Obama must push hard to save himself

THERE were troubling portents in the way the Democrats humbled US President Barack Obama last Friday. It is not only that he made a rare visit to Capitol Hill to appeal for his party's support on his global trade agenda. Nor that he warned them that a vote against it would be the same as one against him. These were bad enough. Worse is that it was Ms Nancy Pelosi - the Democratic leader, and linchpin of every legislative victory since Mr Obama took office, including healthcare - who put the knife in his back. When your closest ally betrays you, it is time to reach for your Shakespeare.

Mr Obama may have to beg, flatter and cajole his way out of this one. The only way to retrieve his trade agenda - let alone his credibility - will be to reverse last week's defeat. It has been done before. The best example is Congress' rejection of the US$700 billion (S$940 billion) Wall Street bailout package in September 2008. It was reversed 72 hours later. But then President George W. Bush could point to a stock market in free fall. The Dow Jones index fell almost 1,000 points after the first vote, enough to terrify lawmakers into the Yes camp on the second. Mr Obama has no such prompts. The Dow dropped 140 points last Friday, which was no more than an average bad day.

Mr Obama badly needs to come up with something in the next few days. The price of failure for him - and the United States - is too high. The costs would be threefold. First, rejection of the trade promotion authority (TPA), or fast-track negotiating powers, would leave the US without a global economic strategy in a rapidly changing world. It would kill prospects of wrapping up the Pacific trade deal on which Mr Obama has been working for three years. The 12-member group covers almost 40 per cent of the world economy. It would also halt progress in the parallel transatlantic talks, which cover close to half the global economy.

It would also rob the US "pivot to Asia" of its most important element. Mr Obama's biggest argument for the Trans-Pacific Partnership (TPP) is that it would force China, which is not in the group, to abide by global rules on trade and investment. Perhaps unwisely, Mr Obama has played that China card repeatedly. A collapse in TPP talks would breathe life into China's rival initiative, to which the US does not belong.

Any scepticism that others would take the China-led trade talks seriously was laid to rest last month when America's regional allies, including Australia and South Korea, spurned the US boycott of the China-led Asian Infrastructure Investment Bank. There is no reason to suppose it would turn out any different on trade. Most countries would prefer US leadership to China's. But in the US' absence, there is only one alternative.

Lastly, the death of TPA at Democratic hands would deprive Mr Obama of credibility on the world stage. His trade team, led by the very able Mr Michael Froman, has assured the US' Pacific partners that TPA's enactment was a foregone conclusion. Since Mr Obama already had the bulk of Republicans on his side, it was only a matter of persuading a sliver of Democrats to back him. The fallout would go far beyond trade. Mr Obama faces a deadline to conclude US-led talks with Iran. This year - and over Mr Obama's protestations - the Senate took the unusual step of passing a Bill that would give it 60 days to review any Iran nuclear deal. There is a clear parallel to fast track. Mr Obama had insisted an Iran deal would not qualify as a treaty, so it would not need Senate approval. Iran is less likely to risk concessions if it thinks Congress will torpedo the deal. On what grounds would Iran trust Mr Obama's assurances?

In an ideal democracy, any of these points ought to be a clincher. But in the real world, politicians look to their own survival before thinking of the bigger picture. Mr Obama must thus come up with something more persuasive. One hope is that Republicans will save the day without Mr Obama having to do anything. After all, Republicans believe in free trade, and fast-track powers would be inherited by Mr Obama's successor, who might well be a Republican.

Last week's defeat was an "only on Capitol Hill" moment, in which TPA was passed, only to be sunk by defeat of another part of the package. Enactment of that part, which subsidises retraining workers who lose their jobs to trade, was required for the whole Bill to pass. Both parties voted heavily against it.

If it squeaks through on the second try, Mr Obama would be saved. But it would require Republicans to hold their noses and vote for something they mistrust (subsidies) to save someone they abhor (Mr Obama). The other hope is that Ms Pelosi and her fellow Democrats change their minds on the merits of trade deals. But that seems improbable. So Republicans are left with a dilemma: Should they defeat Mr Obama and hobble the US? Or give him a victory that would also save the US' credibility? The coming days will be very revealing.

FINANCIAL TIMES

A version of this article appeared in the print edition of The Straits Times on June 17, 2015, with the headline 'Obama must push hard to save himself'. Print Edition | Subscribe