The Australian Financial Review
By Tom Switzer
Obama's failure to push the case for the Trans-Pacific Partnership will damage confidence in the export-led recovery and the nation's tilt to Asia.
In his State of the Union address, Barack Obama struck an optimistic, almost Reaganesque tone, declaring that after a long period of war and recession the United States has turned the page. The President sent a similar message in 2012, an election year, when he proclaimed that "America is back". But at no other point in his six-year presidency could such a claim be justly made as in 2015.
Consumer confidence is at its highest level and the budget deficit at its lowest since the subprime mortgage crisis in 2007. The US economy grew 5 per cent last quarter and unemployment has fallen to less than 6 per cent from 10 per cent at the nadir of the global financial downturn in 2009. (So much for the claim that the congressional-mandated sequester of spending cuts two years ago would lead to a recession.)
Add to this, sharply declining petrol prices and booming energy production, and it is no wonder Obama's job approval ratings are rising. According to a Washington Post/ABC survey, his approval rating stands at 50 per cent — about as high as Ronald Reagan when he began his final two years in office in January 1987.
And yet it's hardly morning again in the US. Polls show that significant pluralities of voters continue to believe the US is heading in the wrong direction. Much of the employment growth is in low-paid and part-time jobs. Wage growth has been relentlessly sluggish. And inequality has widened dramatically in the Obama era.
That has not stopped Obama from pitching an interventionist agenda in the name of "middle-class economics" (read: tax increases to reduce inequality). But many proposals have no chance of becoming law.
Between the White House and the Republican Congress, there just isn't much common ground in Washington, especially on matters to do with the size and scope of the state. In the Washington Post/ABC poll, nine in 10 Americans think government dysfunction is a problem — and they blame both Democrats and Republicans equally.
And yet there is at least one issue where there is room for bipartisanship — and it is directly relevant to not just the US, but also Australia and the Asia-Pacific region. I am, of course, referring to the Trans-Pacific Partnership, a 12-nation free-trade agreement with Pacific Rim countries, which accounts for 40 per cent of the world's economic activity.
In last year's State of the Union address, the President asked Congress to approve the Trade Promotion Authority (TPA), often called fast-track legislation, that would allow an up-or-down vote in Congress on the treaty without amendments.
Yet within 24 hours, Senate Democrats blocked the proposal. Democrats, you see, are traditionally protectionist and tied to powerful trade unions and environmental groups that are wary of global competition.
In Tuesday's address, the President once again renewed his call for TPA. But he dedicated only 1½ paragraphs in a 6500-word address to the task.
At first glance, Obama's request for TPA should be granted. After all, the Republican Party now controls both chambers of Congress. And it's the Republicans, notwithstanding some Tea-Party populist dissenters, who are more inclined to support trade liberalisation, especially if they boost US exports to Asia at a time of increasing Chinese competition.
But both Senate and House Democrats are digging in, refusing to give Obama the leverage he needs to do conclude trade deals. TPA, warns left-liberal firebrand Senator Elizabeth Warren, would leave "America's middle class in a deep hole".
Without TPA or "fast track", it will be difficult for Washington to conclude and ratify the TPP, which is a key component of the Obama administration's so-called pivot to Asia.
But if Obama wants the authority, he will have to fight for it personally and persuade members of his own party to buck labour union and green groups that will kill the deal with crippling amendments. Judging by his State of the Union address, the President is not placing a high priority on kick-starting the trade agenda.
If Obama fails to persuade his own party to support TPA, it is possible that Republicans, still seething at what they see as the President's executive over-reach on immigration and energy policy, might be unwilling to go it alone.
And if that happens, rejection would damage prospects for the TPP before the 2016 presidential campaign. It would dampen confidence in America's export-driven recovery. And it would undermine the administration's broader effort to "rebalance" American foreign policy to the Asia Pacific.
This article was originally published in The Australian Financial Review