unachieved goal of creating a common market along the lines of the European Union. Argentina’s reform-minded new president, Mauricio Macri, has moved quickly to improve the country’s badly damaged trade reputation, but Lousteau cautioned against expecting big changes within Mercosur too quickly given the political and economic turmoil in Brazil.

“I think it’s very important at this moment that Mercosur remain united,” Lousteau said. Still, “not only in Argentina, but also in Brazil, you start to see signs of more openness in terms of Mercosur finally putting on the proposal to the European Union for a trade agreement. And I hope that the Europeans are as open as we want them to be,” he said, referring to recent activity in long-stalled talks between the EU and Mercosur on a trade pact.

OMBUDSMAN V. OMBUDSMAN: European Ombudsman Emily O’Reilly isn’t resting on the assurances of the European Commission that the newly created watchdog for the U.S.-EU “Privacy Shield” agreement won’t be a toothless position, POLITICO Europe’s Joanna Plucinska writes.

This week, O’Reilly sent a second letter to EU Justice, Consumers and Gender Equality Commissioner Vera Jourová repeating her fears that the Privacy Shield ombudsperson, who is the European citizens’ go-to person for concerns about EU-U.S. data transfers under the agreement, could suffer from conflicts of interest as a member of the U.S. State Department.

“The Decision does not contain any procedural rules aimed at preventing conflicts of interest as regards selecting and appointing the Ombudsperson,” O’Reilly writes. “Given ... the Ombudsperson’s obligation to report to the Secretary of State, it could be argued that this does not provide for the necessary distance from the intelligence community that is required for the body to act in an independent manner.”

O’Reilly initially raised concerns about the ombudsperson’s independence in a letter to Jourová on Feb. 22, Plucinska writes. The EU commissioner replied last month that the privacy shield ombudsperson’s role might not fit into a traditional definition of a watchdog, but that Secretary of State John Kerry handpicked Undersecretary of State Catherine Novelli for the job, and that she will be sufficiently independent from the U.S. intelligence community.

INTERNATIONAL OVERNIGHT

Thirteen industry groups representing Amazon, Uber, Apple, Facebook and other major tech companies are urging the next president to support the TPP and make it easier to hire foreign high-tech workers, says Fortune: http://for.tn/24z1kdv.

Google search results for TTIP have overtaken those for TPP, Breitbart reports: http://bit.ly/1UAgIDB.

German Chancellor Angela Merkel says she’ll do everything she can to complete the U.S.-EU trade deal, says Reuters: http://reut.rs/1OeZ9lO.

Still, the majority of Germans oppose TTIP, Deutsche Welle reports: http://bit.ly/1T2Aict.

A New Zealand legislative committee has approved the TPP, Radio New Zealand reports: http://bit.ly/24yWQU8.

Canadian Prime Minister Trudeau is downplaying concerns over the protectionist trade talk in the U.S. presidential campaign, The Toronto Star says: http://on.thestar.com/1rvPgvl.

Global consulting firm A.T. Kearney released its annual Foreign Direct Investment Confidence Index., which ranked the U.S. as the top destination for foreign direct investment for the fourth consecutive year. No. 2 on the list: China: http://bit.ly/1UvN9mP.

Meanwhile, Singapore has been named the 10th best nation for FDI, jumping ahead of economies such as Switzerland and Sweden, Singapore Business Review says: http://bit.ly/26Vmzbw.

Hawaii’s legislature passed a prohibition on the sale of parts and products from 17 endangered species, as well as of ivory; Maui Now reports the ban would be the largest of its kind in the United States if signed by Gov. David Ige: http://bit.ly/1NkiK9s.

ICYMI: The British Parliament’s upper house has released a report saying it could take almost a decade to untangle the United Kingdom from the EU if it votes to leave the bloc June 23: http://bit.ly/23qyxW1.

THAT'S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: [email protected] and @ABehsudi; [email protected] and @vtg2; [email protected] and @tradereporter; [email protected] and @mjkorade; and [email protected] and @JsonHuffman. You can also follow @POLITICOPro and @Morning_Trade.

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